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TMI Blog1968 (6) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... 86 from the purchasers in the auctions held by it over and above the amount of Rs. 50,187 which it had earned as commission. He found that the assessee had made out one cash memo in respect of each sale, including therein the price of the articles and also the amount of sales tax payable thereon. In his opinion that amount of Rs. 32,986 was in reality a portion of the sale price itself, because sales tax was not legally due from the purchasers of the goods but was the liability of the sellers only. As the amounts realised as sales tax had not been paid to the owners of the goods, the amounts formed part of the income of the assessee along with the amount of the commission and accordingly he also included the sum of Rs. 32,986 in the assessee's total income. On appeal by the assessee, the Appellate Assistant Commissioner noticed that in the cash memo issued by the assessee to the purchasers in the auctions, the assessee was shown as the seller. According to him, as between the purchasers and the assessee, the assessee was the full owner of the goods and, so long as the assessee's customers did not revoke the contract, the assessee continued to be the seller of the goods. Further, u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to a separate account other than the trading account. The Tribunal held that as the amount of sales tax was collected by the assessee, not as its profit or gain, but merely for the purpose of making it over to the State in due time, it was a liability. It did not belong to the assessee either in the shape of a trading receipt or in the shape of gain. The character of the receipt being that of a tax, it would not change such character merely because it had remained with the assessee. The Tribunal further observed that if the High Court finally decided that the assessee was liable to pay the amount collected as sales tax to the State, the amount would hive to be made over to the Government. If, on the other hand, the High Court upholds the decision of the writ court and holds that the assessee is not liable for any sales tax, the amount would have to be refunded to the purchasers. Accordingly, the Tribunal upheld the decision of the Appellate Assistant Commissioner and dismissed the appeal. However, at the instance of the Commissioner of Income-tax, the Tribunal has referred the following question of law to this court, namely: "Whether, on the facts and in the circumstances of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision of the Supreme Court in the case of Punjab Distilling Indutstries Ltd. v. Commissioner of Income-tax facts in that case were that the assessee was a manufacturer and dealer in liquor. During the war difficulty was felt in obtaining supplies of bottles in which the liquor was to be sold and the Government devised a scheme whereby the distiller was entitled to charge the wholesaler a price for the bottles in which the liquor was supplied, at the rates fixed by the Government, which the distiller was bound to repay when the bottles were returned. In addition to the price fixed under the Government scheme the assessee took from the wholesalers certain amounts, described as security deposits, without Government sanction and entirely is a condition imposed by the assessee itself for the sale of its liquor. The moneys, described as security deposits, were also returned is and when the bottles were returned, but, in this case, the entire amount of the deposit was refunded when 90 per cent. of the bottles covered by it were returned. The amounts of the deposits were credited in an account called "empty bottles return security deposit account". The question arose whether the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me income. Mr. Pal argued that in this case also the amounts realised by the assessee as sales tax from its purchasers were amounts received in the course of the assessee's trade as an auctioneer and were really the assessee's trading receipts. Mr. Pal finally cited a decision of the Andhra Pradesh High Court in Badri Narayan Balkishan v. Commissioner of Income-tax. The facts in that case are somewhat similar to the facts of the case before us. The assessee was a firm of commission agents who used to sell rice on behalf of its customers. Apprehending that it may be made liable for payment of sales tax in respect of sales made to purchasers outside the State, on the introduction of Central sales tax on inter-State trading, the assessee charged sales tax from its purchasers outside the State and the amounts collected were credited to a separate account called the " deposit account " and were not treated as part of the sale proceeds. The invoices for the sales also showed that the amounts were collected separately as deposit. The assessee also represented that there was an understanding between it and the purchasers that if sales tax was ultimately demanded, payment would be made to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or anything done by the dealer in respect of the goods at the time, or before, delivery thereof, other than the cost of freight or delivery or the cost of installation where such is separately charged. Mr. Chakraborty submitted that it was Explanation 2 to section 2(c) of the Act that made a person who sold the goods of others liable as a dealer. In the case of the assessee the sales tax was charged not because of any apprehension but on account of an actual existing liability to pay the tax. The assessee had been charging sales tax from its customer since 1941 and had in the earlier years paid certain amounts as sales tax. As the assessee was denying its liability to pay sales tax, it kept the amounts credited in a separate account. He referred to the decision of D. N. Sinha J. (as he then was) in the assessee's case in Chowringhee Sales Bureau P. Ltd. v. State of West Bengal, where it was held that : " . . . an auctioneer, who sells goods belonging to a third party, is only the agent of the vendor and could not be treated as the seller of the goods. As the expression 'dealer' is used instead of the word 'seller', the tax is upon the footing that an auction sale is a sale of goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f of their principal. Mr. Chakraborty also referred to sections 217 and 218 of the Indian Contract Act and to Halsbury's Laws of England, 3rd edition, volume 2, at page 80, for the proposition that an auctioneer is an agent for the owner of the goods and must account for any moneys received by him on the vendor's behalf; he is a trustee in respect of such moneys. That an auctioneer is an agent of the vendor when selling goods belonging to a third party is well-settled. It is also well-settled that any moneys received by an auctioneer on the vendor's behalf must be accounted for and paid back after retaining all moneys due to himself in respect of advances made or expenses properly incurred and also such remuneration as he may be entitled to. It is not in dispute that the amount that the assessee collected from the purchasers as the price of the goods was refundable to the owners of such goods and did not or could not be treated as part of the assessee's trading receipts. But the assessee, in this case, was charging sales tax not on behalf of or an account of the vendors, but because, as an auctioneer, he was a dealer within the meaning of section 2(c) of the Bengal Finance, (Sal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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