Statutory conduit receipts are not taxable income where the assessee has no beneficial ownership or real profit element.

Amounts collected by a society merely as a statutory conduit for remittance to the State, with no beneficial ownership and no real profit or gain accruing to it, do not constitute taxable income under the Income-tax Act. The Tribunal noted that the collections were made while performing a statutory function linked to the VAT regime and that the amount ultimately belonged to the State Government, so the Revenue's additions could not stand. Non-registration under section 12AA was irrelevant because the core question was whether any real income had arisen, and section 40(a)(iib) did not alter the position that the receipts were not income at all.

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Issues: Whether the amounts collected by the assessee society towards VAT forms and remitted or retained in terms of its bye-laws constituted taxable income in its hands.

Analysis: The assessee was collecting fees while performing a statutory function connected with the State VAT regime. The collection was made on behalf of the State, and the amount ultimately belonged to the State Government. The earlier view of the Tribunal in the assessee's own case had been affirmed by the jurisdictional High Court, which held that the surplus over expenditure did not assume the character of profit or gain in the assessee's hands. The non-registration under section 12AA was held to be irrelevant because the fundamental question was whether any real income had arisen. The amendment introducing section 40(a)(iib) was also not treated as altering the position that the relevant receipts were not income at all.

Conclusion: The entire amount collected by the assessee was held not to be its income, and the additions made by the Revenue did not survive.

Ratio Decidendi: Amounts collected by an assessee merely as a statutory conduit for remittance to the State, over which it has no beneficial ownership and which do not yield real profit or gain, do not constitute taxable income under the Income-tax Act.

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