High Court of Delhi

Abdul Majid Paramjit Singh

v.

Commissioner of Income tax

MADAN B. LOKUR, DR. S. MURALIDHAR, JJ.

INCOME TAX REFERENCE NO. 438 OF 1985

October 9, 2007

Section 5 of the Income-tax Act, 1961 - Income - Accrual of - Assessment year 1973-74 – Pursuant to corporation’s claim assessee collected terminal tax from its customers in assessment years 1969-70 and 1970-71 - Civil Court held that assessee was not liable to pay terminal tax – Corporations appeal against said order was dismissed on 19-9-1971 – Subsequently, assessee issued advertisement intimating its customers that they could collect terminal tax from Assessee on production of sale bills/cash memos – However, no one came forward to collect terminal tax - Department brought said amount to tax in assessment year 1973-74 – Assessee’s case was that since said amount was collected in assessment years 1969-70 and 1970-71 same was taxable in said years - Whether since liability of handing over amount to corporation ceased only on 19-7-1971 when appeal filed by corporation was dismissed, sum was assessable as income in assessment year 1973-74 - Held, yes

FACTS

The assessee was carrying on the business of excavation of sand from the yamuna river-bed. After excavation the sand was stored and later on sold. The MCD set up a claim that sand was being imported by the assessee from Uttar Pardesh and therefore, the assessee was liable to pay terminal tax. Subsequent to that claim the assessee made collection of certain sum as terminal tax in the accounting year relevant to the assessment years 1969-70 and 1970-71. These amounts were carried forward by the assessee in the accounting year relevant to the assessment years 1971-72 and 1972-73. Meanwhile the assessee filed a civil suit contesting the claim of the MCD regarding the levy of terminal tax. The civil court held that the assessee was not liable to pay terminal tax inasmuch as said was being excavated from within the Union territory of Delhi. The MCD’s appeal was dismissed on 19-7-1971. After the dismissal of the appeal filed by the Corporations, the assessee issued advertisements in some of the local newspapers intimating its customers that they could collect the terminal tax from the assessee on production of the sale bills/cash memos. However, no one came forward to collect the terminal tax amount. The revenue brought the amount of terminal tax to tax in the assessment year 1973-74. The case of the assessee was that since terminal tax was collected in the assessment years 1969-70 and 1970-71 if taxable, it was taxable in said assessment years. The appellate authorities dismissed case of the assessee.

On reference:

HELD

Though the assessee had collected the amount in the accounting year relevant to the assessment years 1969-70 and 1970-71, the liability of the assessee to return the amount to its customers arose only when the appeal filed by the Corporation was dismissed on 19-7-1971. In other words when admittedly the assessee had collected the terminal tax for the assessment years 1969-71 and 1970-71 but the liability of handing over the amount to the Corporation ceased only when the appeal filed by the Corporation was dismissed by an order dated 19-7-1971. In fact, even the assessee understood the legal position in this manner and that was why, after the dismissal of the appeal filed by the Corporation, the assessee issued advertisements intimating us customers that they could collect the terminal tax deposited by them on the production of the sale bills/cash memos. [Paras 8 and 11]

Hence, the Tribunal was justified in holding that the sum was assessable as income in the assessment year 1973-74.