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PETITIONER: PUNJAB DISTILLING INDUSTRIES LTD.

       Vs.

RESPONDENT: THE COMMISSIONER OF INCOME-TAX, SIMLA

DATE OF JUDGMENT: 24/11/1958

BENCH: SARKAR, A.K. BENCH: SARKAR, A.K. AIYYAR, T.L. VENKATARAMA GAJENDRAGADKAR, P.B.

CITATION:  1959 AIR  346            1959 SCR  Supl. (1) 683  CITATOR INFO :  R          1964 SC1709  (1,2,13)  R          1973 SC 376  (13)  R          1988 SC1263  (15)  C          1989 SC1696  (9)

ACT:        Income-tax-Distiller taking deposit refundable on return  of        bottles-Balance   of  deposits  after  refund,  if   trading        receipt-Indian Income-tax Act (XI of 1922), S. 10.

HEADNOTE: The appellant, a distiller of country liquor, carried on the business of selling liquor to licensed wholesalers.  Due  to shortage  of  bottles during the war a scheme  was  evolved, where under the distiller could charge a wholesaler a  price for the bottles in which liquor was supplied at rates  fixed by  the  Government,  which lie was bound to  repay  to  the wholesaler  on  his returning the bottles.  In  addition  to this  the appellant took a further sum from the  wholesalers described  as  ’security  deposit’ for  the  return  of  the bottles.   Like the price of the bottles these  moneys  were also repaid as and when the bottles were returned with  this difference that the entire sum was refunded only when go% of the bottles covered by it had been returned.  The  appellant was assessed to income-tax on the balance of the amounts  of these additional sums left after the refunds made there out. Held,  that the amounts paid to the appellant and  described as  ’security deposit’ were trading receipts  and  therefore income  of the appellant assessable to tax.   These  amounts were paid as an integral part of the commercial  transaction of  the sale of liquor in bottles and represented  an  extra price  charged  for  the bottles.  They  were  not  security deposits  as  there was nothing to secure,  there  being  no right to the return of the bottles. 684 K.   M. S. Lakshmanier & Sons v. Commissioner of  Income-tax and   Excess  Profits  Tax,  Madras,  [1953]  S.C.R.   1057, followed. Davies  v. The Shell Company of China Ltd., (1951) Tax  Cas. 133;  and  Morley  v. Tattersall, (1938)  22  Tax  Cas.  51, distinguished.

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Imperial  Tobacco  Co.  v. Kelly, (1943) 25  Tax  Cas.  292, referred to.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 119 of 1955. Appeal  from the judgment and order dated June 16, 1953,  of the Punjab High Court in Civil Reference No. 1 of 1953. A.   V. Viswanatha Sastri and Naunit Lal, for the appellant. H.   N. Sanyal, Additional Solicitor-General of India, R.   Gopalakrishnan,  R.  H. Dhebar and D.  Gupta,  for  the respondent. 1958.  November 24.  The Judgment of the Court was delivered by SARKAR,  J.-The appellant is a company carrying on  business as  a distiller of country liquor.  It was  incorporated  in May  1945  and  was in fact a  previously  existing  company called the Amritsar Distillery Co. Ltd. reconstructed  under the provisions of the Company’s Act.  The appellant  carried on the same business as its predecessor, namely, sale of the produce  of  its distillery to  licensed  wholesalers.   The wholesalers  in  their  turn sold  the  liquor  to  licensed retailers   from  whom  the  actual  consumers  made   their purchases.   The  entire  trade was  largely  controlled  by Government regulations. After  the  war  started  the  demand  for  country   liquor increased  but  difficulty was felt in  finding  bottles  in which  the liquor was to be sold.  In order to  relieve  the scarcity of bottles the Government devised in 1940 a  scheme called  the  buy-back scheme.  The scheme in  substance  was that  a  distiller on a sale of liquor  became  entitled  to charge  a  wholesaler a price for the bottles in  which  the liquor  was supplied at rates fixed by the Government  which he  was  bound  to repay to the  wholesaler  on  the  latter returning the bottles.  The                             685 same  arrangement, but with prices calculated  at  different rates  was  made  for  the  liquor  sold  in  bottles  by  a wholesaler to a retailer and by a retailer to the consumers. Apparently  it was conceived that the price fixed under  the scheme would be found to be higher than the price which  the bottles  would fetch in the open market and the  arrangement for  the refund of the price would therefore  encourage  the return  of  the  bottles  from  the  consumers  through  the intermediaries  ultimately  to  the  distiller.   The  price refundable was later increased perhaps because the  previous price  did  not  fully achieve the  desired  result  of  the bottles finding their way back to the distillers. Sometime  in  1944, the Amritsar Distillery Co.  Ltd.  which then was in existence, insisted on the wholesalers paying to it  in addition to the price of the bottles fixed under  the buy-back  scheme,  certain  amounts  described  as  security deposits   and  calculated  at  varying  rates  per   bottle according  to sizes for the bottles in which the liquor  was supplied  to  them  promising to pay back  for  each  bottle returned at the rate’ applicable to it and further promising to pay back the entire amount paid on a transaction when  90 per  cent. of the bottles covered by it had  been  returned. The  company  while  it  was  in  existence  realised  these additional sums and so did the appellant after it took  over the  business.   The object of demanding  and  taking  these additional   sums  was  obviously  to   provide   additional inducement for the return of the bottles to the distiller so that  its  trade in selling the produce  of  its  distillery

