Law: Income Tax Act, 1961

Section: 206

(a) Income-tax----Collection of tax at source---Supreme Court---Constitution of India--¬Validity of provisions---Question regarding validity of S.206-C pending before Constitution Bench of Supreme Court---Collection of tax at source could be made under S.206-C because otherwise recovery of tax might become impossible ---Assessee could get refund if S.206-C was held invalid---Indian Income Tax Act, 1961, S.206-C. (b) Income-tax--- ----Collection of tax at source---Surcharge---Surcharge can be collected only if buyer is a domestic company---Indian Income Tax Act, 1961, S.206-C--¬Indian Finance Act, 1995, S.2(6). Held, (i) that the question regarding the validity of section 44-AC/ 206-C of the Income Tax Act, 1961, was being considered by the Constitution Bench of the Supreme Court. Despite the same there was no ground for restraining the Revenue from making collections in terms of the legislative mandate, because, irrespective of the ultimate of the apex Court, the petitioners would be always entitled to claim refund of the amounts so collected. But in case the Constitutional validity of the provision is upheld it may be very difficult for the Income-tax Department to contact the contractors concerned to realise the taxes---the mischief which Parliament had intended to arrest. Moreover, under the scheme envisaged under Chapter XVII of the Act itself, if ultimately on regular assessment the contractors like the petitioner were able to prove that they had not earned any taxable income to the extent of the income-tax collected during the concerned assessment years, they would be entitled to get refund of excess collections with statutory rate of interest provided under the Act. As such, they could not complain of any irreparable injury; (ii) that the surcharge could be collected only if the buyer was a domestic company. In the present case, the petitioner was, admittedly, not a company. Therefore, 10 per cent. surcharge on income-tax could not be collected. JUDGMENT The petitioner is a forest contractor. Consequent to his participation in a tender-cum-auction sale of cashew crops for the year 1995-96, he has been awarded with a work order, dated October 28, 1995…

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