Income-tax Appeal Nos. 1283 and 1284 (Hyd.) of 1983 is filed by the. Since questions involved in these appeals are common, they are taken up together and disposed of by this common order for sake of convenience. 2. According to facts, assessee derived income from ryotwari commission business. In case, of Grandhi Satyanarayana Murthy, Anakapalle, assessee-firm not only derives income from ryotwari commission business but also derives income from purchase and sale of jaggery. In case of Ramu & Co., Anakapalle, assessee apart from carrying on money-lending business also did business in commission agency in agricultural produce. assessee arranged sale of agricultural produce brought by ryots and collected 3 per cent commission on such purchases. commission, thus, received is further sub-divided between assessee and sub-commission agents for services rendered by latter. In case of Grandhi Satyanarayana Murthy, commission earned by assessee during year was Rs. 76,935 of which Rs. 13,419 was claimed as payable to sub-commission agents and it was kept in commission deposit account. As appearing in balance sheet commission deposit account. As appearing in balance sheet commission deposit account shows credit balance of Rs. 13,419 comprising of Rs. 3,386 belonging to sub-commission agents and Rs. 10,083 relating to assessee-firm. This deposit account with credit balance of Rs. 13,419 represents 1 per cent commission collected from ryots. assessee collected commission on sales of ryotwari produce at 3 per cent of which 1 per cent had been kept in commission deposit account. This 1 per cent commission is not offered for assessment and it is stated that it was payable to Agricultural market Committee. 3. Similarly, in case of Ramu & Co. gross commission earned during year amounted to Rs. 3,62,530 of which Rs. 2,60,935 (sic) assessee credited Rs. 55,180 to sub-commission deposit account. This deposit account represents 1 per cent commission collected from ryots. assessee collected commission on sales or ryotwari produce at 3 per cent of which 1 per cent had been kept in sub-commission deposit account. Here also 1 per cent commission was not offered for assessment stating that it is payable to Agricultural market Committee. 4. It was submitted before ITO that Agricultural market Committee, Anakapalle issued orders not to charge commission of more than 2 per cent on sales of ryotwari produce. assessee collected 3 per cent and sum at 1 per cent had been debited to commission account in names of several sub- commission agents and credited to sub-commission deposit account. it was also stated that writ petition was filed in Andhra Pradesh High Court challenging orders of Market Committee. It was claimed that excess collections of commission at 1 per cent against orders of Agricultural market Committee is refundable to ryots. 5. question before ITO was that whether assessee's share amounting to Rs. 10,083 in case of G. Satyanarayana Murthy and Rs. 19,313 in case of Ramu & Co. is to be treated as income or to be allowed as liability as claimed. According to ITO, assessees are commission agents. They auction jaggery brought by ryots and collect commission of 3 per cent on such sale. restriction was imposed by Market Committee to collect commission at 2 per cent only. While assessees collected commission at 3 per cent they neither deposited I per cent commission with market Committee nor refunded it to ryots. following decision of Supreme Court in case of Chowringhee Sales Bureau (P.) Ltd. v. CIT [1973] 87 ITR 542, ITO held that this amount will be included in total income for assessee year under consideration and this will be allowed in year in which will be paid. 6. Aggrieved, assessees filed appeals before first petitioner authority. Before Commissioner (Appeals), assessees submitted that 1 per cent extra commission collected over and above quantum permitted as per Government notification would not constitute trading receipt of assessees. Even according to High Court's interim direction, it was submitted (interim order dated 12-2-1981) that assessees were permitted to collect 3 per cent commission tentatively subject to depositing 1 per cent with Agricultural Market Committee pending disposal of writ petition. In view of High Court decision assessee treated amount as accrued liability and h d accepted this accordingly in balance sheet by opening sub- commission deposit account. It was further submitted that decision in Chowringhee Sales Bureau (P.) Ltd.'s case (supra) is not applicable to facts of this case. They relied upon decisions in Morley (H. M. Inspector of Taxes) v. Tattersall 2 Tax Cases 51, CIT v. Karam Chand Thapar & Bros. (Coal Sales) Ltd.. [1979] 117 ITR 621 (Cal.) and unreported judgment of Andhra Pradesh High Court pronounced on 13-4-1983 in case of CIT v. Devatha Chandraiah & Sons [IT reference No. 11 (Hyd.) of 1981 dated 13-4-1983]. On considering facts and after hearing parties, Commissioner, in case of Ramu & Co., came to conclusion that excess commission of 1 per cent collected by assessee cannot be treated as trading receipt. He held that decision in case of Chowringhee Sales Bureau (P.) Ltd., (supra) is distinguishable. He also was of view that amount was of view that amount was held by assessee in fiduciary capacity as trustee on behalf of agriculturists from whom it was collected. Accordingly, he deleted addition made by ITO and allowed appeal filed by assessee. 