TaxTMI 
TaxTMI 
1982 (2) TMI 32
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....took the view that so far as the amount of Rs. 31,695 is concerned, the payment was made to the assessee under mistake and hence such payment could not be treated as a trading receipt. According to the Tribunal the onus was on the Department to show that the said amount acquired the character of trading receipt before it could be taxed. Since the Department had failed to establish the character of the said amount to be a trading receipt, the same was not liable to tax in the assessment year in question. It further appears that during the previous years relevant to the assessment years 1965-66 and 1966-67, the assessee sold certain items to the Public Works Dept. of the State Govt. and charged sales tax thereon at the rate of 81 per cent. instead of 21 per cent. chargeable in law. The assessee placed the surplus (differential) amount of Rs. 11,446.28 in the suspense account where it continued till it was brought to the profit and loss account in the assessment year 1971-72. The ITO as well as the AAC held that the said income was liable to tax in the assessment year 1971-72. The assessee, feeling aggrieved by this order passed in appeal, approached the Tribunal. The Tribunal, rel....
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....lusion that the amount of Rs. 31,695 received by the assessee from the Pay and Accounts Officer, Calcutta, was not a trading receipt merely because, according to the assessee, it was excess payment and was, therefore, transferred to the suspense account till it was appropriated by a credit entry to the profit and loss account of the assessee, in the assessment year in question. We will assume for the sake of argument that the amount so received by the assessee was by way of a business or trading receipt. We do not consider it necessary to pronounce upon the said question since this reference can be disposed of on an assumption that the said amount was received by the assessee in the course of business and was, therefore, a business/trading receipt. So far as the difference in the sales tax amount of Rs. 11,523 is concerned, the Tribunal has taken the view, relying on the decision in Chowringhee Saks Bureau's case[1973]87 ITR542(SC),that the said amount received by the assessee acquires the character of a trading receipt, We, have, therefore, to determine whether the said amount, which was received by the assessee in the course of business and was a trading receipt, could be brou....
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....al sum of Rs. 29,643 was lying to the credit of the constituents in its account books up to 1960-61. Those amounts were not claimed by the respective constituents and, therefore, during the relevant accounting year, the assessee transferred the said amounts to the credit of its profit and loss account. The ITO treated this amount as income of the assessee during the accounting year 1961-62. The AAC as well as the Tribunal rejected the assessee contention to the contrary. The assessee, therefore, sought a reference and the question which was considered by the High Court was whether the Tribunal was justified in holding that the said amount being the credit balance written off was income of the assessee chargeable to income-tax. The High Court observed that the assessee itself had credited the said amount to its profit and loss account. There was no indication that it was in the nature of a capital receipt. So long as those sums represented deposits in favour of the constituents it could not be treated as income of the assessee but when the assessee transferred it to the profit and loss account during the relevant accounting year, it assumed the character of income of the assessee an....
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....s that an amount which did not initially partake of the character of a trading receipt could be treated as income of the assessee in the accounting year in which it is brought to its profit and loss account. In the case on hand, the contention of the Department is that both the amounts of Rs. 31,695 and Rs. 11,523 were trading receipts from the very inception and, therefore, the three decisions of the Allahabad High Court on which reliance is placed cannot be pressed into service for the simple reason that in those three cases the amounts were initially deposits and did not bear the stamp of trading receipts. In Punjab Steel Scrap Merchants' Association v. CIT [1961] 43 ITR 164 (Punj), the assessee-company, which dealt in scrap iron, received from its constituents a deposit as advance payment for the supply of scrap. If the price of scrap delivered was more than the amount so deposited, the assessee recovered the excess from the constituents. Where the price of scrap iron delivered was less than the amount deposited and the surplus remained with the assessee, the constituents did not sometimes claim the amount of excess and that amount remained with the assessee to its credit. S....
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....trading or business receipt. It emphasized that if a receipt is a trading receipt, the fact that it is not so shown in the account books of the assessee would not prevent the assessing authority from treating it as a trading receipt. Of course, the assessee would be entitled to claim deduction of the amount as and when it is required to pay the same to the State Exchequer. This decision, therefore, clearly establishes that what is relevant is the initial character of the receipt and not the head under which the amount is credited in the account books of the assessee. If the initial character of the receipt was a trading receipt, the fact that it is placed in the suspense account for some time and thereafter brought to the profit and loss account of the assessee would not affect the character of the payment. Similarly, in Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363, the Supreme Court had observed that whether an assessee was entitle to a particular deduction or not will depend on the provision of law relating thereto and not on the view which the assessee might take of his rights; nor can the existence or absence of entries in his books of account be decisive or conclus....
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....nt year 1971-72 merely because they were brought in the profit and loss account in the relevant accounting year. A similar question arose before the Madras High Court in CIT v. Planters Co. (P.) Ltd. [1980] 123 ITR 648. In that case the assessee had collected sales tax on its sales of tea during the years 1956 to 1959 and had credited the amounts so received under the head " Sales tax, reserve account". Payments of sales tax made from time to time were debited to this account. The excess which remained in the said account between June 30, 1960, and June 30, 1969, was credited to the profit and loss account as on June 30, 1970. The ITO assessed this amount as income of the assessment year 1971-72. This was confirmed by the AAC. The Tribunal, however, held that since the excess sales tax realised related to the assessment years 1954-55 to 1958-59, it could constitute its trading receipt for those years only and hence could not be assessed in the assessment year 1971-72. On a reference, the High Court held that the sales tax collected was in the nature of a trading receipt of the year in which it was received. The mere fact that it was credited to a separate account did not in any ....