- (1.) THE following question of law has been referred for the opinion of this Court by the Income -tax Appellate Tribunal, 1134/Chd/1992 relating to the asst. yr. 1990 -91 : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in setting aside the orders of the lower authorities holding that the assessee being L -13 licensee is governed by the proviso to s. 44AC and, therefore, not liable to collect tax at source -
(2.) THE assessee is a dealer in country liquor and holds an L -13 licence as a wholesale dealer. The AO raised a demand against the assessee for failure to collect tax as a wholesaler under s. 206C(6) of the IT Act 1961 (for short, "the Act"). The appellate authority upheld the order of the AO but the Tribunal following the judgment of this Court in K.K. Mittal & Co. vs. Union of India (1990) 90 CTR (P&H) 50 : (1991) 187 ITR 208 (P&H) upheld the plea of the assessee that the tax had to be collected by the distillery from whom the assessee had made purchases and the assessee not being the first seller, was not liable to deduct tax.
(3.) WE find that the issue has been gone into by this Court in Naresh Kumar and Co. vs. Union of India (2000) 160 CTR (P&H) 81 : (2000) 243 ITR 760 (P&H) and taking into account cl. (a)(ii) of the Explanation to s. 206C of the Act, it was, inter alia, observed that the buyer in further sale of goods obtained in pursuance of sale by way of auction or in any other mode specified in the table, was specifically excluded from the purview of the provision. The assessee being a wholesaler purchased liquor for human consumption from the distillery and in that transaction he was the first buyer to acquire the liquor and if the liquor is further sold, the assessee was not liable to deduct tax under s. 206C of the Act. The relevant extract from the Explanation is as under : "(a) 'buyer' 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 -s. (1) or the right to receive any such goods but does not include, - - (ii) a buyer in the further sale of such goods obtained in pursuance of such sale; " After referring to the above Explanation, this Court observed : "The language of cl. (a) in the Explanation is clear and unambiguous and the exclusions referred to therein do exclude from the main provision, the subsequent purchasers of country liquor. It is not disputed by the Department that the petitioners on the basis of their L -14A licences purchased the country liquor from the wholesalers who are L -13 licensees." In K. K. Mittal and Co.'s case (supra) which has been followed by the Tribunal, this Court concurred with the following observations of the Himachal Pradesh High Court in Gian Chand Ashok Kumar & Co. vs. Union of India (1991) 100 CTR (HP) 1 : (1991) 187 ITR 188 (HP) : "Examination of the fundamental provisions governing the grant of L -13 licences clearly shows that the provisions of ss. 44AC and 206C were unduly harsh and arbitrary in their application to cases where the transaction was strictly to be carried out in accordance with specific provisions. It was this mischief which was intended to be eliminated by the new amendment. Otherwise, as calculated by the petitioners, they were to pay much more tax than the expected returns which could not be considered to be the object of the legislation as it originally stood. L -13 licensees appear to be a class which, in view of the existing system of the transaction of sale of country liquor, cannot be considered to be a class evading payment of tax and thus falling under the category of others for whom ss. 44AC and 206C were brought into the statute book, history and object and reasons of which we have specifically dealt with quite elaborately in the initial part of this judgment. The net result of our examination of the matter is that the present petitioners (L -13 licensees) come within the purview of this proviso and the provisions of s. 206C and other parts of s. 44AC(1) do not apply to buyers covered by the proviso. The demand of tax at the purchase point from the petitioners by the respondent has no authority of law and they are restrained from doing so.";