7. But, however, in case of Grandhi Satyanarayana Murthy, anakapalle, on considering facts and circumstances of case, refused to accept conclusion arrived at by Commissioner (Appeals) in case of Ramu & Co. he was of view that principle laid down in case of Chowringhee Sales Bureau (P.) Ltd. (supra) is clearly applicable to facts of case. he further held that at time of collection of commission at rate of 3 per cent it was not incurring any liability. In other words, in opinion of AAC, collection cannot be regarded as incurring liability. he was also of view that when collection is made from some parties in same breath it cannot be held that assessee is incurring liability by way of collection. Therefore, he eventually held that amount collected was nothing but trading receipt. He further observed that Income-tax Act, 1961 ('the Act'), permits taxing of income earned through illegal ways. Therefore, any excess collection made by assessee according to C, could be brought to tax because legality or validity of collection is not primary condition for taxability. He further pointed out that when once we conclude that particular receipt is trading receipt, its scope and nature for income-tax purposes is fixed once for all, when it is received, as held in case of Tattersall. According to him, if 2 per cent commission is trading receipt, it necessarily follows that balance of 1 per cent is also trading receipt, as it form part of one unit. He was also of view that fact that assessee had credited amount to separate account would not be relevant to determine nature of receipt which in his opinion is trading receipt. By following ratio of judgment of Supreme Court in case of CIT v. Bill Cotton Mills (P.) Ltd. [1979] 116 ITR 61, AAC was of view that in instant case, excess collection cannot be treated as collection as trustee. Accordingly, he held that excess amount of 1 per cent collected was clearly in nature of trading receipt in terms of judgment of Supreme Court and in case of Chowringhee Sales Bureau (P.) Ltd. (supra) and this should be taxed in year of receipt. 8. Aggrieved by order of first appellate authority, in case of Grandhi Satyanarayana Murthy, Kaida Kottu, Anakapalle, assessee filed appeal to Tribunal. Similarly, aggrieved by order of first appellate authority, in case of Ramu & Co. Anakapalle and Bondada Satyanarayana Sons, Anakapalle, department filed appeal before Tribunal. 9. learned departmental representative submitted before us that first appellate authority erred in holding that amount collected by assessee from its agriculturist-principals is accrued liability as it does not attract liability to market cess at all under provisions of law. It was further submitted that Commissioner (Appeals) ought to have held that amount collected by assessee as commission agent from its principals is in substance its income as held by Supreme Court in case of Chowringhee Sales Bureau (P.) Ltd. (supra). Therefore, it was submitted that order passed by ITO may be restored. 10. In assessee's appeal it was submitted as under: authorities below have failed to appreciate that 1 per cent deposit was made by assessee is in accordance with directions given by High Court. High Court has permitted assessee to collect 3 per cent commission and directed that 1 per cent to be deposited to Market Committee till disposal of writ petition filed by assessee. assessee has withdrawn writ petition and accepted amendment to bills of Market Committee and also as per directions of High Court. According to market Committee Act, any collection in contravention of rules and bye-laws of market Committee can be recovered from assessee within period of 11 years as if it was arrears of land revenue. Therefore, it is clear liability which is enforceable by Market Committee. agriculturists at Anakapalle are aware of fact that out of 3 per cent commission collected 1 per cent has to be refunded to them. authorities below are not justified in stating that assessee is not having sufficient balance and as such, it could not be considered that said amount was kept out of circulating capital in business without considering fact that there was sufficient balance in Andhra Bank accounts have not considered spirit of judgment referred to by them which do not apply to facts and circumstances of assessee's case. 11. We have heard rival submissions made by parties. fact remains that derived income from commission trade in jaggery. In case of Bondada Satyanarayana Sons, Anakapalle in balance sheet on 4-6-1981, there was commission deposit account showing credit balance of Rs. 15,281. This account represents commission collected from ryots and debited to respective capital accounts of partners at end of accounting year. In case of Grandhi Satyanarayana Murthy, gross commission earned by assessee during year was Rs. 76,935 of which Rs. 13,419 was claimed as payable to sub-commission agents. Out of Rs. 13,419 assessee allocated Rs. 3,386 as relating to sub-commission agents and it was kept in commission deposit account. As appearing in balance sheet, commission deposit account shows credit balance of Rs. 13,419 comprising of Rs. 3,386 belonging to sub-commission agents and Rs. 10,083 relating to assessee-firm. Similarly, in case of Ramu & Co., gross commission during year amounted to Rs. 3,62,530 of which Rs. 2,60,935 was claimed as payable to sub- commission agents. Out of Rs. 2,60,935 assessee credited Rs. 55,180 to sub-commission deposit account. This deposit account represent 1 per cent commission collected from ryots. 