1992 (9) TMI 60 - HC - Income Tax

Summary

Issues Involved:
1. Whether a sum equal to 15% of the excise duty payable by the petitioners on account of the purchase of country spirit can be collected as income-tax u/s 206C of the Income-tax Act, 1961.
2. The interpretation of the terms "buyer" and "seller" under section 206C.
3. The applicability of the Supreme Court's decision in McDowell and Co. Ltd. v. CTO.
4. The relevance of the decision in State of Bihar v. CIT.
5. The constitutional validity of sections 44AC and 206C of the Income-tax Act.

Summary:

1. Collection of Income-tax on Excise Duty u/s 206C:
The court examined whether income-tax could be collected on the excise duty paid by retail vendors for country spirit. It was determined that income-tax u/s 206C should only be collected on the cost price paid by the vendors to the wholesalers, not on the excise duty paid to the government.

2. Interpretation of "Buyer" and "Seller":
The terms "buyer" and "seller" were defined under section 206C. The court clarified that the seller, in this context, is the wholesaler who receives the cost price, and the buyer is the retail vendor. The State Government, which collects excise duty, is not considered a seller and thus cannot collect income-tax on the excise duty.

3. Applicability of McDowell and Co. Ltd. v. CTO:
The court distinguished the present case from McDowell and Co. Ltd. v. CTO, where excise duty was included in the sale consideration. Here, the excise duty is paid separately by the retail vendors to the government, and the cost price is paid to the wholesalers. Thus, the excise duty does not form part of the sale consideration for the purpose of collecting income-tax u/s 206C.

4. Relevance of State of Bihar v. CIT:
The court noted that the decision in State of Bihar v. CIT, which interpreted sections 44AC and 206C, is not applicable to the current case. The provisions of section 206C, as substituted by the Finance Act, 1992, are materially different, and the State Government is no longer considered a seller for the purpose of collecting income-tax on excise duty.

5. Constitutional Validity of Sections 44AC and 206C:
The court acknowledged that the constitutionality of sections 44AC and 206C is pending before the Supreme Court. However, it proceeded on the basis that the current provisions of section 206C are intra vires the Constitution. The court emphasized that its decision would be subject to any future ruling by the Supreme Court on the constitutionality of these sections.

Conclusion:
The court concluded that income-tax u/s 206C should be collected only on the cost price paid by the retail vendors to the wholesalers and not on the excise duty paid to the government. The writ applications were allowed to the extent indicated, without any costs.