1998 (12) TMI 20 - HC - Income Tax

Summary

Issues:
1. Whether the sum collected by the assessee towards hotel receipts tax can be taxed as trading receipts.

Analysis:
The case involved an assessee, a private limited company running a hotel in Madras, who collected a sum of Rs. 45,884 as hotel receipts tax for a specific period but did not remit this amount to the Government. The Commissioner directed the Income-tax Officer to include this amount as part of the assessee's business receipts for the assessment year 1981-82. The Tribunal, however, held that this amount cannot be taxed as trading receipts. The main issue was whether the sum collected by the assessee towards hotel receipts tax should be considered as trading receipts for taxation purposes.

The Tribunal found that the Hotel Receipts Tax Act, under which the amount was collected, was later withdrawn, creating a liability on the assessee to refund the collected amount to its customers. The Tribunal reasoned that since the amount was to be refunded, it could not be classified as a trading receipt. The Revenue argued that the collection of the amount constituted a trading receipt as it accrued to the income of the assessee, relying on various Supreme Court decisions establishing that such amounts should be included in total income.

The court, applying the principles laid down by the Supreme Court in previous decisions, held that the hotel receipts tax amount collected by the assessee should be considered a trading receipt and therefore liable for assessment. The court emphasized that the assessee would be entitled to claim a deduction when paying the amount to the Government or refunding it to customers. The court disagreed with the Tribunal's decision and ruled in favor of the Revenue, stating that the amount collected should be included as part of the assessee's business receipts for taxation purposes.

In conclusion, the court answered the question in favor of the Revenue and against the assessee, emphasizing that the hotel receipts tax amount collected should be treated as a trading receipt and be subject to assessment, with the assessee having the right to claim deductions upon payment to the Government or refund to customers.