12. According to notification dated 11-9-1980, issued by Commissioner for Development of Marketing and Director of Marketing, Commissioner for Development of Marketing and Director of Marketing, Government of Andhra Pradesh Bye-law No. 35 - Annexure IV of Agricultural Market Committee, Anakapalle was amended for restricting quantum of commission chargeable in respect of all notified commodities except onions, to only 2 per cent. assessee along with similar other agents of Anakapalle filed Writ Petition No.. 266 of 1981 in Andhra Pradesh High Court praying for issue of direction or writ in nature of mandanus declaring Government Notification dated 11-9-1980 amending above Bye-law No. 35 restricting quantum of commission to 2 percent as void. By interim order dated 23-1- 1981, High Court suspended operation of Government notification dated 11-9-1980 fixing commission payment at 2 per cent. On Miscellaneous Petition No. 361 of 1981 filed by State Government, High Court as per order dated 9-2-1981 vacated earlier interim order dated 23-1- 1981 thereby lifting ban on operation of Government Notification dated 11-9-1980. Writ Appeal No. 78 of 1981 was filed against High Court's order dated 9-2-1981 in Writ Petition No. 369 of 1981. As per order passed by High Court on 9-2-1981 in Writ Petition Miscellaneous Appeal No. 78 of 1981, High Court had permitted Anakapalle commission agents to collect commission at 3 per cent out of which 1 per cent should be deposited with market Committee pending disposal of main Writ Petition 266 of 1981. Court had also directed that if ultimately commission agents fail in writ petition, market Committee would refund amount of one per cent to respective sellers, viz., agriculturists who had brought their agricultural commodities for sale. commission agents had also given undertaking to effect that they were prepared to furnish to Market Committee detailed particulars such as names and address of agriculturists from whom commission was collected. 13. In assessee's case during accounting year relevant to assessment year 1982-83 order dated 12-2-1981 of Andhra Pradesh High Court was in operation. As per this order, 1 per cent of commission collected at rate of 3 per cent should be kept in deposit with agricultural Market Committee pending final disposal of Writ Petition No. 266 of 1981. At end of accounting year relevant to assessment year 1983- 83 High Court as per order dated 13-7-1982 had dismissed Writ Petition No. 266 of 1981 as it was withdrawn by commission agents of Anakapalle. 14. fact remains that during accounting year relevant for assessment year 1982-83 assessee had collected commission on sale of agricultural produce at 3 per cent. So far 2 per cent of commission is concerned, there is no dispute. In matter of balance of 1 per cent commission it was directed to be deposited with Market Committee according to High Court's order dated 12-2-1981. assessee had credited this 1 per cent commission to separate account called commission deposit account and shown it on liability side of balance sheet prepared by assessee. 15. According the, 1 per cent extra commission collected over and above quantum permitted as per Government notification would not constitute trading receipt of assessee. according to High Court's interim direction in its order dated 12-3-1981 though assessee was permitted to collect 3 per cent commission, 1 per cent thereof was directed to be deposited with Agricultural market Committee pending disposal of writ petition. Thus, according to High Court's order dated 12-2-1981, 1 per cent commission though not deposited in Market Committee it virtually belongs to agriculturists. Therefore, assessees are holding same in fiduciary capacity in trust on behalf of agriculturists to whom this amount has got to be ultimately payable. Accordingly, in view of High Court's direction, assessee treated said amount as accrued liability and exhibited this as such in balance sheet by opening commission deposit account. 16. In support of contention put forward by department decision in case of Chowringhee Sales Bureau (P.) Ltd. (supra) was relied upon. According to learned counsel appearing for assessee, decision in abovesaid case is distinguishable. According to him, in case of Chowringhee Sales Bureau (P.) Ltd (supra), assessee had not earmarked amount realised as sales tax and did not put it in different account of deposits with Government. Therefore, according to learned counsel for assessee, this decision is distinguishable. learned departmental representative pointed out that in case of Chowringhee Sales Bureau (P.) Ltd. (supra), Court was of view that if initial receipt was concluded to be trading receipt, treatment given by assessee to same in his account books was immaterial to determine its nature. It was also pointed out that it is open to (sic) ultimately assessee's treatment will not determine its character. learned departmental representative further submitted that glance of balance sheet will show that excess collection was converted into as part of assessee's circulating