JUDGMENT
Ajit K. Sengupta, J.
1. In this reference under Section 256(2) of the Income-tax Act, 1961, for the assessment years 1975-76 and 1979-80, the following common question of law has been referred to this court :
“Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in law in holding that the sum of Rs. 2,55,959 representing surplus in ‘unclaimed undercharges account’ was not a receipt incidental to the carrying on of business and deleting it ?”
2. The facts as would appear from the statement of case are stated hereinafter. The assessee is a limited company. The assessee-company is a dealer in coal and works as a middleman between the collieries and the consumers of coal, Coal was loaded into railway wagons by the collieries, i.e., the consignor, who sent copies of the forwarding notes to the assessee-company’. The freight was payable by the consignee. Normally, the consignee
had to pay the freight payable with reference to the full loading capacity of the railway wagon irrespective of the actual quantity of coal loaded. The assessee-company preferred a bill for the difference between the amount of the freight payable with reference to the full capacity of the wagon and the freight payable with reference to the coal actually loaded in the wagons by the consignor. The consignor or the colliery paid the said difference which was credited by the assessee-company to a separate “under loading charges” or “under charges” account. Sometimes, the consignee also claimed a similar difference from the assessee-company between the freight actually paid by it with reference to the full loading capacity of the wagon and that chargeable to the actual quantity of coal loaded in the wagon and such claims were settled by the assessee. Quite often the assessee did not have to pay the amount of the difference to the consignee though it realised that from the consignor-colliery as the consignee did not always prefer claims. The surplus balance in the “under charges account” was credited by the assessee to its profit and loss account but claimed it as non-taxable. The Income-tax Officer added Rs. 2,55,959 being the “balance of under charges account” credited by the assessee to its profit and loss account during the years under reference.
3. Against the addition of Rs. 2,55,959, the assessee filed an appeal before the Commissioner of Income-tax (Appeals ). The Commissioner of Income-tax (Appeals ), following the decision of the Hon’ble High Court at Calcutta in the case of the assessee in Karamchand Thapar and Bros. (Coal Sales) Ltd. v. CIT , sustained the action of the Income-tax Officer.
4. Being aggrieved, the assessee filed appeals before the Income-tax Appellate Tribunal. It was submitted by the assessee before the Tribunal that the Commissioner of Income-tax (Appeals) was wrong in sustaining the order of the Income-tax Officer without considering the fact that the facts in Karamchand Thapar and Bros. (Coal Sales) Ltd. v. CIT , were wrongly stated and that the decision of this court in the case of the assessee for an earlier year reported in CIT v. Karam Chand Thapar and Bros. (Coal Sales) Ltd. [1979] 117 ITR 621, was based on correct facts. The Tribunal, by placing reliance on another order of this court dated May 13, 1985, in I. T. Ref. No. 410 of 1975 in the case of the assessee, reversed the findings of the Commissioner of Income-tax (Appeals) on the issue and allowed the assessee’s claim of non-taxability of the above referred to amount of Rs. 2,55,959. Being aggrieved, the Department moved the Tribunal further, vide R. A. Nos. 485 and 486/Cal of 1986, but the Tribunal, vide its order dated July 25, 1986, rejected the reference applications.
5. In CIT v. Karam Chand Thapar and Bros. (Coal Sales) Ltd. [1979] 117 ITR 621, a Division Bench of this court held that the amounts collected by way of undercharges had been received by the assessee as an agent and, therefore, in a fiduciary capacity, vis-a-vis, the consignees. Such amounts did not constitute trading receipts and, accordingly, neither the surplus of the receipts remaining unpaid nor the amounts transferred by the assessee to the profit and loss account could be assessed as income of the assessee. The said reference related to the assessment years 1953-54 and 1956-57 to 1962-63.
6. At this stage, we may mention that on September 3, 1990, the Supreme Court granted special leave to the Revenue to appeal against the said judgment. (See [1990] 186 ITR (St.) 26).
