Retail Vendors exempt from Tax Collected at Source under Income Tax Act; Court cites Excise Commissioner's pricing authority

The Court ruled in favor of the petitioners, Retail Vendors, holding that they are not liable for Tax Collected at Source under Section 206-C of the Income Tax Act. Citing legal precedents, the Court determined that as license holders operating under fixed prices set by the Excise Commissioner, they do not qualify as 'buyers' subject to tax deduction at source. With no rebuttal from the Union of India, the Court accepted the petitioners' claims, emphasizing the powers of the Excise Commissioner in setting prices. Consequently, the Assessing Authority's demands for tax deduction were deemed unsustainable, and the opposite parties were prohibited from deducting tax at source from the petitioners.

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Issues:
Petitioners challenging deduction of Tax Collected at Source under Section 206-C of the Income Tax Act, 1961 by the opposite parties.

Analysis:
The petitioners, Retail Vendors holding valid licenses under the U.P. Excise Act, 1910, contested the deduction of Tax Collected at Source by the opposite parties at the time of purchasing country liquor. The petitioners argued that as they operate under licenses where the Maximum Retail Price is fixed by the Excise Commissioner, they are exempt from the provisions of Section 206-C of the Income Tax Act. They contended that since they do not acquire goods through auction and the sale price is fixed by the Excise Commissioner, they do not fall under the definition of 'buyer' as per Section 206-C.

The Court referred to legal precedents to support the petitioners' claims. In the case of Chandigarh Distillers and Bottlers Ltd. & others, it was held that license holders like the petitioners cannot be considered 'buyers' subject to tax deduction at source under Section 206-C. Similarly, in Sir Shadi Lal Enterprises Ltd. versus Union of India, it was established that the wholesale price fixed by the State becomes the minimum sale price for retailers, thereby negating the need for tax collection at source. The Apex Court's decision in Union of India and others versus Om Prakash S.S. & others emphasized that license holders engaged in liquor trade are not categorized as 'buyers' under Section 206-C.

The Court noted that the petitioners' assertions remained uncontroverted as no counter-affidavit was filed by the Union of India through the Commissioner of Income Tax. Relying on legal principles laid down by the Supreme Court, the Court treated the averments in the writ petitions as admitted due to lack of rebuttal. Additionally, the Court highlighted the powers of the Excise Commissioner under Section 41 of the U.P. Excise Act, which empower him to fix prices and quantities for liquor sales, further supporting the petitioners' position.

Consequently, the Court concluded that the demands made by the Assessing Authority against the petitioners for tax deduction at source were unsustainable. The opposite parties, including the distillery, were restrained from deducting any tax at source from the petitioners in accordance with the provisions of the Income Tax Act. All the writ petitions were disposed of finally based on the above observations and legal positions established in the judgment.

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