1993 (9) TMI 57 - HC - Income Tax

Appeal To Supreme Court, High Court, Income Tax Act, Liquor Business, Tax At Source, Taxing Statutes

Summary

Issues Involved:
1. Vires of sections 44AC and 206C of the Income-tax Act, 1961.
2. Applicability of section 206C to wholesalers with different statuses.
3. Interpretation of "seller" under section 206C.
4. Amendments to the writ petitions questioning the vires of section 206C as amended by the Bihar Finance Act, 1992.
5. Legality of partnerships under the Bihar and Orissa Excise Act in relation to section 206C.

Detailed Analysis:

1. Vires of Sections 44AC and 206C of the Income-tax Act, 1961:
The petitioners questioned the vires of sections 44AC and 206C of the Income-tax Act, 1961. However, the court acknowledged that this issue is pending before the Supreme Court of India in Transfer Petition No. 42 of 1984: Bihar Excise Vendors Association v. Union of India. Consequently, the court did not decide on this question and clarified that the decision would be governed by the Supreme Court's ultimate decision.

2. Applicability of Section 206C to Wholesalers with Different Statuses:
The court referred to multiple precedents, notably Ramjee Prasad Sahu v. Union of India [1993] 202 ITR 800, which held that under the amended section 206C, wholesalers who are individuals, Hindu undivided families, or associations of persons cannot collect income-tax under section 206C. In Raghunath Prasad v. Union of India [1993] 2 BLJ 152, it was reiterated that if a wholesaler's status is that of an individual for income-tax purposes, they cannot collect income-tax under section 206C.

3. Interpretation of "Seller" under Section 206C:
The court examined the definition of "seller" under section 206C, confirming that entities such as the State of Bihar qualify as sellers (State of Bihar v. CIT [1993] 202 ITR 535). In Sheo Shankar Pd. v. Union of India [1993] 1 PLJR 485, it was held that a private limited company is covered under the definition of "seller." The court further clarified that the term "seller" includes firms, even if the business is carried out by a firm where the licensee is an individual.

4. Amendments to the Writ Petitions:
The court did not allow amendments to the writ petitions questioning the vires of section 206C as amended by the Bihar Finance Act, 1992. Instead, it suggested that petitioners file separate writ applications to challenge the amended section.

5. Legality of Partnerships under the Bihar and Orissa Excise Act in Relation to Section 206C:
The court discussed the legality of partnerships where a licensee forms a firm. It cited CIT v. Prakash Ram Gupta [1969] 72 ITR 366 and Jer and Co. v. CIT [1971] 79 ITR 546, emphasizing that a licensee can enter into a partnership without violating the Bihar and Orissa Excise Act. The court concluded that a firm registered under the Income-tax Act must comply with section 206C, regardless of the legality of its constitution under the Excise Act.

The court held that a firm, even if constituted by an individual licensee, falls under the definition of "seller" in section 206C. However, for cases where returns have been filed and taxes paid, no further action is required. Individual assessees can approach authorities for relief if liable for large payments.

Conclusion:
All writ applications are disposed of with directions subject to the Supreme Court's final decision. The court's decision is aligned with previous judgments, confirming the applicability of section 206C to firms and clarifying the interpretation of "seller" under the Income-tax Act.