In Brief
Mysore Sales International, a Karnataka state undertaking, was directed by the income tax authorities to collect tax at source from liquor vendors when selling arrack. The Supreme Court held that Section 206C of the Income Tax Act does not apply to Mysore Sales. The liquor vendors who purchased vending rights through auction are not 'buyers' under the statute because: they obtained only the right to retail, not the arrack through auction; and the sale price of arrack is fixed by state rules within a statutory range. Both exclusion conditions must be satisfied, which they were. The Court also held that orders imposing tax liability must provide the assessee with notice and a reasonable hearing before imposition, as required by natural justice. The Court set aside the tax authority's orders and allowed the appeal.
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