Section 206C l Profits and Gains from Business of Trading in Alcoholic Liquor, Forest Produce, ETC
Circular No. 535 was issued by the Central Board of Direct Taxes on 26 June 1989. Its subject is Section 206C l Profits and Gains from Business of Trading in Alcoholic Liquor, Forest Produce, ETC.
Updates the tax collection at source instructions for the financial year 1989-90, following Circular No. 525 dated 24 November 1988, and records three changes made by the Direct Tax Laws (Amendment) Act, 1989. First, in item (iii) of the table under section 206C(1), ten per cent is replaced by five per cent, so tax on timber obtained by any mode other than a forest lease is collected at 5 per cent of the purchase price payable by the buyer, with effect from 1 June 1988. Second, a new section 206C(5A) requires every collector to prepare half-yearly returns for the periods ending 30 September and 31 March and deliver them to the prescribed authority in the prescribed form and manner. Third, a proviso to section 44AC(1)(a) provides that the 40 per cent presumptive rate for trading in alcoholic liquor for human consumption other than Indian-made foreign liquor does not apply where the goods are not obtained by auction and the sale price at which the buyer sells is fixed by or under a State Act, and in those cases no collection under section 206C is required. Subject to that, the earlier circular continues for 1989-90. Under the Finance Act, 1989 the collection is at 15 per cent of the amount payable by the buyer, 5 per cent for timber obtained otherwise than by forest lease, increased by a Union surcharge of 8 per cent of the collection. The tax collected must reach the Central Government within seven days under section 206C(3), failing which prosecution under section 276BB follows, and a seller who fails to collect from the buyer is himself made responsible for paying the tax under section 206C(6).
Amendments made after the previous year's circular had changed the timber rate, added a half-yearly return and carved out State-controlled liquor sales, and the Board had to communicate them along with the rates for the current year.
SECTION 206C l PROFITS AND GAINS FROM BUSINESS OF TRADING IN ALCOHOLIC LIQUOR, FOREST PRODUCE, ETC.
Instructions regarding deduction of tax at source on profits and gains from the business of trading in alcoholic liquor, forest produce, etc.1. Attention is invited to this Department’s Circular No. 525, dated 24-11-1988 wherein the rates at which collection of income-tax have to be made at source during the financial year 1988-89 in respect of profits and gains from the business of trading in alcoholic liquor (other than Indian-made foreign liquor), timber and other forest produce were communicated.
2. Subsequent to the issue of the aforesaid circular, the Direct Tax Laws (Amendment) Act, 1989 substituted the words "Ten per cent" by words "Five per cent" occurring in column 3 against item ( iii) of the table below sub-section (1) of section 206C of the Income-tax Act, thereby providing that in respect of the timber obtained by any mode other than forest lease, income-tax shall be collected at the rate of 5 per cent of the purchase price payable by the buyer. The said amendment has come into effect from 1-6-1988. The Direct Tax Laws (Amendment) Act has also inserted a new sub-section (5A) in section 206C to provide that every person collecting tax in accordance with the provisions of section 206C shall prepare half-yearly returns for the period ending on the 30th September and 31st March in each financial year and deliver or cause to be delivered to the prescribed income-tax authority such returns in such form and verified in such manner and setting forth such particulars as may be prescribed in the rules. It may also be added that the Direct Tax Laws (Amendment) Act has inserted a proviso to clause (a) of sub-section (1) of section 44AC of the Income-tax Act which provides that clause (a) relating to determination of profits in the trading of goods, in the nature of alcoholic liquor for human consumption (other than Indian-made foreign liquor) at 40 per cent of the purchase price, shall not apply where the goods are not obtained by way of auction and where the sale price of such goods as sold by the buyer is fixed by or under any State Act. In such cases, tax will not be required to be collected under section 206C.
3. Subject to the amendments/modifications mentioned in para 2 above, the instructions contained in the Department’s Circular No. 525, dated 24-11-1988 will be applicable during the current financial year also i.e. , 1989-90. It may be noted that as per the provisions of the Finance Act, 1989 in cases in which tax has to be collected under section 206C, the collection shall be made at the rates specified in that section, i.e., at the rate of 15 per cent of the amount payable by the buyer (at the rate of 5 per cent in the case of timber obtained by any mode other than forest lease), and it shall be further increased by surcharge for the purpose of the Union calculated at the rate of 8 per cent of such collection.
4. It may also be mentioned that the tax so collected is to be paid within seven days to the credit of the Central Government, as provided in sub-section (3) of section 206C. Failure to do so attracts prosecution under section 276BB of the Income-tax Act. Failure to collect the tax from the buyers of the goods mentioned in sections 44AC and 206C makes the "seller" of the goods responsible for paying the tax to the Central Government in terms of sub-section (6) of section 206C.
Circular : No. 535, dated 26-6-1989.
An order treating a timber depot or a liquor contractor as in default for not collecting tax at source, and the demand raised on the seller under section 206C(6).
Source: the Income Tax Department’s own published text — its page for this instrument.
