TMI Blog1992 (2) TMI 377X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT [1973] 87 ITR 542 treated the sales tax collected as part of assessee s trading receipts and held that whatever was paid during the year form part of profit and loss on trading account and whatever surplus was left was required to be taxed in the hands of the bearer. In this case he observed that the assessee was a commission agent and therefore responsibility of the sales tax so collected lay with the assessee till the payment was made to the Government and because of special provision of section 43B the sales tax collected but not paid was required to be added back. According to him it was an obligation on the part of the assessee in view of the aforesaid Supreme Court decision to show the sales tax as part of trading receipts and also the payments as part of trading or profit and loss account. He accordingly added a sum of ₹ 2,40,251 in assessment year 1984-85. The addition was justified by the CIT(A) by placing reliance on the following cases:- 1. George Oakes (P.) Ltd. v. State of Madras [1961] 12 STC 476 (SC) 2. Chowringee Sales Bureau (A) Ltd. s case ( supra) 3. Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363 (SC) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther submitted that it was the assessee who sold the goods to the customers and the principal nowhere came into picture for making the sales to the customers. The sales have in fact been incorporated as part of the trading receipts of the assessee in Profit Loss account and therefore the assessee is not justified in putting up a claim and state that the sales were not on his account but for and on behalf of the principal. He, therefore, pressed for upholding the order of the CIT(A) and the CIT respectively. On the alternative contention of the assessee the learned D.R. submitted that provisions of section 43B are clear and provides for deduction of tax only on actual payment basis. The first proviso to section 43 was inserted by Finance Act 1987 and was made applicable specifically with effect from 1-4-1988 and not from 1-4-1987 a normal date for application of any provisions by the Finance Act. 1987, the Legislative mandate is that it was not retrospective but only prospective, He relied upon the decision of Delhi High Court in the case of Sanghi Motors v. Union of India [1991] 187 ITR 703 1 in this behalf. 5. We have heard the parties and considered the rival submissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipal from time to time. As per clause (3) the property in the goods despatched to the assessee by the principal on consignment basis is provided to be always remained with the principal till the goods were sold and the assessee was prohibited to encumber or deal with the said goods in any other manner except selling the same acting as distributor of the principal. Clause (4) provides that the goods are to be stored in a godown suitable for the products and such part of the godown rent and other expenses as may be agreed upon from time to time are to be reimbursed by the principal to the assessee. The stored goods are required to be duly insured against all risks and as per the contention of the assessee such insurance charges were paid by the principal. As per clause (7) of the agreement, the assessee was required to keep a security deposit for the due fulfilment of the assessee s obligation as a distributor and a sum of ₹ 6 lakhs has been deposited by the assessee as is evident from the balance sheet. As per the agreement the assessee is allowed a commission at the rate of 4 % on the sale of fans and components in the sale market and 6% of the sale of fans and components to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r decision of the Andhra Pradesh High Court in the case of Buddala China Venkata Rao Co. v. CIT [1978] 112 ITR 58 wherein their Lordships have expressed their inability to follow the decision in the case of P. Krishna Rao (supra) as on Identical question another decision of the Andhra Pradesh High Court in Addl. CIT v. T. Nagireddy Co. [1976] 105 ITR 669 was not referred to and also because their Lordships were in respectful agreement with the earlier decision. We also find supports from the decision of the Tribunal Bench of the Bombay in the case of J. Maheshkumar Petro Chemicals (P.) Ltd. (supra ), wherein also on similar facts it was held that the sales tax collected by the agent is not the trading receipt of the assessee agent but of the principal and therefore the addition under section 43B to the income of the assessee would not be made. 8. The contentions of the learned D. R. that it was a liability of the assessee under the Gujarat Sales Tax Act to pay the tax and therefore it was liable to account for the sales tax collected as its trading receipt has also no force. It is true that liability under the Gujarat Sales Tax Act is on the assessee but that is not ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In these circumstances in our opinion though the assessee was jointly and severally liable under the Gujarat Sales Tax Act, the sales tax collected would not form part of the assessee s trading receipts and consequently not even the expenditure. In fact the assessee had not claimed the expenditure in its profit and loss account and the receipts of the sales tax collection as well as the payments made therefrom are directly shown in the balance sheet under the head Sales tax collection account . We therefore allow the claim of the assessee and direct that no disallowance under section 43B be made in the two years under consideration. 9. The second ground for charging interest under section 139(8) in assessment year 1985-86 is consequential and does not require any discussion. 10. In the appeal for assessment year 1985-86 the assessee has also disputed the disallowance of ₹ 16,236 being land revenue disallowed on the ground that it pertained to the previous year. The assessee s case is that the notice of demand has been received on 21-5-1984 a date which falls during the year under consideration and therefore the liability has arisen in the year under consi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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