M. A. MAJEED and Another vs DIVISIONAL FOREST OFFICER and Another

M. FATHIMA BEEVI, J. :

Sec. 206C of the IT Act, 1961 requires a seller referred to in s. 44AC to collect from the buyer of any goods of the nature specified, a sum equal to the percentage specified in the table. Accordingly for timber obtained by any mode other than under a forest lease, a sum equal to 10% is to be collected. The petitioner herein had participated in the auction of timber, notified by the first respondent. Petitioner tendered the amount along with 5% Income Tax for the total amount. It is alleged that the first respondent insisted payment at the rate of 15.75%. Ext. P3 is the communication sent by the first respondent requiring the petitioner to pay at the rate of 15.75% of the total amount. Petitioner contends that what is payable is only 5% of the sale proceeds excluding the sales-tax and forest development tax and therefore, Ext. P3 is illegal. Petitioners have, therefore, prayed for issue of a writ of mandamus or direction to the first respondent to collect the Income Tax only at the rate of 5% from the petitioners for the price of Albizia trees which they have purchased in auction and which were mentioned in Exhibit P3. Petitioners also seek the issue of a direction to the first respondent to declare that the entire purchase as per Exhibit P1 made by the petitioners will come under the table in Exhibit P2 as "timber obtained by any mode other than under a forest lease" and the petitioners are liable to pay Income Tax only at the rate of 5%.

Notice has been taken on behalf of the respondents and both sides are heard.

It is clear from the statute itself that, in the case of sale of timber obtained by any mode other than under a forest lease, what is required to be collected is 10% of the sum payable by the buyer. It is stated that the Departmental instructions have been issued to the effect that, in view of the proposed amendment, instead of 10% Income Tax, 5% need be collected from the purchaser of timber other than those obtained under forest lease. It is also the petitioners case that petitioners are liable to pay at the rate of 5% only of the sale proceeds and not the entire amount which includes sales-tax and other forest development tax. The instructions stated to have been issued by the Commissioner cannot override the statutory provisions which require collection at the rate of 10%. It is, however, agreed that, in view of the instructions issued, it may be necessary only to collect at the rate of 5% and require the purchaser to furnish security for the remaining 5% of the total amount. The contention that, what is to be taken into account is only the sale proceeds and not the total amount, is devoid of merit. The Supreme Court has said in Central Wines, Hyderabad Vs. Special Commercial Tax Officer, that what is collected by the vendor from the vendee by way of consideration for passing the property in the goods to the vendee is the sale price charged by him and not tax collected by him for the purchase. The amount of money which goes from the pocket of the vendee to the pocket of the vendor as a condition or consideration for passing of the property in the goods is thus the said price and not the tax. It is the amount, but for the payment of which, the vendor would not transmit his title to the goods in favour of the vendee and not any amount paid by the vendee towards any tax liability incurred by him on making the purchase of the goods. The principle is applicable where the liability to pay Income Tax on income arises under s. 206C. Therefore, it is necessary for the petitioner to pay 5% of the total amount and furnish security for the remaining 5% of the total amount which includes the sales-tax the other lease.

In the light of what has been stated above, the first respondent is directed to collect the Income Tax at the rate of 5% from the petitioners and accept bank guarantee as security for the remaining 5% of the total amount treating that the entire purchase will come under item (iii) of the table shown in Ext. P2, i.e., timber obtained by any mode other than under the forest lease. Original Petition is disposed of as above.