M.C. Agarwal, J. - (1.) THESE are two references under Section 256 of the Income-tax Act, 1961, in respect of a common assessee and relating to the assessment years 1971-72 and 1974-75.
(2.) THE reference in I. T. R. No. 237 of 1982 arises out of the order dated November 30, 1980, passed by the Income-tax Appellate Tribunal in ITA No. 1603 (All) of 1979. THE following question stated to be of law and to arise out of the said order has been referred for the opinion of this court : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the sales tax of Rs. 2,00,971 credited to the special contingency account in the assessment year 1971-72 was not a trading receipt and hence not includible in the computation of the total income of the assessee for the assessment year under reference ?" Income-tax Reference No. 73 of 1982 arises out of the Tribunal's order dated February 12, 1981, for the assessment year 1974-75 passed in I. T. A, No. 436 (All) of 1980, and the following question stated to be of law and to arise out of the said order has been referred for the opinion of this court : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the sales tax of Rs. 1,42,134 credited in the special contingency account in the assessment year 1974-75 was not a trading receipt and hence not includible in the computation of the total income of the assessee for the year under reference ?" The aforesaid references have been made at the instance of the Commissioner of Income-tax.
(3.) WE have heard Sri A. N. Mahajan, learned standing counsel for the Commissioner, and Sri P. K. Misra, advocate, holding brief from Sri Bharat Ji Agarwal, counsel for the assessee-respondent. The assessee-respondent is a dealer in motor vehicles and sells the same, inter alia, on hire purchase basis in which system there is no immediate sale of the vehicle at the time of the delivery of the same to the prospective buyers but the vehicle is delivered to the prospective buyers under a hire purchase agreement, the ultimate sale being effected after the instalments of hire are cleared. While delivering the vehicle to the buyers, the respondent, in order to hedge itself against any liability for sales tax, takes into account and realises from the hirer the amount of sales tax that could be charged if the sale was executed for the full value of the vehicle. Such amounts are credited to an account called "special contingency account". The sale is ultimately made in most of the cases at a nominal amount of Re. 1, etc., as a result of which the actual liability to sales tax is very little. The excess amount collected from the buyers is generally refunded to them and where it remains unrefunded, it is transferred to another account called sundry creditors account and from there, it seems, the amounts remaining unpaid are taken to the profit and loss account.;