1996 (5) TMI 20 - HC - Income Tax

Court invalidates excise duty inclusion in 'purchase price' under Income-tax Act; reaffirms sections 44AC and 206C.

The court set aside the assessment orders that included excise duty in the 'purchase price' for section 44AC of the Income-tax Act. It emphasized the ... Excise Duty, Liquor Business, Regular Assessment, Tax At Source Issues:- Challenge to assessment orders including excise duty within 'purchase price' for section 44AC of the Income-tax Act.- Validity of sections 44AC and 206C of the Income-tax Act.- Conflict of decisions between different court rulings.- Regular assessment under sections 28 to 43C of the Act.Analysis:The judgment involved multiple writ petitions challenging assessment orders that included excise duty within the 'purchase price' for the purpose of section 44AC of the Income-tax Act. The petitioners, licensees of a country spirit shop, contested the assessments made by the assessing authority for the relevant periods. The Commissioner of Income-tax (Appeals) had withdrawn earlier favorable orders and confirmed the inclusion of excise duty in the purchase price, leading to the petitions.In the case of Ramjee Prasad Sahu v. Union of India, the appellate authority had previously ruled in favor of the petitioners, stating that excise duty should not be included in the purchase price for section 44AC. However, the Commissioner of Income-tax (Appeals) later reversed this decision, citing a mistake in the computation of deemed income and directed the inclusion of excise duty in the purchase price.The judgment discussed the validity of sections 44AC and 206C of the Income-tax Act, referring to the Supreme Court case of Union of India v. A. Sanyasi Rao, which upheld these provisions as valid legislation. It clarified that these sections do not eliminate the need for regular assessments under sections 28 to 43C of the Act.The court highlighted that there was no conflict between the decisions of different courts and emphasized that regular assessments cannot be dispensed with under the relevant provisions of the Income-tax Act. It reiterated that no tax should be collected or paid on excise duty deposited directly with the State Government by a retail vendor as per section 206C of the Act.Ultimately, the court set aside the impugned assessment orders, noting that they were passed without considering the previous court rulings and the Supreme Court decision. However, the order did not prevent the respondents from taking further action in accordance with the law. The writ petitions were disposed of with these observations.