SUJATA V.MANOHAR J. - (1.) THIS is reference under s. 256(1) of the I.T. Act, 1961. It pertains to the assessment year 1969 -70. The facts as set out in the statement of the case are as follows : The assessee is a dealer in machinery. It has been the practice of the assessee -company to take deposits from intending purchasers of machinery, which deposits are later adjusted towards the purchase price of the machinery that is sold. The surplus deposits, if any, are generally refunded to the customers. The assessee is occasionally unable to refund some of the excess deposits because of various reasons such as non -availability of the current address of the customers etc. For the relevant assessment year 1969 -70, such excess deposits which the assessee was unable to refund to its customers, amounting to Rs. 17,691, were written off in the books of the assessee -company by transferring them to the profit and loss account.
(2.) IT was the assessee's contention that the amount of Rs. 17,691 does not represent a taxable receipt. The ITO negatived this contention and held that these were trading receipts and were taxable accordingly. In the appeal before AAC, it was held that the amounts in question, having being originally received as deposits, were impressed with the character of trust money and hence they were not taxable as trading receipts.
(3.) THE Department filed an appeal before the Income -tax Appellate Tribunal. The Tribunal upheld the finding given by the AAC. From this decision, at the instance of the Department, the following question has been referred to us for our opinion : 'Whether, on the facts and in the circumstances of the case, the sum of Rs. 17,691 was rightly held to be not taxable ?' ;