2011 (3) TMI 1383 - HC - Income Tax

Court rules on appealability of Income Tax Act orders under Section 246, excludes basic license fee from tax collection.

The court held that orders under sub-sections (6) and (7) of Section 206C of the Income Tax Act are appealable under Section 246 of the Act. It ruled that ... Whether order passed under sub sections (6) and (7) of Section 206C of the Income Tax Act is appealable under Section 246 of the Act - Department is that only those orders which are specified under Section 246 of the Act are appealable, further submitted that Section 246 has been replaced by Section 246A w.e.f. 1st of April, 1998. At the relevant point of time Section 246A (1) had sub sections (a) to (r) and the orders mentioned in sub clause (a) to (r) could be appealed. As the sub sections (6) and (7) of Section 206C did not find any place in any of these sub sections (a) to (r), the order was not appealable - Section 206C does not find place in any of its clauses of sub section (1) and therefore, the appeal is not maintainable, Sections 246 and/or 246A of the Act, It is in the nature of a residuary clause and gives a right to an assessee to challenge an order by way of appeal if he is so aggrieved subject to the condition that he denies his liability to be assessed under the Act, no error in the order of the Tribunal holding that the appeals are maintainable under Section 246 of the Income Tax Act, appeals lack merit and are hereby dismissed Issues Involved:1. Appealability of orders under sub-sections (6) and (7) of Section 206C of the Income Tax Act under Section 246 of the Act.2. Liability of the District Excise Officer to collect tax at source on basic license fee and excise duty.Issue-wise Detailed Analysis:1. Appealability of Orders under Section 206C:The primary issue addressed in this judgment is whether orders passed under sub-sections (6) and (7) of Section 206C of the Income Tax Act are appealable under Section 246 of the Act. The Commissioner of Income Tax challenged the orders of the Income Tax Appellate Tribunal (ITAT) asserting that Section 206C does not explicitly appear in Section 246, thus making such orders non-appealable.The court examined the statutory framework and the relevant sections. Section 246A(1) allows appeals against orders where the assessee denies liability to be assessed under the Act. The court noted that the term 'assessed' has a broad connotation, encompassing the entire procedure for imposing tax liability. This interpretation aligns with precedents, including the Full Bench decision in CIT vs. Geeta Ramkali Ram and the Supreme Court's ruling in Central Provinces Manganese Ore Co. Ltd. vs. CIT.The court concluded that orders under sub-sections (6) and (7) of Section 206C, which involve determining tax liability and interest for shortfall in tax collection, fall within the ambit of 'assessment' and are thus appealable under Section 246A(1)(a) of the Act.2. Liability to Collect Tax on Basic License Fee and Excise Duty:The District Excise Officer, acting as the assessee, was obligated to collect tax at source on the sale of alcoholic liquor. The department contended that the officer collected tax only on the cost of liquor, not on the basic license fee and excise duty, resulting in a shortfall.The assessee argued that it was not responsible for collecting tax on the license fee or excise duty, as these did not constitute 'goods' under the statutory definitions of 'buyer' and 'seller' in Section 206C. The court referred to the Supreme Court's decision in Union of India vs. M/s. Omprakash, which held that tax collection at source applies only to the cost of liquor and not to the license fee.The court further elaborated that the license fee and excise duty are payments for the privilege of trading in liquor, not for the sale of goods. Therefore, these amounts fall outside the scope of Section 206C. The assessee's denial of liability to collect tax on these amounts was justified, and the appeal was maintainable under Section 246A(1)(a).Conclusion:The court dismissed the appeals, upholding the ITAT's decision that the orders under sub-sections (6) and (7) of Section 206C are appealable under Section 246 of the Income Tax Act. The District Excise Officer was not liable to collect tax on the basic license fee and excise duty, and the appeals were maintainable under the relevant statutory provisions. The judgment reinforces the principle that appeal rights should be interpreted liberally to advance justice.