Short Overview: Activities of collecting toll fees as entrusted by the assessee was not a contract within the meaning of section 206C and did not attract section 206C(1C), rather it was in the nature of outsourcing of job for collection of user fees.

Assessee, a wholly owned subsidiary of NHAI incorporated to construct express highway between Ahmedabad and Vadodara, had given license to A.B. Infrastructure to collect toll tax on various places on the expressway between Ahmedabad and Vadodara. AO held that work carried out by collecting agency was contract within the meaning of section 206C(6A) and, therefore, assessee was one-in-default for not collecting TCS from the collecting party.

It is held that  In terms of agreement entered into by the assessee-company and collecting entity, said collecting entity’s role was limited to collecting toll amount and deposit the same on daily basis in bank account of the company and it had no right on any part of the toll collection. Therefore, activities of collecting toll fees as entrusted by the assessee was not a contract within the meaning of section 206C and did not attract section 206C(1C), rather it was in the nature of outsourcing of job for collection of user fees.

Decision: In assessee’s favour.