Decided on December 18,1963



- (1.) The Income-tax Appellate Tribunal has referred the following question under section 66 (1) of the Indian Income-tax Act, namely, whether on the facts and in the circumstances of the case, the collection as and by way of sales-tax was a trading receipt of the assessee liable to tax.
(2.) It appears that the assessee is a firm carrying on business as commission agent in rice. For the previous year relevant to the assessment year 1958-59 it collected a sum of Rs. 5,702 towards sales-tax and in that relevant to the assessment year 1959-60 it collected a sum of Rs. 21,316. The assessee made these collections on sales made outside the State apprehending that it may be made liable for payment of such sales-tax on the imposition of Central Sales Tax on Inter-State trading from 1st July, 1957. These collections so made from the customers, were credited to a separate account called the " deposit account" and were not treated as part of the sale proceeds. The invoices for sales also showed that the amounts were collected separately as deposit. It was the assessee's case that the understanding between it and the customers was that if sales-tax was ultimately demanded of the assessee, payment would be made to the Government accordingly, but if it was not so demanded, the amount would be refunded to the customers. It was, therefore, contended on behalf of the assessee that the amount collected as and by way of sales-tax did not belong to it, but the assessee was holding that amount as a cestui que trust as stated in the statement of the case, for its customers. In support of this, the assessee relied upon the invoices which, as we have already stated, show that the amount was already collected as deposit. This contention was negatived by the income-tax Officer, who took the view that these collections were trading receipts to be treated as part of the sale proceeds and taxed as income over and above the commission earned on sales. The Income-tax Officer, however, stated that if subsequently the amount was paid to the Government or refunded to the customers, it would be allowed as a deduction in the relevant year. The appeal by the assessee was unsuccessful. So was the appeal to the Tribunal. Mr. Srinivasa Rao states that his assessee has now received an assessment order for 1957-58 and notice of assessment for 1958-59. Of course, the Income-tax officer has himself stated in his order that he will give deduction after the tax is paid. But that is a different question. In spite of this he contends that these 'amounts cannot be treated as trading receipts.
(3.) The learned Advocate for the assessee Mr. Srinivasa Rao, contends that this is a case where the amount received by the assessee was received as a deposit. which was returnable if the Central Government did not levy the tax and consequently was in the same category as moneys borrowed from customers. In support of this contention he has cited several decisions namely morley (Inspector of Taxes) v. Tattersall, (1938) 3 All E. R. 296 : (1939) 7 I. T. R. 316. K. M. S. Lakshmanier and Sons v. Commissioner of Income-tax', (1953) S. C. J. 222 : (1953) 1 M. L. J. 609 : (1953) S. C. R. 1057: (1953) 23 I. T. R. 202 (S. C. ). Punjab Distilling Industries Ltd. v. Commissioner of Income-tax, (1959) S. C. J. 580 : (1959) 1 S. C. R. (Supp. ) 613 : (1959) 35 I. T. R. 519 p. (S. C. ). and Commissioner of lncome- tax v. Punjab Distilling Industries Ltd. (1962) 45 I. T. R. 548.;

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