Strict construction of tax collection rules excluded Assam country spirit shop lessees from buyer status under the Income-tax Act.

Section 206C of the Income-tax Act was applied strictly and, on the Assam excise framework, was treated as not extending to lessees of country spirit shops. The scheme under the Assam Excise Act, 1910 and the Assam Excise Rules, 1945 showed that the shops were settled by tender, prices were fixed by the State, and the transactions operated within a controlled statutory regime. Because the statutory definition of "buyer" excludes goods not obtained by auction where the sale price is fixed by or under a State Act, tax collection at source was considered inapplicable to such regulated excise licensees.

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Issues: (i) Whether lessees of country spirit shops in Assam fell within the expression "buyer" under section 206C of the Income-tax Act, 1961, so as to attract collection of tax at source on their purchases of liquor. (ii) Whether the departmental directions requiring collection of tax at source from such lessees were sustainable.

Analysis: The scheme of the Assam Excise Act, 1910 and the Assam Excise Rules, 1945 showed that country spirit shops were settled by tender, the licensee was bound by regulated prices fixed by the State, and the purchase and sale of liquor occurred under a controlled statutory framework. Section 206C of the Income-tax Act, 1961, as amended, applied only to the class of buyers specifically covered by its Explanation and expressly excluded a buyer where the goods were not obtained by auction and the sale price was fixed by or under a State Act. Read strictly as a fiscal provision, and in light of the excise regime governing the petitioners, the provision did not extend to these lessees.

Conclusion: The lessees of country spirit shops were outside the ambit of section 206C of the Income-tax Act, 1961, and the impugned directions for tax collection at source were unsustainable.

Final Conclusion: The challenged communications were quashed and the writ petitions were allowed, with no order as to costs.

Ratio Decidendi: A tax deduction or collection provision must be strictly construed, and where the statutory definition of "buyer" expressly excludes transactions in which the goods are not obtained by auction and the resale price is fixed by or under a State Act, the provision cannot be extended to regulated excise licensees governed by that framework.

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