1982 (5) TMI 23 - HC - Income Tax

Summary

Issues involved: Taxability of amount under 'Amanat Khata' as trading receipt for assessment year 1973-74.

The High Court of Allahabad considered the case of an assessee-firm engaged in business on its own account and on commission basis. The Income Tax Officer (ITO) noted a credit balance of Rs. 29,028 in the balancesheet under 'Amanat Khata', representing Krishi Utpadam Mandi Tax. The assessee contended that the amount should not be taxed as it was held under mercantile system and had to be paid to the Krishi Utpadan Mandi or constituents. The Assessing Officer (AO) taxed the amount, but the Appellate Authority Commissioner (AAC) ruled in favor of the assessee, stating that the liability had accrued and was ascertained. The Income-tax Appellate Tribunal held that the market fee recovery cannot be considered part of the trading receipt of the commission agent, as it was held on behalf of the State Government. The Commissioner of Income-tax, Agra, raised a question on the taxability of the amount, leading to the court's consideration.

The court referred to the Krishi Utpadan Mandi Rules under the U.P. Krishi Utpadan Mandi Adhiniyam, 1964, which outlined the procedure for market fee recovery. It was observed that the commission agent was accountable for the recovery made from the seller and held the amount as a trustee for the Market Committee. The court cited the Supreme Court's decision in CIT v. Sitaldas Tirathdas [1961] 41 ITR 367, emphasizing the nature of obligations in income tax assessments. The court also referred to previous cases like Thakur Das Shyam Sunder v. Addl. CIT [1974] 93 ITR 27 and CIT v. Bijli Cotton Mills (P.) Ltd. [1979] 116 ITR 60, where amounts collected for specific purposes were not considered as trading receipts.

Contrary to the Revenue's argument citing Chowringhee Sales Bureau P. Ltd. v. CIT [1973] 87 ITR 542, where sales tax realized was considered part of trading receipts, the court distinguished the present case where the amount was held by the assessee as a trustee for the State Government. The court concluded by ruling against the Department, stating that the amount under 'Amanat Khata' was not liable to tax as a trading receipt for the assessment year 1973-74, in favor of the assessee. The assessee was awarded costs amounting to Rs. 250.