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might  not be hampered for want of bottles.  No  time  limit had  been fixed within which the bottles had to be  returned in order to entitle a wholesaler to the refund, nor does  it appear  that a refund had ever been refused.  The  price  of the  bottles  received by the appellant under  the  buy-back scheme  was  entered by it in its  general  trading  account while  the additional sum received for them was  entered  in the general ledger under the heading " Empty Bottles  Return Security Deposit Account ". It is not disputed that for  the accounting  periods with which this case is  concerned,  the additional amounts had been taken 686 without  Government’s sanction and entirely as  a  condition imposed by the appellant itself for the sale of its liquor. The  appellant was assessed to income-tax on the balance  of the amounts of these additional sums left after the  refunds made  there  out.   It had also been  assessed  to  business profits tax and excess profits tax on the same balance.  Its appeals  against the orders of assessment to these taxes  to the  Appellate Assistant Commissioner and thereafter to  the Tribunal  failed.   It then obtained an  order  referring  a certain question arising out of the assessments for decision by  the  High  Court of  Punjab.   The  question  originally suggested was reframed and in its final form reads thus: Whether  on  the  facts and circumstances of  the  case  the collections  by  the  assessee  company  described  in   its accounts  as " empty bottle return security  deposits"  were income assessable under section 10 of the Income-tax Act? The  High  Court answered the question in  the  affirmative. The present appeal is against that decision which related to all the three varieties of taxes for which the appellant had been made liable. We  are  concerned in this appeal only with  the  additional sums demanded and received by the appellant and described as security  deposit  and not with the price of  bottles  which also  it  took under government sanction.  The  question  is whether these amounts called security deposits were. trading receipts.   Now,  as already stated, the  appellant’s  trade consisted  in  selling  in bottles liquor  produced  in  its distillery  to  wholesalers.   The sale was  made  on  these terms:  In each transaction of sale the appellant took  from the wholesaler the price of the liquor, a certain sum  fixed by  the  government, as price of the bottles  in  which  the liquor was supplied and a further sum described as  security deposit for the return of the bottles.  The moneys taken  as price  of the bottles were returned as and when the  bottles were  returned.   The moneys described as  security  deposit were  also  returned as and when the bottles  were  returned with  only this difference that in this case the entire  sum taken in one 687 transaction  was refunded when 90 per cent. of  the  bottles covered by it had been returned, though the remaining 10 per cent.  had not been returned.  Such being the nature of  the appellant’s trade and the manner in which it was  conducted, these  additional  sums  appear  to us  to  be  its  trading receipts. Mr. Vishwanatha Sastri appearing on behalf of the  appellant first contended that on these facts the amounts could not be regarded  as price and that therefore they were not  trading receipts.   He  said  that  the price  of  the  bottles  was separately  fixed  and  the  amount  taken  as  deposit  was different  from  and exclusive of, it.  This  contention  is founded on the use of the word price in the buy-back  scheme in  connection  with  the  rates  which  the  distiller  was

