Commissioner of Income Tax vs Amabati Venkanna and Co.

The question is "whether, on the facts and in the circumstances of the case, the sum of Rs. 61,069 collected by the assessee towards rusum on commission sales of jaggery constitute income liable to tax for the assessment year 1970-71 ?"

The assessee is a firm of four partners carrying on business as commission agents for the sale of jaggery. The ITO noticed that the assessee had collected a sum of Rs. 61,069 by way of rusum representing the amount as sales tax under the Andhra Pradesh General Sales Tax Act on the turnover relating to the sale of jaggery. The contention of the assessee was that the rusum collected by him was payable as sales tax under the Andhra Pradesh General Sales Tax Act and, therefore, it does not constitute income in his hands. The ITO rejected this contention holding that it was part of the assessee''s trading receipts.

Aggrieved by the assessment, the assessee preferred an appeal to the AAC reiterating the same contentions. The AAC rejected the assessee''s contention and dismissed the appeal. On further appeal to the Tribunal, the order of the ITO and the AAC were confirmed. The Tribunal followed a decision of this Court in R.C. Nos. 4, 10 and 44 of 1975 dated August 23, 1976 Buddala China Venkata Rao and Co. Vs. Commissioner of Income Tax, in the case of the same assessee for the assessment years 1968-69 and 1969-70 in which it was held that the assessee had adopted the mercantile system of accounting and as such the liability arises in the year in which the sales are made. On this basis it was held that the amount constituted a trading receipt.

It is contended by Mr. M. Suryanarayana Murthy, the learned counsel for the Department, that there is no material to show that the assessee was adopting the mercantile method of accounting, and, therefore, the matter has to be remanded for going into this factual aspect. We cannot accede to this contention. It is not the case of the Department that the assessee has adopted a different method for the years 1970-71. For the previous two years, it was held by this court, as observed supra, that the assessee had been adopting the mercantile method of accounting. In the absence of any evidence on behalf of the Revenue that the assessee had changed his method of accounting, it cannot be held to the contra in this reference application. Following the decision in R.C. Nos. 4, 10, 44 of 1975 Buddala China Venkata Rao and Co. Vs. Commissioner of Income Tax, in the case of the same assessee for the previous two years, the question is answered in the affirmative and against the Revenue. No costs.