- (1.) THE Revenue has raised the following two questions of law arising out of the order of the Income -tax Appellate Tribunal dated February 29, 1980, in respect of the assessment year 1975 -76 : '(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in deleting the addition of Rs. 1,95,877 ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the amount of Rs. 5,000 odd arrived at after deducting the amount of Rs. 1,95,877 referred to in question No. (1) above from the disputed liability of Rs. 2,09,044 represented statutory liability and as such it should be allowed ?'
(2.) THE assessee has collected a sum of Rs. 1,95,877 on account of sales tax which was credited to the account styled as 'Deposits against Rajasthan Sales Tax Account'. The Income -tax Officer came to the conclusion that the amount was collected against the sales tax liability and as such it is a part of the trading receipt and since the same has not been paid to the Government or refunded to the customers from whom it was collected, the amount could be included in the income and deduction could be claimed in the year in which the sales tax is actually paid to the Government or refunded to the customers. It was also found that in the return submitted by the assessee before the Commercial Tax Officer no liability was admitted and there was a decision of the Board of Revenue in favour of the assessee holding that there was no such liability to tax. In appeal, before the Commissioner of Income -tax (Appeals), it was found that the amount is a part of the trading receipt and simply because of crediting the amount to a separate account in the books of account it cannot be assumed that it is not a business receipt. The amount could be deductible as a business expenditure in the year in which the liability arises or is discharged. The appellate authority held that unless the amount is returned, these would remain a collection on account of sales tax and simply crediting these amounts to a Deposits against Rajasthan Sales Tax Account, the taxability of these amounts would not disappear. The assessee had not admitted his liability in the sales tax return submitted. The liability could not be said to have arisen and been quantified and, therefore, the trading receipt is taxable.
(3.) IN the second appeal before the Tribunal following the earlier decision, the Tribunal allowed the claim of the assessee and it was further observed that the total liability would be of Rs. 2,00,944 and the amount of collection is only Rs. 1,95,877 and, therefore, a further sum of Rs. 5,000 would also be allowed.;