SINCLAIRE MURRAY & CO. (P) LTD. versus COMMISSIONER OF INCOME TAX, CALCUTTA

Citation: [1975] 2 S.C.R. 629 · Decided: 06-11-1974 · Supreme Court of India · Bench: HANS RAJ KHANNA · Disposal: Dismissed

Judgment (excerpt)

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62& 
SINCLAIRE MURRAY & CO. (P) LTD. 
v. 
COMMISSIONER OF INCOME TAX, CALCUTTA 
, 
November 6, 1974 
[H, R. KHANNA AND A. C., GUPTA, JJ.] 
Indian Income Tax Act, 1922-Sales tax collected but rwt deposited with 
the Government-Wheth.er could be included in the income of the assessee, 
'J!le assessee t'OI!ected sales tax fro~ the purchaser but did not pay the col~ 
lectlons to the State Government allegmg that the sale was interstate sale The 
Income Tax Officer treated the sales tax as income of the assessee. The a&essee 
claimed that the sales-tax realised from the purchaser did net form part of the 
sale price of the goods and as such did not constitute taxable receipt. The 
Income-tax Officer held that the. sales-tax formed part of the collSideration for 
the sales and, therefore, the accumulation on - that account represented 
th~ 
assessee's income. The Appellate Assistant Commissioner also rejecied the con-
tention of the assessee that the sales•tax realised was not plll'I of the taxable re-
ceipt of the assessee. The Appellate Tribunal held that where a dealer 90I!ectcd· 
sales-tax under the provisions of the Orissa Sales-tax Act !lie: amount of tax did· 
not form part of the sale price and the dealer did not acquire any beneficial iDte-
rest in that amount and that the failure of the assessee to deposit the amount with 
the Government could not transform the character of tliat amount. The High 
Court held that if a validly eXigible tax Wll!I realised by a trader which bad been 
utilised in his business the tax so realised could not form part of. the sale pri~ 
and that the tax would be included in the trading receipt of the dealer and would 
become part of his income as the money realised from the purchaser on account 
of tax was: employed by the dealer for the purpose of making profit and was not 
separated from. price simp/lciter. 
On appeal to this Court it was contended that the amount received as sales-
tall: retained its character as such and could not be considered to be a part of 
trading receipt 
Dismissing the appeal; 
HELD : 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 as~essee would not prevent the ·assessingauthority from treating it as !rad-
ing receipt. If and when the appellant paid the sum or any part thereof either 
to the State Government or to the purchaser it would be entitled to claim deduc-
tion of the sum so paid. In the instant case there is no escape from the conclu-
sion that the amount should be treated as a. trade receipt. [632B-F; 633C] 
Chowringhee Sales Bureau P. Ltd. v. Commissioner of Income-tax West Ben• 
gal (1973) 87 I.T.R. 542 followed. 
The purchaser pays what the seller demands, that is, the price, even though 
it may include 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 consideraltion for the sale and 
included in the tum over. 
[634F] 
Messrs George Oakes (Private) Ltd, v. The State of Madras ~ Ors, (1961) 
12 S.T.C. 476 followed, Marley (H. M. lnspector of Taxes) v. Messrs. 
Tatter· 
sail 22 T.C. 51 REFERRED TO, Paprika Ltd, & Ahr. v. Board of Trade 
[1944] \ All E.R. 372 ft!lti Love v. Narman Wright (Builders) Ltd .. [1944] 1 
All E.R. 618, held inapplicable. 
CML APPELLATE JURISDICTION : Civil Appeal No. 1357 of 1970. 
From the Judgment &, Order dated the 10th February, 1969 c:4. 
the Calcutta High Court in I. T. Ref, No. 164 of 1963. 
630 
SUPREME COURT REPORTS 
[1975] 2 S.C.R. 
D. Pal, T. A. Ramanchandran and D. N. Gupta, for the appellant 
B. Sen and S. P. Nayar, for the respondent. 
The Judgment of the Court was delivered by 
KHANNA, J. 
This appeal on certificate is directed 
against the 
Judgment of the Calcutta High Court whereby that court answered the 
following question referred to it under section 66( 1) of the Indian 
Income-tax Act, 1922 against the assessee-appellant and in favour of 
the revenue : 
"Whether, on the facts and fa the circumstances of the 
case, the sum of Rs. 7,14,398/- was liable to be included in 
the total income of the assessee under the Indian Income-tax 
Act, 1922 ?" 
The matter relates to the assessment year 1953-54, the corres-
ponding accounting period for which ended on June 30, 1952. The 
assessee is 

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