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TMI Blog2006 (4) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... is taxable under section 206C of the Act and not the basic fee. - - - - - Dated:- 5-4-2006 - Judge(s) : P. C. VERMA., J. C. S. RAWAT. JUDGMENT The judgment of the court was delivered by P.C. Verma J.-Appeals Nos. 35/2001, 37/2001 and 39/2001 have been filed by the appellants against the common order dated May 3, 2000, passed by the Income-tax Appellate Tribunal, Delhi Bench "D" New Delhi (in short "the ITAT"), in I.T.A. Nos. 376, 377 and 378/D of 1997, respectively (assessment years 1992-93, 1993-94 and 1994-95), whereby the learned Income-tax Appellate Tribunal has dismissed the cross-objections of the Revenue on the agreement of the parties that the issue involved in the present cross-objections stands covered in favour of the assessee by the decision of the Tribunal in I.T.A. Nos. 162 to 165 (Delhi) of 1998 dated March 29, 2000. Appeals Nos. 55/2003, 56/2003, 57/2003 and 58/2003 have been filed by the appellants against the common order dated August 1, 2001, passed by learned Income-tax Appellate Tribunal, Delhi Bench "D", New Delhi in I.T.A. Nos. 378, 377, 376 and 379/Delhi of 1997, respectively, for the financial years 1991-92, 1992-93, 1993-94 and 1994-95, whereby ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uor under the said rule and is taxable under section 206C of the Income-tax Act?" The brief facts of the case giving rise to these appeals are that the Income-tax Officer (TDS) came to know that the District Excise Officer had not collected tax on the basic licence fee (issue price) on sale of alcoholic liquor for human consumption (other than Indian made foreign) liquor and therefore he directed the District Excise Officer to supply information regarding the same in respect of the financial years 1991-92 to 1994-95. The appellant supplied such information to the Income-tax Officer (TDS). Examination of this information revealed that the District Excise Officer had not collected tax on the basic licence fee collected by him in these financial years from the liquor contractors. In reply to the show cause notice issued to the District Excise Officer, he contended before the ITO (TDS) that in accordance with the provisions of rule 3(6) of the U.P. Excise Licences (Tender-cum-Auction) Rules, 1991, the basic licence fee has been defined as forming part of the bid money payable by the licensee at the rate specified on the total minimum guaranteed quantity of liquor as determined by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eals in each case. We have heard learned counsel for the parties and have gone through the material on record. By the Finance Act, 1988, section 44AC and section 206C of the Income-tax Act were amended with effect from June 1, 1988. Apart from other amendments, an Explanation was appended to section 206C defining buyer and seller. For convenience, section 206C of the Income-tax Act is reproduced here as under: "206C.(1) Every person, being a seller shall, at the time of debiting of the amount payable by the buyer to the account of the buyer or at the time of receipt of such amount from the said buyer in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, collect from the buyer of any goods of the nature specified in column (2) of the Table below, a sum equal to the percentage, specified in the corresponding entry in column (3) of the said Table, of such amount as income-tax: Table Sl. No Nature of goods Percentage (i) Alcoholic liquor for human consumption and tendu leaves Ten per cent. (ii) Timber obtained under a forest lease Fifteen per cent. (iii) Timber ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her computer readable media as may be specified by the Board (hereinafter referred to as the computer media) shall be deemed to be a return for the purposes of sub-section (5A) and the rules made thereunder and shall be admissible in any proceedings thereunder, without further proof of production of the original, as evidence of any contents of the original or of any fact stated therein. (5C) A return filed under sub-section (5B) shall fulfil the following conditions, namely:- (a) while receiving returns on computer media, necessary checks by scanning the documents filed on computer media will be carried out and the media will be duly authenticated by the Assessing Officer; and (b) the Assessing Officer shall also take due care to preserve the computer media by duplicating, transferring, mastering or storage without loss of data. (6) Any person responsible for collecting the tax who fails to collect the tax in accordance with the provisions of this section, shall, notwithstanding such failure, be liable to pay the tax to the credit of the Central Government in accordance with the provisions of sub-section (3). (7) Without prejudice to the provisions of sub-section (6), if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or co-operative society and also includes an individual or a Hindu undivided family whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which the goods of the nature specified in the Table in sub-section (1) are sold." The vires were challenged of the aforesaid Finance Act of 1988. The hon'ble apex court in the case of Union of India v. A. Sanyasi Rao [1996] 219 ITR 330; [1996] 3 SCC 465, 483 held as under: "17... We have seen that the object in enacting sections 44AC and 206C was to enable the Revenue to collect the legitimate dues of the