Commissioner of Income Tax vs S.S. Sankaralingam

R. Jayasimha Babu, J.

The Tribunal has excluded the amount of deposits received by the assessee during the assessment year 1987-88 as deposits towards sales-tax

even when there was a liability for payment of such tax under the law, and all that the assessee had done was to merely challenge the statutory

provision and there was no order of the court which enabled the assessee to refrain from paying the tax. The deposits so collected was clearly part

of trading receipts of the assessee and could not have been excluded from the computation of his income.

The Supreme Court in the case of The K.C.P. Limited Vs. Commissioner of Income Tax, Bangalore, has held, inter alia, that it is not the head

under which receipt is entered by the assessee that determines the nature of the receipt, and that if the trading receipt is not so shown in the

account books of the assessee, that would not prevent the assessing authority from treating it as a trading receipt. Deposits towards sales-tax

collected by the assessee was clearly a trading receipt. The Tribunal was in error in holding otherwise.

The other question is regarding the correctness of the Tribunal''s view with regard to the deduction of loss and the sale of certain shares sold by

the assessee, in a company in which the members of his family were interested. On that aspect, the Tribunal has found that there was no dispute

that transactions were genuine. It is also found that there was no material to indicate that the assessee had received anything more than the

stipulated sale consideration. The Tribunal has proceeded further to hold, and rightly, that though intrinsic value of the shares was more than the

value for which it is sold, that by itself would not enable the assessing authority to ignore the transaction altogether. We see no error in the order of

the Tribunal. The Tribunal has confirmed the order of the appellate authority regarding the deduction of capital loss from the total income by

holding that the deduction made by the assessing officer was unjustified.

The questions are therefore, answered in favour of the assessee and against the revenue.

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