COMMISSIONER OF INCOME TAX Vs. MEERUT BIDI FACTORY

JUDGEMENT

(1.) UNDER Section 256(1) of the Income -tax Act, 1961, the Income -tax Appellate Tribunal, Delhi Bench 'A', has submitted this statement of the case along with the following question of law for the opinion of this court:

(2.) THE assessee is a registered partnership firm. It is engaged in the business of manufacture and sale of bidis. During the previous year ending on October 24, 1965, relevant to the assessment year 1966 -67, the assessee charged from its customers certain amount, which was credited to a separateaccount called dharamshala account. The charge was at the rate of certain percentage of the sale price of bidis and was separately shown in the sale vouchers issued to the customers. The total collection during the year amounted to Rs. 11,159. The Income -tax Officer called upon the assessee to show as to why the amount in question be not treated as its income. The assessee in a written reply stated that the amount in question represented the collections made for the construction of a dharamshala and, as such, was not a part of its sales. The Income -tax Officer found that there was no trust for the construction of dharamshala nor had any part of the collections been spent by the assessee during the relevant previous year on the construction of the dharamshala. He, accordingly, held the amount to be a part of the assessee's income and levied tax thereon. On appeal, the Appellate Assistant Commissioner of Income -tax upheld the order of the Income -tax Officer holding that since the collections were a part of the sale proceeds of bidis, the amount represented the income of the assessee and the fact that it was subsequently set apart for the construction of the dharamshala did not affect the tax liability of the assessee. On second appeal, the Income -tax Appellate Tribunal did not agree with the view taken by the income -tax authorities. In its opinion the money which had been realised by the assessee on account of dharamshala was the money which did not have any profit -making quality about it. It was the money which in the business sense was the money of the customers and of nobody else. The Tribunal, accordingly, allowed the assessee's appeal and held that the amount in question was not taxable as the assessee's income. The Commissioner of Income -tax is aggrieved and has brought this reference before us.

(3.) ANOTHER set of cases, which would illustrate the point, deal with the collection of sales tax by dealers. Sales tax is a liability imposed upon a dealer in respect of his transactions of sale. If a dealer collects sales tax from a customer, whether he is authorised to do so or not under the Act, the tax so collected is a part of sale price and goes into the computation of his business profits. Of course, any tax paid to the Government has to b3 allowed to him as a deduction. The fact that the sales tax is separately charged in the sale vouchers and is credited to a separate account does not make any difference. See Chowringhee Sales Bureau P. Ltd. v. Commissioner of Income -tax : [1973]87ITR542(SC) . A similar view has been taken by this court in Commissioner of Income -tax v. Sheo Nath Prasad Hari Kishan : [1974]93ITR282(All) .