7. Karamchand Thapar and Bros. (Coal Sales) Ltd. v. CIT, , related to the assessment year 1955-56. In that case, in the assessment year 1955-56, the assessee claimed that a sum of Rs. 49,217 representing unclaimed credit balance written off during the year should not be treated as revenue receipt. Rs. 43,288 out of the said unclaimed credit balance represented undercharges in respect of the freight for the underloaded wagons, which the customers of the assessee had to pay under the Railway Rules, in spite of the fact that the wagons in question were not loaded to their full capacity by the collieries. The assessee claimed these undercharges from the collieries. The same was passed on by the assessee to the customers who made claims in this behalf from the assessee. The Income-tax Officer found that such undercharges were not credited to the account of the individual customers and held that the same represented the trading receipts of the assessee and were liable to tax. In coming to the above conclusion, the Income-tax Officer relied on the findings of the Appellate Assistant Commissioner in the appeal against assessments of the assessee for the assessment years 1953-54 and 1954-55 where a similar question arose for consideration. Being aggrieved, the assessee appealed to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner, relying on his own decision in respect of the said assessment years
1953-54 and 1954-55, upheld the assessment. There was a further appeal by the assessee before the Income-tax Appellate Tribunal. The Tribunal found that in I. T. A. No. 11669 of 1959-60, relating to the assessment year
1954-55, the Tribunal had considered this point and, after a detailed survey of the contentions raised on behalf of the parties, had held that the authorities below were justified in assessing the amount of the unclaimed credit balance as the assessee’s income from business. The Tribunal further
found that the assessee secured orders for the supply of coal from permit-holders and, after obtaining such orders, in its turn, placed orders with various collieries for the supply of coal directly to the permit-holders. The price of coal charged included railway freight up to the destination. The assessee preferred claims in respect of undercharges with the collieries concerned for the excess freight paid in respect of the coal not supplied and realised the same. The amounts so realised were kept as a credit balance and the payments were made to the permit-holders/customers from these receipts as and when claims were preferred by them. After meeting such claims, there was a sizeable balance left, which the assessee transferred to the profit and loss account under the head “Miscellaneous receipts”. In the relevant year, such unclaimed credit balance amounted to Rs. 49,217. The Tribunal came to the conclusion that there was no reason to differ from the decision of the Tribunal for the previous year and accordingly held that the authorities below were right in treating this amount as the assessee’s receipts from its business.
8. There, a Division Bench of this court held that the findings of fact of the Tribunal have not been challenged as being perverse and had consequently become final. Accordingly, the amount of Rs. 43,288 was liable to be included in the assessee’s total income for the assessment year
1955-56.
9. Subsequently, for the assessment years 1969-70 and 1970-71, the matter came up before this court in CIT v. Karam Chand Thapar and Bros. (Coal Sales) Ltd. [1987] 163 ITR 40. There, the Division Bench of this court followed the earlier judgment reported in CIT v. Karam Chand Thapar and Bros. (Coal Sales) Ltd. [1979] 117 ITR 621, and held that the amounts credited in the “undercharge account” reached the hands of the assessee not as a benefit or perquisite of business but on account of the consumers to whom the amounts really belonged and that the assessee was accountable for the same. Therefore, the unclaimed credit balance in the undercharges account, transferred to the profit and loss account of the relevant previous year, did not constitute a trading receipt.
10. As we have already indicated the present reference relates to the assessment years 1975-76 and 1979-80. Following the earlier decisions in the case of the assessee referred to above for the assessment years 1953-54 and
1956-57 to 1962-63 and 1969-70 to 1970-71, we answer the question in this reference in the affirmative and in favour of the assessee.
11. There will be no order as to costs.
12. Inasmuch as the question regarding the assessability of the amount in question is now pending before the Supreme Court against the judgment of this court in CIT v. Karam Chand Thapar and Bros. (Coal Sales) Ltd. [1979] 117 ITR 621, on the oral application of counsel for the Revenue, we certify that this is a fit case for appeal to the Supreme Court. Let the certificate in terms of Section 261 of the Income-tax Act, 1961, be issued expeditiously.
Shyamal Kumar Sen, J.
13. I agree.