9911796707
TMI Blog1993 (5) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts and in the circumstances of the case, the Tribunal was justified in holding that the amount collected by the assessee on account of customs duty payable by the assessee on behalf of the parties but not paid within the previous year was not hit by the provisions of section 43B of the Income-tax Act. 1961 ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that if the goods, are imported on behalf of the parties, customs duty attached to such import does not become the liability of the assessee, when in the instant case the assessee advanced bank guarantee as per direction of the hon'ble court for the disputed portion of customs duty and received the equal amount from the parties inasmuch as the assessee has to pay such customs duty if the hon'ble court finally directs to make such payment ?" In fact, there are two issues covered by the four questions, one relating to includibility in the total income of the deposit of sales tax under section 43B of the Act, common to both the assessment years, the other relating to includibility of customs duty collected by the assessee from third parties for whom the assessee acted as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation forms were allowed to be obtained and placed before the sales tax assessing authorities on the eve of the completion of assessment. The amount so collected becomes a liability of the assessee if non-availability of the form becomes the ultimate eventuality. It was further contended that the collection of full sales tax is the arrangement of the assessee with its customers who are mostly registered dealers under the Sales Tax Act and the arrangement was an imperative necessity as the declaration forms are not readily available with the purchasers and were to be obtained from the Sales Tax Officer which necessarily caused a time lag between the date of purchase and the ultimate furnishing of the declaration forms to obtain the concession in tax for the purchases by a registered dealer. This aspect of the necessity of the arrangement was not questioned by the Commissioner, yet he held that whatever amount is collected from the parties at the time of sale by way of sales tax fastens on the assessee a liability to pay such collections to the sales tax authorities. Irrespective of the circumstances, each and every collection of sales tax was to be treated as sales tax collection an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y may allow for reasons to be recorded in writing such declarations to be produced within such further time as that authority may permit." In this connection, the Tribunal finally came to the finding as contained in the following observation in paragraph 12 of its order: "We have already recorded that the liability to collect the sales tax arises when sale is made and there is no controversy about the above proposition. The assessee collected the sales tax through bills at the rate applicable to registered dealers and the said amount is definitely part of the trading receipts of the assessee. But the Revenue here wants to tax the 'deposit' as amount of deposit along with tax actually collected in the bill as the assessee's sales tax liability accrues even when sale was made to a registered dealer because the requisite declaration at that time was not furnished. On consideration of the provisions quoted above, we are unable to accept this view. As per section 5(1)(aa) of the Sales Tax Act, sales tax is to be collected from a registered dealer at the rate prescribed. The proviso to sub-section (1) would not come into play unless the dealer selling the goods furnishes in the presc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the levy and collection of sales tax, this extra collection from the registered dealer treating him as unregistered dealer in the absence of declaration forms yet to forthcome, represented a deposit by the said registered dealer as caution money refundable against the declaration form eventually furnished. In such circumstances, it cannot be said that such collection would form part of the trading receipts. Section 43B, therefore, does not operate. The arguments placed before the Tribunal were respectively reiterated by learned counsel of the petitioner. Learned counsel for the assessee emphasized that the collection from the registered dealer at the higher rate of sales tax meant for unregistered dealers in the absence of spot furnishing of declaration forms is in essential character nothing but security deposit. Under section 5(1)(aa) of the Bengal Finance Sales Tax Act, the tax is levied at 1 per cent. on so much of the taxable turnover as represents sales to a registered dealer supported by the declaration form. The proviso to the said clauses makes an exception to the effect that this concessional rate of 1 per cent. for sales to registered dealer shall not avail unless ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounsel for the Revenue relied upon the decisions of the Supreme Court in Chowringhee Sales Bureau Pvt. Ltd. v. CIT [1973] 87 ITR 542 and Sinclair Murray and Co. Pvt. Ltd. v. CIT [1974] 97 ITR 615 for the proposition that sales tax collected as part of the sales shall form part of the trading receipts. Therefore, the assessee, by not including any part of the collection of sales tax in the turnover and by crediting the collection to a suspense account cannot side-step the provisions of section 43B. The reliance on the decisions of the Supreme Court does not advance the Revenue's case. It has been