Law: Income Tax Act, 1922

Section:

(a) Income-tax-----Income---Agency---Unclaimed balances ---Assessee acting as declared agent of collieries and also as agent of purchasers of coal---Purchasers paying full freight to railway---Amount claimed and received from colliery companies as under charges for under loading of wagons---Payments made therefrom to purchasers as and when claimed---Surplus over amounts claimed by purchasers credited to profit and loss account and assessed as income in earlier years---Amount received in course of business---No existing liability to repay amounts---Amounts not held in trust---Amount assessable as income.--[CIT v. Karam Chand Thapar & Bros. Coal Sales Ltd. (1979) 117 ITR 621 reversed]. The assessee carried on business as del credere agent of collieries and also as agent of the purchasers of coal. The coal sold by the collieries was sent by wagon to various purchasers F.O.R. The purchasers paid for the freight. Even if the wagons were not filled to their full capacity, the practice of the railways was to charge for the full wagon-load. In other words, the purchasers did not get any rebate from the railways for the wagons not being loaded to their full capacity. In such a situation, the assessee used to claim from the colliery companies, what was described as "under-charges". These amounts were realised by the assessee even without any claim being made by the purchaser. As and when demanded by the purchasers, the assessee used to pay off their claims on account of under-loading of wagons out of the moneys obtained from the colliery companies. But every year, there was an excess of receipts over payments which was taken to the profit and loss account. The surplus amount was assessed as the assessee's income, year after year, till the assessment year 1953-54. For the first time, in its assessment for the assessment year 1953-54, the assessee claimed that these amounts of surplus receipts on account of "under-charges" were not its income at all. The income-tax Officer held that the amount was assessable and this was upheld by the Appellate Assistant Commissioner. However, the Tribunal held that the amount did not constitute income. The High Court upheld the order…

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