TMI Blog2002 (10) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessing authority upholding the addition of Rs, 1,45,752. - - - - - Dated:- 30-10-2002 - Judge(s) : N. N. MATHUR., H. R. PANWAR. JUDGMENT The judgment of the court was delivered by N.N. MATHUR J.-The Income-tax Appellate Tribunal, Jaipur, at the instance of the assessee, Wolkem Pvt. Ltd., has referred the following question of law for the opinion of this court: "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the excise duty collection was a trading receipt in the year of receipt and hence excise duty refund of Rs. 1,45,752 was liable to tax in the hands of the assessee under section 41(1) of the Income-tax Act, 1961?" The background facts relevant for answering the instant reference, briefly stated are as follows: The assessee-company filed its return for the assessment year 1986-87 declaring total income of Rs. 11,34,310 derived from the business of minerals known as calcite and wollastonite. In response to the notice under section 143(2)/142(1) the representative of the assessee-company produced the books of account which reveal that during the assessment proceedings excise duty refundable to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be traceable. In such an event, the Tribunal felt the excise duty refund which is a trading receipt would totally escape tax though earned in the usual course of the business, if the plea of the assessee was accepted. It is submitted by Mr. N.M. Ranka, learned senior advocate appearing for the assessee-company, that the amount collected by the assessee against the excise duty was credited to the suspense account as such it was not pertaining to the assessee and it was payable to the Central Excise Department and as such it cannot constitute as an income of the assessee under any provisions of the Income-tax Act. It is further submitted that part of the amount was due to the different customers and as such it being a liability the addition was unjust. Learned counsel has heavily placed reliance on the Division Bench judgment in CIT v. Wolkem Pvt. Ltd. [1997] 228 ITR 129 (Raj). It is submitted that in the case of the same assessee, for the assessment year 1986-87, the court held that the refund of excise duty was not in the nature of income under section 41(1) of the Income-tax Act. It is submitted that the Revenue has accepted the said judgment, as such it is not open for them ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d part of sub-section (1) signifies that the recoupment or benefit must be in respect of the loss, expenditure or trading liability mentioned in the first part of sub-section (1). The payment with respect to the sales tax or excise duty is normally an allowable item of business expenditure. The facts of the instant case are somewhat near to the facts of the case in Chowringhee Sales Bureau P. Ltd. v. CIT [1973] 87 ITR 542 (SC). In the said case the appellant, a private company, dealing in furniture also acted as an auctioneer. In respect of the sales effected by it as auctioneer, the appellant realised during the relevant period, in addition to the amount of commission Rs. 32,986 as sales tax. This amount collected against the sales tax was credited separately in its account books under the head "Sales tax collection account". The assessee did not pay the amount of sales tax to the actual owner of the goods, nor did it deposit the amount realised by it as sales tax in the State Exchequer, because it took the stand that the statutory provision creating that liability upon it was not valid or refund it to the persons from whom it had been collected. On these facts, the Supreme Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... place, whether the price quoted to the purchaser includes sales tax or whether sales tax is separately collected, the sales tax forms part of the consideration for the sale and it forms part of the turnover of the seller. The amount of the sales tax payable in respect of the sales effected by a particular assessee forms part of his trading receipts and has to be shown on the credit side. As and when he pays the sales tax to the authorities, he can claim deduction for the sales tax paid; in case he has to refund the sales tax to the original purchaser who purchased the goods from him, then the amount so refunded will also be a deduction which he can claim and it must be granted to him, that being deduction on the expenditure side. Thus, it is obvious that in the instant case the assessee-firm which was maintaining its accounts on mercantile basis was bound to show as trading receipt all the amounts which accrued due to it or which were collected by it as sales tax and it was bound to show on the debit side of the accounts, the amounts which it paid by way of sales tax. The fact that no such entries showing credits and debits in respect of sales tax collected and sales tax paid were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ills (P.) Ltd. [1989] 180 ITR 45 (P H); (h) CIT v. Ancherry Pavoo Kakku [1986] 160 ITR 88 (Ker); (i) CIT v. East Asiatic Co. India P. Ltd. [1996] 217 ITR 347 (Mad); and (j) CIT v. Tara Chand Suraj Mal [1996] 217 ITR 315 (All). Making of entry in the books of account or transferring to profit and loss account for the assessment year 1980-81 was an unilateral action, which has no consequences of its own and in this perspective, we rely upon the decisions in Sutlej Cotton Mills Ltd. v. CIT [1979] 116 ITR 1 (SC); J.K. Chemicals Ltd. v. CIT [1966] 62 ITR 34 (Bom); CIT v. Sadabhakti Prakashan Printing Press (P.) Ltd. [1980] 125 ITR 326 (Bom); CIT v. Sugauli Sugar Works (P.) Ltd. [1983] 140 ITR 286 (Cal); CIT v. A.V.M. Ltd. [1984] 146 ITR 355 (Mad); CIT v. B.N. Elias and Co. (P.) Ltd. [1986] 160 ITR 45 (Cal); CIT v. Sadul Textiles Ltd. [1987] 167 ITR 634 (Raj) and CIT v. Combined Transport Co. (P.) Ltd. [1988] 174 ITR 528 (MP). Diversion at source on account of overriding title, where the deposit was of the nature of trust fund, does not really amount to revenue receipt. The liability for payment to the Central excise and/or to return to the customer, really take the entire matt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the apex court and an earlier decision of this court. In this view, we are unable to accept the contention of Mr. N.M. Ranka, the senior advocate, that the Department having accepted the judgment in CIT v. Wolkem Pvt. Ltd. [1997] 228 ITR 129 (Raj), is estopped from taking a different stand. The controversy has now been concluded by a recent decision of the apex court in CIT v. Thirumalaiswamy Naidu and Sons [1998] 230 ITR 534. The apex court relying on its earlier judgment in Chowringhee Sales Bureau P. Ltd. v. CIT [1973] 87 ITR 542 has held that in case of refund and the tax collected, the income shall be liable to tax. The Division Bench of this court in CIT v. Wolkem (P.) Ltd. [1997] 228 ITR 129 has placed reliance on one of the decisions of the Madras High Court in CIT v. Thirumalaiswamy Naidu and Sons [1984] 147 ITR 657. The said decision has been reversed as follows: "The question referred in this case is as under [1984] 147 ITR 657: "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in deleting the sum of Rs. 1,37,379 from the taxable trading receipt of the assessee for 1974-75?" The assessee in the course of sale of its produ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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