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TMI Blog1973 (9) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... tax from his customers and paid a sum of Rs. 4,520 to the sales tax department leaving an excess collection of Rs. 6,019. Similarly, there was an excess collection in respect of the Madras general sales tax amounting to Rs. 324. The Income-tax Officer proposed to treat the excess collections in the two accounts as the assessee's income. The assessee objected to the same on the ground that the sales tax collected did not form part of the sale price for which the goods had been sold, that he has collected the sales tax only as an agent of the Government, and that in any case the excess had to be paid over to the Government. The Income-tax Officer, however, took the view that the sales tax collected formed part of the turnover and, therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded that in any event the assessee cannot segregate the sales tax collections and treat them separately from the turnover. The Tribunal, however, held that in view of the decision in Sundaram Motors P. Ltd. v. Joint Commercial Tax Officer[1965] 16 S.T.C. 644., the sales tax collected by the assessee could not be included in his taxable turnover, that, even otherwise, the sales tax collections made by the assessee was a sort of trust fund to be handed over to the Government and that it is not open to him to appropriate it as his own money. The Tribunal also stated that in the circumstances the only proper method of accounting is the one adopted by the assessee and that such a method had been adopted in the earlier period and accepted by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee could be taken as his trading receipts or whether the total sales tax collections minus the actual accrued liability should be taken to be the actual trading receipts. On behalf of the revenue it is contended that the assessee having maintained a separate account in relation to sales tax collections and payments during the year, the collections during the year minus the disbursements will have to be taken as trading receipts and that that is the way in which the assessee himself has kept his accounts. Reliance is placed on the decision of the Supreme Court in Chowringhee Sales Bureau P. Ltd. v. Commissioner of Income-tax [1973] 31 S.T.C. 254 (S.C.); 87 I.T.R. 542 (S.C.). We are of the view that the above decision fully supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, following the mercantile system of accounting, incurred a liability of Rs. 1,49,776 on account of sales tax determined to be payable by the sales tax authorities on the sales effected by it during the calendar year 1954 relevant to the assessment year 1955-56. The sales tax demand was raised pending the income-tax assessment for that year. The Income-tax Officer rejected the assessee's claim for deduction on the ground (1) that the assessee had contested the sales tax liability in appeals and (2) that it had made no provision in its books with regard to the payment of that amount. The appeals to the higher authorities or courts taken by the assessee contesting its liability to pay the sales tax ultimately failed. On the question as to wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax v. Hira Lal Mittal Sons[1972] 80 I.T.R. 463. is also relied on in support of that proposition. In that case it was held that where a liability arises by operation of law, its deduction cannot be denied merely because it has not been entered in the accounts of the assessee. The question therefore turns on the method of accounting adopted by the assessee. In this case so far as the separate accounts maintained by the assessee are concerned, they have been kept only on cash basis, that is, the sales tax collections made had been credited and the actual sales tax payments have been debited on the respective dates of collection and payment. Neither the sales tax collections nor the payments made by the assessee which have been recor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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