Separately earmarked excess collections held under a repayment obligation are not trading receipts and cannot be taxed as business income.

An amount collected under a subsisting judicial permission, but separately earmarked in a deposit account and linked to individual payers, was treated as a repayable liability rather than the collector's trading receipt. The decisive factors were the express direction to preserve the excess collection pending proceedings, the maintenance of identifiable records for possible repayment, and the statutory framework contemplating recovery of excess collections and consequences for breach. On those facts, the amount did not form part of the collector's circulating capital or an unconditional accrual to profit, and authorities treating unsegregated collections as trading receipts were distinguished.

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Issues: Whether the 1 per cent commission collected in excess of the permitted rate was assessable as the assessee's trading receipt or was held under a repayable liability in a fiduciary capacity.

Analysis: The collection of the additional 1 per cent was made while an interim High Court order permitting collection at 3 per cent was in force, with directions to keep 1 per cent in a separate deposit account pending the writ proceedings. The amounts were separately identified in the books, linked to individual agriculturists, and supported by particulars kept for possible repayment. The relevant market law and rules also contemplated recovery of excess collections and disciplinary action for breach. On these facts, the receipt was not treated as part of the assessee's own circulating capital or as an unconditional accrual to profit, and the authorities relied upon for treating unsegregated statutory collections as trading receipts were distinguished.

Conclusion: The 1 per cent excess commission was not a trading receipt and was instead a liability held for repayment in a fiduciary capacity; the addition was therefore not sustainable against the assessee.

Final Conclusion: The common decision accepts the assessee's treatment of the disputed 1 per cent collection as refundable and rejects the department's attempt to tax it as business income.

Ratio Decidendi: Where an amount is collected under a subsisting judicial permission, separately earmarked, and held subject to an enforceable obligation of repayment to the persons from whom it was collected, it does not constitute the collector's trading receipt.

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