Market fee collections and mercantile deduction principles governed taxability and defeated revision under section 263.

Market fee collected under the Bihar Agricultural Produce Markets Act, 1960 was treated as belonging to the Market Committee and not as the assessee's trading receipt, because the statutory levy was characterised as a liability under market legislation rather than income. The text also states that, on the mercantile system, an accrued liability remains deductible even if unpaid during the year, and that section 43B did not disallow the claim on the facts discussed. On that basis, the assessment was not considered erroneous or prejudicial to the Revenue, so revision under section 263 was not justified.

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Issues: Whether market fee collected under the Bihar Agricultural Produce Markets Act, 1960 constituted a trading receipt taxable in the assessee's hands and, alternatively, whether the amount was deductible on the mercantile system of accounting so that the Commissioner was justified in revising the assessment under section 263 of the Income-tax Act, 1961.

Analysis: The market fee was held to belong to the Market Committee and not to represent the assessee's own trading receipt. The distinction between a tax and a fee was treated as material, and the statutory collection was regarded as a liability arising under the market legislation rather than income of the assessee. The decision also accepted that a liability maintained on the mercantile system remains deductible notwithstanding non-payment during the year, and that section 43B did not defeat the claim on the facts considered. In these circumstances, the assessment order could not be regarded as erroneous and prejudicial to the interests of the Revenue for the purpose of revision.

Conclusion: The revision under section 263 was invalid, and the market fee collections were not taxable as trading receipts; alternatively, the assessee was entitled to deduction on mercantile principles.

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