COMMISSIONER OF INCOME TAX Vs. MOTIPUR SUGAR FACTORY PRIVATE LIMITED

JUDGEMENT

(1.) THE core question falling for consideration in this reference is whether sales tax refunded to the assessee by the State Government for being refunded to dealers from whom they had been realised and whether sums realised from dealers for payment to the Indian Sugar Syndicate Ltd. were trading receipts of the assessee. In this context, the following questions have been referred to this court for our opinion :

(2.) THE assessee is a sugar factory. It had collected Rs. 1,75,548 from dealers as Central Sales Tax and deposited them in the Government treasury. THEse collections had been made in accordance with Sections14A and 20A of the Bihar Sales Tax Act. Subsequently, the two Sections were declared ultra vires by the Supreme Court. THE tax realised on that score was ordered to be refunded. THE assessee got a refund of the aforesaid amount in the assessment year 1957-58. This sum was credited to liability account by the assessee, as it had to be refunded to dealers from whom it had been collected. Up to the assessment year 1961-62, the assessee refunded Rs. 61,439 to dealers. A sum of Rs. 66,109 remained outstanding with the assessee. This was carried forward under the head "Liability for other finance". In the assessment year 1964-65, the ITO treated this amount as income of the assessee.

(3.) THE Supreme Court decision clearly laid down that the amounts realised as sales tax and lying in the hands of the assessee must be treated as trading receipts. THE same view was taken again by the Supreme Court in the case of Sinclair Murray and Co. P. Ltd. v. CIT [1974] 97 ITR 615.