TaxTMI 
TaxTMI 
2003 (11) TMI 50
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....ions had been duly provided for by transfer from the aforesaid accounts?" The assessee is a company registered under the Indian Companies Act which does the business of hire-purchase of motor vehicles. It maintains its accounts on mercantile basis. When the assessee enters into an agreement with a hire purchaser it collects the entire sales tax on the vehicle at the time of financing the transaction. In other words, the entire sales tax on the vehicle is realised by the assessee from its customer at the very beginning of the deal. These amounts collected by the assessee are credited to a contingency account No. II in its books. When the transaction is completed (i.e., when the last instalment is paid) the sales tax liability on the depreciated amount of the vehicle is calculated, which is obviously much less than the sales tax realised by the assessee from the customer. This sales tax liability on the depreciated value of the vehicle is then transferred from the contingency account No. II to the sales tax account. The difference between the total amount of sales tax calculated by the assessee and credited to the assessee account No. II, and the amount of sales tax payable on the....
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....t what was collected by the assessee was really not sales tax at all because the sales tax liability arises when there is a sale. As regards a hire purchase agreement the Supreme Court in Instalment Supply Ltd. v. STO ; [1974] 4 SCC 739 ; [1974] 34 STC 65 recognised the difference between two types of such agreements, first where the hirer is not obliged to buy the goods at the end of the contract, but it is his option to buy it or not, and the second where the hirer is under obligation to buy. The Supreme Court observed that in both these kinds of hire purchase agreement, the property in the goods remains with the financier, and the ownership passes only when the hirer exercises his option in the case of first kind of agreement, or when all the instalments are paid, in the second kind of agreement. Thus in both kinds of agreements the property in the goods remains with the financier till an eventuality occurs subsequently. The decision of the Supreme Court in Jay Bharat Credit and Investment Co. Ltd. v. CST [2000] 7 SCC 165; [2000] 120 STC 1 is distinguishable because there the Supreme Court was considering the definition of sale in the Bengal Finance (Sales Tax) Act as amended....
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....54] 26 ITR 758, the Supreme Court observed that the wide scope of the expression "income" should not be restricted to the technical concept of income in contradistinction to capital. In Bhagwan Dass Jain v. Union of India [1981] 128 ITR 315, the Supreme Court held that the word "income" includes even notional income. In Dooars Tea Co. Ltd. v. Commr. of Agrl. I.T. [1962] 44 ITR 6, the Supreme Court held that the word "income" is a word of wide scope and of elastic import and its extent and sweep are not controlled or limited by the use of words "profit and gains". The definition of income in section 2(24) is inclusive and not exhaustive vide Addl. CIT v. Uma Devi Budhia [1986] 157 ITR 478 (Patna). In CIT v. G.R. Karthikeyan [1993] 201 ITR 866, the Supreme Court held that the purpose of the inclusive definition is not to limit the ordinary meaning of the word "income" but to widen its net, and the several clauses therein are not exhaustive of the meaning of the word "income". Hence even if a receipt did not fall within the ambit of any of the sub-clauses in section 2(24) it might still be income if it partakes of the nature of income. In Emil Webber v. CIT [1993] 200 ITR 483, the ....
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.... account No. II to the sales tax payable account. The difference between the total amount of sales tax collected as credited to contingency account No. II and the amount transferred to the sale tax payable account is transferred to the contingency account No. III. On these facts the Tribunal observed that the credits appearing in contingency account No. II do not represent any trading receipt of the assessee and cannot be brought to tax. We do not agree. As already stated above, the amounts collected by the assessee from the hire purchasers as sales tax were not really sales tax at all because the sale at that time had not taken place. The sales tax is payable when the sale takes place as observed in the case of Kedarnath Jute Manufacuring Co. Ltd. [1971] 82 ITR 363 (SC). In the case of hire purchase the sale akes place only at the time mentioned in the hire purchase agreement, or at he option of the hirer (if so provided in the agreement). Hence, there is no sales tax liability on the assessee at all when he collected the amounts from the lire purchaser. Hence, the amounts in contingency account No. II have to be reated as income of the assessee in the assessment year in which ....