Sales tax refund treated as taxable business income where earlier deduction was allowed and refund was actually received.

Refund of sales tax previously allowed as a business deduction was taxable as business income where the amount had been claimed and allowed in an earlier year and was actually received from the State Government in the relevant previous year. The possibility of a later passing on of the refund to constituents did not create an ascertained liability in that year. Section 10(2A) therefore deemed the receipt to be profits and gains of business, even if it was not income in the strict sense, and the amount was correctly included in the assessee's taxable business income.

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Issues: Whether the sum of Rs. 13,272 received by the assessee as refund of sales tax previously deposited was properly included in the computation of its business income for the accounting year ended October 30, 1959, relevant to the assessment year 1960-61.

Analysis: The amount refunded had earlier been claimed and allowed as a deduction in computing business income, so the first condition of section 10(2A) was satisfied. The assessee had also received the sum from the State Government by way of refund during the relevant previous year, satisfying the second condition. The possibility that the assessee might later pass on the amount to constituents was not shown to create any ascertained liability in the relevant year. The provision deems such receipts to be profits and gains of business, even if they are not income in the strict sense.

Conclusion: The sum of Rs. 13,272.37 was rightly treated as taxable business income under section 10(2A) of the Act, against the assessee.

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