TMI Blog1993 (9) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... ad thus : "Section 44AC.-Special provisions for computing profits and gains from the business of trading in certain goods.-(1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an assessee, being a person other than a public sector company (hereafter in this section referred to as "the buyer"), obtaining in any sale by way of auction, tender or any other mode, conducted by any other person or his agent (hereafter in this section referred to as the seller),- (a) any goods in the nature of alcoholic liquor for human consumption (other than Indian made foreign liquor), a sum equal to forty per cent. of the amount paid or payable by the buyer 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." Provided that nothing contained in this clause shall apply to a buyer where the goods are not obtained by him by way of auction and where the sale price of such goods to be sold by the buyer is fixed by or under any State Act... (2) For the removal of doubts, it is hereby declar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Income-tax Act which came within the purview of the definition of seller as contained in section 206C may deduct the cost price. At this juncture, it is also relevant to mention that in State of Bihar v. CIT [1993] 202 ITR 535, a Division Bench of this court has held that the State of Bihar is also a "seller" within the meaning of the aforementioned provisions. Thereafter, in Raghunath Prasad v. Union of India (C. W. J. C. No. 7817 of 1991), [1993] 2 BLJ 152, (See Madhan Mohan Gupta v. Union of India [1993] 204 ITR 384), this court followed the decision of Ramjee Prasad Sahu's case [1993] 202 ITR 800 (Patna), and held as follows (at page 385 of 204 ITR) : "So far as the first relief is concerned, Mr. Rastogi, learned counsel appearing on behalf of the Income-tax Department, has fairly conceded that in view of the definition of "seller" referred to above, if the status of the wholesaler for the purpose of the Income-tax Act is that of "individual" or "Hindu undivided family" or "association of persons" then such wholesaler cannot collect any amount as income-tax under section 206C of the Act. Accordingly, in view of the assertions made by the petitioner in the writ a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, as in common parlance as well as for statutory purposes, the commodities which are purchased and subsequently sold, after subjecting them to certain processing and reducing its strength, are two different commodities. In this view of the matter, it will be fallacious to say that the petitioners are second buyers of the country spirit purchased by them. Thus, the second ground also fails. So far as the last ground is concerned, on a detailed consideration of the provisions of the Income-tax Act, 1961, and the Bihar Excise Act, 1915, and the rules made thereunder, in the case of Ramjee Prasad Sahu v. Union of India [1993] 202 ITR 800 (C. W. J. C. No. 7278 of 1992 and analogous cases) which have been disposed of today by this Bench, it has been held that deduction under section 206C of the Act can be made only with reference to the cost price of the country spirit and not with respect to the excise duty paid thereon." Yet recently, in Uma Shankar Prasad v. Union of India [1993] 2 PLJR 75 this court held thus : "The obligation on the seller to collect income-tax at source had been provided under section 206C of the Act read with section 44AC thereof. The Finance Act, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is subject to final determination of income of the payee and the amounts collected are subject to adjustment and refund on final assessment of income-tax under the provisions of the Act. Even earlier in respect of the provisions of sections 44AC and 206C, a Bench of this court, to which one of us, G.C. Bharuka J., was a party, has refused to grant any interim relief by way of staying collection of income-tax for the reasons detailed therein in C.W.J.C. No. 5685 of 1991 (Haroon Rashid v. Union of India) disposed of on 5-9-91." All these cases, therefore, would be governed by the aforementioned judgments. However, Mr. S. B. Gadodia, appearing on behalf of the petitioners, raised two contentions in relation to the wholesale dealers of the Ranchi and Giridih districts. So far as Ranchi district is concerned, it is admitted that one Anil Kumar Sahu is an individual. He had taken a licence in his own name, but admittedly, he has constituted a firm which carries on the business. The firm is the assessee. Mr. Gadodia, therefore, submits that in view of the provisions of sections 20, 22, 23 and 42 of the Bihar and Orissa Excise Act and rule 34 of the Rules, a licensee is precluded from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal stated that it had not proceeded on the ground that the partnership was illegal being against the Bengal Excise Act, 1911, the argument was referred to as supporting the conclusion that the firm was not genuine. Section 42(1)(a) of the Bengal Excise Act reads: "42. (1) Subject to such restrictions as the State Government may prescribe, the authority who granted any licence, permit or pass under this Act may cancel or suspend it . . . (a) if it is transferred or sublet by the holder thereof without the permission of the said authority." There was no evidence that the excise licences were transferred or sublet.' If the mere formation of a partnership in which the licensee is a partner amounts to a transfer or sub-lease of the licence, their Lordships of the Supreme Court would not have stated that there was no evidence that the excise licences were transferred or sublet. Therefore, the real question in these two cases for consideration is whether Sri Prakash Ram Gupta had sub-let or assigned the licence obtained by him to the firm." The Bench, after considering a large number of decisions cited at the Bar, held as follows: "Learned counsel for the Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with another person. But the licence, it is clear from the record, was in Form FLII issued under the U. P. Excise Manual. The licence does not prohibit the holder from entering into partnership by the holder of the licence : it merely provides that the licence shall not be sublet or transferred. Since there is no prohibition against entry by the holder of the licence into a partnership the question whether the partnership was illegal does not arise. The firm was entitled on that account to registration. It is somewhat unfortunate that the attention of the Commissioner and the High Court was not invited to the form in which the licence was issued by the excise authorities. They proceeded to decide the case on the footing that rule 322 of the Excise Manual applied. But that rule has no application here. On that view, it is unnecessary to consider the other questions argued at the Bar, whether the partnership related to sharing of profits of the business in liquor carried on by the two partners and that it was not a partnership relating to the licence." It is also not the contention of the petitioner that the firm is not registered in terms of section 185 of the Income-tax Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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