Roy, J. - (1.) This is a reference under Section 66(1) of the Income-tax Act, 1922, and the point for our consideration is whether sales tax charged by an auctioneer forms part of his trading receipts and is as such liable to be assessed to income-tax.
(2.) The assessee is a private limited company, dealing in furniture and also acting as auctioneers. For the assessment year 1960-61, for which the corresponding accounting year was the financial year ending 31st March, 1960, the Income-tax Officer found that the assessee had collected a sum of Rs. 32,986 from the purchasers in the auctions held by it over and above the amount of Rs. 50,187 which it had earned as commission. He found that the aseessee had made out one cash memo. in respect of each sale, including therein the price of the articles and also the amount of sales tax payable thereon. In his opinion that amount of Rs. 32,986 was in reality a portion of the sale price itself, because sales tax was not legally due from the purchasers of the goods but was the liability of the sellers only. As the amounts realised as sales tax had not been paid to the owners of the goods, the amounts formed part of the income of the assessee along with the amount of the commission and accordingly he also included the sum of Rs. 32,986 in the assessee's total income.
(3.) On appeal by the assessee, the Appellate Assistant Commissioner noticed that in the cash memo. issued by the assessee to the purchasers in the auctions, the assessee was shown as the seller. According to him, as between the purchasers and the assessee, the assessee was the full owner of the goods and so long as the assessee's customers did not revoke the contract, the assessee continued to be the seller of the goods. Further, under the provisions of the Bengal Finance (Sales Tax) Act, the assessee was a dealer and was liable for sales tax. While the receipts of the amounts described as sales tax were receipts in the course of the assessee's business, yet, as the assessee had credited these amounts to the sales tax collection account and had not treated them as its liabilities, the amounts could not be held to be the assessee's income. The Appellate Assistant Commissioner noticed that on the assessee's petition under Article 226 of the Constitution, the High Court of Calcutta, by its decision dated 16th November, 1960, had held that the assessee was not a dealer under the aforesaid Sales Tax Act and as such there was no liability on the assessee to pay sales tax. But as this decision was subject to appeal, the Appellate Assistant Commissioner was of the opinion that the assessee was justified in treating these amounts as liabilities and not as income. The Appellate Assistant Commissioner accordingly deleted the amount of Rs. 32,986 from the assessment.;