Case: Sinclaire Murray &amp; Co. (P) Ltd Vs. Commissioner Of Income Tax, Calcutta

([1964] 15 S.T.C. 403.) Ashoka Marketing Ltd. v. State of Bihar Anr.([1970] 26 S.T.C. 254) and State of U.P. &Anr. v. Annapurna Biscuit Manufacturing Co. ([1973] 32 S.T.C. 1.) the State legislature was competent to enact that provision and whether the same was constitutionally valid. Assuming that the said provision is valid, that fact would not prevent the applicability of the dictum laid down in Chowringhee Sales Bureau P. Ltd. The aforesaid decision did take into account the possibility of the appellant in that case being compelled to deposit the amount of sales tax in the State exchequer. It was accordingly observed that the appellant company would be entitled to claim deduction of the amount as and when it paid the amount to the State Government. Likewise, we would like to make it clear in the present case that if any when the appellant pays the sum of Rs. 7, 14, 398 or any part. thereof either to the State Government or to the purchaser, the appellant would be entitled to claim deduction of the sum so paid.10. Dr. Pal points out that the appellant may have to refund the amount realised by it as sales tax to the purchaser. So far as this aspect is concerned, we have already mentioned above that if and when the appellant refunds any part of the amount of sales tax to the, purchaser, the appellant would be entitled to claim deduction on that account.11. Lastly, reference has been made by Dr. Pal to the case of Morley (H. M. Inspector of Taxes) v. Messrs. Tattersall, (22 T.C. 51.) and it is submitted that once an amount was received as sales tax by the appellant it could never be treated as trading receipt. We find it difficult to, accede to the above submission because the case of Chowringhee Sales Bureau P. Ltd. is a direct authority, for; the proposition that an amount even though realised as sales tax can in a case-like the present be, treated as trading receipt. It would be pertinent in this context to refer to the finding of the High Court that the assessee-appellant in the present case did not separately earmark the amount realised as sales tax, or put it in a different account. The assessee also did not deposit the amount with the Government as and when realised nor did the assessee refund it to the purchaser from who m the amount had been realised. The High Court has further found that the assessee company mixed up the amount of sales tax with its own funds and treated the same as its own money. Nothing cogent has been brought to our notice to justify interference with the above findings.12. In. the case of Messrs George Oakes (Private) Ltd. v. The State of Madras &Ors. ([1961] 12 STC 476 ) the Constitution Bench of this Court held that the Madras General Sales Tax (Definition of Turnover and Validation of Assessments) A ct, 1954 was not bad on the ground of legislative incompetence. In that context this Court observed that when the seller passes on the tax and the buyer agrees to pay sales tax in addition to the price, the tax is really part of the entire consideration and the distinction between the two amounts tax and price-loses all significance. This Court in that case relied upon the following observation of Lawrence J. in Paprika Ltd. &Anr. v. Board of Trade.([1944] 1 All. E.R. 372.)"Whenever a sale attracts purchase tax, that tax presumably affects the price which the seller who is liable to pay the tax demands but it does not cease to be the price which the buyer has to pay even if the price is expressed as X plus purchase tax."13. Reliance was also placed upon the following observation of Goddard, L. J. in Love v. Norman Wright (Builders) Ltd.([1944] 1 All. E.R. 618.)"Where an article is taxed, whether by purchase tax, customs duty, or excise duty, the tax becomes part of the price which ordinarily the buyer will have to pay. The price of an ounce of tobacco is what it is because of the rate of tax, but on a sale there is only one consideration though made up of cost plus profit plus tax. So, if a seller offers goods for sale, it is for him to quote a price which includes the tax if be desires to pass it on to the buyer. If the buyer agrees to the price, it is not for him to consider how it is made up or whether the seller has included tax or not."14. After referring to these observations S. K. Das J. speaking for the Constitution Bench of this Court observed"We think that these observations are apposite even in the context of the provisions of the Acts we are considering now, and there is nothing in those provisions which would indicate that when the dealer collects any amount by way of tax, that cannot be part of the sale price. So far as the purchaser is concerned, he pays for the good s what the seller demands viz., X price even though it may includes tax. That is the whole consideration for the sale and there is no reason why the whole amount paid to the seller by the purchaser should not be treated as the consideration for the sale and included in the turnover."15. We are, therefore, of the view that the submission which has been made by Dr. Pal that the sales tax should not be treated to be a part of the price realised by the assessee from the purchaser is not well-founded. The case of Tattersall can be of no help to the appellant because the amount with which the court was concerned in that case was, never received by the assessee as income or trading receipt. In any case, as already observed, the question with which we are concerned stands concluded by the case of Chowringhee Sales Bureau P. Ltd.16.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]In the case of Chowringhee Sales Bureau P. Ltd. the appellant company was a dealer in furniture and also act ed as an auctioneer. In respect of sales effected by the appellant as auctioneer, it realised during the year in question in addition to the commission, Rs. 32, 986 as sales tax. This amount was credited separately in its account books under the head "sales tax collection account". The appellant did not pay the amount of sales tax to the actual owner of the goods nor did it deposit the amount realised by it as sales tax in the State exchequer because it took the position that statutory provision creating that liability upon it was not valid. The appellant also did not refund the amount to persons from whom it had been collected. In the cash memos issued by the appellant to the purchasers in the auction sales the appellant was shown as the seller. This Court held that the sum of Rs. 32, 986 realised as sales tax by the appellant company in its character as an auctioneer formed part of the trading or business receipts. The fact that the appellant credited the amount received as sales tax under the head "sales tax collection account" did not make any material difference. According to this Court, it is the true nature and 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. The Court further observed that the appellant company would be entitled to claim deduction of the amount as and when it paid it to the Stateabove decision, in our opinion, fully applies to this case and in view of it, there is no escape from the conclusion that the amount of Rs. 7, 14, 398 should be treated as tradingare, therefore, of the view that the submission which has been made by Dr. Pal that the sales tax should not be treated to be a part of the price realised by the assessee from the purchaser is not well-founded. The case of Tattersall can be of no help to the appellant because the amount with which the court was concerned in that case was, never received by the assessee as income or trading receipt. In any case, as already observed, the question with which we are concerned stands concluded by the case of Chowringhee Sales Bureau P. Ltd.