TMI Blog2000 (9) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... Division Bench to go behind the same to lay down any different proposition of law. In view of the above, the claim for granting interim order as prayed for could not be countenanced since acceding to the request for the grant of interim order would amount to nullifying and rather ignoring the earlier Division Bench judgment. Hence, the C. M. P. shall stand dismissed. Since the submission of learned counsel involves the consideration of the correctness or otherwise in the earlier Division Bench judgment reported in Rudra and Co. v. Union of India [1998] 233 ITR 66 (HP), it is just and necessary to avoid duplication of the hearing, the matter is straightaway placed before the Full Bench consisting of three judges on May 16, 2000, for final hearing." The petitioners have filed the present petition by invoking the jurisdiction of this court under article 226/227 of the Constitution of India praying for a writ of mandamus directing the respondents not to deduct income-tax at source under section 206C of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), from the petitioners who are holding L-13, L-13A licences treating them as buyers, where goods have not been obt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entry in column (3) of the said Table, of the amount paid or payable by the buyer in respect of the sale of such right or as the purchase price in respect of such goods shall be deemed to be the profits and gains of the buyer from the business of trading in such goods chargeable to tax under the head 'Profits and gains of business or profession'. TABLE --------------------------------------------------------------------------------------------------------------------------------------------------- Sl. No. Nature of goods Percentage -------------------------------------------------------------------------------------------------------------------------------------------------- (1) (2) (3) -------------------------------------------------------------------------------------------------------------------------------------------------- (i) Timber obtained under a forest lease Thirty-five per cent. (ii) Timber obtained by any mode other than under a Fifteen per cent. forest lease. (iii) Any other forest produce not being timber Thirty-five per cent. ------------------------------------------------------------------------------------------------------------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ------------------------------------------ (i) Alcoholic liquor for human consumption (other than Indian- Fifteen per cent. made foreign liquor) (ii) Timber obtained under a forest lease Fifteen per cent. (iii) Timber obtained by any mode other than under a forest lease Five per cent. (iv) Any other forest produce not being timber Fifteen per cent." --------------------------------------------------------------------------------------------------------------------------------------------------- The constitutional validity of the above provisions was challenged by some of the petitioners in the High Court of Andhra Pradesh in A. Sanyasi Rao v. Government of Andhra Pradesh [1989] 178 ITR 31. The court upheld the validity of the said provisions but it held that the tax so paid would be subject to final assessment in accordance with law. A similar view was taken by the High Court of Punjab and Haryana in Sat Pal, and Co. v. Excise and Taxation Commissioner [1990] 185 ITR 375. According to the petitioners, by the Direct Tax Laws (Amendment) Act, 1989, a proviso came to be inserted in section 44AC. The said proviso read as under : "Provided that nothing contained in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Haryana in K. K. Mittal and Co. v. Union of India [1991] 187 ITR 208. It was stated in the petition that the SLP filed by the Union of India against the said decision was dismissed by the Supreme Court. Thus, according to the petitioners, there were two provisions in the Act, i.e., sections 44AC and 206C, the former being imposing section and the latter being collecting provision. By the Finance Act, 1992, section 44AC, was deleted from the statute and its substantial provision was incorporated in section 206C virtually making the said provision as composite one, for imposition of tax as also machinery for collection. The relevant part of section 206C, after the amendment of 1992, reads as under : "206C. Profits and gains from the business of trading in alcoholic liquor, forest produce, scrap, etc.---(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 su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 93] 203 ITR 201, it was held by the court once again that no income-tax can be deducted at source from L-13 licensees as they were not covered by section 206C of the Act. It was further stated by the petitioners that against the said judgment also, SLPs were filed, which were dismissed by the Supreme Court. Thus, according to the petitioners, the settled legal position was that neither before the amendment Act of 1992, the authorities could have deducted tax at source from L-13 licensees under section 44AC of the Act nor were they entitled to deduct such tax under section 206C after the amendment of 1992. The view which was taken by the High Court of Punjab and Haryana as well as by this court in Gian Chand Ashok Kumar's case [1991] 187 ITR 188, was in accordance with law. The SLPs filed