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TMI Blog2004 (9) TMI 691X X X X Extracts X X X X X X X X Extracts X X X X ..... se of Chowringhee Sales Bureau Pvt. Ltd. even though the amount of extra-sales tax had neither been demanded by the Sales Tax Department nor yet paid by the assessee?" 2. Briefly stated the facts giving rise to the present reference are as follows: The present reference relates to the assessment years 1974-75 and 1975-76. The respondent assessee is a registered firm running a Press. The controversy is regarding the assessability of excess Sales-tax collected by the respondent from its customers though much smaller amounts were deposited as sales-tax with the Sales-tax Department during the relevant years. The excess sales-tax collection is ₹ 6,427 in the assessment year 1975-76 and ₹ 77,279 in the assessment year 1975-76 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Tax Department can be treated as sales tax liability and can be allowed. 5. Sri P.K. Jain, learned counsel for the respondent, however, submitted that the respondent had collected sales tax at the rate of 7% as the position was not clear. However, it had paid only 3% as tax to the Sales-tax Department and the balance amount had been kept in the security deposit account. According to him the entire amount of sales tax has been collected from the purchaser and it is immaterial as to whether it has been paid to the Sales Tax Department or not. It remains the liability towards the Sales Tax and therefore was an allowable deduction. He relied upon a decision of the Calcutta High Court in CIT v. Ellenbarrie Industrial Gases Ltd. [1994] 208 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctioneer formed part of the trading or business receipts. The fact that the appellant credited the amount received as sales tax under the head "Sales tax collection account" did not make any material difference. According to the Apex Court, it is the true nature and quality of the receipt and not the head under which it is entered in the account books that would prove decisive. If a receipt is a trading receipt, the fact that it was not so shown in the account books of the assessee would not prevent the assessing authority from treating it as trading receipt. The Apex Court had further observed that the appellant-company would be entitled to claim deduction of the amount as and when it paid it to the State Government. 7. The Apex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to debit the liability in its books of account did not debar it from claiming the sum as a deduction either under section 10(1) or under section 10(2)(xv). 9. In the case of Ellenbarrie Industrial Gases Ltd. (supra) the Calcutta High Court has held that collection by the assessee is in its essential nature a mere deposit to be realized on the reciprocity of release of declaration forms by the purchasing dealer. This deposit gets transformed into sales tax only to the extent the declaration form does not finally come forth at the last point of time when such form is to be presented to the sales tax authority under Sales Tax Rules, i.e., at the time of assessment or before expiry of the extended by such authority and therefore, the Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of CIT v. Hotel Srilekha (P.) Ltd. [2001] 250 ITR 573 3 the Madras High Court had held that the principle laid down by the Apex Court in Chowringhee Sales Bureau (P.) Ltd. (supra), Sinclair Murray & Co. (P.) Ltd. (supra) and Thirumalaiswamy Naidu & Sons (supra) are that the revenue amount collected by the appellant as tax constitutes its trading receipts and it had to be included in its total income and if and when the appellant pays the amount collected to the State Government or refund any part thereof to the purchaser, the appellant would be entitled to claim deduction of the amount so paid or repaid. 13. Applying the principle laid down by the Apex Court in the aforesaid cases, we find that the respondent had realized the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X
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