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TMI Blog1991 (1) TMI 193X X X X Extracts X X X X X X X X Extracts X X X X ..... holding that section 43B comes into play only when tax has accrued and become due for payment. 3. The Commissioner of Income-tax (Appeals) erred in not specifically holding that question of disallowance does not arise under section 43B in cases, where the amount of sales tax collected and paid is charged to separate account and no part of it is claimed as expenditure of business. 4. On facts of the case, the Commissioner of Income-tax (Appeals) erred in holding that appellant company deals in goods and that status of company is trading company. 3. The arguments of the learned counsel for the assessee and the learned Departmental Representative were heard. 4. For the proper appreciation and discussion of the issue involved in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contentions made by the assessee before the revenue authorities have been rejected by them, who have held that the assessee was a trading company and not a service company and that it was dealing in the petroleum products and that the income earned by it was not a commission. It was similarly held by the revenue authorities that the sales-tax collected by the assessee, who was a 'dealer' within the meaning of the Sales-tax Laws, was its own trading receipt and since it had not actually deposited part of the sales-tax so collected during the year under appeal, the assessee was not entitled to deduction in respect of that part of the tax. 7. Now, the assessee had entered into a distribution agreement dated 1-12-1985 with IPCL. Such of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he relevant laws. (x) The distributor was also to show the turnover of the sales on the consignment account in the sales-tax returns during the period he was working as such distributor. (xi) The turnover tax paid by the distributor under the Sales-tax Laws was to be reimbursed by IPCL. (xii) The distributor was entitled to a service charge of Rs. 200 per metric tonne on various products sold by it. (xiii) The IPCL was entitled to recall unsold stock at any time. (xiv) The distributor was to disclose on hill forms that he was a distributor of the IPCL and was effecting sales on behalf of IPCL. (xv) The distributor was not entitled to transfer or otherwise encumber any of its rights or liabilities in favour of a third party ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd conditions of the distribution agreement and also made a thorough study of the other documents produced on the record and find no hesitation incoming to the conclusion that the assessee was merely a distributor and hence a service company within the meaning of the I.T. Law including the Finance Act, 1985 and was not a trading company. The above features of the relationship between the distributor and the consignor company, i.e., IPCL clearly show that the goods were consigned by IPCL to its distributors for stocking and holding the same on behalf of the consignor and also selling them on behalf of the principal. The property in goods till they were sold vested in the consignor IPCL. Insurance cover was also taken by IPCL and the payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the goods belongs to the commission agent or the consignee immediately before the transfer by him to third person. If the property in the goods continues to belong to the principal, the relevant sale price should not form part of the sales/turnover of the commission agent and/or the consignee as the case may be. If, however, the property in the goods belongs to the commission agent and/or the consignee, as the case may be, the sale price received/receivable by him shall form part of his sales/turnover." 10. From the above discussion, we conclude that the assessee is not a trading company, but only a service company and is liable to be taxed as such. This ground of the appeal thus succeeds. 11. Ground Nos. 1, 2 and 3. The substanti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 2(11) of the Bombay Sales Tax Act, 1959 defines a "dealer" as any person, who, whether for commission, remuneration or otherwise, carries on business of buying or selling goods in the State. Section 16 of that Act lays down that where a commission agent sells any taxable goods on behalf of the principal such commission agent and its principal shall both by jointly and severally liable to pay the tax or taxes on the turnover of such sales under section 6. In the context of these two provisions and section 6 relating to turnover tax, the learned counsel for the assessee argued that since it was the assessee, who was distributing the goods it had no option but to get itself registered as a dealer in view of the technical requirements o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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