TaxTMI 
TaxTMI 
2026 (7) TMI 1648
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....r. Raja Shekar Rao Salvaji, learned Senior Standing Counsel for Income Tax Department for the appellant; Mr. A.V. Krishna Koundinya, learned Senior Counsel appearing for Mr. A.V.A. Siva Kartikeya, learned counsel for respondent No.1, and Mr. A. Sudarshan Reddy, learned Advocate General for the State of Telangana appearing for Mr. A.K. Kanishka Anand, learned Standing Counsel for T.G.B.C.L. for respondent No.2. 2. Since the issue involved in the instant batch of appeals is one and the same and the parties also being the same, they are heard together and are decided by this Common Judgment. 3. The instant appeals under Section 260A of the Income Tax Act, 1961 (for short 'the Act of 1961') have been preferred by the appellant challenging the common order passed by the Income Tax Appellate Tribunal, Hyderabad Bench 'B', Hyderabad (for short the 'ITAT'), in ITA.Nos.1024 to 1029/Hyd/2005, decided on 15.09.2006. 4. For convenience, the facts in Income Tax Tribunal Appeal No.69 of 2008 are discussed hereunder. 5. The facts of the case in brief are that the respondent No.1 / A.P. Beverages Corporation Limited (for short the 'APBCL') which is a State Government undertaking had th....
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....on that basis the onward sale by APBCL to retail dealer becomes the first taxable point in the chain attracting Section 206C of the Act of 1961 and confirmed the demand. 8. Aggrieved by this order, the APBCL further filed an appeal before the ITAT. The ITAT held that 'Beer' should be treated as IMFL and therefore it would fall outside Section 206C's earlier entry covering "alcoholic liquor for human consumption other than IMFL". It also relied on the legislative intent and a press note to read the provision as mainly aimed at country liquor, so it concluded that tax at source was not payable on the 'Beer's sales in question. Thus, aggrieved by this order the Department has filed an appeal before this Court under Section 260A of the Act of 1961. 9. The primary contention of N. Venkatraman, learned Assistant Solicitor General appearing for Mr. Raja Shekar Rao Salvaji, learned Senior Standing Counsel for Income Tax Department, was that APBCL was a "seller" within the meaning of the Explanation to Section 206C of the Act of 1961. That once it is found that the commodity sold is "alcoholic liquor for human consumption (other than IMFL)", the obligation to collect tax at source is ....
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....of the Act of 1961. It was submitted that when Section 206C of the Act of 1961 by its own language specifies the nature of goods and mandates collection at sources, the ITAT ought not to have diluted or restricted its operation by importing external aids, particularly when the provision is clear and unambiguous. That executive press notes cannot override the enacted text nor can they be treated as binding instruments for narrowing the charging the scope of the statute. The ITAT's approach in rewriting the provisions by effectively carving out 'Beer' from the specified goods despite the Department's case as accepted by the Commissioner of Income Tax (Appeals) that 'Beer' falls within "alcoholic liquor other than IMFL" for the relevant period. Therefore, the learned Assistant Solicitor General prays that this Court to set aside the ITAT's order and allow the instant batch of appeals. 13. The learned Assistant Solicitor General in support of his contentions, relied upon the following decisions: a) Excellent Timber Imports & Exports (P.) Ltd. vs. Income Tax Officer [2017] 88 taxmann.com 531 (Kerala) b) Commissioner of Central Excise, Bolpur vs. Ratan Melting & Wire....
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....ction 206C is, in substance, a collection-at-source machinery provision and cannot be elevated into a self-contained rule for either chargeability or computation of business income. He also pointed out that Section 206C(1) requires collection "at the time of debiting or at the time of receipt whichever is earlier", which shows that it is triggered by a transactional event and is designed to ensure advance recovery of tax on income "comprised therein". However, Section 206C(4) of the Act of 1961 expressly treats the amount collected as payment of tax on behalf of the buyer and mandates that credit shall be given in the regular assessment "for the assessment year for which such income is assessable", thereby preserving the primacy of the normal assessment process. 17. Learned Senior Counsel further submitted that the legislative intent of section 44AC itself supports a strict and contextual reading where the Direct Tax Laws (Amendment) Act, 1989, inserted a specific proviso (in clause (a) relating to alcoholic liquor) providing that the presumptive deeming rule would not apply where the liquor is not obtained by auction and where the sale price of such goods is fixed by or under a....
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.... 2004-2005) are all pre-bifurcation years and respondent No.2 was not the original assessee before the authorities below. 21. Mr. A. Sudarshan Reddy, learned Advocate General for the State of Telangana appearing for Mr. A.K. Kanishka Anand, learned Standing Counsel for T.G.B.C.L. contended that T.G.B.C.L. is before this Court primarily to assist in defending the correctness of the common order passed by the ITAT in ITA.Nos.1024 to 1029/Hyd/2005, decided on 15.09.2006, whereby the ITAT held that 'Beer' fell within the class of IMFL for purposes of the un-amended entry in Section 206C and consequently that TCS was not attracted on 'Beer' prior to 01.06.2003. The learned Advocate General further contended the submissions of the learned Senior Counsel for respondent No.1 in relation to the contemporaneous Press Notes and CBDT explanatory circulars, the object and scope of Sections 44AC and 206C and the alternative submissions founded on the Explanation to Section 206C regarding the position of the assessee in the chain of sale. 22. The learned Advocate General further contended that the controversy is narrow and turns on the language of the statutory entry prior to 01.06.2003 whi....