very correctly submitted that here the collection by the assessee is in its essential nature a mere deposit to be released on the reciprocity of release of declaration forms by the purchasing dealer. This deposit gets transformed into sales tax only to the extent the declaration form does not finally come forth at the last point of time when such form is to be presented to the sales tax authority under the Sales Tax Rules, i.e, at the time of assessment or before expiry of time extended by such authorities. We, therefore, hold that the Tribunal was right in treating this collection of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of the goods subject to furnishing of the bank guarantee. The assessee furnished the bank guarantee and the principal deposited the excess amount with the assessee which was to be refunded to the principal, depending on the final order of the High Court. Therefore, this cannot be treated as the trading receipt of the assessee. The Department, on the other hand, urged that the assessee was shown to be the importer in the relevant document and it was the "petitioner" in this litigation before the High Court. The deposit under the head "Collector of customs (Party) Account" was part of the trading receipts and the collection of customs duty from customers stood on the same footing as sales tax. The Department also referred to the observations of Chaturvedi and Pithisaria, Volume 4, and relied on the decision of the Calcutta High Court in CIT v. Partabmull Rameshwar [1977] 107 ITR 526, wherein it was held that excise duty collected was part of the trading receipts. Further, it referred to the relevant provisions of section 43B and urged that statutory liability is to be allowed only on actual payment basis. The Tribunal, however, viewed that the assessee never traded in the goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 226 of the Indian Contract Act, reproduced below, would help to settle the controversy : "226. Contracts entered into through an agent, and obligations arising from acts done by an agent, may be enforced in the same manner, and will have the same legal consequences as if the contracts had been entered into and the acts done by the principal in person." It is clear from the record that the customs authorities levied customs duty as soon as the goods were imported. The High Court stayed recovery of duty and directed that bank guarantee be furnished in respect of the disputed customs duty till the matter is finally adjudicated. Although the High Court stayed the recovery of customs duty, the Revenue says that the deposit collected is customs duty. The customs duty already stands quantified and determined (subject, of course, to the order of the High Court). The assessee furnished the bank guarantee as its customers (principals) agreed to deposit equal amount with the assessee. Under the above agreement/arrangement, the goods are released and taken over by the customers. The assessee protected its interest and risk by taking the deposit. The receipt issued by the assessee in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said amount as an allowable deduction and section 43B ex facie cannot have any application. Security deposits are never trading receipts and cannot be treated as income specially when the security deposits are not obtained as part of the proceeds of sales. In this connection, the following decisions are relied upon by learned counsel for the assessee : (i) Bengal and Assam Investors Ltd. v. CIT, reported in [1983] 142 ITR 156 (Cal). In this case, the assessee in its business of general insurance agency, collected amounts on account of premium payable by its clients to the insurer. Thus, its clients paid their premium through the assessee as their agent to the insurer. In the process of rendering this service to the clients, the assessee collected some excess amounts from the clients over the years, which were neither paid to the insurance companies nor refunded to the assessee's clients. The clients also did not claim the refund of the amounts. Such unclaimed amount of premium collected but not paid to the insurance company was sought to be taxed as the assessee's income by the Income-tax Officer who did not accept the assessee's contentions that it did not receive the insuranc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that the assessee was under a contractual obligation to remit the said amounts received to the foreign buyers. Therefore, it followed that such amounts never reached the hands of the assessee as its own receipt or income. The assessee received the same on behalf of its foreign buyers who were entitled to the amounts and to hold the assessee accountable for the same. The amounts were never the income of the assessee as these were diverted even at the inception by an overriding title in favour of the foreign buyers. Any accretions to the said amounts by way of interest or otherwise could not be held to be the income of the assessee. The case before us has close resemblance with the facts in the cases cited by learned counsel for the assessee. It is not in dispute that the assessee was not the importer but merely acted as the authorised agent of the importers. Thus, the liability to pay the Customs Department was not the liability of the assessee and the liability was of its clients who are its principals. The assessee was merely acting as an agent on behalf of the principal and did not have itself any liability. The customs duty which it collected from its clients to get itsel ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
