Section 206C l Profits and Gains from Business of Trading in Alcoholic Liquor, Forest Produce, ETC
Circular No. 660 was issued by the Central Board of Direct Taxes on 15 September 1993. Its subject is Section 206C l Profits and Gains from Business of Trading in Alcoholic Liquor, Forest Produce, ETC.
The Board's annual instruction on collection of tax at source under section 206C for the financial year 1993-94, following Circular No. 634 dated 20-8-1992 for the previous year, and recording that the Finance Act, 1993 left the rates unchanged. The rates are 15 per cent on alcoholic liquor for human consumption other than Indian-made foreign liquor, 15 per cent on timber obtained under a forest lease, 5 per cent on timber obtained otherwise than under a forest lease and 15 per cent on any other forest produce not being timber, increased by surcharge of 15 per cent where the buyer is a domestic company and 12 per cent for other buyers. Collection is at debit to the buyer's account or receipt of the amount, whichever is earlier, only at the first sale, and not from a public sector company. It also restates the machinery: payment to the Government within seven days, a Form No. 27D certificate within ten days, and the exemption certificate in Form No. 27C under rule 37C where the goods go into manufacture, processing or producing rather than trading.
It is the routine yearly circular putting the section 206C rates and obligations for the coming financial year before sellers.
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 the Board’s Circular No. 634, dated 20-8-1992 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 1992-93.
2. The Finance Act, 1993 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 1993-94.
3.1 Sub-section (1) of 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 Table, of such amount as income-tax :
TABLESl. No.
Nature of goods
Percentage
(1)
(2)
(3)
(i)
Alcoholic liquor for human consumption
Fifteen per cent
(other than Indian-made foreign liquor)
(ii)
Timber obtained under a forest lease
Fifteen per cent
(iii)
Timber obtained by any mode other than
Five per cent
under a forest lease
(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 future 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 per cent where the buyer is a domestic company and at the rate of 12 per cent in respect of other buyers.
5. It may be noted 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, within ten days from the date of debit, or, 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 the tax has been collected, specifying the amount of tax and the rate at which it has been collected, and, such other particulars as may be prescribed. This certificate has to be issued in Form No. 27D prescribed under rule 37D of the Income-tax Rules, 1962. 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. 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(2), 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 himself 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 @ 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 is 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 but which may extend up to 7 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 (2) 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. Whenever there is any doubt, reference may be made to the relevant provisions of the Income-tax Act, 1961, and Income-tax Rules, 1962. In case any assistance is required, the Assessing Officer concerned or the local Public Relations Officer of the Income-tax Department may be contacted.
Circular :No. 660, dated 15-9-1993.
On a section 206C default or a Form No. 27D dispute in an old liquor or timber auction assessment.
Forms it names. Form No. 27C, Form No. 27D, Form No. 27EA
Rules it names. Rule 37C, 37D, 37E of the Income-tax Rules, 1962. The 1962 Rules were replaced by the Income-tax Rules, 2026, which renumbered nearly everything: a rule number quoted here almost never means the same rule today.
Source: the Income Tax Department’s own published text — its page for this instrument.