Trading receipt treatment of collected sales tax upheld where the amount was retained as business funds and not segregated.

Sales tax collected by a trader from customers, but retained as part of its own business funds, was treated as a trading receipt and included in taxable income. The character of the receipt depended on its true nature and use, not on the label attached in the accounts. An obligation to remit the amount to the Government or refund purchasers did not prevent taxation at the point of collection where the sum was not kept segregated or paid over. The trader could seek deduction if any amount was later remitted or refunded.

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Issues: Whether sales tax collected by the assessee from purchasers, but not paid over to the State and treated as part of its own funds, constituted a trading receipt liable to be included in its taxable income.

Analysis: The amount was realised by the assessee in the course of its business as sales tax on sales of jute. The character of the receipt depended on its true nature and quality, not on the label given to it in the accounts. The fact that the assessee may have been under an obligation to remit the amount to the Government or refund it to purchasers did not prevent the receipt from being taxable when it was collected and used as part of the assessee's business funds. The reasoning applied the principle that a sum collected in the course of trading, even if separately described as tax, forms part of the trading receipts where it is not kept apart or paid over.

Conclusion: The sales tax amount was a trading receipt and was rightly included in the assessee's total income.

Final Conclusion: The appeal failed, and the inclusion of the collected sales tax in taxable income was upheld, leaving the assessee to claim deduction if and when any amount was later paid over or refunded.

Ratio Decidendi: An amount collected by a trader from customers in the course of business, even if described as sales tax and potentially refundable, is taxable as a trading receipt when it is not segregated or remitted and is treated as part of the trader's own funds.

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