COMMISSIONER OF INCOME TAX Vs. BHAPKAR M L

JUDGEMENT

(1.) THIS reference is in relation to asst. year 1961 62. The Revenue has obtained a reference under s. 256(1) of the IT Act, 1961, of the following questions for the opinion of this Court :

(2.) THE assessee is a legal heir of one deceased M.M. Bhapkar who was carrying on business as partner of a partnership firm in the name and style of M/s N.L. Bhapkar & Co. The partnership carried on business as carting agent. After the original assessment for the asst. year 1961 62 had been completed, the Revenue issued notices under S. 147(a) r/w S. 143(3) of the IT Act for reopening of the assessment proceedings. The reason given was that the assessee had received a sum of Rs. 4,12,172 plus an amount of Rs. 66,350 (as interest upon the former amount) from the Poona Municipal Corpn. The said amount represented 10% of the octroi duty which was retained by the Poona Municipal Corpn. on behalf of the merchants who transported their goods through its territorial jurisdiction for whom the assessee had acted as an agent with Poona Municipal Corpn. The 10% of the octroi duty paid which had been initially retained by the Poona Municipal Corpn., came to be refunded by the said Corporation in view of decision of the Supreme Court in a suit filed by one D.N. Deodhar against the Poona Municipal Corpn. (AIR 1965 SC 355). The Supreme Court took the view that the Corporation did n ot have any authority to retain the 10% of the octroi duty which it had charged on transit goods on the merchants transporting the goods through its territorial jurisdiction. It was, in consequence of the law laid down by the Supreme Court in Deodhar's case that, the Corporation had to refund the amount as aforestated to the assessee M/s N.L. Bhapkar & Co. from whom it had collected the said amount initially. Since the amount had been retained in its hands illegally, the Corporation had to pay interest against the principal amount which has already stated.

(3.) ON the aforesaid facts, the questions as indicated earlier, have been referred to us for the opinion of this Court. At the hearing of the reference, counsel for the assessee made available to us the decision of this Court in Smt. Lilavati's case which is a decision dt. 14th Dec., 1989 in IT Ref. No. 469 of 1976 (per Bharucha & Sugla, JJ). After perusing the judgment in Lilavati F. Shah's case (supra), we are of the view that the facts and circumstances of the assessee's case are very much similar to those in Smt. Lilavati Shah's case. Here also, the assessee was an agent who used to import goods within the territory of the Poona Municipal Corpn. There also an agreement had been entered into between the importers and the agent that for the work carried on by the agent, the agent would receive a stated commission at the rate of two and half per cent and further that at the time of importing the goods the agent had to pay an amount equivalent to 90% of the octroi duty levied on the goods. This, the agent used to do on behalf of his customers, the balance 10% being paid by the customers. There also the amount of 10% retained in the hands of the Municipality was challenged as illegal retention of money and pursuant to the decision of the Supreme Court in Deodhar's case, the Poona Municipal Corpn. became obliged to refund the 10% of the octroi amount retained in its hands. The question arose in the income tax proceedings as to whether the refunded amount was assessable as trading receipt or income in the hands of the agent. The Revenue having failed in the proceedings at the level of the Tribunal, two questions were referred for the opinion of this Court and the questions are more or less similar to the questions those have been referred in the present case also. In Lilavati's case (supra), the Court opined that the amount refunded by the Poona Municipal Corpn. and received by the assessee could not be held to be a trading receipt liable to tax as an income. The second question therein, was not pressed by the Revenue.