District Mining Officer is under Statutory Obligation to Collect TCS on Compounding Fee Received from Illegal Miners: ITAT [Read Order]

In a recent case, the Raipur Bench of the Income Tax Appellate Tribunal (ITAT) has held that the District Mining Officer is under statutory obligation to collect tax at source (TCS) on the compounding fee received from illegal miners even in the absence of a valid lease or licence of mines.

The assessee challenged the respective orders of the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, which in turn arises from the orders passed by the A.O under section 206C(1C) and (6) & (7) of the Income-tax Act, 1961 (‘the Act’) for the aforementioned assessment years.

The survey officials came across the issue that the assessee, by not collecting tax at source (TCS) on the amount of compounding fees that were received from illegal miners and transporters of minerals, had violated the provisions of Section 206C (1C).

It was submitted by the assessee that they believed that no liability was cast upon it to collect any tax at source on the said receipts.

The two bench member of Ravish Sood (Judicial Member) and Arun Khodpia (Accountant Member) has observed that the obligation cast upon an assessee to collect tax at source (TCS) under section 206C(1C) of the Act does not presuppose the existence of a lease or license or a contract, but would also apply to a case where a person had transferred any right or interest, either in whole or in part, inter alia, in a mine to another person.

“The claim that as there is no lease deed/license/contract executed between the assessee, i.e. DMO and the illegal miners/transporters of minerals, therefore, in absence of satisfaction of the said pre-condition no obligation for collection of tax at source under section 206C(1C) of the Act could have been fastened upon the assessee w.r.t the amount of compounding fees received from the aforesaid persons is devoid and bereft of any force of law and cannot be accepted.”, the bench held.

As per Section 9C of the Mines and Minerals (Development and Regulation) Act, 1957, the leaseholders remained under an obligation to pay the specified amount of the NMET, and no involvement of the assessee can be traced in the scheme of the MMDR Act.

The ITAT bench further held that, as per Section 206C, the assessee was under a statutory obligation to collect tax at source on any “Amount Payable” by the lease-holders, and it was not restricted only to royalty.

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