Sales tax recovered from customers is taxable as trading receipt when it forms part of sale consideration.

Amounts recovered from customers as part of the sale price are trading receipts and are taxable as business income when received, unless evidence shows they were held as refundable deposits. The character of the receipt is determined at the time of the transaction, and a later dispute about sales tax liability does not change that character. Where an assessee itself credits the amount to the profit and loss account, that treatment supports revenue character. Any later refund to customers is dealt with in the year of repayment.

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Issues: Whether the sum of Rs. 4,155 recovered from customers and credited to the profit and loss account constituted a trading receipt liable to income-tax, or whether it was merely a sales tax deposit outside the assessment.

Analysis: The finding of fact that there was no evidence that the amount had been recovered as a deposit was binding. The amount was treated by the assessee itself as a revenue receipt by transferring it to the profit and loss account. Under the sales tax law, the liability to pay sales tax rested on the dealer, and the amount charged from customers formed part of the consideration for the sale. The character of the receipt had to be judged at the time of the transaction, and a later event such as a subsequent challenge to the taxability of the sales tax could not alter the nature of the original receipt. Amounts received in the course of business and forming part of the sale price were therefore trading receipts within the charging provision for business income. If any amount was later refunded to customers, the assessee's remedy would lie in the year of repayment.

Conclusion: The sum of Rs. 4,155 was a trading receipt and was rightly assessable to income-tax; the question was answered against the assessee and in favour of the Revenue.

Final Conclusion: Sales tax recovered from customers, where it forms part of the consideration for the sale and is not proved to be a refundable deposit, is assessable as business income in the year of receipt, leaving any later refund to be dealt with in the year of repayment.

Ratio Decidendi: Amounts recovered from customers in the course of trading, which form part of the sale consideration and are not shown by evidence to be held as deposits, constitute taxable trading receipts in the year of receipt, notwithstanding a possible later refund.

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