Supreme Court Dismisses Revenue’s SLP on TCS Liability for District Mining Officers

The Revenue initiated proceedings against District Mining Officers (DMOs) in Chhattisgarh, alleging failure to collect Tax Collected at Source (TCS) under Section 206C of the Income Tax Act, 1961 on royalty paid by mining leaseholders. As per Revenue, since DMOs grant mining rights and receive royalties on behalf of the State, they should be treated as liable to collect TCS.

The DMOs argued that they merely discharge statutory duties as government officials and that royalty is a statutory levy payable to the State rather than consideration from a commercial transaction.

HC Held: The High Court held that a District Mining Officer acts on behalf of the State Government and cannot be treated as a “seller” or “licensor” under Section 206C. It further observed that royalty paid for the extraction of minerals is a sovereign levy and not a commercial payment, and therefore, the provisions relating to TCS are not attracted.

Thereafter, the Deputy Commissioner of Income Tax (TDS) filed multiple Special Leave Petitions challenging the judgement of the High Court. There was also a significant delay in filing these petitions (ranging from 170 to 190 days), for which the Revenue sought condonation.

Main Issue: Whether the District Mining Officer is required to collect tax at source (TCS) on royalty payments made by mining leaseholders under Section 206C of the Income Tax Act.

Supreme Court: The Hon’ble Supreme Court dismissed the SLP. While the Court condoned the delay in filing, it found no merit in the Revenue’s appeals on the substantive legal issue. While dismissing the SLP, the Court upheld the High Court’s position that the DMO does not fall within the specific ambit of “seller” or “licensor” as intended for the mandatory collection of TCS on mineral royalties in the context of state-granted mining leases.

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