against the decisions of the High Court of Punjab and Haryana were also dismissed by the Supreme Court. Then in Union of India v. A. Sanyasi Rao [1996] 219 ITR 330, the Supreme Court upheld the constitutional validity of sections 44AC and 206C confirming the decision of the High Court of Andhra Pradesh in A. Sanyasi Rao v. Government of Andhra Pradesh [1989] 178 ITR 31, observing that the tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioners could be said to be "buyers" and they were subject to the provisions of section 206C of the Act. The action of the distilleries to deduct tax at source, hence, was in accordance with law. Now, a Division Bench of this court in Rudra and Co. v. Union of India [1998] 233 ITR 66, upheld the contention of the authorities. After considering the decision in Gian Chand Ashok Kumar's case [1991] 187 ITR 188 of this court and in A. Sanyasi Rao's case [1996] 219 ITR 330 of the Supreme Court upholding the constitutional validity of section 206C, the Division Bench held that after deletion of section 44AC by the Finance Act, 1992, with effect from April 1, 1993, L-13, L-13A licensees also became liable under section 206C and tax could be deducted at source as such a person can be said to be a "buyer" within the meaning of section 206C. The attention of the Division Bench in Rudra and Co.'s case [1998] 233 ITR 66 (HP) was invited to the Explanation and it was contended that a person holding L-13 licence cannot be said to be "buyer" and hence the provision of section 206C would not apply to him. The Division Bench, however, repelled the contention stating : "It is true that the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said to be a "buyer" if the goods are not obtained by him by way of auction or where the sale price of such goods to be sold by the buyer is fixed by or under any State Act. According to the petitioners L-13 and L-13A licensees cannot be said to be buyers. As they do not obtain goods in auction, the first ingredient of "buyer" was not satisfied. Likewise, sale price of such goods is prescribed by the Department, i.e., the authorities, and thus the second condition was also not present. The petitioners, therefore, cannot be said to fall within the definition of "buyers" and, hence the provision relating to deduction of tax at source would not apply in their cases. Gian Chand Ashok Kumar's case [1991] 187 ITR 188 (HP) was, therefore, rightly decided in the line of the decision of the High Court of Punjab and Haryana in Sat Pal's case [1990] 185 ITR 375, and other cases, which had gone up to the Supreme Court and the SLPs were dismissed and it still holds the field. It was also submitted that even after the amendment in 1993, virtually there is no difference in the legal position so far as the definition of "buyer" is concerned. There was no liability on L-13, L-13A licensees for pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igation to deduct tax at source. The petition, therefore, deserves to be dismissed. Having given anxious consideration to the facts and circumstances of the case, in our opinion, the petition deserves to be allowed. It has been observed in the decision of the second Division Bench in Rudra and Co.'s case [1998] 233 ITR 66 (HP) that the point regarding deduction of tax at source was covered in Gian Chand Ashok Kumar's case [1991] 187 ITR 188 (HP) wherein it was held that a person holding L-13 licence cannot be said to be termed as "buyer" within the meaning of the proviso to section 44AC and, hence, he would not fall within the mischief of section 206C. According to the Division Bench however, the ratio of Gian Chand Ashok Kumar's case [1991] 187 ITR 188 (HP) was no more applicable after deletion of section 44AC and insertion of the Explanation in section 206C. For coming to that conclusion, the subsequent Division Bench relied upon a decision of the Supreme Court in A. Sanyasi Rao's case [1996] 219 ITR 330 (SC). In our considered opinion, however, the Division Bench was not right in taking that view. So far as A. Sanyasi Rao's case [1996] 219 ITR 330 is concerned, there merely the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e [1998] 233 ITR 66 (HP), therefore, in our view, was not right in holding that the legal position was changed and liability of L-13 licensees arose under section 206C. To us, it is clear that by holding so, the subsequent Division Bench in Rudra and Co.'s case [1998] 233 ITR 66 (HP) has committed an error of law. With due respect to the Division Bench, we hold that it did not lay down the correct law. We, therefore, approve the ratio laid down in Gian Chand Ashok Kumar's case [1991] 187 ITR 188 (HP) and overrule Rudra and Co.'s case [1998] 233 ITR 66 (HP). We further state that a similar view has been taken by a Division Bench of the High Court of Punjab and Haryana recently in Naresh Kumar and Co. v. Union of India [2000] 243 ITR 760. For the foregoing reasons, the petition deserves to be allowed and is, accordingly, allowed. We reiterate the ratio laid down in Gian Chand Ashok Kumar's case [1991] 187 ITR 188 (HP) and overrule the decision in Rudra and Co.'s case [1998] 233 ITR 66(HP). We declare that the persons holding L-13, L-13A licences cannot be said to be "buyers" and the provisions relating to deduction (collection ?) of tax at source do not apply to them. Consequen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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