1998 (3) TMI 105 - HC - Income Tax

Summary

Issues:
- Whether liquor license-holders can seek a writ of mandamus against income-tax authorities to not collect income tax at source under section 206C of the Income-tax Act.
- Relevance of a previous judgment regarding the applicability of section 44AC to the current petitioners.
- Constitutionality of section 206C upheld by the Supreme Court.
- Application of article 14 of the Constitution in the context of income tax collection from liquor license-holders.

Analysis:
The petitioners, who are liquor license-holders purchasing country liquor from Government distilleries and selling to retail shops, sought a writ of mandamus against income-tax authorities to avoid income tax collection at source under section 206C. They relied on a previous Division Bench judgment regarding the applicability of section 44AC to L-13 licensees. However, the Advocate-General argued that since section 44AC was deleted and the constitutionality of section 206C was upheld by the Supreme Court, the petitioners cannot contest the tax deduction. The court examined the nature of trade and purchase obligations in the previous judgment to conclude that the petitioners were exempt under the proviso to section 44AC, which was subsequently deleted. The current provisions of section 206C require sellers, including Government distilleries, to collect income tax from buyers, as clarified by the Explanation defining a "buyer."

The court emphasized that the petitioners' mode of purchase, not through auction but directly from Government distilleries, still falls under the purview of section 206C. The sellers are obligated to collect income tax at specified rates. The attempt to invoke article 14 of the Constitution based on a communication suggesting exemption from tax collection was dismissed as irrelevant, as the previous judgment regarding section 44AC did not apply post its deletion. The court reiterated that the petitioners cannot challenge the legality of tax deduction at source under section 206C, especially after the Supreme Court upheld its constitutionality. Consequently, all writ petitions were dismissed, and no costs were awarded.