Law:

Section:

Section 206C, read with section 43AC, of the Income-tax Act, 1961 - Tax collection at source - Profits and gains from business of trading in alcoholic liquor, forest produce, scrap, etc. - Whether section 43AC can be said to be arbitrary and discriminatory as it selects purchasers of specified goods, denying them benefits computed in accordance with sections 28 to 43C and assess their profits and gains at 40 per cent of purchase price - Held, no - Whether Parliament is perfectly competent to enact section 43AC and section 206C and it does not suffer from any constitutional infirmity - Held, yes - Whether section 43AC is not an independent provision but it is an adjunct to and explains provisions in section 206C and, thus, a regular assessment has to be made in respect of an assessee dealing in specified goods in accordance with sections 28 to 43C - Held, yes Facts Section 206C was given effect to on and from 1-6-1988 and section 44AO from 1-4-1989 by the Finance Act, 1988. Soon after 1-6-1988 the sellers of specified goods started calling upon the purchasers to deposit an additional amount in terms of section 206C by way of income-tax in addition to the purchase price. They refused to sell the aforesaid goods unless such amount was deposited. A batch of writ petitions was immediately filed questioning the provisions on the grounds: (i) section 44AC is an arbitrary and discriminatory provision. It has arbitrarily selected the purchasers of specified goods and subjected them to grave discrimination. While the profits and gains of business of every other assessee are computed in accordance with sections 28 to 43C - which sections provide for several deductions, rebates and other advantages -the purchasers of specified goods are denied the benefit of the said provisions. Their profits and gains are assessed arbitrarily at 40 per cent of the purchase price; (ii) the measure of profits and gains prescribed by section 44AC constitutes an unreasonable restriction upon the petitioners' fundamental right guaranteed by sub-clause (g) of clause (1) of article 19; and (iii) there ought to be income, before tax is levied thereon. No income is derived unless the goods…

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