SECTION 206C OF THE INCOME-TAX ACT, 1961 – COLLECTION OF TAX AT SOURCE – PROFITS AND GAINS FROM BUSINESS OF TRADING IN ALCOHOLIC LIQUOR, FOREST PRODUCE, SCRAP, ETC. – INSTRUCTION REGARDING ISSUE OF CERTIFICATE OF LOWER COLLECTION OF TAX AT SOURCE U/S 206C(9)

INSTRUCTION NO. 4/2010 [F. NO. 275/23/2007-IT(B)], DATED 21-7-2010

I am directed to state that Instruction No. 8/2006, dated 13-10-2006 was issued by the Board making it mandatory to get prior administrative approval of Additional Commissioner of Income-tax/Joint Commissioner of Income-tax before issue of any certificate of lower deduction of tax at source under section 197 of the Income-tax Act, 1961. Further, Instruction No. 7/2009, dated 23-12-2009 was issued communicating prior administrative approval of the Commissioner of Income-tax (TDS) in the cases where the cumulative amount of tax foregone by non-deduction/lesser rate of deduction of tax arising out of certificate under section 197 during the financial year for a particular assessee exceeds Rupees Fifty lakh in major stations and Rupees Ten lakh for other stations.

2. For effective monitoring and control of tax foregone through certificate of lower Tax Collection at Source (TCS), I am directed to communicate that for issue of certificate of lower collection for tax at source under section 206C(9), prior administrative approval of Additional Commissioner of Income-tax/Joint Commissioner of Income-tax shall be obtained in each case. Further, prior administrative approval of Commissioner of Income-tax (TDS) shall be taken where cumulative amount of tax foregone by lesser rate of tax collection at source during the financial year for a particular buyer or licensee or lessee; as the case may be; exceeds Rupees Fifty lakh in Delhi, Mumbai, Chennai, Kolkata, Bangaluru, Hyderabad, Ahmedabad and Pune Stations and Rupees Ten lakh for other stations. Once the Addl. CIT/JCIT or the CIT(TDS), as the case may be, gives administrative approval of the above, a copy of it has to be endorsed to the jurisdictional CIT also.

3. In relation to TCS matters of a buyer or licensee or lessee falling within the jurisdiction of Directorate of Income-tax (International Taxation), the powers indicated above shall be vested in the officers concerned i.e., Range Additional DIT/JDIT (International Taxation) or Director of Income-tax (International Taxation), as the case may be.

4. “Tax foregone” in case of a buyer or licensee or lessee; as the case may be; should ordinarily mean difference between taxes computed at the relevant rate of collection stipulated and the tax computed on the basis of rate at which the certificate under section 206C(9) is sought to be issued.

5. The content of this instruction may be brought to the notice of all officers working in your charge for strict compliance.