COMMISSIONER OF INCOME TAX Vs. ALCHEMIC PRIVATE LIMITED

JUDGEMENT

(1.) IN this case, at the instance of the Revenue, the following question has been referred to us for our opnion :

(2.) IN the instant case, we are concerned with the asst. year 1971 72, the previous year being the calendar year 1970. The assessee is a private limited company and carries on business of recovering caustic soda from mercerising waste caustic liquor and resupplying the same to mills. The assessee was served with a notice that excise duty was recoverable in respect of dilute waste lye sent from one mill to another factory for concentration or recovery which was done by the assessee on behalf of others. On the one hand, the assessee company paid the amount and on the other, it recovered Rs. 15,964 from its constituents. At the same time, the assessee contended before the excise department that duty was not leviable on the facts of the particular case. The assessee succeeded and the amount of Rs. 15,964 was refunded to it by the excise department in calendar year 1970, that is, during the relevant accounting year. This amount was credited by the assessee to the profit and loss account. The assessee claimed deduction of this amount of Rs. 15,964 before the ITO and there the contention of the assessee was that this amount was not taxable because it was of a casual and non recurring nature. This contention was rejected by the ITO and he did not grant this deduction. In the appeal before the AAC, it was pointed out that the Tribunal had dealt with this very point in the case of this very assessee for the asst. year 1968 69. The AAC accepted the assessee's claim on the similar point and he allowed the assessee's appeal. Against the decision of the AAC, an appeal was preferred to the Tribunal by the Revenue. According to the contentions urged before the Tribunal, the case of the Revenue was on two alternative grounds. It was firstly argued on behalf of the Revenue that the amount was taxable under S. 28 (iv) as value of any benefit arising from business. The alternative contention was that, in any case, the amount fell within the mischief of S. 41(1) as the assessee would have got deduction for payment of this amount of excise duty and that when the amount was refunded, the assessee had become liable to tax. It was urged on behalf of the Revenue that the excise duty collected from various constituents was a part of the assessee's business receipts and was on par with sales tax and it was contended that excise duty was held to be part of taxable receipts in a number of cases. The Tribunal held that before the claim could be considered under S. 41(1) of the IT Act, 1961, some investigation would be necessary. Firstly, it should be seen how the assessee recovered this amount from the constituents, what was the treatment, whether the excise payment reduced the assessee's income. Secondly, it should be seen whether the refund was subject to the claim of the constituents that they should get back the excise duty which the assessee had wrongly recovered from them. The ITO had not considered the provisions of S. 41(1) at all. As altogether a new case requiring extensive investigation into facts was sought to be made out at the stage of appeal before the Tribunal, the Tribunal thought that it would not be proper for them to allow the Department to agitate the point. As regards the contention with regard to S. 28(iv) of the Act, the Tribunal held that looking to the language of S. 28(iv), since what was received from the excise department was money and not something the value of which was required to be converted into money, the provisions of S. 28(iv) would not apply to the facts of this case. The Tribunal, therefore, dismissed the appeal of the Revenue, and thereafter, at the instance of the Revenue, the question hereinabove set out has been referred to us for our opinion.

(3.) IT is not for us to go into this question at this stage because the Revenue never approached the question from that angle, nor did it give an opportunity to the assessee to lead proper facts which would have a bearing on the question under S. 41(1) of the Act. It is true, as Mr. Raval for the Revenue has urged before us, that excise duty is part of the consideration which the constituents of the assessee would pay to the assessee for the goods purchased from it and the total amount received, namely, the price of the goods together with excise duty, would form part of its trading receipts. On the other hand, as and when excise duty was paid or liability to pay excise duty was incurred by the assessee, since the assessee is keeping its accounts on mercantile basis, the amount of excise duty would be a taxable expenditure in connection with its business activities. In Motilal Ambaidas vs. CIT 1977 CTR (Guj) 165 : (1977) 108 ITR 136 (Guj) : TC13R.343, the provisions of S. 41(1) of the IT Act were considered by a Division Bench of this High Court and it was held that when S. 41(1) speaks of deduction of a particular amount in the past, the words meant not only what was actually deducted but what ought to have been deducted in the past. But the question would still remain whether the amount was received back under particular circumstances and Mr. Raval contended that in the instant case in view of the decision in Motilal Ambaidas' case (supra), on the excise authority refunding the amount of Rs. 15,964 back to the assessee, all the provisions of S. 41(1) would come into play. However, the Tribunal in the exercise of its discretion refused to go into this question because various facts would have been required to be investigated into as pointed out by the Tribunal in order to examine the question under S. 41(1) and it was for that reason that the Tribunal declined to go into the question of S. 41(1). In our opinion, the stand taken by the Tribunal was in exercise of jurisdiction and it is not necessary for us to go into the question regarding the chargeability to tax, so far as this amount of Rs. 15,964 was concerned, under S. 41(1) of the Act.