State from the persons carrying on particular trades in view of the peculiar difficulties experienced in the past and the measure was so enacted to check evasion of substantial revenue due to the State. It is a matter of common knowledge that trade or business produces or results in income which can be brought to tax. In order to prevent evasion of tax legitimately due on such 'income', section 44AC and section 206C were enacted, so as to facilita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in this perspective also, we have no doubt that even at the time of purchase, income can be said to have accrued to attract imposition of tax. 19.... The charge for the levy of the income that accrued or arose is laid by the charging sections, viz., sections 5 to 9 and not by virtue of section 44AC or section 206C. The fact that the income-tax is levied at a flat rate or at an earlier stage will not in any way alter the nature or character of the levy since such matters are completely in the realm of legislative wisdom." The definition of "buyer" in the aforesaid context means a person who obtains in any sale, by way of auction, tender or any other mode, goods of the nature specified in the Table in sub-section (1) or the right to receive any such goods. The "seller" in the aforesaid context means the Central Government, a State Government or any local authority or corporation or authority established by or under a Central, State or Provincial Act, or any company or firm or co-operative society and also includes an individual or a Hindu undivided family by whom the goods of the nature specified in the Table in sub-section (1) are sold. Therefore, the sale of goods specified i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 41 is in its essence the rental or consideration for the grant of such right or privilege by the State Government. (c) that the Excise Commissioner as the head of the Excise Department of the State shall be deemed, while determining or realising such fee, to act for and on behalf of the State Government. 30. Payment of exclusive privileges.-(1) Instead of or in addition to any duty leviable under this Chapter, the State Government or on its behalf the Excise Commissioner may accept payment of a sum in consideration of the grant of the licence for any exclusive or other privilege under section 24 or section 24A. (2) The sum payable under sub-section (1) may either be fixed by auction or inviting tenders or otherwise or be assessed on the basis of the sales made or quota lifted under the licence or partly fixed and partly assessed in the aforesaid manner. (3) For the financial year commencing on April 1, 1983, apart from the sum fixed for grant of licence under section 24A, the sum assessed called as assessed fee, on the basis of sales under the licence shall be payable, at the rate of rupees five per reputed quart bottle of all kinds of spirit, wine, liquor and cordial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity, if any, of the bhang or country liquor or foreign liquor in relation to such shop or group of shops. 8. List of licences to be exhibited.-A list of licences to be disposed of shall be exhibited along with basic licence fee, if any, in advance at the licensing authority's office and at the time of the auction. No shops other than those thus specified shall, except under very special circumstances, be auctioned. Notification:-Noti. No. 1264-E-2/XIII-92, dated March 20, 1992, No. 15121/Sansodhan/Karadhan/Licence-92-93, dated March 11, 1992, published in the U.P. Gazette (Extra), Part 4, section (ka) dated 11th March, 1992. In exercise of the power under clause (g) of rule 3 of the U.P. Excise Licences (Tender-cum-Auction) Rules, 1991, the Excise Commissioner, Uttar Pradesh, with the previous sanction of the State Government, directs that the basic licence fee on the minimum guaranteed quantity fixed for each district for country liquor of strength 36% v/V, shall be payable by the auction purchaser at the rate of rupee 1 per bulk litre with effect from 1st April, 1992, and also directs that the basic licence fee shall be paid to the Government before the issue of country liquo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of U.P. v. Sheopat Rai [1994] Supp 1 SCC 8; Khoday Distilleries Ltd. v. State of Karnataka [1995] 1 SCC 574; State of Orissa v. Narain Prasad [1996] 5 SCC 740; AIR 1997 SC 1493; Solomon Antony v. State of Kerala [2001] 3 SCC 694 and Government of Maharashtra v. Deokar's Distillery [2003] 5 SCC 669. The hon'ble apex court in the case of Union of India v. Om Prakash S.S. and Co. [2001] 248 ITR 105 (SC); [2001] 3 SCC 593, while considering section 206C of the Act held as under: "It is quite evident that section 206C of the Income-tax Act, 1961, refers to a case where by reason of the payment to the seller the buyer gets specific goods mentioned in the Table to the said section or gets a right to collect or receive those goods by virtue of that payment. In the instant case, when the Government issues a licence, it only enables the licensee to carry on trade or business in that item. The payment made by the licensee by way of licence fee does not ipso facto entitle the licensee to lift the goods. For obtaining the goods mentioned in the Table, the licensee has to place an order on the manufacturer or the supplier of the said goods and it is at that point of time that section 206C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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