Madras High CourtThe Commissioner Of Income Tax vs M/S. Sri Murugan Offset Printers on 25 April, 2005Bench:Markandey Katju,F.M.Ibrahim KalifullaIN THE HIGH COURT OF JUDICATURE AT MADRAS           

Dated: 25/04/2005 

Coram 

The Hon'ble Mr.MARKANDEY KATJU, CHIEF JUSTICE        
and 
The Hon'ble Mr.Justice F.M.IBRAHIM KALIFULLA    

Tax Case No. 64 of 2002 

The Commissioner of Income Tax,  
Madurai.                                ... Appellant

-Vs-

M/s. Sri Murugan Offset Printers,
Sivakasi.                               ... Respondent


!For Appellant         ...  Mrs.Pushya Sitaraman
                           Standing Counsel for Income Tax

^For Respondent    ...  Mr.P.P.S.Janardhana Raja

:J U D G M E N TTHE HONOURABLE THE CHIEF JUSTICE         

        This is a reference underSection 256(1)of the Income Tax  Act,  1961
at  the  instance  of  the Department in which the following question has been
referred to us for our opinion:  -"  Whether  on  the  facts  and  in the circumstances of the case, the
Appellate Tribunal erred in law in not holding that the amounts of  sales  tax
on  printing  receipts collected by the assessee formed part of the assessee's
trading receipts in view of the ratio of the Supreme Court's decisions in  the
case of  Chowringhee  Sales Bureau P.  Ltd (87 ITR 542), Jonnalla Narashimarao
and Co.  and others (200 ITR 588) and Sinchlair Murray Co.  P.   Ltd  (97  ITR615)"2.  Heard the learned counsel for the parties.3.  The  assessee  is  a  partnership  firm.   For the assessment year
1987-8 8, the Assessing Officer had made an addition of Rs.1,49,620/-  on  the
ground  that  the  assessee  was found to have collected sales-tax contingency
deposit of Rs.1,49,620/-  which  had  not  been  remitted  to  the  Government
account.  The assessee contended that the Tamil Nadu Government had brought in  
an amendment to theSales-Tax Actto the effect that all contract receipts are
liable for  levy  of  sales  tax.    As  the  assessee had received charges on
printing and processing on job  work  basis,  the  Sales  Tax  Department  had
interpreted  that  the  receipts  are  in  the nature of contract receipts and
proposed to levy sales tax.  The assessee had objected to this levy  of  sales
tax in a writ petition filed in this Court and obtained a stay order which was
subsequently vacated.    It  is  submitted  that  the  said  petition is still
pending.4.  On appeal by  the  assessee,  the  Commissioner  of  Income-Tax  (
Appeals) by order dated 23.3.1990 decided the issue in favour of the assessee.
On  further  appeal  by  the  revenue,  the  Appellate Tribunal by order dated
22.4.97 following the decisions in the case of  M/s.Sundaravel  Industries  in
I.T.A.No.2406/Mds/89  and  M/s.Sakthi  Finance Limited in I.T.A.No.3206/Mds/90
held that the receipt should be treated as a deposit in certain  contingencies
and such  receipts  could  not  assume the character of income.  The Appellate
Tribunal upheld the order of Commissioner (Appeals).5.  The question involved in this case is covered against the assessee
in an unreported decision of this Court in The  Commissioner  of  Income  Tax,
Madurai v.   M/.s.Sri Murugan Offset Printers, Sivakasi, T.C.  ( Appeal) No.42
of 2000 dated 24.3.2003, wherein this Court observed:  -"  This  Court  has  considered  an  identical  issue  in the case ofC.I.T v.
Southern Explosives Co.(2000 (Vol.242) I.T.R.  107) and held that  the  true
character  of the 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  as
deposit,  it cannot be said that the assessee had constituted itself a trustee
and therefore, the amounts received were not required to be regarded as a part
of trading receipt.The abovesaid decision of this Court will squarely cover the facts  of
the present case.  Hence the appeal, at the instance of the Revenue, has to be
allowed.The appeal is allowed, setting aside the order of the Tribunal."6.   Following  the above said decision, and also the decision of this
Court inC.I.T v.  Southern Explosives Co.(supra), the question referred to us
is answered in the affirmative i.e., in favour of the department  and  against
the assessee.Index;Yes 
Internet:Yes

pv/

Copy to:The Commissioner of Income Tax,  
Madurai.