Trading receipts include retained business collections, even when shown as liabilities in the books, because true character controls taxation.

Amounts collected in the course of business retain the character of trading receipts where their real nature is commercial income, even if recorded in the books as a liability. Retained sales tax refunds not passed on to dealers are treated as taxable trading receipts because the decisive test is the true character of the receipt, not its accounting treatment. Likewise, sums collected from dealers for payment to the Indian Sugar Syndicate and not remitted are treated as assessable income when retained by the assessee. On that basis, the note states that both amounts were liable to tax.

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Issues: (i) Whether the sales tax refund retained by the assessee and not passed on to the dealers was a trading receipt chargeable to tax. (ii) Whether the amount collected from dealers for payment to the Indian Sugar Syndicate and retained by the assessee till the relevant assessment year was a trading receipt assessable as income.

Issue (i): Whether the sales tax refund retained by the assessee and not passed on to the dealers was a trading receipt chargeable to tax.

Analysis: The amounts had been collected by the assessee in the course of business and later refunded to it after the statutory levy was held invalid. The decisive test was the true nature and quality of the receipt, not the manner in which it was shown in the books. Amounts received as sales tax and retained in the assessee's hands, without being returned to the persons from whom they were collected, were treated as trading receipts under the governing Supreme Court authorities.

Conclusion: The retained sales tax refund was a trading receipt and was chargeable to tax.

Issue (ii): Whether the amount collected from dealers for payment to the Indian Sugar Syndicate and retained by the assessee till the relevant assessment year was a trading receipt assessable as income.

Analysis: The collections were made by the assessee in the course of its trading operations and were carried as a liability, but the book description did not alter the character of the receipt. Sums received in the course of business for onward payment, when retained by the assessee and not discharged, were treated as part of trading receipts and assessable as income.

Conclusion: The amount collected for the Indian Sugar Syndicate and not paid over was a trading receipt assessable as income.

Final Conclusion: Both disputed amounts were held to be trading receipts of the assessee and liable to tax, and the reference was answered against the assessee.

Ratio Decidendi: A receipt collected in the course of business retains its character as a trading receipt if its real nature is commercial income, and its treatment in the books or as a liability does not prevent taxation where the amount is retained by the assessee.

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