Collection of income-tax at source during the financial year 1989-90-Profits and gains from the business of trading in alcoholic liquor, forest produce, etc.-Instructions regarding - Income Tax - 535/1989

Collection of income-tax at source during the financial year 1989-90-Profits and gains from the business of trading in alcoholic liquor, forest produce, etc.-Instructions regarding Circular No. 535 Dated 26/6/1989 Attention is invited to this Department's Circular No. 525 [F. No. 275A/3/88-IT (B)], dated 24th November, 1988, [printed at [1988] 174 ITR (St.) 56] wherein the rates at which collection of income-tax have to be made at source during the financial year 1988-89 in respect of profits and gains from the business of trading in alcoholic liquior (other than Indian made foreign liquor), timber and other forest produce were communicated. 2. Subsequent to the issue of the aforesaid circular, the Direct Tax Laws (Amendment) Act, 1989, substituted the words "Ten per cent." by the words "Five per cent." occurring in column 3 against item (iii) of the Table below sub-section (1) of section 206C, thereby providing that in respect of the timber obtained by any mode other than forest lease, income-tax shall be collected at the rate of 5% of the purchase price payable by the buyer. The said amendment has come into effect from June 1, 1988. The Direct Tax Laws (Amendment) Act, 1989, has alo inserted a new sub-section (5A) in section 206C to provide that every person collecting tax in accordance with the provisions of section 206C shall prepare half-yearly returns for the period ending on 30th September and 31st March in each financial year and deliver or cause to be delivered to the prescribed income-tax authority such returns in such form and verified in such manner and setting forth such particulars as may be prescribed in the rules. It may also be added that the Direct Tax Laws (Amendment) Act, 1989, has inserted a proviso to clause (a) of sub-section (1) of section 44AC which provides that clause (a) relating to determination of profits in the trading of goods, in the nature of alcoholic liquor for human consumption (other than Indian made foreign liquor) at 40% of the purchase price, shall not apply where the goods are not obtained by way of acution and where the sale price of such goods as sold by the buyer is fixed by or under any State Act. In such cases, tax will not be required to be collected under section 206C. 3. Subject to the amendments/modifications mentioned in para 2 above, the instructions contained in the Department's Circular No. 525, dated November 24, 1988, ([1988] 174 ITR (St.) 56) will be applicable during the current financial year also, i.e., 1989-90. It may be noted that as per the provisions of the Finance Act, 1989, in cases in which tax has to be collected under section 206C of the Income-tax Act, the collection shall be made at the rates specified in that section, i.e., at 15% of the amount payable by the buyer (at 5% in the case of timber obtained by way mode other than forest lease), and it shall be further increased by a surcharge for the purpose of the Union calculated at the rate of 8% of such collection. 4. It may also be mentioned that the tax so collected is to be paid within seven days to the credit of the Central Government, as provided in sub-section (3) of section 206C of Income-tax Act. Failure to do so attracts prosecution under section 276BB of the Income-tax Act. Failure to collect the tax from the buyers of the goods mentioned in sections 44AC and 206C of Income-tax Act makes the "seller" of the goods responsible for paying the tax to the Central Government in terms of sub-section (6) of section 206C of the Income-tax Act. 5. These instructions may please be brought to the notice of all Departments, local authorities, corporations set up by the State Government or under the control of the State Governments, etc. In case any assistance is required in this regard the Assessing Officer or the Local Public Relations Officer of the Income-tax Department may be approached for the same who will, if necessary, obtain the orders of the higher authorities in the matter. Copies of the circular are available with the director of Income-tax (RSP PR), 6th Floor, Mayur Bhavan, Connaught Circus, New Delhi. (Sd.) B.E. Alexander Under Secretary, Central Board of Direct Taxes.