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Commissioner of Income-tax Vs. International Spice Co. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKerala High Court
Decided On
Case NumberIncome-tax Reference No. 39 of 1978
Judge
Reported in[1987]164ITR345(Ker)
AppellantCommissioner of Income-tax
Respondentinternational Spice Co.
Appellant Advocate B.K. Ravindranatha Menon, Adv.
Respondent Advocate S.A. Nagendran,; N.N.D. Pillai and; D.A. Kamath, Adv
Excerpt:
- .....and in the circumstances of the case, the appellate tribunal is right in law in holding that the laga collections made by the assessee-firm is not income of the assessee '2. the assessee is a firm doing business in hill produce on commission basis. it was collecting a small percentage of the sale proceeds from thecustomers in addition to the sale price. this was credited to an account called the 'laga account'. certain items of charities were debited to this account. the total receipts during the year amounted to rs. 13,220. the income-tax officer treated this as assessable income. on appeal, the appellate assistant commissioner, differing from the income-tax officer, accepted the assessee's contention that the collections were in accordance with the custom prevailing in the.....
Judgment:

Gopalan Nambiyar, C.J.

1. This reference is at the instance of the Revenue. The assessment year with which we are concerned is 1972-73. The question of law referred is :

'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that the laga collections made by the assessee-firm is not income of the assessee '

2. The assessee is a firm doing business in hill produce on commission basis. It was collecting a small percentage of the sale proceeds from thecustomers in addition to the sale price. This was credited to an account called the 'Laga account'. Certain items of charities were debited to this account. The total receipts during the year amounted to Rs. 13,220. The Income-tax Officer treated this as assessable income. On appeal, the Appellate Assistant Commissioner, differing from the Income-tax Officer, accepted the assessee's contention that the collections were in accordance with the custom prevailing in the Mattancherry bazaar for specific disbursements to charities. He accordingly deleted the addition. The Revenue preferred an appeal to the Income-tax Appellate Tribunal. The Tribunal followed certain prior decisions of its own finding that a custom existed in Mattancherry bazaar with respect to hill produce market for the collection of laga. It held that the assessee collected money only as the agent for distribution as charities. The Tribunal was of the view that the collections would not constitute the assessee's trading receipts. The Department's appeal was dismissed.

3. The view taken by the Tribunal has been sustained recently by the Supreme Court in CIT v. Bijli Cotton Mills (P.) Ltd. : [1979]116ITR60(SC) . Following the said decision, we answer the question referred in the affirmative, that is, in favour of the assessee and against the Revenue. There will be no order as to costs.


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