TaxTMI 
TaxTMI 
2011 (3) TMI 80
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....ppeals have been admitted on the following common question of law: "Whether on fact and circumstances of the case, the ITAT was legally justified by not treating the basic licence fee as purchase price for the purpose of section 206C of the I.T. Act, 1961 and by not treating the District Excise Officer in default in respect of tax collectable at source u/s 206C (1) as well as in respect of interest chargeable u/s 206C(7) as he was liable to collect tax as source." 2. The background facts of the case may be noticed in brief. 3. The assessees namely District Excise Officer, Muzaffarnagar (in eight appeals) and District Excise Officer, Saharanpur (in three appeals) were subjected to the proceedings under Sections 206C (1) and 206 C(7) of the Income Tax Act (hereinafter referred to as the Act) for the assessment years 1989-90 to 1997-1998. The appeal no.39 of 2003 was left out by the office due to omission and was not shown in the cause list. But the record of the same was summoned from the office as everything including parties and counsel are the same. 4. On scrutiny of the returns filed by the assessee under the provisions of sub section (5A) ....
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....nbsp; Rs. 1,84,19,216/- I, therefore, direct to issue necessary notice of demand and challan of Rs.1,84,19,216/- for payment within a week of receipt of this order, failing which, necessary action will be taken to recover the said demand. Penalty show cause notice for failure to furnish half yearly returns for the half year ending 30.9.91 to 30.9.92 under section 272A(2)(c) has been issued separately and also penalty show cause notice u/s271C for failure to deduct tax at source to the above extend has been issued seperately." 6. The calculation of the liability on basic licence fee for failure to collect tax at the source for ....
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.... the distillers as the terms of license of manufacturer reveals. Subsequently the government grants rights for sale of liquor to the retailers (liquor contractors) for a consideration i.e. license fees. This shows that at no point of time the right to sale the liquor remains with the distiller and rather the State Government with itself always keeps this right of sale. Thus it is clear that the work of supplying whole sale liquor to the retailers is with the state government which performs this function through the District Excise Officer. Therefore, the state government/DED is 'seller' in the above case as defined in section 206C of the I.T. Act. 10. It was further submitted that the state excise authorities have collected tax at source u/s 206C on the amount of cost price of liquor at the time of purchase. Therefore, if the state excise authority can collect tax u/s 206C of the I.T. Act on certain amount (cost price) of liquor from liquor contractors during these years, then it cannot be claimed that liability to collect tax on the basic licence fees was not on its part, as it was clearly a 'seller' within the meaning of section 206C of the I.T. Act. 11. In re....
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.... 16. License fee: has been defined in rule 3(m) to mean that part of bid money which is payable on acceptance of the bid other that the part of bid money described as basic license fee. 17. Basic license fee is defined in rule 3(g) to mean that part of the bid money which is payable by the auction purchaser calculated on the entire minimum guaranteed quantity at the rate notified Excise Commissioner from time to time. 18. From the above definitions it would be seen that the License fee is the auction money which is offered by a buyer in an auction at the fall of hammer in an auction. It is a fee charged by the govt. for granting exclusive privilege of selling by retail any country liquor or foreign liquor in the shop or groups of shops for which the auction is made. Thus the license fee is in lieu of obtaining exclusive right for trading in liquor which is otherwise prohibited by law. 19. Basic license fee is the amount fixed by the Excise Commissioner in respect of a shop or group of shops calculated on the entire minimum guaranteed quantity (MGQ) at the notified rates. The govt. has fixed a minimum quantity for every shop or groups of shops of count....
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....ent as provided in the case of other assessees under the various sections shall also be made. In other words, section 206C is not a charging section. In the case of Union of India and others Vs. Om Prakash SS & Co. and another (supra), a case under the State Excise Act, it has been held that "buyer" would mean whether a person by virtue of payment, gets a right to receive specified goods and not where he has merely allowed/permitted to carry on the business in that trade. The relevant extract is quoted below: "Buyer would mean whether a person by virtue of payment, gets a right to receive specified goods and not where he has merely allowed/permitted to carry on the business in that trade." 26. The aforesaid observation of the Apex Court clearly points out a distinction in between "a mere right to carry on a business in a particular trade" and "a right to receive specified goods". As already delineated above the assessee herein has collected the tax at source on the sale/purchase price of the liquor. To this extent there is no dispute. The assessee has not collected the tax at source on the licence fee i.e. the amount paid by the assessee to the State Government ....