9911796707
TMI Blog1999 (11) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... 981, for the assessment year 1974-75 passed in I. T. A. No. 436 (All) of 1980, and the following question stated to be of law and to arise out of the said order has been referred for the opinion of this court : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the sales tax of Rs. 1,42,134 credited in the special contingency account in the assessment year 1974-75 was not a trading receipt and hence not includible in the computation of the total income of the assessee for the year under reference ?" The aforesaid references have been made at the instance of the Commissioner of Income-tax. We have heard Sri A. N. Mahajan, learned standing counsel for the Commissioner, and Sri P. K. Misra, advocate, holding brief from Sri Bharat Ji Agarwal, counsel for the assessee-respondent. The assessee-respondent is a dealer in motor vehicles and sells the same, inter alia, on hire purchase basis in which system there is no immediate sale of the vehicle at the time of the delivery of the same to the prospective buyers but the vehicle is delivered to the prospective buyers under a hire purchase agreement, the ultimate sale being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the firm. These additions were also upheld by the Appellate Assistant Commissioner in appeal. For reasons stated in the earlier assessment years, the net credit of Rs. 2,58,868 (special contingency Rs. 2,58,134 and contingency account Rs. 734) is added to the total income of the assessee. The details are as under : Special contingency account Received Paid Rs. P. Rs P. Allahabad 54,064.99 738.89 Varanasi 2,60,079.17 55,270.78 ---------------------------------------------------- 3,14,144.16 56,009.67 ---------------------------------------------------- Surplus 2,58,134.49 -------------------- -------------------- Contingency account Allahabad 5,658.85 8,783.54 Varanasi 11,399.75 7,669.03 277.00 150.00 ---------------------------------------------------- 17,335.60 16,602.57 ---------------------------------------------------- Surplus 733.03 ------------------ ------------------ The above addition of Rs. 2,58,868 finds support from the Supreme Court decisions (i) Punjab Distilling Industries Ltd. v. CIT [1959] 35 ITR 519 and (ii) Chowringhee Sales Bureau P. Ltd. v. CIT [1973] 87 ITR 542." The assessee carried the matter in appeal before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontingency account. This has been further raised to Rs. 1,43,161 only in the revised return filed on February 10, 1978. During the course of the hearing, the assessee replied that the party's account is debited and the special contingency account is credited for the sum to be retained by the assessee on account of the party towards sales tax and other contingency. The excess to the credit of the customer (hirer) in the special contingency account after liquidating the sales tax and other contingency is payable by the assessee to the hirer. However, if it finds that the payment of any of the credit in the account of any of the hirers can be avoided it transfers the excess of the credit to the profit and loss account. The rest of the credit balances of the hirers in the special contingency account are transferred back to the sundry creditors account. From this description it is not clear how the assessee can claim deduction of rupees 1,36,237 on account of excess payment over realisation in the contingency account. Rs. 1,36,237 neither represents payment of sales tax on the basis of the return filed by the assessee, nor is it determined payable by the Sales Tax Department at the time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that the actual credit transferred to the sundry creditors account was only Rs. 1,42,134 and this amount is included in the appellant's profit and the addition could be only of Rs. 1,027. He, therefore, reduced the addition to Rs. 1,027. For this year again, the Tribunal without passing a detailed and independent order upheld the order passed by the Commissioner of Income-tax (Appeals) by following its order for the assessment year 1972-73. Learned standing counsel placed reliance on Punjab Distilling Industries Ltd. v. CIT [1959] 35 ITR 519 (SC). In that case the assessee carried on business as a distiller of country liquor. There was difficulty in finding bottles in which the liquor was to be sold and to relieve the scarcity, the Government devised a scheme whereby the distiller was entitled to charge the wholesalers a price for the bottles in which the liquor was supplied, at rates fixed by the Government, which he was bound to repay when the bottles were returned. The assessee, however, in addition to the price fixed under the Government scheme, took from the wholesalers certain further amounts described as security deposits, without the Government's sanction and entirely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax (Appeals) and the Tribunal. The Assessing Officer, on the other hand, had assessed the receipts themselves in the year of receipt and, therefore, this authority did not support the Revenue's case on all fours. Reliance was also placed on Chowringhee Sales Bureau P. Ltd. v. CIT [1973] 87 ITR 542 (SC) and Sinclair Murray and Co. P. Ltd. v. CIT [1974] 97 ITR 615(SC) in which the sales tax collected from a purchaser was held to be a trading receipt and includible in income. In the present case, there is no finding that the amount collected was received from the customers as sales tax payable in respect of the transaction. It is admitted that the vehicles were handed over to the prospective buyers on hire under hire purchase agreements in which the customer has the option to purchase the vehicle at a price determined in accordance with the agreement at any subsequent stage. Therefore, it is admitted that at the time of the receipt of the amounts by the assessee, there was no liability towards sales tax. The liability would arise only when the sale was actually made and that event was uncertain. Therefore, it was not established that the amounts were received on account of sa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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