2000 (2) TMI 88 - HC - Income Tax

Summary

Issues Involved:
1. Whether the holder of L-14A licence is a "buyer" within the meaning of section 206C of the Income-tax Act, 1961.
2. Whether the Excise Department while auctioning such a license is a "seller" and required to collect 10 per cent of the amount of licence fee as income-tax.

Summary:

Issue 1: Definition of "Buyer" u/s 206C of the Income-tax Act, 1961
The petitioners, holding L-14A licences for retail vend of country spirit, were considered by the Deputy Commissioner of Income-tax as "buyers" within the meaning of section 206C of the Income-tax Act, 1961. The petitioners purchased country liquor from wholesalers (L-13 licensees) who in turn bought it from distilleries. The court held that the petitioners are not "buyers" as defined in section 206C since they fall under the exclusion clause (a)(ii) of the Explanation, which excludes buyers in the further sale of such goods. The first sale is from distilleries to wholesalers, making the petitioners subsequent buyers.

Issue 2: Definition of "Seller" u/s 206C of the Income-tax Act, 1961
The court examined whether the Excise and Taxation Commissioner, who issued L-14A licences, could be considered a "seller" required to collect 10 per cent of the licence fee as income-tax. The court concluded that the Excise and Taxation Commissioner did not sell any goods specified in column No. 2 of the Table u/s 206C but only granted licences. Therefore, he cannot be described as a "seller" within the meaning of the Act.

Additional Considerations:
The court also clarified that the "amount payable" u/s 206C refers to the purchase price of the goods sold, not the licence fee. The licence fee is unrelated to the purchase of country liquor and must be paid regardless of any liquor purchase. Thus, the licence fee cannot be included in the amount payable for the purpose of collecting income-tax at source.

Conclusion:
The writ petitions were allowed, and the impugned notices requiring the petitioners to deposit 10 per cent of the licence fee as income-tax were quashed. There was no order as to costs.