TMI Blog1970 (5) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... e to be known as " quota holders ". Subsequently, the arrangement was modified. The manufacturers were now required to sell their stocks directly to the wholesale dealers with the result that the quota holders were excluded altogether. In order to prevent the hardship thus caused to the quota holders an order dated September 13, 1945, was made by the Textile Commissioner requiring the manufacturer to recover from the wholesale dealer the wholesale price of the yarn at the controlled rate and to pay to the quota holders, to whom it would have originally sold the yarn, that part of the sum which represented the excess over the ex-mill price, the sale being " for this purpose deemed to have been made by the manufacturer on behalf of the quota holders ". The amounts representing the margin of profits due to the quota holders were credited to an account called the "quota holders margin account ". Whenever amounts from this account were paid to the quota holders, they were debited to the said account. At the end of 1951 the account showed a balance of Rs. 36,318. On December 21, 1952, the company transferred this balance of Rs. 36,318 to the credit of its profit and loss account for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld by the assessee on behalf of the quota holders. It is well-settled that the taxability of a receipt is fixed with reference to its character at the moment it is received and that merely because the recipient treats it subsequently in his own accounts as his own does not alter that character. At this stage, we may refer to the especially pertinent observations made by Greene M. R. in Morley v. Tattersall: " The money which was received was money which had not got any profit making quality about it ; it was money which, in a business sense, was the client's money and nobody else's. It was money for which they were liable to account to the client, and the fact that they paid it into their own account, as they clearly did, and the fact that it remained among their assets until paid out, do not alter that circumstance." The learned Master of the Rolls expressed himself in favour of the principle that " the quality and nature of a receipt for income-tax purposes is fixed once and for all when it is received ". Clearly, if at its inception the entire amount of the wholesale price did not represent money belonging to the assessee but a part of it in fact belonged to the quota holder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this country, the assessee mixed up this money with its own money and may have deposited the money in its own bank account ; it may be that this money remained part of the general assets of the assessee for a long time ; but this mixing up did not have the result of converting the money into the assessee's money or trading receipt or income." The learned judges also repelled the contention that the bar of limitation would affect the situation. They referred to an earlier decision of the Bombay High Court in Kohinoor Mills Co. Ltd. v. Commissioner of Income-tax, where unclaimed wages which had remained unpaid and the recovery of which was barred by limitation were held to represent a subsisting debt of the assessee. The claim of the revenue that because of the bar of limitation they could no longer be claimed and as such they represented the income of the assessee was repelled. For the same reasons which appealed to the learned judges in that case we are of opinion that the consideration applied by the Tribunal in the present case that the amount belonging to the quota holders could not be recovered by them by reason of limitation must be regarded as one of little importance. Fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter because the title under which he received it intervened to alter that character. In the case before us no such circumstance can be referred to. Then, reliance is placed on Punjab Steel Scrap Merchants' Association Ltd. v. Commissioner of Income-tax. The assessee sold scrap iron to permit holders on their depositing the estimated price When the scrap iron was actually supplied it was found upon calculation that the amounts deposited were sometimes more and sometimes less than the true price which could be charged. In some cases, where the purchase price was less than the amount received, the permit-holders did not call for refund of the difference. The surplus accumulated over the years were transferred to the profit and loss account. The Income-tax Officer included the unclaimed surplus of the year in the assessable profits of the assessee. In this, he was upheld by the Punjab High Court. Upon careful consideration, it appears to us that the case is distinguishable. The amounts were received by the assessee from the permit-holders as price of the scrap iron ; from their very inception they were impressed with the character of trading receipts of the nature of revenue. Consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in dispute constituted the income of the assessee rested on the basis that they were paid under a covenant directly related to the payment of rent and royalty, which admittedly were taxable as income, that the amounts in question had been paid by the buyers and received and appropriated by the assessee as if he was entitled to receive them and the excess received over the amount for which the assessee could, under the terms of the lease, claim reimbursement had, therefore, to be regarded as income liable to tax. It was pointed out that the mere circumstance that the lessee might claim refund of the excess did not deprive the payments of the character of income when received. Here again, the decision turned on the character of the payments at the time of receipt, subsequent events being held not to modify or affect that character. The decision in V. S. S. V. Meenakshi Achi v. Commissioner of Income-tax, to which reference has been made, is also distinguishable. Under the Rubber Industry (Replanting) Fund Ordinance, 1952, a fund was created into which cesses were collected, and amounts were paid from that fund for the purpose of encouraging the producing of rubber. The amounts out ..... X X X X Extracts X X X X X X X X Extracts X X X X
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