1992 (5) TMI 7 - HC - Income Tax

Summary

Issues Involved:
1. Whether the State of Bihar is a "seller" of alcoholic liquor for human consumption within the meaning of section 44AC and section 206C of the Income-tax Act, 1961.

Summary:

1. Definition of "Seller" u/s 44AC and 206C:
The primary issue is whether the State of Bihar qualifies as a "seller" of alcoholic liquor for human consumption u/s 44AC and 206C of the Income-tax Act, 1961. The State of Bihar controls alcoholic liquor from manufacture to consumption under the Bihar Excise Act, 1930. The petitioners argue that the State merely collects a fee for the privilege of dealing with the liquor, without transferring ownership of the liquor itself, which remains with wholesale dealers. The respondents, however, assert that the Excise Department is the seller and must comply with section 206C of the Act.

2. Petitioners' Arguments:
The petitioners, represented by Mr. K. N. Jain, argue that the Excise Department does not deal in liquor and thus cannot be considered a seller within the meaning of section 44AC. They emphasize that the State merely regulates transactions and collects duties, without owning the liquor at any point. The prices paid by retail dealers are credited to a separate account and then paid to the distillers by the State.

3. Respondents' Arguments:
Mr. Rastogi, representing the Income-tax Department, contends that since the State collects the cost price of liquor, it is bound to collect the tax from retail dealers. He points out that tax had been collected in the past, but due to short-payments, proceedings were initiated against the petitioners under the Act. He argues that the State is a "seller" as it collects the cost price and excise duty from retail dealers.

4. Interpretation of Relevant Provisions:
The court examines the provisions of the Bihar Excise Act and rules framed thereunder, highlighting that the State exercises control over the entire process of liquor manufacture and sale. The court notes that the State collects the cost price and excise duty, and the distillers have no direct contact with retail dealers. The court concludes that the State acts as a seller or at least as an agent of the distillers/wholesalers in the sale of liquor.

5. Legislative Intent and Context:
The court considers the legislative intent behind sections 44AC and 206C, introduced to combat tax evasion by liquor contractors and other traders. The provisions were designed to ensure tax collection from businesses dealing in specified goods, including alcoholic liquor. The court emphasizes that the statute must be interpreted in light of its purpose to prevent tax evasion and ensure revenue collection.

6. Conclusion:
The court concludes that the State of Bihar qualifies as a "seller" within the meaning of sections 44AC and 206C of the Income-tax Act. The application is dismissed, and the court holds that the State is responsible for collecting tax on the sale of alcoholic liquor for human consumption.

Judgment:
The application is dismissed, and the State of Bihar is deemed a "seller" under sections 44AC and 206C of the Income-tax Act, 1961. There is no order as to costs.