P. CHATTERJEE, J.

( 1 ) THIS is a reference under Section 66 (1) of the Indian Income-lax Act, 1922. The Commissioner of Income-tax is the applicant. The assessment relates to the year 1953-54. The corresponding accounting year ended on the 30th June, 1952.

( 2 ) THE assessee is a limited company. Its head office is in Calcutta. The assessee purchases and sells jute in the State of Orissa. The assessee is a registered dealer under the Orissa Sales Tax Act. During the accounting year the assessee sold jute to Messrs. Mcleod and Co. Ltd. ; the said company purchased the said jute for being used in two jute mills under its management, namely, Chitavatsah and Nellimarla Jute Mills. These jute mills are in Andhra Pradesh. The assessee used to charge sales tax at the rate of one anna per rupee on the value of the goods. Such sales tax was charged under a separate head in the bill in the following manner : "sales tax, buyer's account. . . at the rate of one anna per rupee to be paid to the Orissa Government ". In the balance-sheet of the assessee as on the 30th June, 1952, under the head "liability for expenses" a sum of Rs. 16,54,455 was shown on account of sales tax. The said sum was not actually paid to the Orissa Government during the year in question.

( 3 ) HENCE the question arose as to whether the sum of Rs. 16,54,455 should be included in the total income of the assessee.

( 4 ) ACCORDING to the assessee, sales tax realised from the purchaser did not form part of the sale price and therefore the amount received by the assessee as sales tax was not a part of the sale price. Hence the balance-sheet of the company showed the correct state of affairs according to the assessee. The Income-tax Officer found that the said sum was received as part of the price and therefore added the said sum to the total income of the assessee.

( 5 ) THE assessee filed an appeal before the Appellate Assistant Commissioner. He found that the actual amount received as sales tax during the relevant period was Rs. 7,41,962. The assessee during the relevant year paid a sum of Rs. 27,564 to the Orissa Government. Hence the Appellate Assistant Commissioner found that a sum of Rs. 7,14,398 should be the sum which would be added to the assessee's total income. He rejected the argument that sales tax did not form any part of the price. The Income-tax Officer decided the case on the 31st August, 1957, and the Appellate Assistant Commissioner decided the case on January 2, 1961. An appeal was then filed against the decision of the Appellate Assistant Commissioner before the Tribunal. The Tribunal decided the matter on the 13th November, 1962. In the meantime a judgment of the Supreme Court dated March 24, 1961, in the case of State of Orissa v. Orient Paper Mills, [1961] 12 S. T. C. 358 (S. C.) was published.

( 6 ) JUTE was purchased in Orissa and sold in Andhra Pradesh. Therefore, under Article 286 (2) of the Constitution, as it stood then, no sales tax would be payable to the Orissa Government with regard to such inter-State sales. According to the assessee he realised sales tax on the "buyer's account" and showed that money separately as a "sort of suspense account". According to the assessee, if tax was not exigible at all, it would refund the same to the purchaser, or he was in duty bound, under the provision of Section 9b (2) of the Orissa Sales Tax Act, to deposit the same with the Government. If tax was exigible, it would have to pay the same to the Government. In either case the assessee claimed to have beneficial interest in the same sums. According to the assessee the nature of the receipts was therefore money received in trust and it was not trading receipt. Therefore, it would not have been included within the income of the assessee.

( 7 ) THE Tribunal considered the argument. The Tribunal also considered the decision of the Supreme Court in the Orient Paper Mills case. The Tribunal came to the conclusion that the amounts so realised would no

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