1984 (9) TMI 160 - AT - Income Tax

Summary

Issues Involved:
1. Assessability of certain amounts received by the assessee in connection with the sale of sugar.
2. Nature and character of the amounts received as income or trading receipts.
3. Limitation for assessment completion.

Issue-wise Detailed Analysis:

1. Assessability of Certain Amounts Received in Connection with the Sale of Sugar:
The central issue in these consolidated appeals was the assessability of amounts received by the assessee, Shri Someshwar Sahakari Sakhar Karkhana Ltd., and other similar sugar factories, in connection with the sale of sugar. The government fixed the price of sugar at two levels: levy sugar price and free sugar price. The levy sugar price was lower, leading to potential losses for the factories, which they could offset by selling free sugar at higher prices. The price for the 1974-75 season was initially fixed at Rs. 156.99 per quintal and later revised to Rs. 140.31 per quintal for the 1975-76 season. The assessee challenged this price reduction in the High Court, which granted an interim order allowing the assessee to sell sugar at the higher price of Rs. 156.99 per quintal, pending final adjudication. The difference between the two prices was credited to a suspense account by the assessee, claiming it was not income as it was under dispute.

2. Nature and Character of the Amounts Received as Income or Trading Receipts:
The Tribunal examined whether the excess amount received by the assessee constituted taxable income. The assessee argued that the amount did not accrue as income since it was disputed and held in a suspense account. The Tribunal noted that the interim order allowed the assessee to receive the higher price but required a bank guarantee for the difference, indicating the amount was provisional. The Tribunal concluded that the excess amount was a deposit, not trading receipts, and could not be treated as income until the final price was determined by the court. The Tribunal distinguished this case from the Supreme Court decision in Chowringhee Sales Bureau (P) Ltd. vs. CIT, where the nature of the receipt was different.

3. Limitation for Assessment Completion:
The assessee raised a preliminary issue that the assessment was time-barred. The Tribunal admitted this additional ground but did not delve into it as the assessee withdrew the ground, contingent on a favorable decision on the merits. The Tribunal noted that limitation must be considered even if not pleaded, but since the assessee's appeal was allowed on merits, the limitation issue was treated as withdrawn.

Conclusion:
The Tribunal held that the excess amount of Rs. 25,27,126 received by the assessee was not taxable income for the year as it was a deposit pending final adjudication of the sugar price. The appeals were allowed, and the Tribunal emphasized that the amount was an ad hoc deposit and not part of the price of sugar, thus not constituting income. The Tribunal's decision was based on the nature of the receipt and the conditions imposed by the High Court's interim order.