Law:

Section:

Income-tax-Income-Brokerage collected from constituents payable to brokers-Unpaid surplus-Whether income or trading liability-Tests. The assessee-company managed the business of transactions of its constituent members in sugar, etc. such transactions were carried on through the agency of approved brokers who were registered with the assessee-company. For the services rendered, the assessee collected, under its bye-laws, in addition to commission and dharmada, brokerage at a certain rate and this brokerage was payable to the concerned brokers. Receipts and disbursements for brokerage were entered in a brokerage account. Any brokerage not paid out by the in any year was carried over as a liability. In the assessment for the assessment year 1959-60, the Income-tax Officer added the balance of Rs. 4,042 in the surplus brokerage account to the income of the assessee, overruling the assessee's objection that it was not the income of the assessee. That order was set aside by the Appellate Assistant Commissioner but restored by the Appellate Tribunal. On a reference to the High Court: Held, that the taxability of such unclaimed balances depend on the nature and character of the initial receipts. If the amounts initially received partake of the character of a trading receipt, the unclaimed accumulations of such receipt would necessarily be taxable as such; if, however, the amount are initially, the trading liability of the assessee, the unclaimed a balances cannot be taxed despite the magnitude of the accumulation and despite its appropriation by the assessee to his own credit. In the present case, the amounts initially received by the assessee were its trading liabilities and, therefore, the amount in question is not liable to be assessed as the income of the assessee. Morley v. Tattersall (1938) 22 T C 51 and Agra Bullion Exchange Ltd. v. Commissioner of Income-tax (1961) 41 I T R 472 fol. Punjab Distilling Industries Ltd. v. Commissioner of Income-Tax (1959) 35 I T R 519 ref. JUDGMENT T. P. MUKERJEE, J.---The question referred to this Court under section 66(1) of the Income-tax Act, 1922 (hereinafter referred to as the Act), relates to the taxability of the sum…