capital. It was also argued by learned departmental representative that agriculturists from whom collections were made were not aware of fact that they are entitled to collect 1 per cent from assessees. Therefore, it was submitted that it is not acceptable liability. According to learned departmental representative this was also due to fact that assessee contested Government notification instead of accepting it. Eventually, it was contended that inasmuch as dispute between parties was pending throughout accounting year without any final settlement, collection was trading liability at its inception. It was also case of department that in instant case there is no collection on behalf of third party and, therefore, at time of collection of commission at rate of 3 per cent assessee was not incurring liability. 17. According to learned departmental representative in Chowringhee Sales Bureau (P.) Ltd.'s case (supra) also there was collection of sales tax which assessee should not have collected. In such situation, Supreme Court held that amount should be recorded as trading receipt and should be allowed as deduction in year when amounts were returned back to customers. As in Chowringhee Sales Bureau (P.) Ltd.'s case (supra) in instant case also, assessee collected commission and, therefore, in both these cases, assessees have collected certain amounts far in excess. In that view of matter, ruling of Supreme Court in Chowringhee Sales Bureau (P.) Ltd.'s case (supra) will be clearly applicable to facts of this case according to department. 18. According to facts appearing in case of Chowringhee Sales Bureau (P.) Ltd. (supra), sales tax collected by assessee from buyers which was neither paid to State Government nor to owner of goods nor refunded to purchaser was held to be trading receipt of assessee. Supreme Court had confirmed finding of High Court that 'the sales Supreme Court had confirmed finding of High Court that 'the sales tax collected was part of trading receipt and was to be included in appellant's total income since money realised from purchases was employed by appellant did not earmark amount realised as sales tax and did not put it in different account or deposit it with Government in terms of section 9B (3)'. 19. In present case though 1 per cent which was collected was not deposited with Market Committee, assessee had taken adequate caution b y treating this as liability by depositing impugned amount to separate account styled as sub-commission deposit account. In this respect it was pointed out that money representing total credits, has been circulating in assessee's business as available in balance sheet where sufficient balance was not available and this clearly shows, according to learned departmental representative, that assessee did not keep out of circulation in business.. But this does not appear to be correct because we have verified accounts shown to us at time of hearing. In separate commission deposit account, names of parties, were mentioned. It was also shown that some of these accounts are due. Their address were also given. Such ryot's account was also worked out with reference to bills. These minute details were mentioned in eventuality of repayment. Thus, this is distinguishing feature found in cases of assessee herein as against what is stated in case of Chowringhee Sales Bureau (P.) Ltd. (supra). In fact, those amounts were collected in accordance with interim order passed by High Court dated 9- 2-1981 in Writ Petition Miscellaneous Appeal No. 78 of 1981. Thus, during accounting year relevant for assessment year 1982-83, High Court's permission to collect 3 per cent commission was very much in force. When writ petition was dismissed on 13-7-1982 position reversed back to Government notification dated 11-9-1982 position reversed back to Government notification dated 11-9-1980 fixing commission payment at 2 per cent. Therefore, during relevant point of time, when assessee made collection of 3 per cent there was no infraction of law. In fact, assessees gave undertaking during time of pendency of writ petition that they were prepared to furnish to Market Committee detailed particulars of names and addresses of agriculturists from whom commission was collected. From these facts, we find that there is justification of Supreme Court in Chowringhee Sales Bureau (P.) Ltd.'s case (supra) from facts of present case. 20. There was judgment in case of Moreley v. Tattersall 22 Tax C s e s 51. In that case, assessee-firm was carrying on business as auctioneers of horses and was having as one of its terms and conditions of business that no purchase money would be paid or remittance by post without written order from customers. It had accordingly accumulated with it as unclaimed balances of customers who had not demanded same for many years. After some years, funds accumulated were divided by firm among partners, with stipulation that any payment claimed by any customer subsequently and paid to him out of his accumulated funds available to firm. should be met by partners in their profit-sharing ration. It was also pointed out that at all times, firm considered itself liable to pay its balances as and when claims were made. Considering these facts, court of appeal held that unclaimed balances so transferred to partners were not trading receipts of firm assessable to income-tax. It