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entitled  to charge a wholesaler for the bottles.  It  seems to us that this contention lays undue emphasis on that word. We  think that the High Court took substantially  a  correct view  of  the matter when it said that  in  realising  these amounts " the company was really charging an extra price for the bottles ". It is clear to us that the trade consisted of sale  of bottled liquor and the consideration for  the  sale was constituted by several amounts respectively called,  the price  of  the  liquor, the price of  the  bottles  and  the security  deposit.   Unless  all these sums  were  paid  the appellant  would  not have sold the liquor.  So  the  amount which  was called security deposit was actually a  -part  of the  consideration  for the sale and therefore part  of  the price  of  what was sold.  Nor does it make  any  difference that  the  price of the bottles was entered in  the  general trading account while the so called deposit was entered in a separate  ledger  termed  "  empty  bottles  return  deposit account ", for, what was a consideration for the sale cannot cease  to  be  so  by being written up in  the  books  in  a particular  manner.  Again the fact that the money  paid  as price of the bottles was repaid as and when the-bottles were returned while the other moneys were repaid in full when  90 per  cent. of the bottles were returned does not affect  the question  for ,none of these sums ceased to be parts of  the consideration because it had been agreed that they would be 688 refunded in different manners.  It is not contended that the fact  that  the additional sums might have  to  be  refunded showed  that they were not part of the price.  It could  not be  so contended because what was expressly said to  be  the price  of  bottles  and  admitted  to  be  price  was   also refundable.   If  so,  then  a  slightly  different   method providing  for their refund cannot by itself  prevent  these additional sums from being Price. Now,  if these additional sums were not part of  the  price, what  were  they ? Mr. Sastri said that they  were  deposits securing  the  return of the bottles.  According to  him  if they  were  such security deposits, they  were  not  trading receipts.  Again we are unable to agree.  There could be  no security  given for the return of the bottles  unless  there was a right to their return for if there was no such  right, there  would be nothing to secure.  Now we find no trace  of such a right in the statement of the care.  The  wholesalers were clearly under no obligation to return the bottles.  The only thing that Mr. Sastri could point out for  establishing such  an obligation was the use of the words " security  de- posit  ". We are unable to hold that these words  alone  are sufficient  to  create an obligation in the  wholesalers  to return  the bottles which they had bought.  If it  had  been intended  to  impose  an obligation on  the  wholesalers  to return  the bottles, these would not have been sold to  them at all and a bargain would have been expressly made for  the return  of the bottles and the security deposit  would  then have been sensible and secured their return.  The fact  that there was no time limit fixed for the return of the  bottles to  obtain  the  refund also indicates  that  there  was  no obligation  to  return the bottles.  The  substance  of  the bargain  clearly  was  that the appellant  having  sold  the bottles  agreed to take them back and repay all the  amounts paid in respect of them. For this part of the case Mr. Sastri relied on Davies v. The Shell  Company of China Ltd. (1), but we do not  think  that case  assists at all.  What had happened there was that  the Shell  Company  had appointed a large number  of  agents  in China to sell its products

