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2024 (2) TMI 1167 - ITAT KOLKATATCS u/s 206C - Sale of tendu leaves at the second stage whereas in the first stage the tendu leaves were sold on the Govt Undertaking - Treating the assessee in default for non-collection of tax at source u/s 206C(6)/206C(7) - CIT(A) dismissed the appeal of the assessee by holding that the assessee is involved in the trades in Tendu leaves and the provisions of section 206C were applicable as the tendu leaves were purchased from Government Undertaking i.e. Orissa Forest Development Corporation Ltd. HELD THAT:- CIT(A) has wrongly observed that the provisions of Section 206C of the Act were applicable to the assessee even though the assessee has made sale at second stage and the entity involved in the first stage was public sector undertaking. In the present case we also find that the assessee has collected Form no. 27BA as per Rule 37J and form 27C as per rule 37C from all the six parties copies of which are placed stating that they were engaged in business of manufacturing of Bidies and the tendu leaves were to be used for the purpose of manufacturing units and not for the purpose of trading. In the case of Karnataka Forest Development vs. ITO [2015 (7) TMI 908 - ITAT BANGALORE] the coordinate bench has held that where the assessee has obtained the form 27 to the effect that the buyer would use the tendu leaves in manufacturing process , then the assessee cannot be treated as assessee in default u/s 206C of the Act or liable for interest. Where the declaration is made in terms of section 206C(1A) of the Act , then the liability to collect at source under section 206C(1 ) would not apply We direct the AO to delete the demand by holding that the provision of TCS u/s 206C of the Act are not applicable to the assessee. The appeal of the assessee is allowed.
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