Trading receipts doctrine treats bottle return security deposits as sale proceeds when linked to liquor sales.

Amounts collected as empty bottle return security deposits were treated in substance as part of the sale proceeds of bottled liquor and, therefore, as trading receipts. Their character was determined by the true nature of the receipt at inception, not by the label attached to it, because the sums were charged in connection with the sale of bottles and liquor and formed no real commercial distinction from the sale price. The earlier authority on monies received for others was distinguished since these amounts arose in the assessee's trading operations rather than as funds merely held on behalf of customers.

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Issues: Whether the amounts collected by the assessee as empty bottle return security deposits were income assessable under section 10 of the Income-tax Act as trading receipts.

Analysis: The collections, though described as security deposits, were found to be part of the sale proceeds of bottled liquor in substance. The amounts were charged in connection with the sale of bottles and liquor, were refundable on return of the bottles, and the commercial arrangement showed no real distinction between the price of the bottles and the so-called deposit. The receipt was therefore characterised by its true nature at inception and not by the label attached to it. The earlier authority treating customer monies as never becoming the recipient's money was distinguished because, here, the sums were received as part of the assessee's trading operations and not as money held for others.

Conclusion: The amounts were trading receipts and were assessable to income-tax in the hands of the assessee; the question was answered in the affirmative, against the assessee and in favour of the Revenue.

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