Income Tax collected at Source (TCS) – Stayed by High Court, later upheld – What happens to the period when tax was not collected?
Recently the Bombay High Court had an interesting case.
As per section 206 C(1), certain sellers of alcohol, Tendu leaves, Timber etc,. are required to collect tax at source and pay it to the government. If he fails to collect that tax, he is responsible for paying it.
Now in this case the High Court had granted interim stay from collection of this tax on some writ petitions challenging this very provision of law. The validity of the provision was later upheld.
Now the question is ‘was there a failure to collect the tax during the period when there was stay by the High Court?'
The High Court held that during that time if they collected the tax it would have amounted to contempt of court. So during the stay, no tax could be collected but after the stay was vacated, could the tax be collected ?. The High Court held that it could not be collected.
Fine! Reasonable. But what happens to government Revenue which was lost due to the stay? No way to recover?
Actually the Government did not lose any Revenue; it was only tax collected at source and the buyer would anyway be entitled for credit of this amount when calculating his tax liability. So ultimately government does not lose anything! Wait wait – there is the interest angle. Who will pay the interest?
Interestingly when this stupendously important case came up for hearing before the High Court, there was no counsel for the Revenue to defend the case. Yet another reason why the government loses cases. The amount involved in this case is over Rs. 25 lakhs and there was none to represent the Revenue. Was it intentional?
The Revenue should have been present and pleaded that when the STAY is vacated, its interests should be protected and anyway it should have got interest.
This is the way Revenue treats its important cases and they blame the Judiciary pro-assessee.
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