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TMI Blog1979 (12) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... , added the sum of Rs. 12,697 as the income of the assessee for the asst. yr. 1972-73. 2. The assessee appealed to the AAC and contended that it was not a revenue receipt, that it was either payable to the government or refundable to the customers from whom it had been collected, and, lastly if at all, it could be assessed it would be assessable in the years in which these amounts were collected. It was also submitted that the decision of the Gujarat High Court in 103 ITR 312 relied on by the ITO was inapplicable to the facts of the present case. 3. The AAC agreed that the decision in 103 ITR 312 was inapplicable to the case of the assessee, but held that there were other decisions which have a direct bearing on the case. She relied on the decision of the Punjab Haryana High Court in CIT Saraswati Industrial Syndicate Ltd.(1) and held that the facts of the present case were similar to the facts in the said decision. She, therefore, held that the ITO had rightly assessed the amount of Rs. 12,697 as income of the assessee since it was charged along with the price from the customers and the customers had also paid the same to the assessee. She held that it was a trading receip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ended that as a result of the decision of the Punjab Haryana High Court M/s. Amar Singh Modi Lal vs. State of Haryana Ors.(2) there was no liability on the part of the assessee to pay these amounts of royalty to the State Government of Punjab, but that the assessee was liable to refund the same to its customers. He argued that the assessee was in the position of a trustee who held this amount in trust on behalf of his customers and that, therefore, the amount in question could not assessed in its hands as a trading or revenue receipt. In support of his pleas, Shri Gupta pointed out that from 1956 till date the price of bricks was controlled under the Punjab Control of Bricks Supply Order, 1956. He relied on the decision of the Court of Appeal in Morley vs. Tattersall(3) and the following decision:- Upper India Sugar Exchange ltd. vs. CIT(4) CIT, U.P. vs. Shiv Nath Prasad.(5) Agra Bullion Exchange Ltd. vs. CIT,(6) and Badrinarain Balakrishan vs. CIT A.P.(7) 5. Alternatively, Sri Gupta contended that the amount in question was not taxable in the year under appeal, but in the earlier years when they were collected. He pointed out that the sum of Rs. 12,697 represent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same to a separate account styled as "Royalty Account" in its books in the following three years:- . . Royalty amounts collected (i) Year ended 30-6-1966 Rs. 1,075 (ii) Year ended 30-6-1967 Rs. 2,879 (iii) Year ended 30-6-1968 Rs. 8,742 . Total credit balance in . . Royalty Rs. 12,696 . A/c as on 30-6-1971 . The ld. counsel for the assessee did not dispute the factual position that the assessee had separately charged for this Royalty amount in the sale bills issued to its customers, apart from the sale price for bricks, and other collections from sales tax, Octroi and Terminal tax, collected the same from its customers and credited the same directly to the Royalty A/c in its books of account. The ld. Counsel also did not dispute the position that there was now no liability on the part of the assessee to pay these accumulated collections of Royalty amount to the State Government of Haryana, as a result of the decision of the Punjab Haryana High Court in M/s. Amar Singh Modi Lal vs. State of Haryana Ors.(2) 9. We asked the ld. counsel to pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of royalty under the above entry seems to have been laid only on manufactures of bricks, who had the option to pay to the State Government the said royalty calculated in any one of the three methods specified in the entry. The fact that the assessee preferred to choose the third method of calculating royalty with reference to the quantity of pucca bricks sold by him, did not make the "royalty" payable by the assesses, into a liability laid on and payable by the customers of the assessee, who purchased bricks from him. Similarly, the further facts that the assessee chose to separately show the royalty amount in his sale bills distinct from the sale price and other collections such as sales-tax, octroi or terminal tax, would not invest the royalty amounts collected by the assessee with the character of its being the liability of the customers, nor would it make the assessee, a trustee for such collections, of royalty as claimed by the ld. counsel. It seems to us that the assessee adopted the last method of calculating royalty with reference to the quantities of bricks sold by him and the specification of this royalty in the sale bills was only to facilitate such calculation and nothi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion is taxable in the year under appeal or in the earlier years, when they were collected by the assessee. We are unable to accept the contention of the Revenue that under s. 41(1) of the IT Act, 1961, the receipts in question would be chargeable to tax in the year under appeal for the simple reason that these amounts were never claimed nor allowed as an expenditure or loss in any of the earlier previous years. We are unable to agree with the view of the AAC that these amounts were indirectly allowed as a deduction and that s. 41 would be applicable, as there is no material to support such a conclusion. On the authority of the decisions of the Supreme Court and of the Punjab Haryana High Court, we hold that the royalty receipts would be taxable as income in the hands of the assessee in the three respective years of their collection, namely, Rs. 1,075 1967-68 asst. yr. Rs. 2,879 in 1968-69 asst. yr. and Rs. 8,742 in 1969-70 assessment year. The ITO is directed to take appropriate action and to bring to charge these amounts in the said asst. yrs. in accordance with law. Accordingly, we accept the alternative contention of the ld. counsel and delete the addition of Rs. 12,697 from ..... X X X X Extracts X X X X X X X X Extracts X X X X
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