TMI Blog1999 (3) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... fuses. It had collected four per cent. on the price of the goods as sales tax and paid the same to the Government. It collected a further four per cent. on the price of the goods as deposit against the sales tax and surcharge for the assessment years 1979-80 and 1980-81. The assessee contended before the sales tax authority that the explosive detonators, and safety fuses sold by it were not chemicals and they were therefore to be subjected to lower rate of sales tax. Nevertheless, it proceeded to collect from the customers the entire amount which would have been payable by the assessee to the Government as sales tax if those explosive detonators and safety fuses were to be treated as chemicals. The amounts so collected were in part paid ove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stomers as the amounts paid towards sales tax, there can be no doubt that the entire amount would be treated as part of its trading receipt and deduction allowed only to the extent of the amount paid by it as sales tax to the State Government. The question for our consideration is as to whether by characterising a part of the amount collected by the assessee from its customers as deposit towards sales tax, the assessee could avoid treating that receipt as part of its trading receipt. Learned senior counsel for the Revenue, Mr. S. V. Subramaniam, relied on the decisions of the Supreme Court in the case of Chowringhee Sales Bureau P. Ltd. v. CIT [1973] 87 ITR 542 ; Sinclair Murray and Co. P. Ltd. v. CIT [1974] 97 ITR 615 and CIT v. Assam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . [1977] 107 ITR 776 and CIT v. Bijli Cotton Mills (P.) Ltd. [1979] 116 ITR 60 and submitted that where the receipt is burdened by an obligation, the amounts so received by the assessee cannot be regarded as forming part of the assessee's trading receipt. In the cases relied on by counsel, the apex court held that the amounts collected by the assessee towards charity were amounts collected for a specific purpose and that even at the time of collection, the amounts were subjected to a trust, the assessee being burdened with the obligation to apply those monies for charity only. Those amounts were held by the apex court to be amounts which did not form part of trading receipts. Learned counsel also relied on the decision of the Madhya Prade ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were meant to be utilised by the assessee for meeting its tax liability. Even if the assessee had paid over the entire amount received by it as deposit towards sales tax to the State Government, it would still have been open to the assessee to seek refund if the assessee wished to claim such refund on the ground that the tax had been levied at a higher rate than the rate permissible. In the event of such claim being upheld, it would have been open to the assessee, to receive a refund and thereafter pay those amounts to the persons from whom the amounts had been collected. The fact that the assessee had chosen to adopt the device of labelling a part of the amounts collected towards its sales tax liability as deposit cannot make a differenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount required from its customers, the true character of the collection is a trading receipt. By calling a portion of the amount as deposit, it cannot be said that the assessee had constituted itself as a trustee, and therefore, the amounts received were not required to be regarded as part of its trading receipt. Had the assessee been unsuccessful in its claim that his goods were not to be treated as chemicals there is no doubt that the amounts though collected as deposit, would have been paid over to the State Government as the amounts had been collected for payment to the State Government as sales tax in the event of the goods being treated as chemicals. We, therefore, answer the question referred to us in favour of the Revenue and again ..... X X X X Extracts X X X X X X X X Extracts X X X X
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