1. The assessee-firm carries on business in Khand, Dane, etc., on its own account as well as on commission basis. The ITO while making assessment for the assessment year 1973-74, noticed that in the balance-sheet there was an account under the style, ' Amanat Kkata ' with a creditbalance of Rs. 29,028. This amount was realised from the 'constituents by the assessee and represented Krishi Utpadam Mandi Tax payable under Krishi Utpadan Mandi Act. The assessee took the stand that the amount could not be taxed as it maintained the accounts under mercantile system and that it had to pay the balance either to Krishi Utpadan Mandi or the constituents from whom it was realised. The ITO brought this amount to tax. On appeal, the AAC took the view that the liability to pay Krishi Utpadan Mandi Tax had accrued in the assessee's case. He found that the assessee had received various' notices of demand from Krishi Utpadan Mandi Samiti, Agra. It clearly indicated that the liability had accrued and ascertained. The addition of Rs. 29,029 was consequently deleted. On appeal by the Department the Income-tax Appellate Tribunal took the view that the recovery of market fee cannot form part of the trading receipt of the commission agent and the commission agent simply held the market fee on behalf of the State Govt. as a trustee and the amounts recovered cannot be said to be the income of the assessee in any case and, therefore, it cannot be brought to tax.
2. At the instance of the Commissioner of Income-tax, Agra, the following question has been referred for the opinion of this court:
'Whether, on the facts and in the circumstances of the case, the sum of Rs. 29,028 was liable to tax as trading receipt of the assessee for the assessment year 1973-74 ?'
3. In order to judge the nature of the receipt we may refer to Krishi Utpadan Mandi Rules framed under the U.P. Krishi Utpadan Mandi Adhiniyam, 1964 (Act No. XXV of 1964). Rule 66 empowers the Market Committee to levy and collect fees on the specified agricultural produce bought and sold in the market yards. Rule 68 runs as follows :
'68. Recovery of fees--section 17(iii).--(1) The marketfee on specified agricultural produce shall be payable as soon as such produce is sold in the Principal Market Yard or Sub-Market Yards in accordance with the terms and conditions specified in the bye-laws.
(2) The market fee shall be realised from the seller in the following manner.
(i) If the specified agricultural produce is sold through the commission agent or directly to the trader, the commission agent or the trader, as the case may be, shall charge market fee from the seller in sale voucher in Form No. VI and deposit the amount of market fee so realised with the Market Committee in accordance with the directions of the Committee issued in this behalf.
(ii) If the specified agricultural produce is sold directly by the seller to the consumer, the market fee shall be realised by the servant of the Market Committee authorised by it in this behalf....'
4. It is apparent from Sub-rule (2)(i) of Rule 68 that the commission agent is accountable for the recovery which he makes from the seller in sale voucher in Form No. VI. The commission agent is not liable to deposit any other amount with the Market Committee. He is not liable to deposit the amount of market fee on the total sales which he makes. Market fee, only on those sales, which have been recorded in sale voucher in Form No. VI is payable to the Market Committee. The market fee realised by the commission agent does not form part of his trading receipt. He holds this amount only as a trustee for and on behalf of the Market Committee.
5. The Supreme Court in CIT v. Sitaldas Tirathdas : 41ITR367(SC) , has laid down the principle for determining as to when and in what circumstances the receipt of an amount by an assessee can be considered to be in his account for the purpose of income-tax. The Supreme Court observed as follows (p. 374):
'In our opinion, the true test is whether the amount sought to be deducted, in truth, never reached the assessee as his income. Obligations, no doubt, there are in every case, but it is the nature of the obligation which is the decisive fact. There is a difference between an amount which a person is obliged to apply out of his income and an amount which by the nature of the obligation cannot be said to be a part of the income of the assessee. Where by the obligation income is diverted before it reaches the assessee, it is deductible ; but where the income is required to be applied to discharge an obligation after such income reaches the assessee, the same consequence, in law, does not follow. It is the first kind of payment which can truly be excused and not the second. The second payment is merely an obligation to pay another a portion of one's own income, which has been received and is since applied. The first is a case in which the income never reaches the assessee, who even if he were to collect it, does so, not as part of his income, but for and on behalf of the person to whom it is payable.'
