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Addl. Commissioner Of Income-Tax vs U.P. State Agro Industrial Corporation on 16 September, 1980
cites
Commissioner Of Income-Tax, Bombay ... vs Shoorji Vallabhdas And Co. on 27 March, 1962
26. Learned counsel appearing for the Agro Corporation also relied upon the case of CIT v. Shoorji Vallabhdas and Company [1962] 46 ITR 144 (SC), wherein the assessee-firm was the managing agent of two shipping companies and under the managing agency agreement it was entitled to receive as commission 10% of the freight charge. During the period relevant to the assessment in question the assessee became entitled to receive certain amount from the managing company by way of commission. Subsequently,
for certain reasons the assessee agreed to accept only 2% as commission from the two managing companies and gave up the remaining amount of its commission earnings during the relevant year. The department sought to assess the amount given up by the assessee on the ground that the commission of 10% had already accrued to the assessee in the relevant accounting year and the fact that the assessee gave up a portion of that income subsequently, did not alter its position. The Supreme Court, after considering the agreements entered into between the assessee-company and the managing company, came to the conclusion that the effect of the subsequent agreement whereby the assessee-company gave up its claim for commission over and above 21/2% was that it had altered the rate of commission in such a way as to make the income which really accrued to the assessee different from what had been entered in the books of account. This was not a case of a gift by the assessee to the managing company of a portion of the income which had already accrued, but an agreement to receive a lesser remuneration than what had been agreed upon. The assessee had in fact received only the lesser amount in respect of the entries in the account books and this lesser amount alone was taxable. It appears that in this case the Supreme Court construed the subsequent agreement as superseding the earlier agreement and as if the provisions contained in the subsequent agreement were enforced from the very beginning. In the case before us, there is no such subsequent agreement entered into either between the Agro Corporation and its customers entitling them to receive back certain amounts or between the Trading Corporation and the Agro Corporation for the return of such amount to the customers. As already stated, there is nothing on record to indicate that the Agro Corporation has, in fact, refunded this amount to its customers or that any enforceable liability has been created against it to refund that amount.
Indian Companies Act, 1913
Punjab Distilling Industries Ltd vs Commissioner Of Income-Tax, Punjab on 9 February, 1965
" The fact that the appellant credited the amount received as sales tax under the head ' Sales tax collection account' would not, in our opinion, make any material difference. It is the true nature and the quality of the receipt and not the head under which it is entered in the account books as would prove decisive. If a receipt is a trading receipt, the fact that it is not so shown in the account books of the assessee would not prevent the assessing authority from treating it as trading receipt. We may in this context refer to the case of Punjab Distilling Industries Ltd. v. Commissioner of Income-tax [1959] 35 ITR 519 (SC). In that case certain amounts received by the assessee were described as security deposits. This court found that those amounts were an integral part of the commercial transaction of the sale of liquor and were the assessee's trading receipt. In dealing with the contention that those amounts were entered in a separate ledger termed ' empty bottles return security deposit account', this court observed :
Sinclaire Murray & Co. (P) Ltd vs Commissioner Of Income Tax, Calcutta on 6 November, 1974
15. Applying the ratio of the aforementioned observations to the facts of the case before them the learned judges of the Supreme Court found that in the cash memos issued by the appellant to the purchaser, the appellant had been shown to be the seller. The amount realized by him from the purchasers included sales tax. The appellant, however, did not pay the amount of sales tax to the actual owner of the goods auctioned because the statutory liability for the payment of sales tax was his. The appellant also did not deposit the amount realized by it as sales tax in the State Exchequer because it took the decision that the statutory provision creating that liability upon it was not valid. Since the amount of sales tax was received by the appellant in its character as an auctioneer the amount formed part of the appellant's trading or business receipts. Of course, the appellant would be entitled to claim deduction for the amount as and when it paid it to the State Govt. Aforementioned view of the Supreme Court was reaffirmed by it in the case of Sinclair Murray & Co. P. Ltd. v. CIT [1974] 97 ITR 615 (SC), wherein it was held that the amount of sales tax collected by a trader constituted its trading receipts and had to be included in its total income and that if and when the appellant paid the amount collected to the State Govt. or refunded any part thereof to the purchaser, the appellant would be entitled to claim deduction of the sum so paid or refunded.
New Victoria Mills Co. Ltd vs Commissioner Of Income-Tax, U. P. on 20 March, 1965
In the case of New Victoria Mills Co. Ltd. v. CIT [1966] 61 ITR 395 (All), his court observed thus (head note) :
Poona Electric Supply Co. Ltd vs Commissioner Of Income-Tax, Bombay on 19 April, 1965
We are, accordingly, of opinion that the facts of Poona Electric Supply Company's case [1965] 57 ITR 521 (SC) and the law enunciated therein does not help the submissions made on behalf of the Agro Corporation.
Section 14 in Indian Companies Act, 1913 [Entire Act]
Morvi Industries Ltd vs Commissioner Of Income Tax ... on 5 October, 1971
12. The Income-tax Act seeks to tax the income falling under one of the heads A to F enumerated in Section 14 of the Act. So far as the income falling under the head " Profits and gains of business or profession " is concerned, Section 145 of the Act lays down that such income is to be computed in accordance with the method of accounting regularly employed by the assessee. The two systems of accounting generally employed by the assessees are the cash and the mercantile system. Sometimes it so happens that an assessee employs a system of accounting which is neither purely cash nor purely mercantile but a system which is a hybrid or a mixture of cash and mercantile systems. (We are, in this case, not concerned with the hybrid system of accounting). The Supreme Court in the case Morvi Industries Ltd. v. CIT [1971] 82 ITR 835 pointed out that it is well known that the mercantile system of accounting differs substantially from the cash system of book keeping. Under the cash system it is only the actual cash receipts and actual cash payments that are recorded as credits and debits ; whereas under the mercantile system credit entries are made in respect of amounts due immediately they become legally due and before they are actually received ; similarly, the expenditure items, for which a legal liability has been incurred, are immediately debited even before the amounts in question are actually disbursed. Where the accounts are kept on mercantile basis the profits or gains of business are credited though they are not actually realized, and the entries thus made really show nothing more than the accrual or arising of the said profit at the material time and the same is the position with regard to debits made.