T.P. Mukerjee, J. - (1.) THE statement of the case submitted by the Appellate Tribunal raises the following question of law: "Whether, on the facts and in the circumstances of the case, the sum of Rs. 1,17,571 represenled taxable income of the assessee ?"
(2.) THE statement of the case relates to the assessment year 1959-60. THE assessee is a firm which was accorded registration under the Income-tax Act, 1922, hereinafter referred to as the Act, and it carries on wholesale business in cloth. THE aasessee was also a registered dealer under the U.P. Sales Tax Act and as such it collected sales tax from its customers and also paid out its liability on account of sales tax to the Government. THE assessee used to maintain a separate account denominated as the "sales tax account" in which all receipts paid by the assessee's customers on account of sales tax were credited and all payments made by it to the Government debited. Up to the end of the assessment year 1957-58 there was a debit balance in the sales tax account maintained by the assessee and this debit balance was transferred by the assessee to its profit and loss account and allowed as a deduction in the income-tax assessment. In the accounting year relevant to the assessment year 1958-59, collections made by the assessee from its customers on account of sales tax were in excess of the payments made to the Government with the result that there was a closing credit balance of Rs. 1,30,044 in the sales tax account. THE assessee, however, instead of crediting such excess to the profit and loss account, showed it as a liability in the balance-sheet. It appears, however, that the Income-tax Officer overlooked the manipulations in the accounts and failed to tax the excess of the sales tax collected as the income of the assessee. Coming to the relevant accounting year, the sales tax account maintained by the assessef showed a credit balance of Rs. 2,47,615 at the end of the year. THEre was an opening balance of Rs. 1,30,044 which meant that the collections on account of sales tax made by the assessee during the relevant period exceeded the payments made to the Government by the sura of Rs. 1,17,571. THE Income-tax Officer included this amount in the assessment of the assessee for the assessment year 1959-60. The assessee made an appeal to the Appellate Assistant Commissioner against the inclusion of the sum of Rs. 1/17,571 in its assessment but the appeal was unsuccessful. The assessee then appealed to the Tribunal. Before the Tribunal it was contended on behalf of the assessee that the sales tax collected by it was not a trading receipt at all. It had to pay the entire amount collected by it to the Government. It was argued that the assessee maintained its accounts in the mercantile system and even when an amount was not actually paid to the Government the liability of the assessee subsisted and the amount was really debited in the sales tax account maintained by it. It was further argued that any amount received by the assessee from its customers on account of sales tax either legally or under a colour of authority was also payable to the Government under Section 8A(iv) of the U.P. Sales Tax Act, 1948, which, it may be mentioned, had not been declared as ultra vires at the relevant time. The assessee, therefore, contended that the amount in question, namely, Rs. 1,17,571, representing excess of collections over payments made to the Government was not assessable to tax as income of the assessee.
(3.) THE departmental representative originally contended that the amount of sales tax received by the assessee was really in the nature of a revenue receipt and when the assessee did not pay such amount to the Government it became his income. It appears, however, from the agreed statement of the case submitted by the Tribunal that ultimately, the departmental representative conceded that the sales tax charged for and received by the assessee did not become its income as and when the sale was made but, later on, when the assessee did not make payment thereof to the Government and retained the amount, such amount represented the income of the assessee. In the agreed statement of the case the Tribunal has set out the contention of the department, as stated in paragraph 9 of its appellate order, in the following words: "9. It was not the case of the department that the sales tax received by the assessee at the time of the sale itself was the income of the assessee. THE department's case is that the sales tax so charged did not become the income of the assessee as soon as the sale was made but it became so later on, when it was not accounted for to the Government." Such being the contention of the revenue, the Tribunal held that the quality and nature of a receipt for income-tax purposes are determined once for all when it was received and they did not change with time and supervening circumstances. The Tribunal observed that if the amount of sales tax collected by the assessee was not initially its income it could not become income of the assessee thereafter under circumstances which came into existence some time later. The Tribunal, therefore, concluded that sales tax collected by the assessee and credited separately in the "sales tax account" did not constitute a trading receipt and, therefore, the surplus collection of sales tax represented by the figure of Rs. 1,17,571 was not taxable as the income of the assessee.;