was further held that unclaimed balances when first received from auction purchasers were obviously liabilities and no subsequent operation of alteration in account would turn them into trading receipts. first appellate authority was of view that when once we conclude that particular receipt is trading receipt, its scope and nature for income-tax purposes will remain as same for rest of period as held in case of Tattersall (supra). Therefore, he came to conclusion that after collecting amount which is evidently trading receipt if assessee has to pay back part or whole, nonetheless subsequent event does not affect character of receipt. It was pointed out that assumption made by first appellate authority that 1 per cent commission collected by assessees as trading receipt is not at all correct since he proceeded on basis that assessee did not earmark this amount realised as payable in his account in case if assessees were called upon to repay said collection in view of decision in case of Chowringhee Sales Bureau (P.) Ltd. (supra). But on other hand, facts appearing in these appeals are entirely different as we have pointed out in foregoing paragraphs especially in view of pending proceedings in High Court. Therefore, initial assumption made by first appellate authority itself cannot stand for moment's scrutiny. 21. next contention of learned departmental representative was that amounts collected by assessees were used as circulating capital and it is not kept apart and mere balance sheet entry is not sufficient. Therefore, it must be treated as trading receipt. In other words, according to learned departmental representative, money representing total credits has been circulating in assessee's business and it is not clear from balance sheet whether sufficient cash balance was available. This clearly means according to departmental representative that assessees did not keep money out of circulation in business. We have already stated that facts appearing in these appeals are quite contrary to submission made by learned departmental representative. In instant case we have already pointed out that 1 per cent commission was all along been treated as liability to be discharged by refunding amount to agriculturists from whom it was collected and shown in books of account besides showing it as liability in balance sheet as separate account in sub-commission deposit account. we have also scrutinised sub-commission agent accounts produced before us. O n such scrutiny, it appears that assessees kept separate commission deposits account with hands of parties to whom amounts are due and their addresses, worked out with reference to bills. Therefore, contention raised by departmental representative in this regard is not acceptable. 22. learned departmental representative pointed out that collection made by assessees in contravention of rule after withdrawal of writ petition is in nature of income. Even otherwise it was submitted that collection made and liability arose in infraction of law is also taxable. He further, by drawing analogy from judgment of Andhra Pradesh High court in CIT v. Kodandarama & Co. [1983] 144 ITR 395 where collection of welfare fund was held to be infraction of law, submitted that commission collected by assessees are also to be treated in like manner so as to make it liable for taxation. In Kodandarama & Co.'s case (supra) assessees who were all dealers-cum-millers of paddy, made contributions at specified rates to Andhra Pradesh Welfare Fund, West Godavari District and in return were Andhra Pradesh Welfare Fund, West Godavari District and in return were granted export permits by Collector for exporting boiled rice to Kerala. assessee submitted that said amount was expenditure incurred wholly and exclusively in course of business and, accordingly claimed deduction under section 37(1) of Act. Andhra Pradesh High court was of view that payments were made by assessee only because they were told that they would not get export permit unless they made contribution. regularity and systematic manner in which contributions were made showed, according to High court, that contributions to welfare fund were pre-condition for grant of export permits. Therefore, it was observed that contributions were compulsory payments extracted from assessees as price for granting export permits. Therefore, High court was of view that this would certainly be subversive of public interest and good administration. It is under these circumstances, High court held that payments made by assessee to Andhra Pradesh Welfare Fund for obtaining permits for export of rice being in contravention of public policy would not be allowed as business expenditure. In present case facts are different. commission was collected in view of order of High court, on undertaking given by assessees that they will repay same in case they lose battle in Court. Further, according to section 17A of Agricultural Market Act, where market committee is of opinion that any commission agent has made any collection in excess of what is allowed by law, it may require that amount within period of eleven years from that person after giving opportunity of being heard to him. In these circumstances, there is definite liability on part of assessee to repay commission collected from agriculturists. Accordingly, analogy drawn by learned departmental representative from judgment of Andhra Pradesh respondent in Kodandarama & Co.'s case (supra) has become unsound analogy. 