Ita v. The Hon’ble Mr. Justice M.s. Ramachandra Rao, Chief Justice

IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA ITA No.56 of 2009 a/w ITA Nos.57 to 61 of 2009, ITA Nos. 36 & 44 of 2010 & ITA Nos.3 and 14 of 2011 Decided on: 10.08.2023 ITA No.56 of 2009Asstt. Excise & Taxation Commissioner, Bilaspur, H.P. Bilaspur, H.P. .… Appellant. VersusIncome Tax Officer (TDS), Palampur, Camp at Shimla…. Respondent. ITA No.57 of 2009Asstt. Excise & Taxation Commissioner, Una, H.P. .… Appellant. VersusIncome Tax Officer (TDS), Palampur, HP (TDS), Palampur, HP TDS), Palampur, HP ), Palampur, HP Palampur, HP pur, HP ur, HP , HP HP …. Respondent. pondent. ondent. Income Tax Officer (TDS), Palampur, HP (TDS), Palampur, HP TDS), Palampur, HP ), Palampur, HP Palampur, HP pur, HP ur, HP , HP HP …. Respondent. pondent. ondent. ITA No.58 of 2009Asstt. Excise & Taxation Commissioner, Bilaspur, H.P. .… Appellant. VersusIncome Tax Officer (TDS), Palampur, Camp at Shimla…. Respondent. ITA No.59 of 2009Asstt. Excise & Taxation Commissioner, Bilaspur, H.P. .… Appellant. VersusIncome Tax Officer (TDS), Palampur, Camp at Shimla…. Respondent. ITA No.60 of 2009Asstt. Excise & Taxation Commissioner, Bilaspur, H.P. .… Appellant. VersusIncome Tax Officer (TDS), Palampur, Camp at Shimla…. Respondent. ITA No.61 of 2009 Asstt. Excise & Taxation Commissioner, Bilaspur, H.P. .… Appellant. VersusIncome Tax Officer (TDS), Palampur, Camp at Shimla…. Respondent. ITA No.36 of 2010Asstt. Excise & Taxation Commissioner, Sirmour, District Sirmour, H.P. .… Appellant. Versus Income Tax Officer (TDS), Nahan, District Sirmour,H.P. …. Respondent. Coram The Hon’ble Mr. Justice M.S. Ramachandra Rao, Chief Justice. The Hon’ble Mr. Justice Ajay Mohan Goel, Judge. Whether approved for reporting? For the appellants: Mr. Anup Rattan, Advocate General, with M/s Rakesh Dhaulta, Pranay Pratap Singh, Additional Advocate Generals and M/s Arsh Rattan, Sidharth Jalta, Deputy Advocate Generals, with Mr. Rakesh Sharma, Standing Counsel, in all the appeals. For the respondents: Mr. Vinay Kuthiala, Senior Advocate, with Ms.Vandana Kuthiala and Mr. Diwan Singh Negi, Advocates, in all the appeals. M.S. Ramachandra Rao, Chief Justice(Oral) In all these appeals, following substantial questions of law arisefor consideration:- “(i) That collection of toll by lease or the person employedby him on behalf of the Govt. under HP Tolls Act, 1975 isonly delegation of collection of tax levied under authority ofState and the same does not fall within ambit of section206C (IC) of the Income Tax Act, 1961. (ii) That delegation of function of collection of toll undersection 3-A of HP Tolls Act, 1975 is clothed with statutoryauthority and is not a business as defined under section2(13) of the Income Tax Act, 1961. (iii) That collection of Toll under HP Tolls Act, 1975 is not atoll plaza under section 206C (IC) of the Income Tax, 1961. (iv) The collection of toll under HP Tolls Act, 1975 has been 4 levied under Entry 59 of List-II of Seventh Schedule to theconstitution of India irrespective of whether collected by theGovt. machinery or other agents of the Govt., levy remainsan income of the State exempted from Union Taxation byvirtue of Article 289(1) of the Constitution. (v) That Income Tax, if any, is to be assessed on the incomeof the toll lessees and not on the tax collection of the Stateand for which the State is not responsible in any manner.”of the toll lessees and not on the tax collection of the Stateand for which the State is not responsible in any manner.” 2)The background facts are that State of Himachal Pradesh enacted theHimachal Pradesh Tolls Act, 1975 ( for short ‘the Act’) to provide forthe levy and collection of tolls on mechanical vehicles passing overany road infrastructure in the State of Himachal Pradesh.Himachal Pradesh Tolls Act, 1975 ( for short ‘the Act’) to provide forthe levy and collection of tolls on mechanical vehicles passing overany road infrastructure in the State of Himachal Pradesh. (v) That Income Tax, if any, is to be assessed on the incomeof the toll lessees and not on the tax collection of the Stateand for which the State is not responsible in any manner.”of the toll lessees and not on the tax collection of the Stateand for which the State is not responsible in any manner.” 