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TMI Blog1964 (3) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... cts will be found in the judgment in the earlier case and it is unnecessary to state them at length over again. The assessee, who was a distiller and seller of bottled country liquor, started collecting from its customers from the year 1945, besides the price of the liquor and the bottles in which the liquor was sold, a further charge called " empty bottles return security deposit ". This charge was made at a certain rate per bottle delivered depending on its size on the term that it would be refunded as and when the bottles were returned to the assessee and that the entire sum collected on this account in respect of any one transaction would be refunded in full on return of 90 per cent. of the bottles covered by it. The question is whether this charge is a trading receipt assessable to tax. In the earlier case this court held it to be assessable. This court then said : " . . . the trade consisted of sale of bottled liquor and the consideration for the sale was constituted by several amounts respectively called, the price of the liquor, the price of the bottles and the security deposit. Unless all these sums were paid the appellant would not have sold the liquor. So the amount whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cent. of the bottles issued " or the words " falling short of the 90 per cent. limit ". It is not necessary, however, to pursue this matter for we shall not be concerned with the precise meaning of these words. It is not in dispute that some charge described as a deposit was realised on the term that it would be refunded in certain eventualities and that is enough for our purpose for the only question is whether this charge was a trading receipt. The High Court thought that the earlier judgment of this court had been based on three considerations, namely, (1) that the charge concerned had been made without Government's sanction and entirely as a condition imposed by the assessee itself for the sale of its liquor ; (2) that it could not be security deposit for the return of the bottles for there was no right to their return and (3) that it was refundable under the contract of sale itself. In the High Court's view if these circumstances were not there, our decision would have been different. The High Court held that since the amended rules came into force, none of these considerations was available and, therefore, the charges could not be held to be trading receipts. The following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urned on whether a charge was made under a Government scheme or purely as a matter of contract would indeed appear to have always been the common case. Thus even before the amended rules had come into force, the assessee had been collecting under the aforesaid " buy-back scheme ", which had the sanction of the Government, from its customers as price of the bottles, a charge which was refundable on the return of the bottles. The charge now under consideration is a charge additional to that collected under the " buy-back scheme " and this we have earlier said. It has never been in dispute, either in the earlier case or now, that the charge under the " buy-back scheme " which was collected under Government's sanction constituted a taxable income. This court had never said, nor was it ever contended by the assessee, that a collection would not be taxable if it had been made with the sanction of the Government. The first point of distinction sought to be made by the High Court is, therefore, unfounded. The second point made by the High Court was that the observation in the earlier judgment that the charge could not be a security for the return of the bottles as there was no right to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return security deposits " were. The real point, therefore, in contending that the deposits were security deposits was to establish that they were not part of the trading transactions at all but related to a stage anterior to the trading transactions. This contention was rejected and it was held that the " empty bottles return security deposits " were not the kind of deposits considered in the Shell Company case. The other case on which Mr. Sastri then relied was K. M. S. Lakshmanier and Sons v. Commissioner of Income-tax and Excess Profits Tax. That case dealt with three trade arrangements. Mr. Sastri contended that the " empty bottles return security deposits " were the kind of deposits dealt with in the third arrangement considered in that case but this argument also failed. Under the third arrangement, the trader took from its constituent at the commencement of an expected series of trading transactions with it a deposit and kept the same till the business connection came to an end whereupon the deposit was refundable to the constituent with interest at 3 per cent. per annum after deduction thereout of any amount remaining due from the constituent on the trading transactions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : " Mr. Sanyal was prepared to argue that even if the amounts were securities deposited for the return of the bottles, they would still be trading receipts, for they were part of the trading transactions and the return of the bottles was necessary to enable the appellant to carry on its trade, namely, to sell liquor in them. As we have held that the amounts had not been paid as security for the return of the bottles, we do not consider it necessary to pronounce upon this contention." This court, therefore, did not decide that if the deposits had been made to secure the return of the bottles, they could not be a trading receipt. The High Court was in error in distinguishing the present case from the earlier one on the basis that this court had then so decided. We now turn to the question whether under the amended rules there, was any right in the distiller to the return of the bottles. We think there was not and in this respect the two cases are identical; in none was the charge in fact a security deposit. The reason for that view is this. The liquor passed through three sales before it reached the consumer ; first, the distiller sold it to a wholesaler, then the wholesaler to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ract or as part of the trading transaction constituted by it. With great respect to the learned judges, there appears to be some confusion here. The rule by its own force does not compel a deposit to be made. The terms of the rule make this perfectly clear. All that it does is to empower a distiller to take a deposit. But the deposit must be taken under a contract made in regard to it; it is not taken under the rule itself. In other words, all that the rule does is to authorise the making of a contract concerning the deposit on the terms mentioned in it the object apparently being to avoid any question as to its validity arising later. We may here point out that the trade in liquor is largely controlled by Government regulations. It must, therefore, be held that the deposit was actually taken under a contract; it was none the less so though the contract was authorised by the statutory rules. The third point of distinction on which the High Court relied was, therefore, also without foundation. Whether if the deposits had been made without a contract and directly under the rules and in respect of a trading transaction made by a contract they would have been trading receipts or not, i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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