1993 (7) TMI 110 - AT - Income Tax

Summary

Issues Involved:
1. Taxability of Disputed Storage Charges
2. Nature of Amount Collected
3. Accrual of Income
4. Refund and Deduction of Amount

Issue-wise Detailed Analysis:

1. Taxability of Disputed Storage Charges:
The primary issue was whether the amount of Rs. 50,754.47 collected by the assessee as storage charges in excess of the rate fixed by the Government should be treated as income for the assessment year 1980-81. The ITO included this amount in the assessee's income, citing that it was shown as a receipt in the books of account for the period 1-4-1979 to 31-3-1980. The CIT (A) deleted this addition, considering it a liability rather than income. The revenue appealed, arguing that the amount constituted revenue receipt.

2. Nature of Amount Collected:
The ITO argued that the amount collected in excess of the prescribed storage charges was a revenue receipt, as it was shown in the books of account and not refunded to the potato-growers. The CIT (A) viewed it as a liability, held in trust for the customers, and not as income. The revenue cited cases like Chowringhee Sales Bureau (P.) Ltd. v. CIT and Sinclair Murray & Co. (P.) Ltd. v. CIT to support their stance that such collections should be treated as trading receipts.

3. Accrual of Income:
The CIT (A) and the assessee argued that the amount did not accrue as income due to the pending dispute and the stay order from the High Court. The learned Accountant Member supported this view, citing that the disputed amount could not be considered accrued income under the mercantile system of accounting. The learned Judicial Member, however, contended that the amount was under the assessee's control and used in its business, thus should be treated as income.

4. Refund and Deduction of Amount:
The learned Judicial Member argued that the amount could be claimed as a deduction in the year it was refunded to the potato-growers, aligning with the principle laid down in cases like Chowringhee Sales Bureau (P.) Ltd. The learned Accountant Member disagreed, stating that the amount, being disputed and kept separately, did not constitute accrued income and thus could not be taxed in the assessment year 1980-81.

Separate Judgments:

Judgment by Judicial Member:
The learned Judicial Member held that the amount of Rs. 50,754.47 was a revenue receipt for the assessment year 1980-81. He emphasized that the amount was shown in the books of account, was under the control of the assessee, and was used in business. The plea of liability was rejected, and it was concluded that the amount should be taxed as income, with a deduction allowed in the year of refund to the potato-growers.

Judgment by Accountant Member:
The learned Accountant Member disagreed, holding that the disputed amount did not accrue as income due to the pending dispute and the directions of the High Court. He cited similar cases and authoritative pronouncements to support that the amount, being kept in a separate account and subject to court orders, could not be considered income for the assessment year 1980-81.

Third Member Decision:
The Third Member agreed with the learned Accountant Member, stating that the disputed amount did not accrue as income in the period ending 31-3-1980. The pending dispute and court directions meant the amount could not be taxed as revenue receipt. The case was referred back to the regular Bench for final disposal in accordance with this view.

Conclusion:
The appeal by the revenue was dismissed, and it was held that the amount of Rs. 50,754.47 collected in excess of the prescribed storage charges did not constitute accrued income for the assessment year 1980-81. The assessee was not liable to tax on this amount for that year, and it would only be considered income in the year it was refunded to the potato-growers.