Trading receipts characterised by inclusion in the transaction price: sales tax collected as part of consideration held taxable.

Amounts collected as sales tax were held to be trading receipts when, at the time of receipt, they formed part of the price or were integrally connected with each sale; sums merely labelled as deposits or credited to separate accounts do not alter character. The determinative test is the nature of the receipt on payment-relating to consideration for the transaction (taxable trading receipt) versus collateral security or borrowing (not trading income). On the present facts the collections corresponded to leviable sales tax and were attributable to each sale, therefore taxable as trading receipts.

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Issues: Whether the amounts collected from customers as and by way of sales tax were trading receipts of the assessee liable to income-tax.

Analysis: The inquiry focuses on the character of the receipts at the time they were received. Deposits or sums that form part of the price or are taken as an integral part of each transaction are trading receipts, even if shown separately in the books or labelled as deposits. By contrast, sums received that have no relation to the sale price and are received solely as security for performance or as genuinely borrowed money are not trading receipts. Authorities establish that the determinative test is the nature of the receipt when paid: whether it relates to the trading transaction (part of the consideration) or whether it is collateral to the transaction (security/borrowed money). In the present facts, the sums taken in each transaction corresponded to the sales tax leviable and were collected as part of the transactional consideration, credited to a deposit account but attributable to each sale.

Conclusion: The amounts collected as and by way of sales tax were trading receipts liable to income-tax.

Ratio Decidendi: A receipt is a trading receipt liable to tax if, at the time of receipt, it forms part of the price or is integrally connected to the trading transaction; labels or subsequent accounting treatment do not alter that character.

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