Mercantile accounting treats rusum collected on sales as trading receipts, making the amount taxable when sales occur.

Where an assessee followed the mercantile system of accounting and no change in that method was shown for the relevant year, amounts collected as rusum on commission sales of jaggery were treated as trading receipts when the sales were effected. On that basis, the collection formed part of taxable income for the assessment year 1970-71, and the issue was answered against the assessee and in favour of the Revenue.

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Issues: Whether the sum collected by the assessee as rusum on commission sales of jaggery constituted taxable income for the assessment year 1970-71.

Analysis: The assessee had been held in earlier years to follow the mercantile system of accounting, under which the relevant liability arises when the sales are made. In the absence of any material to show a change in the method of accounting for the year in question, the earlier finding was followed. The amount collected as rusum was therefore treated as part of the assessee's trading receipts.

Conclusion: The amount was taxable as income and the question was answered in the affirmative, against the assessee and in favour of the Revenue.

Ratio Decidendi: Where an assessee follows the mercantile system of accounting and no change in that method is shown, amounts collected in connection with sales are taxable as trading receipts when the sales are effected.

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