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(1)  (1951) 32 Tax Cas. 133.                             689 and  had  taken from each agent a deposit to  secure  itself against the risk of default by the agent duly to PI  account for  the sale proceeds.  The deposits were made  in  Chinese dollars and later converted into sterling.  When the Company closed  its  business in China it reconverted  the  deposits into Chinese dollars and refunded to the agents the deposits made  by  them.   Owing to a  favourable  exchange  for  the conversion  of  sterling into dollars, the  Company  made  a profit  and it was sought to assess this profit  to  income- tax.   It was held that the profit could not be  taxed,  for the  deposits  out  of which it was  made  were  really  not trading receipts at all.  Jenkins, L. J., observed at p. 157: "  Mr. Grant described the agents’ deposits as part  of  the Company’s trading structure, not trade receipts but anterior to  the stage of trade receipts, and I think that is a  fair description  of  them.  It seems to me that it would  be  an abuse of language to describe one of these agents, after  he had  made a deposit, as a trade creditor of the Company;  he is a creditor of the Company in respect of the deposit,  not on account of any goods supplied or services rendered by him in the course of its trade, but simply by virtue of the fact that  he has been appointed an agent of the Company  with  a view to him trading on its behalf, and as a condition of his appointment  has deposited with or, in other words, lent  to the company the amount of his stipulated deposit." lie also said at p. 156: it  If  the agent’s deposit had in truth been a  payment  in advance to be applied by the Company in discharging the sums from time to time due from the agent in respect of petroleum products  transferred to the agent and sold by him the  case might well be different and might well fall within the ratio deciding of Landes Bros. v. Simpson (1) and Imperial Tobacco Co.  v.  Kelly (2).  But that is not the  character  of  the deposits here in question.  The intention manifested by  the terms of the agreement is that the deposit should be (1)  (1934) 19 Tax Cas. 62. (2) (1943) 25 Tax Cas. 292. 87 690 retained   by  the  Company,  carrying  interest   for   the benefit of the depositor throughout the terms of the agency. It  is to be available during the period of the  agency  for making good the agent’s defaults in the event of any default by him ; but otherwise it remains, as I see it, simply as  a loan owing by the Company to the agent and repayable on  the termination of the agency ". It  would  therefore appear that the deposits in  that  case were  held not to be trading receipts because they  had  not been  made  as part of a trading transaction.  It  was  held that they had been received anterior to the commencement  of the  trading  transactions  and really  formed  the  trading structure of the Company.  The character of the amounts with which  we  are Concerned is entirely different.   They  were parts  of  the  trading  transactions  themselves  and  very essential parts: the appellant would not sell liquor  unless these  amounts were paid and the trade of the appellant  was to make profit out of these sales.  The fact that in certain circumstances  these amounts had to be repaid did not  alter their nature as trading receipts.  We have already said that it  is not disputed that what was expressly termed as  price of  bottles  was a trading receipt though these  had  to  be repaid  in almost similar circumstances.  We may  point  out

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that it had not been said in Shell Company case(1) that  the deposits were not trading receipts for the reason that  they might  have to be refunded; the reason for the decision  was otherwise as we have earlier pointed out, namely, that  they were  no  part of the trading  transactions.   We  therefore think that the deposits dealt with in the Shell Company case were  entirely of a different nature and that case does  not help.   Mr.  Sanyal was prepared to argue that even  if  the amounts  were  securities deposited for the  return  of  the bottles, they would still be trading receipts, for they were part  of  the  trading transactions and the  return  of  the bottles  was necessary to enable the appellant to  carry  on its trade, namely, to sell liquor in them.  As we have  held that  the  amounts  had not been paid as  security  for  the return of the bottles, we do not (1)  (1951) 32 Tax Cas. 1133.       691 consider it necessary to pronounce upon thiscontention. We might also refer to the observationsmade   in   Imperial Tobacco Co. v. Kelly(1) mentioned in the Shell Company  case (2)  and set out below.  There the Company in the course  of its trading activity used to purchase tobacco in America and for  that  purpose had to acquire American dollars.   It  so happened  that  after it had acquired a  certain  amount  of dollars  for  making the purchases, it  was  prevented  from buying tobacco in America by Government orders passed due to outbreak  of war.  While the dollars lay with  the  Company, they  appreciated in value and later the  Treasury  acquired the dollars and paid the Company for them in sterling at the then current rate of exchange, as a result of which  payment the Company made a profit.  It was hold that the profit  was a  trading receipt of the Company.  Lord Greene said  at  p. 300: " The purchase of the dollars was the first step in carrying out an intended commercial transaction, namely, the purchase of  tobacco leaf.  The dollars were bought in  contemplation of  that  and  nothing else ". He  also  observed  that  the dollars   "  were  an  essential  part  of  a   contemplated commercial operation ". It seems to us that the amounts with which this case is concerned, were paid and were  refundable as an integral part of a commercial transaction, namely, the sale of liquor in bottles by the appellant to a wholesaler. The  case nearest to the present one is, in our  view,  that decided  by  this Court in K. M. S. Lakshmanier  &  Sons  v. Commissioner  of Income-tax and Excess Profits  Tax,  Madras (3).   There  the appellants, who were the  assessees,  were merchants  carrying on business as the sole  selling  agents for  yarn  manufactured by the Madura Mills Co.  Ltd.   They sold  the  yarn to their constituents and  in  the  relevant accounting period the sales were made under three successive arrangements each of which covered a part of it.  Under each arrangement, the assessees were paid a certain initial (1) (1943) 25 Tax Cas. 292.    (2) (1951) 32 Tax Cas. 133. (3) (1953) S.C.R. 1057. 692 sum  by their customers.  The question was as to the  nature of  these initial payments.  Under the first  arrangement  " the  appellants  had  two  accounts  for  each  constituent, namely,  ’ a contract deposit account’ and ’ a current  yarn account’,  crediting the moneys received from the  customers in  the  former account and transferring them  to  the  yarn account  in  adjustment of the price of the  bales  supplied then  and there, that is, as and when deliveries  were  made under  a contract either in instalment or in full ". It  was held that the amounts received from the customers under this

