1977 (3) TMI 62 - AT - Income Tax

Summary

Issues:
- Whether refunds received by the assessee are liable to be included as trading receipts for taxation purposes.

Analysis:
The judgment involves two appeals concerning the inclusion of refunds received by the assessee as trading receipts for taxation. The assessee, a dealer in watery and dry coconuts, did not collect Central Sales-tax on sales of coconuts to places outside the State of Andhra Pradesh. The Central Sales Tax Amendment Act, 1972, provided for the refund of State sales-tax on declared goods in cases where central sales tax had been paid on inter-state sales. The assessee had received refunds for purchase tax paid on coconuts sent outside the state. The Revenue argued that since the assessee had received the refunds, they should be treated as trading receipts. On the other hand, the assessee contended that the refunds were not trading receipts as they were holding the amounts on behalf of the State Government.

The Tribunal referred to the decision of the Andhra Pradesh High Court in a similar case and held that the retrospective amendment of the law meant that although the assessee had received the refunds, they were not entitled to them. The Court emphasized that there was a liability on the assessee to refund the amounts to the State Government due to the amendment in sales-tax laws. The Court considered the mercantile system of accounting followed by the assessee and concluded that the liability imposed by the amended law meant that the refunds received could not be treated as trading receipts for taxation purposes. Therefore, the Tribunal ruled in favor of the assessee, holding that the refunds were not includible in the assessee's income and deleted the amounts from assessment.

In conclusion, the Tribunal allowed the appeals, stating that the refunds received by the assessee were not liable to be included as trading receipts for taxation purposes. The judgment highlighted the impact of retrospective amendments in tax laws on the treatment of refunds and emphasized the legal liability of the assessee to refund the amounts to the State Government.