Statutory collections held as conduit are not trading receipts and do not become taxable income

Amounts collected by a commission agent under a statutory obligation for remittance to the Market Committee do not form trading receipts of the agent where the agent acts only as a conduit and the sum never reaches him as his own income. The U.P. Krishi Utpadan Mandi Rules required the market fee to be charged in the sale voucher and deposited only to the extent realised, so the collection was received on behalf of another authority rather than on the assessee's own turnover. The principle applied is that income is taxable only when it accrues to the recipient as income; amounts diverted before that point, including statutory or trust-like collections, are outside taxable trading receipts.

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Issues: Whether the amount of market fee collected by a commission agent under the U.P. Krishi Utpadan Mandi Rules formed part of the assessee's trading receipt and was taxable as income.

Analysis: Under Rule 68, the commission agent was required to charge market fee from the seller in the prescribed sale voucher and deposit only that realised amount with the Market Committee. The amount collected was not a levy on the assessee's own sales turnover, but a sum received on behalf of the Market Committee under a statutory obligation. Applying the principle that income is taxable only if it reaches the assessee as income and not where it is diverted before reaching him, the receipt was held not to be the assessee's trading receipt. The earlier decisions on dharmada and similar collections supported the view that amounts received for a specific statutory or trust-like purpose do not become income of the recipient. The decision dealing with sales tax collections was distinguished because there the dealer was liable on his own turnover and the amount formed part of business receipts.

Conclusion: The amount of Rs. 29,028 was not liable to tax as the assessee's trading receipt and the question was answered in the negative, in favour of the assessee.

Ratio Decidendi: Amounts collected by an assessee under a statutory obligation for remittance to another authority, and held only as trustee or conduit, are not trading receipts and are not taxable as income because they never reach the assessee as his own income.

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