9911796707
TMI Blog1996 (4) TMI 504X X X X Extracts X X X X X X X X Extracts X X X X ..... livery of the steel they never ask for the balance amount and this unclaimed amount remains with the assessee. In the previous year 1975-76 the assessee credited its P L a/c with such amounts aggregating to ₹ 35,277. However, while filing the return of the income for the asst. yr. 1975-76, the assessee claimed that the amount should not be taken as the income of the assessee since according to it, the liability to pay the amount still existed. The ITO did not accept the assessee's claim and he assessed the amount of ₹ 35,277 under the provisions of s. 41(1) of the Act. According to the ITO, the assessee had obtained some benefit in respect of the liabilities by way of remission or cessation thereof. 3. The aggrieved assessee filed an appeal before the AAC, who held that the provisions of s. 41(1) are not applicable to the facts of this case. He upheld the addition on a different ground. According to the AAC, the amount in question constituted part of the trading receipts and is, therefore, liable to tax. The assessee thereafter went in appeal to the Tribunal. The Tribunal held that the ITO was not justified in invoking the provisions of s. 41(1) of the Act and al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year under consideration. In order to support these contentions learned counsel for the assessee also relied upon various decisions which we will consider at a later stage. 7. The fact remains that in the asst. yr. 1975-76 the ITO noticed that the assessee had credited its P L a/c with unclaimed credit balances amounting to ₹ 35,277, in the memo for adjusting the income for income-tax purposes claimed deduction of the sum as an untaxable item. The assessee's authorised representative placed before the Tribunal a breakup of this amount of ₹ 35,277 which includes a sum of ₹ 24,700 from the assessee's account of the private ledger, representing unclaimed balance of earlier years transferred from the sales ledgers. The other amounts represented the unclaimed credit balances in the sales ledgers of the Madras, Coimbatore, Trichy and Madurai branches of the assessee- company. He also placed before the Tribunal a list of persons or companies in whose names the credit balances as on 31st Dec., 1974 stood in the Madras branch sales ledger. With these materials it was submitted that on no account this could be said to be a part of the sale proceeds or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pprehending that it may be made liable for payment of such sales-tax on the imposition of Central Sales-tax on inter-State trading from 1st July, 1957. However, the collections so made from the customers credited to a separate account called the deposit account and not treated as part of the sale proceeds. According to the assessee the understanding between it and the customer was that if sales-tax was ultimately demanded from the assessee, the payment would be made to the Government accordingly, but, if it was not so demanded, the amount would be refunded to the customers. Since, however, neither a demand was made, nor had the assessee paid the amount to the Government and the amount was also not refunded to the customers in any of the previous years. On these facts on a reference the Andhra Pradesh High Court held that the principle applicable in the case of deposits or security deposits is that where it is part of the price or part of each transaction, whether the amount is returnable or not, it is deemed to be a trading receipt. But, if the amount received has nothing to do with the transaction as such or is no part of the price but is only received for the due performance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng its capital. The benefit received by the assessee by appropriation of this amount to its P L a/c was definitely convertible into money and assessable under s. 28(iv) of the Act . 12. According to the facts arising in the case of K.M.S. Lakshmanier Sons vs. CIT, Etc. (1953) 23 ITR 202(SC) : TC 15R.872, the assessees were the sole selling agents for yarn manufactured by a textile mill and they distributed yarn to customers under forward contracts in respect of which they obtained from their customers advances of moneys were adjusted towards the final payment of purchase price at the time of delivery of goods. The assessee demanded from the customer as security deposit a certain sum which was to be held by them as security for the due performance of the contracts by the customers so long as his dealings with them by a way of forward contracts continued. The price was to be paid by the customers in full against delivery in respect of each contract without any adjustment out of the deposit which carried an interest of 3% per annum. A question arose whether the amounts received by the assessee constituted borrowed money within the meaning of r. 2A of Sch. II of the EPT Act, 1940 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were not taxable. Thus, a plain reading of the judicial pronouncements cited supra would go to show that the unpaid balance amount credited in the P L a/c would partake the character of trading receipts. 14. Learned counsel appearing for the assessee submitted that in as much as the unpaid balance amounts related to the earlier assessment years and simply because they were brought into the P L a/c in the accounting year relevant to the assessment year under consideration the entire amounts are (not ?) taxable in the assessment under consideration as trading receipts. 15. According to the facts arising in the case of CIT vs. Planters Co. (P) Ltd. (1980) 15 CTR (Mad) 395: (1980) 123 ITR 648(Mad) : TC 39R.654 sales-tax collected by the assessee on its sales of the tea during the years 1956 to 1959 was credited to a sales-tax reserve account and payments of sales-tax were debited to this account. The excess which was kept in the said account between 30th June, 1960, and 30th June, 1969, was credited to the P L a/c as on 30th June, 1970. On these facts a question arose whether the excess sales-tax referred by the assessee during the earlier years and transferred to the credit of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treated as the income of the assessee. While answering this question the Gujarat High Court held that if the amounts of ₹ 31,695 and ₹ 11,523 were received by the assessee as trading receipts, the mere facts that the said amounts were transferred to the suspense account for a few years and were later transferred to the P L a/c could not alter the character of the receipt. The amounts could have been taxed in the assessment year in which they were received. The Department having failed to do so, the amounts would not be assessable in the asst. yr. 1971- 72 . According to the case of State Bank of India vs. CIT (1985) 49 CTR (SC) 379: (1986) 157 ITR 67(SC) : TC 13R.398, the Supreme Court, while considering whether the increase in value of the foreign currency was incidental to the banking business carried on by the assessee is his capital or revenue receipt, held that it is well settled that the way in which the entries are made by the assessee in its books of account is not determinative of the question whether the assessee has earned any profit or suffered any loss. The assessee might, by making entries which were not in conformity with proper principles of accountanc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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