TCS provisions not applicable on assessee trading timber sawn after importing from other countries: HC

Case Details: PCIT (TDS) v. Nirmal Kumar Kejriwal - [2022] 142 taxmann.com 141 (Calcutta)

Judiciary and Counsel Details

• • T. S. Sivagnanam & Bivas Pattanayak
  • Soumen Bhattacharyya, Adv. for the Appellant.
  • J.P. Khaitan, Sr. Adv. & Ananda Sen, Adv. for the Respondent.

Facts of the Case

Assessee was engaged in trading of processed timber which was imported from several countries like Indonesia, Malaysia, and Burma. ‘Processed timber’ (sawn timber) was derived from timber logs that were cut in different sizes. The Assessing Officer (AO) held the assessee to be ‘assessee in default’ for non-collection of tax on the sale of timber as per provisions of section 206C(1).

On appeal, the CIT(A) set-aside order passed by AO. The Tribunal also upheld the findings of AO. Aggrieved-AO filed the instant appeal before the High Court.

High Court Held

The Calcutta High Court held that section 206C deals with profits and gains from the business of trading in alcoholic liquor, forest produce, scrap, etc. The table under section 206(1) leased out several products and serial No. (ii) deals with timber obtained under a forest lease. Thus, what has to be borne in mind is that the tax is collectible on forest produce.

Accordingly, to attract the provisions of section 206C, one has to examine whether the items sold by the assessee were forest produce or not. Forest produce is the produce grown spontaneously, maybe at the subsequent stages, some human effort and skill may be applied to protect and extract the resultant produce which could be considered as forest produce.

As was evident from the relevant provisions, the tax collection at the time of sale was intended only to be applied in respect of forest produce and not with reference to agricultural produce.

Further, if the timber is being sized, and sawn into logs of different dimensions and shapes in activities carried on sawmills authorized by the Government, it would amount to different produce. Even in respect of timbers that are procured as described in the table, if it is used in the process of manufacturing, the provision of section 206C(1) would not be applicable due to the fact that the product ceased to be a forest produce.

Therefore, considering the fact of the case, the provisions of section 206(1) would have no application.

List of Cases Reviewed

• • Andhra Pradesh Forest Development Corpn. Ltd. v. Asstt. CIT [2005] 144 Taxman 51/272 ITR 245 (AP.) (para 9)
  • Andaman & Nicobar Islands Forest & Plantation Development Corpn. Ltd. v. CIT [2005] 147 taxman 160/[2006] 280 ITR 118 (Cal.) (para 10) followed.
  • Y. Moideen Kunhi v. Collector of Central Excise 1985 taxmann.com 10 (Kar.) (para 11) distinguished.
  • order of ITAT, Calcutta in ITA Nos. 249 to 253/Kol./2013, CO No. 39/Kol./2013, dated 6-4-2016 and corrigendum dated 12-5-2016 (para 12) affirmed.

List of Cases Referred to

• • Y. Moideen Kunhi v. Collector of Central Excise 1985 taxmann.com 10 (Kar.) (para 7)
  • Collector of Central Excise v. Y. Moideen Kunhi & Co. 2004 (163) ELT 299 (Kar.) (para 7)
  • State of Orissa v. Titaghur Paper Mills Co. Ltd. AIR 1985 SC 1293 (para 7)
  • Andhra Pradesh Forest Development Corpn. Ltd. v. Asstt. CIT [2005] 144 Taxman 51/272 ITR 245 (AP) (para 9)
  • Andaman & Nicobar Islands Forest & Plantation Development Corpn. Ltd. v. CIT [2005] 147 Taxman 160/[2006] 280 ITR 118 (Cal.) (para 10).