Decided on February 10,1982



A.M.AHMADI, J. - (1.)THE assessee is carrying on business in the name and style of Spunpipe & Construction Co. (Baroda) (P) Ltd. and had supplied certain items to the Government during the previous year relevant to the asst. year 1959 60. The assessee received from the Pay and Accounts Officer, Calcutta, the price of the items so supplied which was in excess to the extent of Rs. 31,695. The assessee placed this amount in the suspense account where it remained till it was brought to the profit and loss a/c in the relevant year, that is, asst. year 1971 72. The ITO treated the said amount as the income of the assessee liable to tax in the said assessment year. The AAC also took the same view in appeal. However, the Tribunal, Ahmedabad Bench 'A', took the view that so far as the amount of Rs. 31,695 is concerned, the payment was made to the assessee under mistake and hence such payment could not be treated as a trading receipt. According to the Tribunal the onus was on the Department to show that the said amount acquired the character of a trading receipt before it could be taxed. Since the Department had failed to establish the character of the said amount to be a trading receipt, the same was not liable to tax in the assessment year in question.
(2.)IT further appears that during the previous years relevant to the asst. yrs. 1965 66 and 1966 67, the assessee sold certain items to the Public Works Dept. of the State Govt. and charged sales tax thereon at the rate of 8 per cent. instead of 2 per cent. chargeable in law. The assessee placed the surplus (differential) amount of Rs. 11,446.28 in the suspense account where it continued till it was brought to the profit and loss account in the asst. year 1971 72. The ITO as well as the AAC held that the said income was liable to tax in the asst. year 1971 72. The assessee, feeling aggrieved by this order passed in appeal, approached the Tribunal. The Tribunal, relying on the decision of the Supreme Court in Chowringhee Sales Bureau (P) Ltd. vs. CIT 1973 CTR (SC) 44 : (1973) 87 ITR 542 (SC), held that the said amount received by the assessee by way of sales tax had the character of a trading receipt, but, since it was received by the assessee partly in the financial year 1964 65 and partly in the next financial year 1965 66, it could not be taxed as income derived during the assessment year in question. In this view that the Tribunal took, it set aside the order passed by the authorities below and allowed the appeal of the assessee.
The Department feeling aggrieved by the view expressed by the Tribunal on both the counts, sought a reference to this Court. The Tribunal while drawing up the statement of case on 5th July, 1977, formulated the question for reference as under :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the amounts of Rs. 31,695 and Rs. 11,523 cannot be treated as the income of the assessee ?"

(3.)SINCE the relevant year is the asst. year 1971 72, the question referred to us must necessarily relate to the said assessment year. Having regard to the nature of the controversy between the assessee and the Department, we think that the formulation would be complete if we reformulate the question by adding the words " for the asst. year 1971 72" after the word "assessee". We will take the question as reformulated by us as the one referred to us for our opinion.

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