INCOME TAX

Collection of income-tax at source under section 206C of the Income-tax Act, 1961, in respect of profits and gains from the business of trading in alcoholic liquor, forest produce, etc.--Financial year 1992-93

Circular No. 634

Dated 20/8/1992

Attention is invited to the Board's Circular No.620 (F. No. 275/3/91-IT(B)), dated 6th December, 1991 (See [1992] 193 ITR (St.) 19), regarding collection of income-tax at source under section 206C of the Income-tax Act, in respect of profits and gains from the business of trading in alcoholic liquor, forest produce, etc., during the financial year 1991-92.

2. The Finance Act, 1992, does not make any change in the rates of tax applicable for the collection of tax at source under section 206C for the financial year 1992-93. However, section 44AC, which was hitherto inter-linked with section 206C, has been deleted by the Finance Act, 1992. Simultaneously, certain amendments consequential to the deletion of section 44AC, have been made in section 206C.

3.1 Sub-section (1) of the amended section 206C enjoins that 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
(1)	(2)	(3)
(i)	Alcoholic liquor for human consumption (other than Indian-made foreign liquor)	Fifteen per cent
(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

3.2 The term "buyer" in section 206C is defined to mean "a person who obtains in any sale, by way of auction, tender or any other mode, goods of the nature specified in the Table referred above or the right to receive any such goods but does not include:

(i) a public sector company,

(ii) a buyer in the further sale of such goods obtained in pursuance of such sale, or

(iii) 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;"

3.3 The term "seller" 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.

4. The amount of tax collectible at source at the rates referred to in paragraph 3.1 shall be increased by a surcharge at the rate of 15% where the buyer is a domestic company and at the rate of 12% in respect of other buyers.

5. It is clarified that the provisions of sub-section (1) of section 206C in relation to a buyer will not apply to a public sector company and to any other buyer who obtains the said goods at a second or subsequent sale of such goods. Thus, these provisions will apply only at the point of the first sale of such goods.

6. It is also clarified that where the Assessing Officer, on an application made by the buyer, gives a certificate in the prescribed form that, to the best of his belief, any of the goods referred to in the Table in paragraph 3.1 are to be utilised for the purpose of manufacturing, processing or producing articles or things and not for trading purposes, the provisions of sub-section (1) of section 206C shall not apply so long as the certificate remains in force. Reference in this regard may be made to rule 37C of the Income-tax Rules, 1962, and Form No. 27C prescribed thereunder.

7. The responsibilities, obligations, etc., under the Income- tax Act, of the person collecting tax at source under section 206C, are as follows:

(a) Any person collecting any amount under section 206C(1) shall pay within seven days the amount so collected to the credit of the Central Government or as the Board directs.

(b) Every person collecting tax shall, from the date of debit or within ten days of receipt of the amount, furnish to the buyer to whose account such amount is debited, or, from whom such payment is received, a certificate to the effect that tax has been collected, specifying the sum so collected and the rate at which the tax has been collected and such other particulars as may be prescribed. On production of this certificate by the buyer, credit shall be given to him for the amount so collected in the assessment made under the Act for the assessment year for which such income is assessable. Reference in this regard may be made to rule 37D of the Income-tax Rules, 1962, and Form No. 27D prescribed thereunder. If a person fails to issue the certificate of tax collected at source by him, he shall be liable to pay by way of penalty, under section 272A, a sum which shall not be less than Rs.100 but which may extend to Rs.200 for every day during which the failure continues.

(c) If any person responsible for collecting tax fails to collect the tax, he shall still be liable to pay in terms of sub-section (6) of section 206C, the tax to the credit of the Central Government within the period of seven days referred to in sub-para (a) above.

(d) If the seller fails to collect the tax, or, after collecting the tax, fails to pay it to the credit of the Central Government, he shall be liable in terms of sub- section (7) of section 206C to pay simple interest at 2 per cent. per month or part thereof, on the amount of such tax from the date on which such tax was collectible to the date on which such tax was actually paid. Further, section 276BB lays down that if a person fails to pay to the credit of the Central Government the tax collected by him as required under the provisions of section 206C, he shall be punishable with rigorous imprisonment for a term which shall be not less than three months and which may extend up to seven years and with fine.

(e) Every person collecting tax 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 designated/concerned Assessing Officer the said returns. Under rule 37E of the Income-tax Rules, 1962, these returns are to be furnished in Form No. 27EA, 27EB, 27EC or 27ED relating respectively to alcoholic liquor for human consumption, timber obtained under a forest lease, timber obtained by any mode other than under a forest lease, or any other forest produce not being timber, as the case may be, within a period of one month from the end of the half- yearly period to which the return relates.

(f) If a person fails to furnish the half-yearly returns in time, he shall be liable to pay by way of penalty, under section 272A, a sum which shall not be less than Rs.100, but which may extend to Rs.200 for each day during which the default continues. However, the penalty shall not exceed the amount of tax which was collectible at source.

8. These instructions are not exhaustive and are issued only with a view to helping the persons responsible for collecting tax at source under section 206C. Wherever there is any doubt, a reference may be made to the relevant provisions of the Income-tax Act, 1961, and the Finance Act, 1992. In case any assistance is required, the Assessing Officer concerned or local Public Relations Officer of the Income-tax Department may be approached.

9. The contents of this Circular may please be brought to the notice of all concerned.

10. Copies of this Circular will be available with the Director of Income-tax (RSP & PR), 6th Floor, Mayur Bhawan, New Delhi-110001.

(Sd.) Rajesh Chandra,

Under Secretary,

Central Board of Direct Taxes.