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TMI Blog1994 (2) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... e circumstances of the case, the Tribunal was right in holding that section 41(1) covered the case and that Rs. 5,00,000 was a benefit to the assessee taxable as income under that section ?" 2. By the Commissioner : "3. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that a sum of Rs. 1,06,879 was not liable to tax under section 41(1) of the Act ?" After hearing learned counsel for the parties, with a view to focus the real controversy involved, question No. 2 is split into questions Nos. 2A and 2B as under : "(2A) Whether, on the facts and circumstances of the case, the Tribunal was right in holding that section 41(1) covered the case ? (2B) Whether, on the facts and circumsta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of excise duty. The amount represented refunds of excise duty paid over the years 1971 to 1975 by the assessee. The Income-tax Officer, in an order approved under section 144B by the Inspecting Assistant Commissioner, brought to tax the above amount under section 41(1) of the Income-tax Act. According to the Income-tax Officer, the amount was recovered from the customers as part of the price of grinders sold to them and the excise duty paid had already been allowed as a deduction to the assessee. Since the assessee had already got the benefit of deduction and the allowed amounts were refunded, the entire amount of Rs. 6,06,879 was held to be taxable under section 41(1) by the Income-tax Officer. The assessee had contended that the said am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner (Appeals), therefore, allowed the claim of the assessee, deleting the addition of Rs. 6,06,879 holding that the sum was not taxable. The Department preferred an appeal before the Tribunal. The Tribunal held that during the years 1971 to 1975, the assessee had collected from the customers a total amount of Rs. 6,06,879 as central excise duty in respect of the domestic grinders sold to them and though indicated as a separate amount, it was included in the same bill issued to the customer. The Tribunal held that the assessee neither took credit for these receipts as its income nor claimed deduction for the amounts paid under the mistaken notion that it was liable to pay the same to the Department as a deduction. The Tribunal found that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee. The Tribunal held that there could not be any dispute as to the applicability of section 41(1) with regard to the said amount subject to any overriding claim by the customers and the position as regards the balance also would depend only on the claim of the customers. The Tribunal, in terms, held that the assessee could not abdicate its responsibility to repay the amounts to its customers, but taking stock of the fact that the assessee had paid on an average Rs. 10,000 per year and the refunds to the customers were small, fixed the figure for which the assessed would benefit at Rs. 5 lakhs, set aside the order of the Commissioner of Income-tax (Appeals) and restored the order of the Income-tax Officer substituting Rs. 5 lakhs for R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey were received. The assessee undertook that they would adjust the amount towards service charges which may become payable by the customers. The fact that service cards were issued to the customers is also borne out from the record. It would also be noticed that, earlier, when excise duty was collected from the customers, it was separately mentioned in the bills which were issued to the customers. Thus, the customers were in a position to know that the amounts of excise duty which were refunded to the assessee stood credited to their accounts by way of deposit and that they could get them adjusted by getting the servicing of the grinders done by the assessee. Since the assessee was maintaining the accounts as per the mercantile system, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounts which it paid by way of sales tax. The fact that no such entries showing credits and debits in respect of the sales tax collected and sales tax paid, were made by the assessee-firm, does not alter the real substance of the transaction nor does it alter the real character of what was required to be done by the assessee. It was held that what has been enacted in section 41(1) is that if deduction has been made in a previous year and the assessee has benefited by such deduction in the past, if by chance some amount is refunded to him or comes back to him, the amount so got back should be brought to tax and in case he has to refund the sales tax to the original purchasers who purchased the goods from him, then the amount so refunded would ..... X X X X Extracts X X X X X X X X Extracts X X X X
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