Inclusion of Trading Receipts in Total Income for Assessment Year 1972-73

The sum of Rs. 1,50,993 representing trading receipts should be included in the total income for the assessment year 1972-73. The court held that the liability towards Central Sales Tax continues until exemption is accepted by the sales tax authority, emphasizing that the true nature of a receipt determines its treatment as a trading receipt. The judgment distinguished the case from precedent and concluded that the sum in question constituted trading receipts and must be included in the total income.

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Issues:
Interpretation of whether a sum represented trading receipts and should be included in total income for the assessment year 1972-73.

Analysis:
The judgment involves a reference under section 256(2) of the Income-tax Act, 1961 to determine if a sum of Rs. 1,50,993, representing trading receipts, should be included in the total income for the assessment year 1972-73. The assessee dealt in Kirloskar and Cummins products, where goods were despatched from manufacturers in Bombay and Poona to Bihar, with Central Sales Tax (C. S. T.) included. The assessee reimbursed itself by charging C. S. T. from customers during a second sale, but credited this amount to an "exempted sales tax account" instead of the sales account. The Income-tax Officer and Appellate Assistant Commissioner treated this amount as a trading receipt, while the Tribunal held that the liability towards C. S. T. continues until exemption is accepted by the sales tax authority based on statutory declarations.

The judgment delves into the provisions of the Central Sales Tax Act, emphasizing that liability for C. S. T. arises once in the hands of the first seller during inter-State trade. Exemption is granted to subsequent sellers upon fulfilling statutory formalities, with no discretion for authorities to deny exemption if formalities are met. The judgment cites precedents like Chowringhee Sales Bureau P. Ltd. v. CIT and Punjab Distilling Industries Ltd. v. CIT to establish that the true nature of a receipt determines its treatment as a trading receipt, irrespective of how it is recorded in account books.

The judgment distinguishes the case at hand from CIT v. Hindustan Housing and Land Development Trust Ltd., asserting that the principles laid down in Chowringhee Sales Bureau P. Ltd.'s case are directly relevant. It concludes that the sum of Rs. 1,50,993 represented trading receipts for the assessee during the assessment year and should be included in the total income. The judgment is agreed upon by both judges, with directions to send a copy to the Income-tax Appellate Tribunal, Patna Bench, for necessary action under section 260 of the Act.

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