( 1 ) THE petitioner is a registered Association of the stamp vendors of Ahmedabad. As the Officers of the Income Tax Department called upon the State Government to deduct tax-at-source under Section 194h of the Income Tax Act, 1961 (hereinafter referred to as "the Act") on commission or brokerage to the persons carrying on the business as stamp vendors, the petitioner-Association has approached this Court with a prayer to quash and set aside the communication at Annexure d collectively, and for a declaration that Section 194-H of the Act is not applicable to an assessee carrying on business as a stamp vendor.

( 2 ) IN response to the notice, an affidavit-in-reply has been filed by the Commissioner of Income tax, Ahmedabad-II for justifying the invocation of Section 194-H of the Act.

( 3 ) BY the Finance Act, 2001, Section 194-H was inserted in the Act with effect from 1. 6. 2001. The Section reads as under : Commission or brokerage. 194h. Any person, not being an individual or a Hindu undivided family, who is responsible for paying, on or after the 1st day of June, 2001, to a resident, any income by way of commission (not being insurance commission referred to in section 194d) or brokerage, shall, at the time of credit of such income to the account of the payee or at the time of payment of such income in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of five per cent :provided that no deduction shall be made under this section in a case where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year to the account of, or to, the payee, does not exceed two thousand five hundred rupees :provided further that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44ab during the financial year immediately preceding the financial year in which such commission or brokerage is credited or paid, shall be liable to deduct income-tax under this section. Explanation. ___ For the purposes of this section,__ (I) "commission or brokerage" includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered (not being professional services) or for any services in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing, not being securities; (II) xxx xxx xxx (III) the expression "securities" shall have the meaning assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956); (IV) xxx xxx xxx

( 4 ) MR. Mihir Joshi, learned counsel for the petitioner, has made the following submissions : (I) The stamp vendors are not agents of the State Government from whom they purchase the stamp papers. The stamp vendors have to first obtain the licence under the Bombay Stamp Act and/or the Indian Stamp Act. The licensed stamp vendor has to apply to the Treasury Office for the stamps required by him. The statement of sale of stamps etc. , popularly known as chalan will have to be filled which clarifies the discount available to the stamp vendors on the basis of purchase of stamps and the total amount paid for it. The stamp vendor has to make the payment of the requisite amount in cash which is the total price of the stamps on their face value less the discount available to the vendor. (II) Since the stamp vendor has to pay the price less discount in advance to the Treasury Officer and thereafter the required stamps are disbursed to the stamp vendor on the next day of payment, all dealings are done only on cash basis. Hence there is no payment from the Government to the stamp vendor, much less commission or brokerage. (II