9911796707
TMI Blog2003 (11) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... justifying the Tribunal's finding that there was a corresponding liability in respect of accretion in the contingency account No. II amounting to Rs. 43,095? 2. Whether the Tribunal was in law justified in holding that the accretion in the contingency account No. II could not be brought to tax as trading receipt in spite of the fact that the actual sales tax liability in respect of completed transactions 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he entire amount of sales tax due on the full purchase price of the truck from the hirer and credited it to the contingency account No. II. Thereafter on completion of the hire purchase or at the time of payment of the last instalment, the sales tax due on the depreciated value of the vehicle was paid by the assessee to the Government, which was much less than the amount realised and credited to the contingency account No. II. The Income-tax Officer added the amounts in contingency account No. II as the assessee's income but the Appellate Assistant Commissioner and the Tribunal have held that since the assessee maintains its account books on mercantile basis hence the liability to sales tax should also be allowed as a deduction in the years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preme 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. By the 1959 amendment even transfer of goods on hire purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceedings, the liability for payment of tax was independent of the assessment. It is true that the assessee has been maintaining its accounts on mercantile basis but even on that basis the tax liability arises when the sale takes place. As already observed above, in a case of a hire purchase agreement it will depend on the terms of the agreement as to when the sale takes place. However, when the petitioner collected amounts in the name of sales tax from its hire purchaser what it actually collected was not sales tax at all but an amount in anticipation of its sales tax liability. The word "income" as defined in section 2(24) of the Income-tax Act has been held to include almost every kind of receipt or gain vide Bhola Nath Kesari v. Direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... properly described as income is taxable under the Act unless it is exempted by any other provision of the Act. Hence, we are certainly of the opinion that the amount in question is income in the hands of the assessee. CIT v. Thirumalaiswamy Naidu and Sons [1998] 230 ITR 534 (SC) and K.C.P. Ltd. v. CIT [2000] 245 ITR 421 (SC) it was observed by the Supreme Court: "The excess amount realised and retained by the assessee in a separate account would not make any difference, if the same is actually a trading receipt realised by him as a trading receipt and the excess amount which was neither paid to the Government nor refunded to the customers from whom the same has been charged will be taxed in the assessee's hands as his income irrespective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount 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 on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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