2)The background facts are that State of Himachal Pradesh enacted theHimachal Pradesh Tolls Act, 1975 ( for short ‘the Act’) to provide forthe levy and collection of tolls on mechanical vehicles passing overany road infrastructure in the State of Himachal Pradesh.Himachal Pradesh Tolls Act, 1975 ( for short ‘the Act’) to provide forthe levy and collection of tolls on mechanical vehicles passing overany road infrastructure in the State of Himachal Pradesh. 3)Tolls barriers have then been established on road infrastructure incertain districts under Section 6 of the said Act by the StateGovernment by issuing Notifications from time to time.certain districts under Section 6 of the said Act by the StateGovernment by issuing Notifications from time to time. 4)Under Section 3-A of the said Act, power has been conferred upon theState Government to grant lease of rights to any person to collect tolllevied under Section 3 of the Act for respective financial years byauction or tender or combination of both or any other mode on suchterms and conditions as the Excise & Taxation Commissioner maydetermine and the amount of auction is received in installments. TheState Government to grant lease of rights to any person to collect tolllevied under Section 3 of the Act for respective financial years byauction or tender or combination of both or any other mode on suchterms and conditions as the Excise & Taxation Commissioner maydetermine and the amount of auction is received in installments. The 5 installments are deposited directly in the Government Treasury by thelessee. 5)Thus, after the auction is conducted, the successful bidder is required to pay installments of part thereof of the lease money by the due dateinto Government Treasury of the district.into Government Treasury of the district. 6)The Income Tax Department made inspection of the office of the saidDepartment and noticed that there was no Tax Collection at Source (inshort ‘TCS’) being made by the representatives of the said Departmentwho were authorized to receive payment in installments in respect oftoll money.Department and noticed that there was no Tax Collection at Source (inshort ‘TCS’) being made by the representatives of the said Departmentwho were authorized to receive payment in installments in respect oftoll money. 7)Accordingly, notices were issued under Section 156(3) of the IncomeTax Act, 1961 against the Department of Excise & Taxation.Tax Act, 1961 against the Department of Excise & Taxation. 8)Orders were passed on 30.06.2008 for the year 2004-05 to 2008-09,and according to the Income Tax Department huge demand is due onthis count.and according to the Income Tax Department huge demand is due onthis count. 9)Against the orders passed on 30.06.2008, the Department preferredappeals before the Commissioner of Income Tax ((Appeals), Shimla,H.P., who dismissed the said appeals on 25.02.2009, upholding thedemands raised by the Department.appeals before the Commissioner of Income Tax ((Appeals), Shimla,H.P., who dismissed the said appeals on 25.02.2009, upholding thedemands raised by the Department. 10)This order of the CIT (Appeals) was further challenged by theDepartment in ITA Nos.273 to 277 before the Income Tax AppellateTribunal, Chandigarh.Department in ITA Nos.273 to 277 before the Income Tax AppellateTribunal, Chandigarh. 11)The said Appellate Tribunal vide order dt. 28.05.2009 dismissed theappeals and upheld the orders passed by the Assessing Authority andother Authorities referred to above.appeals and upheld the orders passed by the Assessing Authority andother Authorities referred to above. 12)Challenging the same, these appeals are filed. 10)This order of the CIT (Appeals) was further challenged by theDepartment in ITA Nos.273 to 277 before the Income Tax AppellateTribunal, Chandigarh.Department in ITA Nos.273 to 277 before the Income Tax AppellateTribunal, Chandigarh. 11)The said Appellate Tribunal vide order dt. 28.05.2009 dismissed theappeals and upheld the orders passed by the Assessing Authority andother Authorities referred to above.appeals and upheld the orders passed by the Assessing Authority andother Authorities referred to above. 12)Challenging the same, these appeals are filed. 