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TMI Blog1972 (5) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... the sum of Rs. 1,30,045 as the assessee's income for the assessment year in question and levied tax thereon. On appeal the Appellate Assistant Commissioner of Income-tax, relying upon a decision of the Income-tax Appellate Tribunal in the case of the assessee for the assessment year 1959-60, held that the surplus of Rs. 1,30,045 in the sales tax account did not constitute revenue receipt and remitted the tax levied thereon. The income-tax department went up in appeal before the Income-tax Appellate Tribunal. The Tribunal has dismissed the appeal, but at the instance of the Commissioner of Income-tax has submitted the following question for our opinion : " Whether, on the facts and in the circumstances of the case, the sum of Rs. 1,30,045 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee's income. The short question that we have to answer is as to whether the view taken by the Tribunal is right. Section 3 of the U.P. Sales Tax Act is the charging section. It imposes tax on every dealer on the turnover of sales during an assessment year. The liability to pay sales tax is, therefore, on the dealer which term has been defined to mean a person carrying on business of buying or selling goods. There is no liability cast upon the purchasers to pay sales tax. Under section 8A(2)(b) of the U.P. Sales Tax Act a registered dea ler has been given the right to recover from his customers an amount equivalent to sales tax payable by him but he is not obliged to do so. If he does not collect the tax from his customers he is visited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a dealer was a part of the price of goods sold by him. The Supreme Court observed in paragraph 8 : " Under section 4, the liability to pay tax is that of the dealer. The purchaser has no liability to pay tax. There is no provision in the Act from which it can be gathered that the Act imposes any liability on the purchaser to pay the tax imposed on the dealer. If the dealer passes on his tax burden to his purchasers he can only do it by adding the tax in question to the price of the goods sold. In that event the price fixed for the goods including the tax payable becomes the valuable consideration given by the purchaser for the goods purchased by him. If that be so, the tax collected by the dealer from his purchasers becomes a part of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es it clear that the sales tax need not be passed on to the purchasers and this fact does not alter the real nature of the tax which, by the express provisions of the law, is cast upon the seller. The buyer is under no liability to pay sales tax in addition to the agreed sale price unless the contract specifically provides otherwise." In our opinion, the position under the U. P. Sales tax Act is precisely the same. The next question which has to be considered is as to whether the sales tax realised by the assessee is a trading receipt, unless it is shown that it cannot be treated to be a revenue receipt liable to income-tax. Under the U.P. Sales Tax Act a registered dealer when he charges tax from his customers does so at the time of a tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale, it is for him to quote a price which includes the tax if he desires to pass it on to the buyer; if the buyer agrees to the price, it is not for him to consider how it is made up, or whether the seller has included tax or not." It is thus clear that the tax charged by the dealer from his customer is in reality a part of the price of the goods sold and, as such, it would be a revenue receipt. Of course, any amount paid by the assessee to the Government by way of sales tax would be an allowable deduction and likewise any outstanding liability on account of sales tax would also be an allowable deduction if the assessee follows the mercantile system of accounting. Thus, if an assessee collects some amount by way of tax which he is liable ..... X X X X Extracts X X X X X X X X Extracts X X X X
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