Trading debt and remand observations: credit purchases were not borrowed money, and interim dicta did not bind the final decision.

A liability arising from purchases of cloth on credit was treated as a trading debt, not borrowed money, because no loan transaction or acceptance of the amount as capital was shown; it therefore could not be excluded from average capital computation under the Excess Profits Tax Act. The text also states that conditional observations made in earlier remand proceedings were not binding findings of fact or law, but only interlocutory dicta, so the Tribunal could reconsider the issue at final disposal. The reference was answered in favour of the Revenue, with costs to the Department.

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Issues: (i) Whether the amount due from the assessee to the supplier represented borrowed money or only a trade debt, and whether it could be excluded from average capital computation under the Excess Profits Tax Act; (ii) Whether observations made in earlier remand orders of the Tribunal were binding findings or merely obiter dicta.

Issue (i): Whether the amount due from the assessee to the supplier represented borrowed money or only a trade debt, and whether it could be excluded from average capital computation under the Excess Profits Tax Act.

Analysis: The amounts standing to the assessee's debit arose from purchases of cloth on credit. No transaction of loan was established, and there was no positive act of lending coupled with acceptance of the amount as a loan. The liability represented the price of goods supplied, namely a trading liability, and not capital introduced into the business. Such sums therefore could not be treated as borrowed money under the relevant rule, and, in any event, they did not constitute capital employed in the business.

Conclusion: The amount was not borrowed money but a trade debt and was not to be included as capital employed; the answer was against the assessee and in favour of the Revenue.

Issue (ii): Whether observations made in earlier remand orders of the Tribunal were binding findings or merely obiter dicta.

Analysis: The impugned observation was conditional and hypothetical, made while the appeal was still pending and before final disposal. It did not amount to a conclusive finding of fact or law. Observations made in the course of remand proceedings did not preclude the Tribunal from reconsidering the matter when finally deciding the appeal.

Conclusion: The earlier observations were not binding findings and were merely obiter dicta; the answer was against the assessee and in favour of the Revenue.

Final Conclusion: The reference was answered in favour of the Revenue, with costs awarded to the Department.

Ratio Decidendi: A liability arising from purchase of goods on credit is a trading debt, not borrowed money or capital employed, and an interlocutory remand observation made while the appeal remains pending does not bind the final decision-maker.

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