Liquor licence holders with fixed sale prices are not "buyers" for TCS under Section 206-C

Retail liquor vendors holding valid licences under the U.P. Excise Act, 1910, whose sale price is fixed by or under that Act, are outside the definition of "buyer" in Explanation (a)(iii) to Section 206-C of the Income Tax Act, 1961, where the goods are not obtained by auction. A licence to carry on liquor trade does not, by itself, make the licensee a buyer for tax collected at source purposes. Accordingly, tax collection at source was not applicable to such vendors, and the TCS demand could not be sustained.

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Issues: Whether Tax Collected at Source under Section 206-C of the Income Tax Act, 1961 was exigible from retail liquor vendors whose sale price was fixed by the Excise Commissioner under the U.P. Excise Act, 1910, and whether such vendors fell within the definition of "buyer".

Analysis: The petitioners held valid retail licences under the U.P. Excise Act, 1910, and the maximum retail price was fixed under Section 41(e)(iii) of that Act. Under Explanation (a)(iii) to Section 206-C of the Income Tax Act, 1961, a buyer does not include a person where the goods are not obtained by auction and the sale price is fixed by or under a State Act. The governing principle applied was that a licence to carry on liquor trade does not, by itself, make the licensee a buyer of goods for the purpose of Section 206-C. On that basis, the petitioners were outside the ambit of tax collection at source.

Conclusion: The petitioners were not liable to deduction or collection of tax at source under Section 206-C, and the demand for TCS could not be sustained.

Ratio Decidendi: A liquor licensee whose sale price is fixed by or under a State Act and who does not obtain the goods by auction is not a "buyer" for the purposes of Section 206-C of the Income Tax Act, 1961; therefore, tax collected at source is not applicable.

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