COMMISSIONER OF WEALTH TAX Vs. BHAGPATIA FOOD INDUSTRIES

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal has referred the following three questions of law arising out of its order dated July 5, 1980, in respect of the assessment year 1974-75 :

(2.) WHETHER, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the amount of Rs. 6,257 collected by the assessee as cess from its customers on sale of oil could not be assessed as a trading receipt ?

(3.) THE amount which has been received by the assessee as cess from its customers is for sale of oil and has to be construed as a trading receipt, there could be a liability for payment of cess and if the accounts are maintained on mercantile basis, the liability being statutory, could be allowed. If the accounts are maintained on cash basis, then the same could be claimed in the year when actual payment is made. THE amount was received by the assessee in the course of his business and is in the nature of a revenue receipt. From the facts of this case, it is, found that the amount was not deposited with the Government and a dispute was being raised about this payment. It was held by the apex court in the case of Kedarnath Jute Manufacturing Co. Ltd. v. CIT [1971] 82 ITR 363 that where the assessee follows the mercantile system of accounting, the liability which has accrued can be claimed. THE liability which has been claimed in the present case cannot be said to be a contingent liability, there must be a liability which should be ascertained either by the assessee or the authorities under the statute and after ascertainment, if it is disputed then it will not be contingent. In the present case it has not been found that any assessment of "cess" was made or how this liability could be said to have accrued. No returns were found to have been submitted disclosing the amount as having been collected or disputed. How there was any dispute has not been considered. THE entry in the books is a unilateral action and will not change the character of the initial collection which was made as part of the trading activity. THE Tribunal has proceeded mainly on the ground that the amount was held in trust and is not a trading receipt. Since we are of the opinion that the amount collected is a trading receipt and is not an accrued liability during the year under consideration, we are of the opinion that the Income-tax Appellate Tribunal was not justified in holding that the amount collected from the customers on sale of oil by way of cess is not a trading receipt.