Contact us   Feedback   Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

TCS on Services is doubtful due to flaw in drafting Section 206C of IT Act

Income Tax - Direct Tax Code - DTC - By: - Manoj Agarwal - Dated:- 6-7-2016 Last Replied Date:- 6-7-2016 - I am sure that you are completely surprised by the title that the collection of TCS on services is doubtful so please do let me explain. Since the objective of the write-up is to discuss TCS on the provision of services (and not for any transaction of sale of goods), it should be read from the perspective of service provider and service receiver only. The Hon ble Finance Minister Shri Arun .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

-. The amended provision has come into effect from 01-06-2016. The relevant provision of Tax Collected as Source (TCS) under Section 206C(1D) as amended by Clause 88 of Finance Act, 2016 (which is underlined to highlight the same), is reproduced below: (1D) Every person, being a seller, who receives any amount in cash as consideration for sale of bullion or jewellery or any other goods (other than bullion or jewellery) or providing any service, shall, at the time of receipt of such amount in cas .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

hapter XVII-B. The main features are: The liability is on seller When consideration is received in cash The transaction should be for sale of goods or provision of any service The consideration should exceed the threshold limit of ₹ 5 Lacs (jewellery) or ₹ 2 Lacs (others) Seller shall collect from the buyer TCS calculated @1% of sale consideration In simple words, it appears that the provision of TCS @ 1% which was earlier applicable (since 01-07-2012) on sale of bullion & jewell .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

lth services) and even if TDS is applicable but the receiver fails to deduct TDS, in that case TCS is applicable. Consequently, amendments have been made in the definition of buyer and seller by way of Explanation after Section 206C. The amendments made by Finance Act, 2016 is underlined to highlight the same, and extracted below: (aa) buyer with respect to- (i) sub-section (1) means a person who obtains in any sale, by way of auction, tender or any other mode, goods of the nature specified in t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

said sub-section ; (c) seller means the Central Government, a State Government or any local authority or corporation or authority established by or under a Central, State or Provincial Act, or any company or firm or co-operative society and also includes an individual or a Hindu undivided family whose total sales, gross receipts or turnover from the business carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediatel .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

dment in the definition of buyer . Upon plain reading, it is clear that the definition of buyer is exhaustive (and not inclusive) and with respect to sub-section 1D, it means a person who obtains any goods pursuant to any contract of sale. To put it in different perspective, buyer do not include service recipient because provision of service is quite distinct from a transaction of sale. Since the definition is exhaustive, it has to be given restrictive meaning within the four corners of the defi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

llowing are few judicial pronouncements by the Hon ble Supreme Court, which are self explanatory. The Supreme Court in the case of Sales Tax Commissioner Vs. Modi Sugar Mills 1960 (10) TMI 65 - SUPREME COURT OF INDIA 10. ...In interpreting a taxing statute, equitable considerations are entirely out of place. Nor can taxing statutes be interpreted on any presumptions or assumptions. The court must look squarely at the words of the statute and interpret them. It must interpret a taxing statute in .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

with a taxing provision, the principle of 'Strict Interpretation' should be applied. The Court shall not interpret the statutory provision in such a manner which would create an additional fiscal burden on a person. It would never be done by invoking the provisions of another Act, which are not attracted. It is also trite that while two interpretations are possible, the Court ordinarily would interpret the provisions in favour of a tax-payer and against the Revenue. In case of UOI Vs. Dh .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ng of an Act, they cannot add or mend, and by construction make up deficiencies which are left there. (See State of Gujarat v. Dilipbhai Nathjibhai Patel - 1998 (3) TMI 677 - SUPREME COURT OF INDIA It is contrary to all rules of construction to read words into an Act unless it is absolutely necessary to do so. [See Stock v. Frank Jones (Tipton) Ltd. - 1978 (1) ALL ER 948.]... 17. While interpreting a provision the court only interprets the law and cannot legislate it. If a provision of law is mi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

an absurdity or manifest injustice. Words may be modified or varied, where their import is doubtful or obscure. But we assume the functions of legislators when we depart from the ordinary meaning of the precise words used, merely, because we see, or fancy we see, an absurdity or manifest injustice from an adherence to their literal meaning . (See Abley v. Dale, ER p. 525) In the case of Doypack Systems Pvt. Ltd. Vs. UOI 1988 (2) TMI 61 - SUPREME COURT OF INDIA In the words of Lord Scarma, We are .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

1% of the sale consideration . However, in case of provision of service, there is no sale involved, making it uncertain, on what amount TCS of 1% should be collected by the service provider. Therefore, the author is of the considered view that unless necessary amendments are made to rectify the defects in Section 206C of the Income Tax Act, 1961, the legal liability to collect TCS @1% cast upon service provider in respect of receipt of cash consideration exceeding ₹ 2,00,000/- against prov .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Disclaimer: This article is the property of the author and is for the purpose of information only. No one shall publish, reproduce or use it in any manner, for any purposes, without the permission of the author. The author shall not be responsible or liable for anything done or omitted to be done on the basis of this article. The author is mainly practicing as a Service Tax Consultant having located at Rourkela, Odisha. - Reply By Manoj Agarwal - The Reply = Dear Admin, 206C(1D)(iii) is inadvert .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version