23. Further, learned departmental representative by relying upon passage in commentaries of Sampath Iyengar on Law of Income-tax, 7th edn. at page 473 contended that income is income even though it is tainted. It was stated that - "Income is income, though tainted. When receipt possess quality of income, it does not shed its quality by reason of fact that it comes from tainted source, or through tainted means. degree of taint may vary from simple unenforceability in court of law of contract intended to produce income to illegality of making contract itself and consequent visitation of fines and imprisonment on transgression thereof..." In this context, he also relied upon following decisions in cases of Kali Prasad Singh v. CIT [1955] 28 ITR 294 (Pat.) Chowringhee Sales Bureau (P.) Ltd. (supra) and Sinclair Murray & Co. (P.) Ltd. v. CIT [1974] 97 ITR 615 (SC). In M. Ct. Muthiah v. CIT [1974] 97 ITR 516 (Mad.). since sales tax collected from purchaser was neither paid to revenue nor refunded to purchaser and was also not separately earmarked or put into different account, Supreme Court held that amount collected by assessee is its trading receipt. In Chowringhee Sales Bureau (P.) Ltd.'s case (supra) also position is same as in M. Ct. Muthiah's case (supra). 24. In Kali Prasad Singh's case (supra) there was prohibition by Bengal Cess Act, 1980, for recovering entire road cess from tenant. There Patna High Court held amount of cess recovered by landlord in excess of Rs. 1 lakh of his income can be assessed to income-tax under Indian Income-tax Act, 1922. But according to facts appearing in present case, 1 per cent commission was collected in view of order of High Court as stated above. Therefore, at time when collection was made, there was sanction of Court to collect and keep same in separate account with undertaking to repay same to agriculturists. Under such circumstances, ruling of Patna High Court in Kali Prasad Singh's case (supra) will not be applicable to facts of this case. As we have also pointed out collection of commission was made by assessee in view of order of High Court, we consider that there is no infraction of law., Therefore, question of taxing tainted income in infraction of law does not arise. 25. There was also recent decision of Andhra Pradesh High Court in matter like this in case of CIT v. Devatha Chandraiah & Sons [IT Reference No. 11 (Hyd.) of 1981 dated 13-4-1983]. In that case assessee, commission agent, used to collect sales tax while selling goods on behalf of agriculturist principals. sales tax so collected was credited to sales tax account which was debited when payments were made after completion of sales tax assessments. In Takpatties, all relevant details regarding name of agriculturist principals, commodities sold, and deduction made were noted. In debtor's ledger, where separate account was opened for such agriculturist principal, his account was credited with amount of sales tax and refundable to him. Considering these facts, Andhra Pradesh High Court held that amount collected in from of sales tax did not constitute assessees' trading receipts. 26. learned counsel appearing for assessee further submitted that amount of collection was held by assessee in fiduciary capacity as trustee on behalf of agriculturist from whom it was collected. According to learned counsel appearing for assessee, collection made amounts to brokerage collected from constituents to be paid to brokers but remaining unpaid as in case of Upper India Sugar Exchange Ltd. v. CIT [1969] 72 ITR 331 (All.) or in case as in Addl. CIT v. Brijlal Gupta [1974] 94 ITR 88 (All.) where clerk charges collected by senior advocate repayable to his clients or money deposited with solicitors by his clients and remaining unrefunded as in case of CIT v. Sandersons & Morgans [1970] 75 ITR 433 (Cal.). In all these cases such amount remaining with assessee were held to be not trading receipt since amounts have been collected in fiduciary capacity. Instances were also cited from decisions of Allahabad High Court in cases of CIT v. Shiv Nath Prasad [1970] 77 ITR 378 and Upper India Sugar Exchange Ltd.'s case (supra). decision of Calcutta High Court in Karan Chand Thapar & Bros. (Coal Sales) Ltd.'s case (supra) was also relied upon in this context. learned counsel also relied upon decision of same High Court in Bengal & Assam Investors Ltd. v. CIT [1983] 142 ITR 156, where in process of rendering service to his clients as insurance agent, assessee collected some excess amount from clients over years which were neither paid to insurance companies nor refunded to clients. clients also did not claim refund of these amounts. assessee contended that he did not receive insurance premium as trading receipt and same represented liability to insurance premium as trading receipt and same represented liability to clients which remained unclaimed over years and liability had been adjusted in accounts of relevant year and amount did not constitute taxable income. Calcutta High Court on these facts held that said sum could not be assessed as income of assessee during relevant assessment year, since there was fiduciary relationship between clients and principal. Further, High Court held that taxability of amount must be determined on nature of receipt and capacity in which it was received, etc. In Karam Chand Thapar & Bros. (Coal Sales) Ltd.'s case (supra) where unloading charges collected by Del Credere agent in fiduciary capacity from principal, viz., collieries, but not paid to consignee are held to be not assessable as business income. 