TMI Blog2002 (4) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... pany, carrying on the business of tea broking and auctioneering. In the assessment year 1984-85, a sum of Rs.1,45,759 being the sales tax collected by the assessee under the West Bengal Sales Tax Act but remaining unpaid at the end of the accounting year was disallowed and added back under section 43B of the Income-tax Act. The case of the assessee was that it was neither a purchaser nor a seller of tea and the tea sale proceeds did not represent its trading receipts and, therefore, the sales tax collected could not be treated as a part of the trading receipts. It was further contended by the assessee that no entries in the profit and loss account were made debiting the sales tax nor was the same claimed in the return as deduction. In these facts and circumstances, the assessee contended that the disallowance under section 43B was not proper. However, the contentions of the assessee were rejected and the amount was added. The order was confirmed by the Commissioner of Income-tax (Appeals). On further appeal it was pointed out that the decision of the Supreme Court in Chowringhee Sales Bureau P. Ltd. v. CIT [1973] 87 ITR 542 was rightly applied by the Department to the facts of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted out that the amount received towards sales tax by the assessee from the purchaser was received on behalf of the actual owner of tea and therefore the same could not constitute a trading receipt. According to Dr. Pal the said amount which was paid periodically during the course of the year in question to the Government by way of sales tax and later on the assessment being completed, the turnover of the individuals whose turnover was less than Rs.10,000 only, the amount of tax paid became refundable, in fact was refunded to the assessee. Therefore, according to Dr. Pal initially the amount of sales tax received by the assessee cannot bear the insignia of income or trading receipt so as to be assessable to income-tax. Dr. Pal has also drawn our attention to a decision of the Supreme Court in the case of CIT v. D. Shankaraiah [2001] 247 ITR 798, in which the judgment of the Andhra Pradesh High Court in the case of CIT v. Devatha Chandraiah and Sons [1985] 154 ITR 893, has been duly confirmed. That being the position relying on the aforesaid two decisions, one of the Supreme Court and of the Andhra Pradesh High Court, Dr. Pal contended that the sales tax collected could not be trea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. v. CIT [1973] 87 ITR 542 and submitted that the decision of the Supreme Court is clearly applicable to the facts and circumstances of the present case as it would be evident that in that decision the Supreme Court was considering a case of an auctioneer. It was further submitted by Mr. Saha that the decision of Chowringhee Sales Bureau Pvt. Ltd.'s case [1973] 87 ITR 542 (SC) has been consistently and repeatedly followed by the Supreme Court in the case of Sinclair Murray and Co. Pvt. Ltd. v. CIT [1974] 97 ITR 615 and also in the case of Jonnalla Narashimharao and Co. v. CIT [1993] 200 ITR 588 (SC). Another decision of the Supreme Court in the case of CIT v. Thirumalaiswamy Naidu and Sons [1998] 230 ITR 534 was also relied on by Mr. Saha to show that refund of sales tax was held to be the income of the assessee. Accordingly, Mr. Saha contended that since the decision of the Supreme Court in the case of Chowringhee Sales Bureau Pvt. Ltd. v. CIT [1973] 87 ITR 542 has been consistently and repeatedly followed by the Supreme Court, which also dealt with the case of the auctioneer, as we are concerned with in this case, the reference cases should be answered against the assessee and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipt or not is a question, therefore, to be decided now. In our view the case of Chowringhee Sales Bureau Pvt. Ltd. [1973] 87 ITR 542 (SC) was rightly explained by the Division Bench of the Andhra Pradesh High Court in the case of CIT v. Devatha Chandraiah and Sons [1985] 154 ITR 893. At this stage it may be recorded that this decision of the Andhra Pradesh High Court was subsequently confirmed by the Supreme Court in the case of CIT v. D. Shankaraiah [20011 247 ITR 798. In the case of CIT v. D. Shankaraiah [2001] 247 ITR 798 (SC) as noted herein earlier the Supreme Court considered its decision in the case of Chowringhee Sales Bureau Pvt. Ltd. [1973] 87 ITR 542 (SC) and distinguished the same at page 799 of the said Report in the following manner: "Learned counsel for the appellant contends that the matters are covered by the judgment referred in Chowringhee Sales Bureau P. Ltd. v. CIT [1973] 87 ITR 542 (SC) and the Tribunal was in error in distinguishing that case. We are unable to accept this contention. It is seen from the said judgment that the assessee in that case was an auctioneer and in the cash memos issued by the assessee to the purchasers in the auction sale the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the seller. In the present case the aforesaid decision of the Supreme Court cannot at all be applicable as we find that the assessee in the present case is neither the actual buyer nor the actual seller of tea so that neither the payment for the purchase of tea was recorded as the purchase of the assessee in its accounts nor the sale proceeds were recorded as the sale of the assessee. That is to say, the sale price in the present case was not treated as the sale price on account of the assessee. This position also did not reflect in its accounts. The Supreme Court in the case of Chowringhee Sales Bureau Pvt. Ltd. [1973] 87 ITR 542, treated the sales tax collection as a business and/or a trading receipt because the sale price along with the sales tax collection was shown and treated as a sale price realised by the assessee on its own and that fact was also reflected in the accounts of that assessee. Therefore, in our view, sales tax realised from the purchasers can be treated as a trading and/or a business receipt only when the sale price is shown to have been realised by the assessee on its own. In our view, the decision in the case of Jonnalla Narashimharao and Co. v. CIT [199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court could be explained from another angle. In the aforesaid two decisions, the Supreme Court treated the sales tax collected by the assessee as a trading and/or business receipt because the sale price along with sales tax collected was shown and treated as a sale price realised by the assessee on its own and that fact was also reflected in their accounts. As noted herein earlier, in our view in the present case, the sales tax realised could be treated as a trading or business receipt only if sale price was shown to have been realised by the assessee on its own. Sales tax collection cannot be a business and/or a trading receipt when the sales price itself is not reflected in the accounts of the assessee as the realisation of sale proceeds is not on its own. The decision of the Supreme Court in the case of Chowringhee Sales Bureau Pvt. Ltd. [1973] 87 ITR 542 was also considered in the case of CIT v. Devatha Chandraiah and Sons [1985] 154 ITR 893 (AP) and the decision in the case of Chowringhee Sales Bureau Pvt. Ltd. [1973] 87 ITR 542 (SC) was distinguished by the Andhra Pradesh High Court in the following manner: "So far as the principle goes, as stated by the Supreme Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and a liability to repay as and when it is refunded, the same cannot be included in the income of the assessee for the purpose of computation." Such being the position, after considering the decisions of the Supreme Court and the High Courts of India we are of the view that the sales tax collected in the present case cannot be treated as a trading receipt unlike the facts of Chowringhee Sales Bureau Pvt. Ltd.'s case [1973] 87 ITR 542 (SC) of the Supreme Court. Accordingly, we firmly hold that the sales tax collected by the assessee as an auctioneer and a tea broker cannot be a trading and/or a business receipt when in the present case the sales price itself was not reflected in the accounts of the assessee as the realisation of the sale proceeds was not on its own. Before we take this question as closed we may consider the judgment of the Supreme Court in the case of Sinclair Murray and Co. P. Ltd. v. CIT [1974] 97 ITR 615 and also in the case of Jonnalla Narashimharao and Co. [1993] 200 ITR 588 (SC). So far as the decision of the Supreme Court in the case of Sinclair Murray and Co. P. Ltd. [1974] 97 ITR 615 is concerned we find that the said decision practically followed t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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