TCS Not Applicable on Compounding Fee for Illegal Mining
By J the App
Executive Summary
The Chhattisgarh High Court ruled that tax collection at source under Section 206C(1C) of the Income Tax Act does not apply to compounding fees collected from persons involved in illegal mining.
The Court clarified that TCS applies only when a mining right is granted through a lease, licence, or contract. Illegal miners do not receive such rights, and therefore the payment collected from them is only a penalty to compound the offence.
As a result, the demand raised by the Income Tax Department for failure to collect TCS was quashed.
The Supreme Court declined to interfere with the High Court ruling and dismissed the Revenue’s appeal.
The dispute arose from a batch of tax appeals filed by various District Mining Officers of the State of Chhattisgarh against orders passed by the Income Tax authorities und...
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