Law:

Section:

Article 226 of the Constitution - Writ - Maintainability of - Section 44AC of the Income-tax Act, 1961 was introduced with effect from 1-4-1989 by which a certain percentage of purchase price paid or payable by buyer in respect of specified goods shall be deemed to be profits and gains of buyer from business of trading in such goods, chargeable to income-tax - Section 206C provides for procedure for collection of said sum from buyer - A press note was consequently issued clarifying how provisions of section 208C should be implemented - Whether apprehension of petitioner dealing in specified goods that implementation of provisions of section 44AC would, as per press note, result in levy of 66 2/ 3 per cent tax on its income, was without any reason and, hence, writ petition was liable to be rejected - Held, yes Facts The assessee was a timber merchant. By the Finance Act, 1988, a special provision, i.e., section 44AC, for computing profits and gains from the business of trading in certain goods including timber was inserted with effect from 1-4-1989 by which a certain specified percentage of the purchase price paid or payable by the buyer from the business of trading in such goods shall be deemed to be the profits and gains of the buyer from the business of trading in such goods, chargeable to tax. Section 206C introduced by the same Finance Act, with effect from 1-6-1988, provides for procedure for collection of the said sum from the buyer with reference to each class of goods referred to therein. A press note was released by the Government to clarify the provisions of section 206C. On writ, the assessee challenged the press note as illegal on the ground that if the provisions of section 44AC were implemented as per the press note, the tax would be 66 per cent of the income comprised in the purchase. Held What is deemed as profits and gains of the assessee under section 44AC is 15 per cent or 20 per cent of the purchase price depending upon the nature of lease and the manner of obtaining timber for business. Section 206C provides for collection of such deemed profits at source from the buyer of the goods at rate specified in the table annexed to section 44AC.…

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