Law:

Section:

Section 28(i) of the Income-tax Act, 1961 - Business income - Chargeable as Where assessee was a builder and had sold some flats and on behalf of purchasers assessee used to collect house tax and pay it to municipal corporation, amount of house tax due not collected by assessee from purchasers could not be treated as its income [A.Y. 1991-92] The assessee was a builder and had sold some flats and on behalf of these purchasers, the assessee used to collect the house tax and pay it to the municipal corporation. For the relevant assessment year, though the house tax liability on the purchasers was to the extent of Rs. 13,61,747, the Commissioner (Appeals) noted that the assessee actually collected Rs. 3,98,421 which was paid to the municipal corporation. Over and above that, the assessee appeared to have paid an amount of Rs. 3,281 which was debited in the profit and loss account. The liability of house tax due from the purchasers was initially shown as liability in the balance sheet of the assessee and was, therefore, taken as the income of the assessee by the Assessing Officer. The Commissioner (Appeals) found that no debit was made in the profit and loss account of the assessee in respect of house tax liability of the purchasers. It was noted that the total amount of Rs. 13,62,000 was actually a liability on behalf of the purchasers and was not the liability of the business of the assessee. On that basis, the Commissioner (Appeals) deleted the addition made by the Assessing Officer. The Tribunal upheld order of the Commissioner (Appeals). Held that the assessee had only collected an amount of Rs. 3,98,421 from the house owners which was to be paid to the municipal corporation. As per the facts found by the Commissioner (Appeals) the balance of Rs. 9,63,327 towards house tax was not collected by the assessee. As such, it could not be said under any circumstances that this amount was the income of the assessee or should be the liability of the assessee. The assessee paid the amount collected over and above that an amount of Rs. 3,281 was paid in excess and only that excess amount was debited in the profit and loss account. There was no debit in the profit and…

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