6. The test laid down by the Supreme Court was applied in determining the 'nature of the contributions' made towards dharmada fund maintained by the assessee in a Full Bench decision of this court in Thakur Das Shyam Sunder v. Addl. CIT : 93ITR27(All) . Under a custom prevailing in the market, the commission agents realised dharmada from their constituents. This amount was collected over and above the commission payable to the commission agents. It had to be spent on charities. This court took the view that the amount so collected was not received by the assessee as its income and could not be brought to tax.
7. The nature of dharmada receipt came up for consideration before the Supreme Court in CIT v. Bijli Cotton Mills (P.) Ltd. : 116ITR60(SC) . The Supreme Court observed that the dharmada amount is not a part ofthe price, but a payment for the specific purpose of being spent on charitable purposes. It cannot be said to have been paid involuntarily by the customers and in any case the compulsory nature of the payments, if there be any, cannot impress the receipts with the character of being trading receipts. Further, the fact that the assessee would be having some discre-.tion as regards the manner in which and the time when it should spend the dharmada amounts for charitable purposes would not detract from the position the assessee held qua such amounts, namely, that it was under an obligation to utilize them exclusively for charitable purposes.
8. A similar question came up for consideration before the Supreme Court in CIT v. Tollygunge Club Ltd. : 107ITR776(SC) . In that case, the assessee, a social and sports club, conducted horse races with amateur riders, and charged fees for admission into the enclosure of the club at the time of the races. A resolution was passed for levying a surcharge of eight annas over and above the admission fees, the proceeds of which were to go to the Red Cross Fund and for local charities. Every entrant was issued two tickets, one, an admission ticket for admission to the enclosure of the club, and the other, a separate ticket in respect of the surcharge of eight annas for local charities. The question was whether receipts on account of the surcharge were to be treated as the assessee's income. Confirming the decision of the Tribunal and the High Court, the Supreme Court held that the surcharge was not a part of the price for admission but was a payment made for the specific purpose of being applied to local charities. Since a resolution was passed at the general meeting for levying the surcharge for local charities and pursuant to this resolution the surcharge was paid by the race-goers and received by the respondent for the specific purpose of being applied to local charities, the surcharge, when paid, was clearly impressed with an obligation in the nature of trust for being applied for the benefit o! local charities, and was by that obligation diverted before it reached the hands of the respondent and at no stage became part of the income of the respondent. The Supreme Court reiterated the principle enunciated by it earlier in the case of CIT v. Sitaldas Tirathdas : 41ITR367(SC) .
9. Learned counsel for the Revenue placed reliance on the decision of the Supreme Court in Chowringhee Sales Bureau P. Ltd. v. CIT : 87ITR542(SC) . In that case, the assessee, a private company dealing in furniture also acted as an auctioneer. In respect of the sales effected by it as auctioneer, the assessee realised during the relevant period, in addition to the commission a certain sum as sales tax. This amount was credited separately in its account books under the head 'Sales tax collection account'. The assessee did not pay the amount of sales tax to the actual owner of the goods. Neither did it deposit theamount 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, nor refund it to the persons from whom it had been collected. In the cash memos issued by the assessee to the purchasers in the auction sales the assessee was shown as the seller. On these facts and circumstances the Supreme Court held that the amount realised as sales tax by the assessee in its character as an auctioneer formed part of its trading or business receipts. The fact that the assessee credited the amount received as sales tax under the head 'Sales tax collection account' did not make any material difference. The Supreme Court further observed that it was 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.
10. Under the sales tax law the dealer is liable to pay sales tax on his total turnover irrespective of the fact whether or not he has recovered sales tax from the customers. It is for the dealer to chalk out the scheme to recover the sales tax from the constituents. The dealer may include the sales tax in the price to be recovered from the customers. He may charge the sales tax separately or may not charge it at all. He, however, continues to be liable to pay the sales tax to the State Exchequer. In the case of Chowringhee Sales Bureau P. Ltd. : 87ITR542(SC) , the facts clearly indicated that the amount of sales tax realised formed part of its trading or business receipts. The decision in that case is of no assistance to determine the nature of the receipt in the case in hand where the amount was held by the assessee only as a trustee for and on behalf of the State Government and did not constitute its income or form part of its trading receipt.
11. In the result, we answer the question referred in the negative, against the Department and in favour of the assessee. The assessee is entitled to costs which are assessed at Rs. 250.