Rastogi, J. - (1.) THIS is a reference under Section 256(1) of the I.T. Act. The assessment years involved are 1968-69, 1969-70 and 1971-72. The assessee, M/s. Poonam Chand Trilok Chand, Bareilly, is a partnership firm and carried on business in foodgrains as commission agent and on its own. During the previous years relevant to the years under consideration the assessee had realised Rs. 1,46,302, Rs. 92,870 and Rs. 40,570 as purchase tax from its customers respectively, The assesses did not include these amounts in its profit and loss account for any of these years. At the time of making the assessments for the assessment years 1968-69 and 1969-70, the ITO failed to notice these receipts. Subsequently, he initiated proceedings under Section 147(b)of the Act and framed reassessments under Section 144/147(b) of the Act treating these receipts as trading receipts and included the same in the total income. For the assessment year 1971-72, for similar reasons, he added the amount of Rs. 40,570 in the total income of the assessee.
(2.) AGGRIEVED, the assessee filed appeals against these orders. The AAC accepted the assessee's contention and held that the disputed amounts did not constitute the assessee's income for the aforesaid respective years and hence deleted the same. From that decision, the revenue filed three appeals before the Income-tax Appellate Tribunal. The Appellate Tribunal, relying on the decision of the Supreme Court in Chowringhee Sales Bureau P. Ltd. v. CIT [1973] 87 ITR 542 (SC) and Sinclair Murray and Co. P. Ltd. v. CIT [1974] 97 ITR 615 and that of this court in CIT v. Sheo Nath Prasad Hari Kishan [1974] 93 ITR 282 (All), held that the disputed receipts constituted trading receipts of the assessee and even though the assessee had been disputing its liability to pay the purchase tax to the State Govt. these receipts were liable to be added in its total income. According to the Tribunal, the unilateral act of the assessee of making credit entries in the accounts of the customers in its books was not of much consequence. For these reasons, the addition of these amounts in these three assessment years respectively was restored. The assessee's contention that in view of the decision of the Supreme Court in Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363, the question for consideration was as to whether the amount claimed by the assessee as a deduction on account of sales tax payable by it was deductible as business expense, was repelled on the ground that the assessee had not claimed any such deduction and the only question for consideration in these cases was whether the disputed amounts constituted its trading receipts or not. The Tribunal, accordingly, allowed the appeals of the department and restored the order of the ITO in regard to the addition of the aforesaid amounts for the aforesaid three years respectively. Now, at the instance of the assessee, the Appellate Tribunal has referred the following questions of law to us : "1. Whether, on the facts and in the circumstances of the case, the assessee was entitled to claim exemption on the purchase tax collected by it in the computation of income, profits and gains of the assessee for the assessment years 1968-69, 1969-70 and 1971-72 ? 2. Whether, on the facts and circumstances of the case, the finding of the Income-tax Appellate Tribunal in the present cases that the assessee did not claim any deduction on account of its sales tax liability and the only question for consideration in these cases is whether the amount in question constituted trading receipts of the assessee or not is perverse ?"
(3.) QUESTION No. 1 is not happily worded. The assessee had not claimed exemption in respect of purchase tax realisations but it had claimed deduction in respect of the same for the reason that it was a statutory liability as the assessee was to pay the purchase tax realised to the State Govt. Therefore, in question No. 1, in respect of the expression "exemption", we would read the expression "deduction". As for question No. 2 as well, it has not been properly framed inasmuch as the assessee had not claimed deduction on account of its sales tax liability but had claimed deduction on account of its purchase tax liability. We, therefore, reframe the questions as under : "1. Whether, on the facts and in the circumstances of the case, the assessee was entitled to claim deduction in respect of the purchase tax realisations made by it, from the computation of its income, profits and gains for the assessment years 1968-69, 1969-70 and 1971-72 ? 2. Whether, on the facts and in the circumstances of the case, the finding of the Income-tax Appellate Tribunal that the assessee had not claimed any deduction in respect of its purchase tax liability and the only question for consideration in these cases was whether the amounts in question constitute the trading receipts of the assessee or not is perverse ?" Both the questions may be taken up together. It is not disputed that the assessee follows the mercantile system of accounting. It realised from its customers the disputed three amounts in the three assessment years under consideration respectively by way of purchase tax. It does not admit of any doubt that these realisations amounted to trading receipts of the assessee and were liable to be included in its total income. Reference may be made for this purpose to the decisions of the Supreme Court in Chowringhee Sales Bureau P. Ltd. v. CIT [1973] 87 ITR 542 and Sinclair Murray and Co. P. Ltd, v. CIT [1974] 97 ITR 615 and that of this court in CIT v. Sheo Nath Prasad Hari Kishan [1974] 93 ITR 282. These decisions are on the question of sales tax realisations. It is not disputed that the nature of purchase tax realisations is the same as that of sales tax realisations. Therefore, the disputed realisations were trading receipts of the assessee.;