While upholding an order passed by the Mumbai ITAT, the Nagpur bench of the Bombay High Court held that TDS provisions of section 206C(1C) of income Tax Act, 1961 is not applicable to ‘Octroi’ collected by the Municipal Corporations through its agents since the provision is applicable to parking lots, toll plazas and mine or quarry only.
Assesse, in the present case is the Municipal Corporation for the town Akola. For the year under consideration, assesse appointed agent to provide services of collecting octroi on its behalf as per the agency agreement. The rate of octroi was fixed by the assesse and the receipts were issued in their name. Assessing Officer treated them as assesse-in-default for not collecting tax at source for the amount of octroi collected by the agent appointed by the assesse.
On appeal, the Appellate Tribunal accepted the contentions of the assesse finding that the obligation under section 206C of the IT Act is restricted to parking lots, toll plazas and mine or quarry. It therefore, held that “octroi” collectible by the assessee is different than “toll” and thus is not within the ambit of 206C(1C) of the Income Tax Act, 1961.
The department carried the matter before the High Court contending that there is no difference between “octroi” and “toll” and Section 206C(1C) of the Act which obliges a person to collect tax in respect of toll collected by an agent/licensee is equally applicable to collection of octroi by an agent.
A bench comprising Justices M S Sanklecha and Manish Pitale observed that there is basic constitutional difference between that two levies since the power to levy octroi is specified under Entry 52 of List II and toll under Entry 59 under the Seventh Schedule of the Constitution.
Concurring with the findings of the Appellate Tribunal, the bench observed that Section 206C(1C) of the Income Tax Act only obliges a person to collect tax from its agents/licensee who collects a toll on its behalf and the same cannot be extended to collection of octroi.
“The legislature when it brought in section 206C(1C) of the Act has not authorised the collection of tax at source in respect of octroi. It specifically restricted its obligation to only three categories namely parking, toll plaza, mining and quarrying. It is not open to the Revenue to extend the ambit and scope of section to also include contracts, license or lease for collection of items other then toll, parking fees and for mining and quarrying. Therefore, there is no legislative mandate to collect tax at source or the octroi collected under Section 206C(1C) of the Act.”
Read the full text of the Judgment below.