Law:

Section:

Section 4 of the Income-tax Act, 1961 (Corresponding to section 3 of the Indian Income-tax Act, 1922) - Income - Chargeable as - Assessment year 1953-54 - High Court held that sales tax collected by assessee-company was part of its trading receipt and was to be included in its total income since money realised from purchaser was employed by assessee for purpose of making profit - Besides, assessee did not earmark amount realised as sales tax and did not put it in a separate account - Moreover, said amount was not deposited with State Government in terms of section 9B(3) of Orissa Sales Tax Act, 1947 - Whether since nothing had been brought on record to justify interference with above findings, order passed by High Court was to be affirmed - Held, yes - Whether, however, if and when assessee pays amount in question or part thereof either to State Govt. or to purchaser, it would be entitled to claim deduction of sum so paid - Held, yes FACTS The assessee-company was a registered dealer under the Orissa Sales-tax Act, 1947. During the relevant assessment year, it sold jute to the purchaser for being used in two jute mills situated in A.P. and charged sales-tax under a separate head in the bill. The total amount collected was shown in the balance sheet as 'liabilities for expenses'. The said sum was, however, not paid to the State Govt. as the sale by the assessee to the purchaser-company was stated to be inter-Stat sale. The ITO held that the sales tax formed a part of the consideration for the sales and, therefore, the accumulation on that account represented the assessee's income. On second appeal, the Tribunal held that where a dealer collects sales tax under section 9B(3) of the Orissa Sales Tax Act, the amount of the tax does not form part of the sale price and the dealer does not acquire any beneficial interest in that amount. According to the Tribunal, subsequent failure of the assessee to deposit the amount in the Orissa Treasury could not transform the character of that amount. The Tribunal consequently held that the said amount did not form part of the assessee's total income. On reference, the High Court was of the view that the tax would be included in…

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