Trading receipt principle applies: sales tax collected as part of sale consideration remains taxable despite later refund.

Amounts collected by a dealer from buyers as sales tax, though separately described, formed part of the total sale consideration and were taxable as trading receipts when received. The Bombay Sales Tax Act placed the primary liability on the dealer, and section 21 did not convert the dealer into a mere collecting agent or create a statutory liability in the purchaser. The character of the receipt had to be determined at the time it entered the assessee's hands; on that basis, the refund later granted by the sales tax authorities did not change its original taxable nature. The refunded amount was therefore assessable as business income in the assessee's hands.

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Issues: Whether the refund of Bombay sales tax received by the assessee formed part of its taxable business income for the relevant assessment year.

Analysis: The assessee had purchased coal and resold it in the course of trade, and the amounts collected from buyers, though described separately as sales tax, were part of the total consideration for the sales. The statutory scheme of the Bombay Sales Tax Act fastened the primary liability to pay sales tax on the dealer, and section 21 did not create a statutory liability in the purchaser or convert the dealer into a mere collecting agent. The character of the receipt had to be judged at the point when it entered the assessee's hands; on that footing, the amount represented a trading receipt and not another person's money held in trust or by diversion before accrual. The subsequent refund by the sales tax authorities did not alter the original character of the receipt.

Conclusion: The refunded sales tax was assessable as the assessee's income from business, and the question was answered in the affirmative, in favour of the Revenue.

Ratio Decidendi: Where sales tax amounts are collected by a dealer as part of the price in a trading transaction, the receipt is a trading receipt in the dealer's hands, and a later refund does not change its taxable character.

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