Basic licence fee under excise law is not purchase price for tax collection at source; TCS applies only to sale consideration.

The basic licence fee paid under the U.P. excise regime is treated as consideration for the State's exclusive privilege to permit liquor , not as purchase price of liquor for section 206C purposes. Because tax collection at source applies to sale consideration and not to a fee for grant of trading permission, the licence fee falls outside the TCS mechanism. On that basis, failure to collect tax on the licence fee does not justify treating the excise officer as an assessee in default or charging interest on that amount.

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Issues: Whether the basic licence fee paid under the U.P. excise regime formed part of the purchase price for the purposes of tax collection at source under section 206C of the Income-tax Act, and whether failure to collect tax on that amount justified treating the District Excise Officer as an assessee in default and charging interest.

Analysis: The statutory scheme showed that the State had the exclusive privilege to manufacture and sell liquor and that the amount described as licence fee or basic licence fee was consideration for parting with that privilege. The relevant excise rules defined bid money, licence fee and basic licence fee in a manner that separated the licence consideration from the price of liquor itself. Section 206C was enacted as a machinery provision for collection of tax at source on specified sales, and the distinction drawn by the Supreme Court between a right to carry on a trade and a right to receive specified goods supported the view that a fee paid for permission to conduct liquor business was not purchase price. The tax had already been collected on the sale price of liquor, but not on the licence fee, because the latter was not part of the sale transaction.

Conclusion: The basic licence fee was not purchase price within the meaning of section 206C, and the assessee was not liable to be treated as in default or saddled with interest on that amount.

Ratio Decidendi: A consideration paid to the State for grant of its exclusive privilege to trade in liquor is not purchase price for section 206C purposes, because tax at source applies to sale consideration and not to a fee for permission to carry on business.

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