C.I.T. PATIALA vs. VIRSA SINGH & CO.
What were the facts?
The Commissioner of Income Tax, Patiala (Revenue) filed a reference before the High Court of Punjab and Haryana challenging an order of the Income Tax Appellate Tribunal, Chandigarh Bench. The Tribunal had set aside the orders of the lower authorities concerning assessment year 1990-91. The assessee, Virsa Singh & Co., Patiala, is a wholesale dealer in country liquor holding an L-13 license. The Assessing Officer had raised a demand against the assessee for failure to collect tax at source under Section 206-C(6) of the Income Tax Act, 1961. The appellate authority upheld this demand, but the Tribunal, relying on previous High Court judgments, ruled in favor of the assessee.
What did the High Court hold?
The High Court answered the question of law in favor of the assessee and against the revenue. The Court noted that the issue had been considered in multiple previous judgments by the same High Court, including Naresh Kumar and Co. and others v. Union of India and others (2000) 243 ITR 760, Chandigarh Distillers and Bottlers Limited v. Union of India and others (2002) 253 ITR 205, and K.K. Mittal & Co. v. Union of India (1991) 187 ITR 208. The Court reiterated the principle that Clause (a)(ii) of the Explanation to Section 206-C specifically excludes a buyer in the further sale of goods from the purview of the provision. As the assessee, an L-13 licensee, purchased liquor from the distillery and was a first buyer in that transaction, they were not liable to collect tax at source when selling further. The Court found that the proviso to Section 44-AC was intended to address the harshness of the provisions for such licensees. The ratio is that L-13 licensees, as subsequent purchasers of liquor for resale, are not liable to collect tax at source under Section 206-C as they fall within the exclusion of a buyer in further sale.
What were the issues?
1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in setting aside the orders of the lower authorities holding that the assessee, being an L-13 licensee, is governed by the proviso to Section 44-AC and, therefore, not liable to collect tax at source? Assessee's Contention: The assessee argued that as an L-13 licensee (wholesale dealer), they are not liable to collect tax at source under Section 206-C of the Income Tax Act. They contended that the tax should have been collected by the distillery from whom they purchased the liquor, and since they were not the first seller in the chain, they were not liable. They relied on the judgment in K.K. Mittal and Co. v. Union of India and others (1991) 187 ITR 208. Revenue's Contention: The revenue contended that the assessee, as a wholesale dealer, was liable to collect tax at source under Section 206-C(6) of the Act. The lower authorities had upheld this view. The revenue's arguments are not explicitly detailed beyond the initial assessment and appellate orders.
Which sections of the Income-tax Act were involved?
Section 206-C, Section 44-AC
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
JUDGMENT: Following question of law has been referred for the opinion of this Court by the Income Tax Appellate Tribunal, Chandigarh Bench, Chandigarh (for short, 'the Tribunal'), arising out of its order dated 6.4.1993 in ITA No.1134/Chandi/92 relating to assessment year 1990-91:- “Whether on the facts and in the circumstances of the case, the Tribunal was right in law in setting aside the orders of the lower authorities holding that the assessee being L-13 licensee is governed by proviso to section 44- AC and, therefore, not liable to collect tax at source?”
The assessee is a dealer in country liquor and holds L-13 licence, as wholesale dealer. The Assessing Officer raised demand against the assessee for failure to collect tax as a whole-seller under section 206-C (6) of the Income Tax
The order continues below.
Read the full judgment
A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.
The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.
Recent GST High Court judgments
Search GST case law →- Kniit Net Industries Private Limited, Khurda vs. Superintendent Of CGST And Central Excise, Bhubaneswar Ii CircleOrissa · 14 Oct 2026
- M/S Maa Swarnapai Chemicals (Opc) Private Limited, Cuttack vs. Sales Tax Officer, Cuttack IOrissa · 14 Oct 2026
- M/S. Middlex, Puri vs. Commnr. Of State Tax, Banijyakar Bhawan, CuttackOrissa · 14 Oct 2026
- M/S Maa Sunadei Indane Gramin Vitrak, Nayagarh vs. Commissioner Of CT And GST, Cuttack, OdishaOrissa · 14 Oct 2026
- Sunanda Raul vs. The Commissioner Of Commercial Taxes And Goods Nad Services Tax, OdishaOrissa · 14 Oct 2026
