1981 (2) TMI 58 - HC - Income Tax

Summary

Issues involved:
The judgment addresses the inclusion of additional charges made by the assessee on account of royalty in their taxable income for the assessment year 1971-72. The issues revolve around whether the amount collected by the assessee should be considered as income, the application for rectification of the order by the assessee, and the subsequent filing of a case for a mandamus to refer a question to the Tribunal.

Inclusion of Additional Charges in Taxable Income:
The assessee-firm, engaged in the business of brick-kiln, had additional charges of royalty collected from customers added to its total income. This was challenged by the assessee on the grounds that the amount was held in trust for customers and should not be treated as income. The Tribunal relied on a Supreme Court decision stating that the true nature of the receipt determines its treatment as income, regardless of how it is recorded in account books. The Tribunal's decision was upheld, leading to the inclusion of the royalty charges in the taxable income of the assessee.

Application for Rectification and Mandamus:
Following the Tribunal's decision, the assessee applied for rectification of the order, arguing that the disputed amount should not be considered as income during the accounting year. The Tribunal rejected this application, stating that the issue was not raised before them. Subsequently, a case was filed seeking a mandamus to direct the Tribunal to refer the question. The court dismissed the application for a mandamus, as the question raised was not considered to have been raised before the Tribunal.

Conclusion:
The judgment concluded that the inclusion of royalty charges in the taxable income of the assessee was justified based on the precedent set by a Supreme Court case. The court emphasized that the true nature of the receipt determines its treatment for tax purposes, irrespective of how it is recorded in account books. Therefore, the question referred was answered in the affirmative, affirming the inclusion of royalty charges in the taxable income of the assessee for the assessment year 1971-72.