1972 (8) TMI 25 - HC - Income Tax

Sales Tax - Whether on the facts and in the circumstances of the case the Tribunal was justified in law in excluding from the assessment the sum of Rs. 4, 155 representing sales tax deposits ?

Issues Involved:

1. Whether the Tribunal was justified in excluding the sum of Rs. 4,155 representing sales tax deposits from the assessment.

Issue-wise Detailed Analysis:

1. Justification of Excluding Sales Tax Deposits from Assessment:

The primary question of law is whether the Tribunal was justified in excluding the sum of Rs. 4,155, representing sales tax deposits, from the assessment. The facts presented indicate that the assessee-firm recovered Rs. 4,155 as sales tax from its customers before 1956 but did not pay this amount to the authorities because the Supreme Court ruled that no sales tax was payable on such transactions. The assessee-firm wrote back this amount in the profit and loss account for the year 1963-64.

The Income-tax Officer (ITO) assessed this amount as taxable income, a decision upheld by the Appellate Assistant Commissioner (AAC). The AAC noted that no evidence was provided to show that the amount was recovered as a deposit, and the assessee treated it as a revenue receipt by transferring it to the profit and loss account. The Tribunal, however, relying on a Delhi Tribunal judgment, held that the sales tax deposit remained a liability and allowed the assessee's appeal.

Nature of Sales Tax as a Trading Receipt:

The court examined whether sales tax is an integral component of the sale price. It was determined that the consideration for the transfer of goods includes the total amount paid by the purchaser, which encompasses the sales tax. The dealer is liable for the sales tax, and the amount charged as sales tax is part of the trading receipt, irrespective of whether it is shown separately or included in the price.

Relevant Case Law:

Several precedents were considered, including:
- Punjab Distilling Industries Ltd. v. Commissioner of Income-tax: The Supreme Court held that additional amounts described as security deposits were part of the consideration for the sale and thus trading receipts.
- Tata Iron and Steel Co. Ltd. v. State of Bihar: The Supreme Court stated that sales tax, even if shown separately, is part of the consideration for the sale.
- George Oakes (Private) Ltd. v. State of Madras: It was held that sales tax, when passed on to the buyer, becomes part of the entire consideration.
- Chhatrasinhji Kesarisinhji Thakore v. Commissioner of Income-tax: The Supreme Court ruled that amounts received under a contract are taxable income, even if the payer might claim a refund.
- Ikrahnandi Coal Co. v. Commissioner of Income-tax: The Calcutta High Court held that refunded sales tax is assessable as income.
- Badri Narayan Balakishan v. Commissioner of Income-tax: The Andhra Pradesh High Court held that amounts collected as sales tax are trading receipts if part of every transaction.

Conclusion:

The court concluded that the sales tax amount received by the assessee was an integral component of the sale price and thus a trading receipt subject to income-tax. The Tribunal's decision to exclude the amount from assessment was not justified. The reference was answered in the negative, indicating that the sum of Rs. 4,155 should be included in the assessment. The judgment emphasized that any refund to purchasers could be claimed as relief in the year of repayment, not the year of receipt. The answer to the question referred was thus in the negative, with no order as to costs.

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