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TMI Blog1970 (3) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to as the Act, and it carries on wholesale business in cloth. The assesssee was also a registered dealer under the U.P. Sales Tax Act and as such it collected sales tax from its customers and also paid out its liability on account of sales tax to the Government. The assessee used to maintain a separate account denominated as the " sales tax account " in which all receipts paid by the assessee's customers on account of sales tax were credited and all payments made by it to the Government debited. Up to the end of the assessment year 1957-58 there was a debit balance in the sales tax account maintained by the assessee and this debit balance was transferred by the assessee to its profit and loss account and allowed as a deduction in the inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by it to the Government. It was argued that the assessee maintained its accounts in the mercantile system and even when an amount was not actually paid to the Government the liability of the assessee subsisted and the amount was really debited in the sales tax account maintained by it. It was further argued that any amount received by the assessee from its customers on account of sales tax either legally or under a colour of authority was also payable to the Government under section 8A(iv) of the U.P. Sales Tax Act, 1948, which, it may be mentioned, had not been declared as ultra vires at the relevant time. The assessee, therefore, contended that the amount in question, namely, Rs. 1,17,571, representing excess of collections over paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Tribunal observed that if the amount of sales tax collected by the assessee was not initially its income it could not become income of the assessee thereafter under circumstances which came into existence some time later. The Tribunal, therefore, concluded that sales tax collected by the assessee and credited separately in the " sales tax account " did not constitute a trading receipt and, therefore, the surplus collection of sales tax represented by the figure of Rs. 1,17,571 was not taxable as the income of the assessee. At the instance of the Commissioner of Income-tax the question set out hereinabove has been referred to this court for its opinion. From what has been stated in the statement of the case to which we have adverted ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co. Ltd, their Lordships of the Supreme Court have indicated, at page 611 of the report, what are the questions of law which might be taken to arise out of the order of the Tribunal. Their Lordships have summarised the principles as below : " The result of the above discussion may thus be summed up : (1) When a question is raised before the Tribunal and is dealt with by it, it is clearly one arising out of its order. (2) When a question of law is raised before the Tribunal but the Tribunal fails to deal with it, it must be deemed to have been dealt with by it, and is, therefore, one arising out of its order. (3) When a question is not raised before the Tribunal but the Tribunal deals with it, that will also be a question arising out of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of this reference becomes very limited. We have only to decide the question whether the sum of Rs. 1,17,571 could be regarded as the taxable income of the assessee when it was not controverted that the amount was not liable initially to suffer tax. Almost an identical question came in for consideration by this court in the case of Upper India Sugar Exchange Ltd. v. Commissioner of Income-tax. It was held in that case that the taxability of an amount would depend on the nature and character of the receipts at the initial stage. If the amount initially received partakes of the character of a trading receipt the amount would necessarily be taxable as such ; if, however, the amounts are initially not taxable, they cannot be taxed despite the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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