Khattar Kiln Co. vs Commissioner of Income Tax

S.P. Goyal, J.—The assessee-firm, was-engaged in the business of brick-kiln during the assessment year 1971-72 and its total income was assessed by the ITO at Rs. 59,240. The firm owned four kilns and collected four amounts of Rs. 2,363, Rs. 435, Rs. 2,772 and Rs. 5,234 as royalty from various customers. In the absence of a mining lease agreement between the State Govt. and the brick-kiln owners the royalty was held to be not payable, by a Full Bench of this court in Amar Singh Modi Lal Vs. State of Haryana and Others, . As a result of this decision, the asses see-firm also did not pay the royalty to the Government and the ITO added this amount to its total income. The appeals filed by the assessee before the A AC and the Tribunal were also dismissed. Thereupon an application u/s 256(1) of the I.T. Act, 1961, was moved for referring the following two questions to this court:

"1. Whether, on the facts and circumstances of the case, the royalty collected by the applicant is taxable as part of the total income ?

Whether, on the facts and circumstances of the case, the royalty collected by the applicant and held not payable to the Haryana Government in view of the Punjab and Haryana High Court decision dated March 25, 1971, in the case of Amar Singh Modi Lal Vs. State of Haryana and Others, as taxable for any assessment year earlier than 1972-73 assessment year ?"

The Tribunal rejected the application with the following observations :

"In view of the fact that the assessee had conceded before us that the amounts in question did constitute income receipts in the hands of the assessee and that there is no dispute about the proposition that the law applicable to the assessment under consideration would be the law as it stood on April 1, 1971, we conclude that the order of the Appellate Tribunal gives rise to no question of law."

Thereafter, the assessee filed the present application u/s 256(2) of the Act for a mandamus directing the Tribunal to refer the following question to this court:

"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the four amounts of royalty totalling to Rs. 12,804 have been correctly included in the total income for the assessment year 1971-72 ?"

The two questions mentioned in the application u/s 256(1) of the Act have been combined in the question mentioned in the present application. The latter part of the question does not arise as observed by the Tribunal in view of the admission on the assessee that the amounts in question did constitute income receipts in the hands of the assessee during the accounting year. It is not disputed by the learned counsel for the Revenue that the other question as to whether the lour amounts of royalty have been correctly included in the income of the assessee does arise from the order of the Tribunal. However it was urgsd that the matter having been settled by the Supreme Court in Chowringhee Sales Bureau (P) Ltd. Vs. Commissioner of Income Tax , West Bengal, , it is not obligatory on this court to issue a mandamus. Contention of the learned counsel for the Revenue, in our opinion, is well founded.

In Chowringhee Sales Bureau (P) Ltd. Vs. Commissioner of Income Tax , West Bengal, , the assessee, a private company, dealing in furniture, also acted as an auctioneer. In respect of the sales effected by it as auctioneer, the appellant realised during the relevant period, 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 accounts". The assessee did not pay the amount of sales 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 the statutory provision creating that liability upon it was not valid, or refund it to the persons from whom it had been collected. On these facts it Was held that the sum of Rs. 32,986 realised as sales tax by the appellant in its character as an auctioneer formed part of its trading or business receipts and that 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. It was further observed that 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 and 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. Except that, here, the amount in dispute was collected as royalty, there is no point of distinction between the case before the Supreme Court and in the present case.

We, therefore, fully agree with the learned counsel for the Revenue that the matter stands concluded by the decision of the Supreme Court in the said case and this petition for mandamus is accordingly dismissed. No costs.