TaxTMI 
TaxTMI 
2000 (12) TMI 20
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....nd 206C were inserted in the 1961 Act for computing the profits and gains from the business of trade in certain goods, including liquor, with effect from April 1, 1989, and for collection of tax at source with effect from June 1, 1988. This was followed by the Direct Tax Laws (Amendment) Act, 1989, vide which the following proviso was inserted in section 44AC: "Provided that nothing contained in this clause shall apply to a buyer where the goods are not obtained by him by way of auction and where the sale price of such goods to be sold by the buyer is fixed by or under any State Act." In view of these provisions, the distilleries started making deductions of tax on the transactions involving sale of liquor to the holders of L-13 licences granted under the Punjab Excise Act, 1914 (for short, "the 1914 Act"), read with the Punjab Liquor Licence Rules, 1956 (for short "the Rules"). This was challenged by the licensees by filing writ petitions in various High Courts, including this court and the High Court of Himachal Pradesh. In Gian Chand Ashok Kumar and Co. v. Union of India [1991] 187 ITR 188, a Division Bench of the Himachal Pradesh High Court held that L-13 licensees fall w....
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....----- (1) (2) (3) --------------------------------------------------------------------------------------- (i) Alcoholic liquor for human consumption (other than Ten per cent. Indian made foreign liquor) and tendu leaves (ii) Timber obtained under a forest lease Fifteen per cent. (iii) Timber obtained by any mode other than under a forest Five per cent. lease (iv) Any other forest produce not being ....
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....es appear to be a class which, in view of the existing system of the transaction of sale of country liquor, cannot be considered to be a class evading payment of tax. Hence, in respect of L-13 licensees income-tax cannot be deducted from sales made to them by distilleries under section 206C." The special leave petition filed by the Union of India and others against that order were dismissed by the Supreme Court on November 1, 1993. The question as to whether the holder of an L-13 licence can deduct tax at source under section 206C of the 1961 Act from an L-14 licensee came up for consideration before a Division Bench of this court in Satya Pal Amrik Singh and Co. v. Union of India [1997] 228 ITR 653. After considering the scheme of section 206C of the 1961 Act and the relevant rules, this court held as under: "Rule 38(15)(g) of the Rules of 1956 imposes a restriction on the sale of country spirit by L-13 licensees at rates other than those fixed by the Excise Commissioner. In terms of the conditions of auction, L-14 licensees are bound to purchase liquor from L-13 licensees. In these cases, the petitioners do not have freedom to obtain their supply from any other source ot....
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....es of persons are excluded from the concept of buyers as defined in section 206C with the result that persons who fall in any of these three clauses will not be covered by the definition even if they are covered by the first part. A buyer in the further sale of such goods is one of the classes of persons who stand excluded from the definition by virtue of sub-clause (ii) of clause (a) of the Explanation being the subsequent buyers. The petitioners before us undoubtedly purchased country liquor from the wholesalers who are L-13 licensees and the latter had purchased the same from the distilleries (manufacturers). The sale in favour of the petitioners is thus a second sale covered by the exclusion sub-clause (ii) of clause (a) of the Explanation. In this view of the matter, the petitioners are not buyers within the meaning of section 206C of the Act. . . ." The argument urged on behalf of the Department that the petitioners were covered by the first part of the Explanation appearing below section 206C was rejected by the court with the following observations: "It was strenuously contended by Shri Sawhney, on behalf of the Department, that the Explanation talks of two types of b....
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....ource. We are of the opinion that this view of the Income-tax Department is wholly misconceived and not warranted from the provisions of section 206C of the Act. A seller is required to collect ten per cent. of the amount as income-tax at source only on the sale of goods of the nature specified in column No. 2 of the Table. What the Excise and Taxation Commissioner can be said to have sold to the petitioner are the L-14A licences on the basis of which they can carry on their business of selling country liquor in retail. He has not sold any goods of the nature specified in column No. 2 of the Table. He has not sold country liquor. The licence only gives a right to the petitioner to receive the goods of the nature specified in column No. 2 of the Table and the requirement of sub-section (1) of section 206C is that ten per cent. of the amount payable is to be collected by the seller from the buyer of the goods and not from the buyer of the right to receive the goods. Since no goods have been sold by the Excise and Taxation Commissioner, he cannot be described as a seller within the meaning of the Act. We may now examine the matter from another angle as well. Sub-section (1) of sect....
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....es during the year 1998-99. In its reply, the petitioner-Chandigarh Distillers and Bottlers, averred that it could not deduct tax from the licensees in view of the judgment of the High Court in K. K. Mittal's case [1991] 187 ITR 208 (P&H) and Satya Pal Amrik Singh and Co.'s case [1997] 228 ITR 653 (P&H). The licensees challenged the action initiated by respondent No. 3 by filing C.W.P. No. 17291 of 1999 (Jaspal v. Union of India). By an order dated December 14, 1999, this court stayed the operation of the notices impugned in that petition, which was ultimately disposed of as infructuous on May 8, 2000, because the period of licence had expired. Soon after the disposal of C. W. P. No. 17291 of 1999, respondent No. 3 issued notices dated May 9, 2000, to the petitioners and called upon them to collect tax from the licensees under section 206C of the 1961 Act and also file prescribed returns. The petitioners filed detailed replies to the said notices reiterating their earlier stand that in view of the judgments of the High Court, they were not in a position to deduct the tax. The petitioner Chandigarh Distillers and Bottlers, also furnished a statement containing the particulars of ....
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..... Union of India the petitioners were bound to deduct tax at source. The petitioners have filed separate rejoinders in which they have averred that the decision of the two judges Bench of the Himachal Pradesh High Court in Rudra and Co. v. Union of India [1998] 233 ITR 66 cannot be relied upon by the respondents to justify the impugned notices because the same stands overruled by the Full Bench of the same High Court in C. W. P. No. 224 of 1999 (Saini and Co. v. Union of India [2000] 246 ITR 762) decided on September 8, 2000. Respondents Nos. 1 and 2 have filed counter affidavits asserting therein that the applicability of section 206C in the cases of persons having L-13 licences must be determined keeping in view the fact that such persons also hold L-14 licences. We have heard learned counsel for the parties. The decisions of the Supreme Court in Union of India v. A. Sanyasi Rao [19961 219 ITR 330 and of the Division Bench of the Himachal Pradesh High Court in Rudra and Co. v. Union of India [1998] 233 ITR 66 have been considered by the Full Bench of the Himachal Pradesh High Court in C. W. P. No. 224 of 1999 (Saini and Co. v. Union of India [2000] 246 ITR 762) decide....
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....ision remained a 'buyer' even after the amendment in 1993 in section 206C. Likewise, a person, who was not a 'buyer' and whose case was covered under the proviso to section 44AC prior to the amendment of 1993 remained as such and did not become a 'buyer' under the Explanation to section 206C even after the amendment of 1993. To put it differently, stating positively a person, who was a 'buyer' earlier under section 44AC remained as 'buyer' under section 206C. Similarly, stating negatively, a person, who was not a 'buyer' under the former provision remained as such and did not become a 'buyer' under the latter provision after the insertion of section 206C. In our considered opinion, therefore, the former Division Bench in Gian Chand Ashok Kumar's case [1991] 187 ITR 188 (HP) was wholly right and fully justified in coming to the conclusion that a person covered by the proviso to section 44AC cannot be said to be a 'buyer' and hence no tax can be deducted at source in respect of liquor obtained by him from the distilleries. The same principle and analogy will apply to section 206C as cases of such L-13 and L13A licensees under the Explanation to section 206C. We are further of the ....