K. Raviraja Pandian, J.@mdashThis appeal is at the instance of the revenue against the order of the Income Tax Appellate Tribunal dated
09.06.2003 made in ITA No. 1651 (Mds)/95. The assessment year is 1992-93.
2. The facts are: The assessment of the assessee company for the assessment year 1992-93 was completed u/s 143(3) on 28.03.1995 on a total
income of Rs. 1,26,15,810/-. While completing the assessment, the assessing officer found that the assessee had collected a sum of Rs. 8,66,386/-
towards contingent sales tax liability. Though this amount has been collected, it has not been paid either before 31.03.1992 or before 31.12.1992
being the last day for filing the return of income. The assessing officer, therefore, disallowed the liability u/s 43B of the Income Tax Act, while
assessing the sum of Rs. 8,66,386/- as trading receipts. Aggrieved by that order of the assessing officer, the assessee filed an appeal before the
Commissioner of Income Tax (Appeals) contesting the addition made regarding sales tax collected and not paid. The Commissioner of Income
Tax (Appeals) upheld the addition made by the assessing officer on this account. The assessee took the matter on further appeal before the
Tribunal. The Tribunal relied on the judgment of this Court in the case of Commissioner of Income Tax Vs. South India Sugars Ltd., , accepted the
contention of the assessee that the amount collected by the assessee was kept as contingent deposit till such time the refund was made and thus
allowed the appeal of the assessee. Aggrieved by that order of the Tribunal, the revenue is before us in this appeal.
3. This appeal was admitted on 07.04.2005 on the following substantial question of law:
Whether, on the facts and in the circumstances of the case that the Income Tax Appellate Tribunal was right in holding that the amounts collected
from the customers towards sales tax and kept as a contingent deposit did not form part of its trading receipts and the amount has to be excluded
from the computation of income?
4. Heard the learned Counsel on either side and perused the materials available on record.
5. Learned Counsel for the revenue submits that the issue involved in this case is squarely covered by a judgment of the Division Bench of this
Court, in favour of the revenue in the case of Commissioner of Income Tax Vs. Southern Explosives Co., , wherein it was observed thus:
The true character of a receipt must be judged with reference to the reasons for the collection, and the liability for meeting which the collection was
made. When the liability is a statutory liability, which the assessee was required to meet and for meeting which it was by the statute or authorities
permitted to collect the amount required from its customers, the true character of the collection is a trading receipt. By calling a portion of the
amount deposit, it cannot be said that the assessee had constituted itself as a trustee, and therefore, the amounts received were not required to be
regarded as a part of its trading receipt.
The said judgment was followed by another Division Bench of this Court in the case of The Commissioner of Income Tax Vs. Sakthi Finance Ltd.,
.
6. Following the decisions cited supra and for the reasons stated therein, we answer the question of law in favour of the revenue and against the
assessee. The appeal is allowed. No costs.