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....rcentage or distinct regulatory handling. The strongest point against the appellant's contentions is that the statutory amendment effective from 01.06.2003 deleting the IMFL exclusion where if 'Beer' were always outside IMFL, the amendment would be largely redundant as regards 'Beer'. A coherent reading is that Parliament prospectively widened the entry by removing the carve-out meaning that pre-01.06.2003 IMFL (including 'Beer') stood outside the TCS net and post 01.06.2003 it stood included, thereby giving full effect to the amendment. Consequently, once 'Beer' is held outside the pre 2003 entry, the "seller / buyer" mechanics and interest under Section 206C(7) becomes academic and in any event, any reasonable doubt on coverage must be resolved in favour of the assessee as held in the case of The Commissioner of Income Tax, West Bengal 1, Calcutta vs. M/s. Vegetable Products Ltd (1973) 88 ITR 92 (SC). 25. In support of his arguments, the learned Advocate General relied on the following decisions: a) Arlem Breweries Ltd. vs. Assistant Commissioner of Sales Tax, Panaji 1983 SCC OnLine Bom 466 b) Allied Motors (P) Ltd. vs. Commissioner of Income Tax, Delhi (1997....
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....mported from foreign countries and includes Wine, Beer, Milk Punch and other liquors consisting of or containing any such spirits, but does not include Foreign Liquor;]" 32. It would also be relevant at this juncture to refer to a few judgments on the subject matter. In the case of Arlem Breweries Ltd. (supra) in paragraph No.27, it has been held as under: "27. The last question was whether ''Beer'' could be classified as "Indian made foreign liquor" liable for sales tax under item 22 of the First Schedule to the Act, viz., "foreign liquor and Indian-made foreign liquor". Although the Sales Tax Act does not define the said term, the Goa, Daman and Diu Excise Duty Act of 1964 which was also a fiscal statute dealing with same subject, defined in section 2(kk) of the said Act the said expression as meaning "brandy, whisky, gin, rum, milk punch, wines or 'Beer' manufactured in India and such other liquor as may be declared by the Government as Indian-made foreign liquor. Apart from the said definition, ''Beer'' which was a drink of foreign origin, and also was a liquor though of lower alcohol percentage could be without any difficulty classified as Indian-made foreign liquo....
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.... a reasonable interpretation can be given to the section as a whole." 35. Lastly, in the case of A. Sanyasi Rao and Others (supra) it was held as under: "3. The above new provisions enable the Revenue to estimate the profits on a "presumptive basis". It appears that Government wanted to get over the problems in assessing income and recovering tax in the case of persons dealing in country liquor, timber, forest produce, etc. Experience revealed that a large number of persons dealing in the said commodities did not maintain any books of account or the books of account maintained by such persons are incomplete. The business of the above-mentioned persons existed only for a short period - a year or two. After the period of contract or agreement, it was impossible to trace them in many cases. Many of them were found to be dealing in benami names. There was evasion on a large scale. Government found it difficult to collect the tax due from such persons. Section 44-AC occurs in Chapter IV of the Act dealing with computation of total income. Section D deals with computation of profits and gains of business or profession. Section 44-AC(1) determines the profits and gains of the ....
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....main question is simply whether the goods sold fit that Table description. For the years in question, the relevant entry was framed as "alcoholic liquor for human consumption (other than IMFL)". The words in parentheses are not decorative or incidental, but they are part of the definition of the taxable category and operate as an inbuilt limitation. The entry covers only that subset of alcoholic liquor which is not IMFL. To put in simple language, the Revenue is only partly right where TCS is mandatory only if the sale falls within the table entry and the entry applies only when the goods match the description completely including the words in brackets that exclude IMFL. So unless it is first shown that 'Beer' is not IMFL for that period Revenue cannot say TCS was automatic just because 'Beer' is alcoholic liquor for human consumption. 38. Moreover, the term IMFL is not defined anywhere in the Income-tax Act when a tax law uses a common commercial term but does not define it, Courts generally do not invent a new meaning on their own. Instead, they try to understand the term in the way it is normally understood by people who deal with that product in real life, such as traders, s....
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....of 1961 as a tax collection mechanism. 40. At most, State excise practice and regulatory documents can be treated as supporting or background material. They may help the Court understand how the product is generally viewed in administration and trade, but they cannot override the text of the Income-tax Act or nullify an exclusion that Parliament has expressly built into the statutory description of goods. The same principle applies to the ITAT's use of contemporaneous explanatory material, such as Press Notes or CBDT explanatory notes. The ITATdid not treat those materials as if they were "law" or as if they could change the statute. It referred to them only for a limited and legally permissible purpose, namely to assist in understanding an undefined commercial expression like "IMFL" and to appreciate the context in which the collection-at-source scheme was introduced. 41. Yet another aspect which was highlighted by the learned counsel appearing for the respondents was that the demand and contention raised by the appellant / Revenue has not been applied or made applicable in any of the States or Union Territories within the country and has been experimented only in the State ....