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TMI Blog2003 (11) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... as delivered by M. KATJU J. -These three income-tax references are being disposed of by a common judgment. Heard learned counsel for the parties. We treat I.T.R. No. 91 of 1981 as the leading case. In this case the questions of law referred to us for our opinion are as follows: "1. Whether there was material justifying the Tribunal's finding that there was a corresponding liability in respect of accretion in the contingency account No. II amounting to Rs. 43,095? 2. Whether the Tribunal was in law justified in holding that the accretion in the contingency account No. II could not be brought to tax as trading receipt in spite of the fact that the actual sales tax liability in respect of completed transactions had been duly provided for by transfer from the aforesaid accounts?" The assessee is a company registered under the Indian Companies Act which does the business of hire-purchase of motor vehicles. It maintains its accounts on mercantile basis. When the assessee enters into an agreement with a hire purchaser it collects the entire sales tax on the vehicle at the time of financing the transaction. In other words, the entire sales tax on the vehicle is realised by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Co. P. Ltd. v. CIT [1974] 97 ITR 615 (SC), it was held by the Supreme Court that the amount of sales tax realised by a trader is its trading or business receipts. It was further observed therein: "It is the true nature and quality of the receipt and not the head under which it is entered in the account books that would prove decisive. If a receipt is a trading receipt, the fact that it is not so shown in the account books of the assessee would not prevent the assessing authority from treating it as trading receipt." In the present case the amount of sales tax realised by the assessee from the hire purchaser was much more than the sales tax paid by it on completion of the hire purchase. Moreover, in fact what was collected by the assessee was really not sales tax at all because the sales tax liability arises when there is a sale. As regards a hire purchase agreement the Supreme Court in Instalment Supply Ltd. v. STO ; [1974] 4 SCC 739 ; [1974] 34 STC 65 recognised the difference between two types of such agreements, first where the hirer is not obliged to buy the goods at the end of the contract, but it is his option to buy it or not, and the second where the hirer is under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taining its accounts on mercantile basis but even on that basis the tax liability arises when the sale takes place. As already observed above, in a case of a hire purchase agreement it will depend on the terms of the agreement as to when the sale takes place. However, when the petitioner collected amounts in the name of sales tax from its hire purchaser what it actually collected was not sales tax at all but an amount in anticipation of its sales tax liability. The word "income" as defined in section 2(24) of the Income-tax Act has been held to include almost every kind of receipt or gain vide Bhola Nath Kesari v. Director of State Lotteries [1974] 95 ITR 171 (All). In Navinchandra Mafatlal v. CIT [1954] 26 ITR 758, the Supreme Court observed that the wide scope of the expression "income" should not be restricted to the technical concept of income in contradistinction to capital. In Bhagwan Dass Jain v. Union of India [1981] 128 ITR 315, the Supreme Court held that the word "income" includes even notional income. In Dooars Tea Co. Ltd. v. Commr. of Agrl. I.T. [1962] 44 ITR 6, the Supreme Court held that the word "income" is a word of wide scope and of elastic import and its exten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the other hand, there is a clear finding by the Tribunal as well as by the authorities below that the amount of sales tax was realised by the assessee from the hirers/customers on full purchase price of the vehicle. Thus the decision of this court in CIT v. Auto Sales [2000] 246 ITR 494 is clearly distinguishable. The Tribunal in paragraph 12 of its appellate order has stated that the credits in contingency account No. II represent collections from the customers on account of sales tax made at the time of financing the transactions. When the transaction is completed the sales tax liability on the completed contract is calculated and the amount of such liability is transferred from contingency account No. II to the sales tax payable account. The difference between the total amount of sales tax collected as credited to contingency account No. II and the amount transferred to the sale tax payable account is transferred to the contingency account No. III. On these facts the Tribunal observed that the credits appearing in contingency account No. II do not represent any trading receipt of the assessee and cannot be brought to tax. We do not agree. As already stated above, the amounts ..... X X X X Extracts X X X X X X X X Extracts X X X X
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