13)Though, learned counsel for the Excise & Taxation Department of theState of Himachal Pradesh, which is the appellant herein contendedthat Section 206 C(1-C) of the Income Tax Act is not attracted sincethe collection of toll under the Himachal Pradesh Tolls Act, 1975 is notin force at a Toll Plaza, but said contention is not pressed and it ishowever contended that the provisions of TCS is similar to that ofTDS, and if the assessee/ lessee had already paid tax to the Income TaxDepartment on the sale turn over for the respective assessment years,then the appellant cannot be mulcted with liability to again pay taxthereon.State of Himachal Pradesh, which is the appellant herein contendedthat Section 206 C(1-C) of the Income Tax Act is not attracted sincethe collection of toll under the Himachal Pradesh Tolls Act, 1975 is notin force at a Toll Plaza, but said contention is not pressed and it ishowever contended that the provisions of TCS is similar to that ofTDS, and if the assessee/ lessee had already paid tax to the Income TaxDepartment on the sale turn over for the respective assessment years,then the appellant cannot be mulcted with liability to again pay taxthereon. 14)Reliance has been placed by the appellant on the decision inCommissioner of Income Tax, New Delhi Versus Eli Lilly andCommissioner of Income Tax, New Delhi Versus Eli Lilly and 7 Company (India) Private Ltd [1],Singapore Airlines Limited VersusCommissioner of Income Tax, Delhi [2] and Hindustan Coca ColaBeverage (P) Ltd. Versus Commissioner of Income Tax[3]. 15)In all these cases it was held that the recipient of the income on whichTDS has not been deducted, even though it was liable to suchdeduction under the Income Tax Act, had already included that amountin its income and paid taxes on the same, the assessee can no longer beproceeded against the recovery of the short fall in TDS. However, itwas held that it would be open to the revenue to seek payment ofinterest under Section 201 (1-A) of the Act for the period between thedate of default in deduction of TDS and the date on which the recipientactually paid income tax on the amount for which there has been ashort fall in such deduction. 16)Therefore, before any liability is imposed on the appellant for paymentof tax, it is required to be verified as to whether respective toll lesseesof the Himachal Pradesh Government had in fact paid taxes on theirincome/ sale turn over while collecting tolls at the barriers erected by 1(2009) 15 SCC 1 2(2003) 1 Supreme Court Cases 497 3(2007) 8 Supreme Court Cases 463 8 the State Government or not. In the event such toll lessees had alreadypaid tax on their income, even if the appellant had not deducted the TCSon such income, then the appellant cannot be mulcted with the liabilityto again pay the tax. In the event of the Assessing Officer finding thatthe toll lessees had not paid the tax which ought to have been deductedas TCS by the appellant when it had filed its return, the appellant shallbe held liable to pay the same. 1(2009) 15 SCC 1 2(2003) 1 Supreme Court Cases 497 3(2007) 8 Supreme Court Cases 463 8 the State Government or not. In the event such toll lessees had alreadypaid tax on their income, even if the appellant had not deducted the TCSon such income, then the appellant cannot be mulcted with the liabilityto again pay the tax. In the event of the Assessing Officer finding thatthe toll lessees had not paid the tax which ought to have been deductedas TCS by the appellant when it had filed its return, the appellant shallbe held liable to pay the same. 17)Therefore, the appellant is directed to share with the respectiveAssessing Officers the details of the toll lessees including their PANnumber for the respective assessment years in question within fourweeks. On receipt of such information, within eight weeks theAssessing Officer shall verify the return filed by the respective tolllessees , and in the event he comes to the conclusion that the said tolllicencee had already paid tax which ought to have been deducted asTCS by the appellant, then he shall not levy any tax on the appellant. Ifnot, he may proceed to collect the same from the appellant Department. 18)However, the appellant is held liable to pay interest under Section206C (7) of the Act to the Department for the period between the dateof default in deduction of TCS and the date on which the toll licenceehad actually paid the income tax on the amount for which there had206C (7) of the Act to the Department for the period between the dateof default in deduction of TCS and the date on which the toll licenceehad actually paid the income tax on the amount for which there had 9 been a short fall in such deduction, within eight weeks of notification of the same by the Assessing Officer to the appellant. 19)The appeals are disposed of accordingly. 20)Pending miscellaneous applications, if any, also stand disposed of. (M.S. Ramachandra Rao) Chief Justice August 10, 2023(rishi) (Ajay Mohan Goel) Judge