27. We have already set out that commission in question was collected as permitted by High Court and same was kept under separate account called under 'Commission agents account. There is also provision in Agricultural markets Act (section 17A), according to which commission collected in excess of what is allowed by law, that commission many be asked to be refunded within period of 11 years from person whom it was collected. According to rule 52(1) (b) of Andhra Pradesh (Agricultural Produce and Livestock) Market Rules, 1969, Market Committee has also got power of suspending licnece of any commission agent, who is found to have committed breach of any rule or bye-law of Market Committee. On top of it, assessee has also given undertaking before Andhra Pradesh High Court to furnish particulars to Marketing Committee about names and address of agriculturists to whom money was to be returned. Under these circumstances, in view of judicial pronouncements we are of view that collections made by assessees were not that of their own and liability is always there to refund same to ultimate owners. Therefore, we have no hesitation in coming to conclusion that assessees are holding collections in fiduciary capacity as trustee on behalf of agriculturists to whom it was repayable. 28. learned departmental representative submitted that out of collection made part - 2 per cent - was said to be trading receipt and balance 1 per cent was non-trading receipt. This is not correct since both belongs to one unit. learned departmental representative further contended that this dichotomy is not envisaged. According to him, assessees collected to appropriate commission for themselves and intention is only to utilise same for their benefit. Therefore, according to him, it is not liability but only penalty. But, according to us question of dichotomy as pointed out by learned departmental representative does not arise on facts of these cases, because entire 3 per cent was collected by assessees in view of order of High Court when interim order was in force. subject-matter in this appeal relates only 1 per cent commission collected by assessee. 2 per cent commission collected by assessee is not subject-matter in appeal before us. In view of fact that we have already held that this collection of 1 per cent does not amount to trading receipt, question of bifurcating 2 per cent and 1 per cent as attempted to do by learned departmental representative, does not arise. 29. Under these circumstances, we have also come across judgment of Madras High Court in CIT v. Thirumalaiswamy Naidu & Sons [1984] 147 ITR 657. According to facts in case of Thirumalaiswamy Naidu (supra), assessee firm dealing in jaggery collected from its customers amounts towards contingent liability account in order to protect itself from any possible liability to sales tax at future date and paid same to sales tax department. amounts collected on contingent liability account were not brought into trading and profit and loss account on credit side and remittances of tax from those collections to sales tax department were also not brought into debit side. Later on, when proceedings were taken challenging validity of levy of sales tax, High Court held that jaggery was exempt from central sales tax. Consequently, amount paid by assessee to sales tax department came to be refund to assessee resulting assessee highly obliged to refund amount to its customers. As refund was received by assessee in assessment year under consideration, department was of view that refund so received would represent taxable profit for year in question by reason of section 41(1) of Act. On these facts High Court held that refund received by assessee from sales tax department was not payment receivable by assessee in its trading transactions but was received purely in fiscal transaction. There was not business relationship of any kind between assessees and sales tax department in refund granted. Section 41 could not, therefore, be invoked to assess sales tax refund. Nor could it be brought to tax de hors this section under any other valid principle of taxation of case. 30. Thus, on considering facts in light of judicial pronouncements, we are of view that 1 per cent commission collected is amount with liability attached with obligation to repay same to agriculturist. Under such circumstances, assessees were holding amounts belonging to agriculturist in fiduciary capacity as trustee on behalf o f agriculturists from whom same was collected. Therefore, 1 per cent commission as collected by assessees cannot be considered as assessees' trading receipt. Accordingly, addition made under this head in appeal relating to G. Satyanarayana Murthy. Anakapalle is deleted and in respect of orders passed by Commissioner (Appeals) in cases of Ramu & Co. and Bondada Satyanarayana Sons are confirmed. 31. In result, appeal filed by assessee is allowed while appeals filed by department are dismissed. *** INCOME TAX OFFICER v. BONDADA SATYANARAYANA SONS