Section 206C limits tax collection by excluded wholesalers and confines country spirit levy to cost price basis.

Section 206C of the Income-tax Act was discussed in relation to the definition of "seller" and the classes excluded from collection of income-tax at source. A wholesaler having the status of an individual, Hindu undivided family or association of persons falls outside the authorised class and cannot collect tax under the provision; however, no factual finding was recorded on the respondent wholesaler's actual status. The article also notes that, for country spirit, collection is confined to the cost price basis, following earlier identical decisions. The legal position was therefore clarified on both the statutory status of the collector and the permissible base of computation.

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Issues: (i) Whether a wholesaler who is an individual, Hindu undivided family or association of persons could collect income-tax under section 206C of the Income-tax Act, 1961. (ii) Whether the collection of income-tax on country spirit could be made only with reference to the cost price.

Issue (i): Whether a wholesaler who is an individual, Hindu undivided family or association of persons could collect income-tax under section 206C of the Income-tax Act, 1961.

Analysis: The definition of "seller" in the Explanation to section 206C excluded a wholesaler having the status of an individual, Hindu undivided family or association of persons from the class of persons authorised to collect income-tax. The Court, however, recorded that the actual status of the respondent wholesaler was not disclosed, and therefore no factual finding could be entered on that point in the present proceedings.

Conclusion: If the respondent wholesaler is an individual for the purposes of the Act, he is not permitted to collect any amount as income-tax under section 206C; no final finding was recorded on his actual status.

Issue (ii): Whether the collection of income-tax on country spirit could be made only with reference to the cost price.

Analysis: The Court followed its earlier decision in identical matters and treated the levy as confined to the cost price of the country spirit purchased.

Conclusion: Income-tax could be collected only with reference to the cost price of the country spirit.

Final Conclusion: The writ application was disposed of with the legal position clarified on the scope of section 206C and on the cost-price basis of collection, while leaving the respondent wholesaler to act according to his statutory status and permitting consequential adjustment of amounts deposited under interim orders.

Ratio Decidendi: Under section 206C of the Income-tax Act, 1961, a person whose statutory status falls outside the defined class of "seller" cannot collect income-tax at source, and the collection must be confined to the legally permissible base of computation.

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