N.N. Mathur, J.-The Income-tax Appellate Tribunal, Jaipur, at the instance of the assessee, Wolkem Pvt. Ltd.,

has referred the following question of law for the opinion of this Court: “Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the excise duty collection was a trading receipt in the year of receipt and hence excise duty refund of Rs. 1,45,752 was liable to tax in the hands of the assessee under Section 41(1) of the Income-tax Act, 1961 ?“

.2. The background facts relevant for answering the instant reference, briefly stated are as follows:-The assessee-company filed its return for the assessrnent year 1986-87 declaring total incorne of Rs. 11,34,310 derived frorn the business of minerals known as calcite and wollastonite. In response to the notice under Section 143(2)1142(1) the representative of the assessee-company produced the books of account which reveal that during the assessrnent proceedings excise duty refundable to the assessee was worked out to a surn of Rs. 2,91,500. Out of the said arnount a sum of Rs. 1,09,38 1 was directly claimed by various customers from the Excise Department. Thus, the assessee-company received refund of excise duty amounting to Rs. 1,45,752. The assessee did not credit the said amount in the profit and loss account on the ground that the same was not taxable. It was contended that this amount was to be refunded in turn to its various customers and the assessee was under the obligation to repay the said amount, hence the said receipt did not constitute the income of the assessee. The assessing authority rejected all the contentions and treated the refund amount against the excise duty as income and,

.accordingly, added to the total income of the assessee. The Commissioner of Income-tax (Appeals) deleted the addition having held that it was not an income. However, the Tribunal relying on the decision of the Gujarat High Court in Motilal Ambaidas vs. CIT [1977] 108 ITR 136 held that the subject refund constitutes the income of the assessee and as such set aside the order of the Commissioner of Income-tax (Appeals) and restored the order of the assessing authority. In the opinion of the Tribunal the excise duty collected from the customers was embedded in the sale price and hence it has to be credited in the profit and loss account. The Tribunal found that the assessee instead of crediting the excise collected to the profit and loss account, credited it to the Central Excise Duty deposit account. When this amount was paid to the Excise Department, it was paid by debiting the same account. Rejecting the contention of the assessee that it had never claimed it is an expenditure in the past, the Tribunal held that the effect on the profit and loss remained the same irrespective of the accounting entries passed as per the alternative method. Accordingly, the Tribunal concluded that as excise collection is a trading receipt and excise duty payable is a trading liability, the assessee is also deemed to have claimed the excise payable as a trading liability. Consequently, the Tribunal held that the refund received by the assessee as a remission of such liability would attract the provisions of Section 41(1). The Tribunal also envisaged a situation where the customers to whom the duty had to be refunded, may not either come forward for any reason whatsoever or may not be traceable. In such an event, the Tribunal felt the excise duty refund which is a trading receipt would totally escape tax though earned in the usual course of the business, if the plea of the assessee was accepted.

3. It is submitted by Mr. N. M. Ranka, learned senior advocate appearing for the assessee-company, that the amount collected by the assessee against the excise duty was credited to the suspense account as such it was not pertaining to the assessee and it was payable to the Central Excise Department and as such it cannot constitute as an income of the assesse