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arrangement  were  taxable  as  they  were  merely   advance payments  of the price and could riot therefore be  regarded as  borrowed money.  This was clearly so because under  this arrangement cash was deposited by a purchaser in respect  of a contract of purchase at the time it was made and was to be applied  when the goods had been delivered by the  appellant under that contract towards the price payable in respect  of them, such price not being payable in any other manner. The arrangement for the second part of the accounting period was  that the payment made by a constituent at the  time  of the  making of a contract was taken as "  Contracts  advance fixed deposit " and it was refunded when the goods under the contract had been supplied and the price in respect  thereof paid  in  full irrespective of the  earlier  payment.   With respect to the payment initially made under this arrangement Patanjali Sastri, C. J., said at p. 1067 : "...we  are of opinion that, having regard to the  terms  of the  arrangement  then in force, they partake  more  of  the nature  of trading receipts than of security  deposits.   It will  be  seen  that the amounts received  were  treated  as advance payments in relation to each " contract number " and though  the agreement provided for the payment of the  price in  full by the customer and for the deposit being  returned to him on the completion of delivery under the contract, the transaction is one providing in substance and effect for the adjustment  of the mutual obligations on the  completion  of the contract.  We hold accordingly that 693 the  sums received during this period cannot be regarded  as borrowed money............ It seems to us that the amounts involved in the present case were  exactly  of  the nature of the deposits  made  in  the second  period in Lakshmanier & Sons’ case (1).   There,  as here,  as soon as a transaction of sale was made the  seller received  certain moneys in respect of it.  It is true  that in  Lakshmanier & Sons’ case the transaction was a  contract to  sell  goods in future whereas in the  present  case  the transaction  was a sale completed by delivery of  the  goods and  receipt of the consideration.  But that  cannot  change the nature of the payment.  In Lakshmanier & Sons’ case, the payment  initially made was refundable after the  price  had been paid; in the present case the contract is to refund the amount  on the return of the bottles already sold.  In  each case  therefore  the payment was made as part of  a  trading transaction  and in each case it was refundable  on  certain events  happening.   In  each case  again  the  payment  was described as a deposit.  As in that case, so in the  present case,  the payment cannot be taken to have been made by  way of  a security deposit.  We must therefore on the  authority of Laskhmanier & Sons’ case, hold the amounts in the present case to have been trading receipts. It  was  Mr. Sastri’s effort to bring the  case  within  the arrangement  that  prevailed  in  the  third  part  of   the accounting  period in Laskhmanier & Sons’ case, the  initial payments  made during which were held to be loans.   But  we think  that  he  has not succeeded in  this.   The  payments during  the  third  period were  made  under  the  following arrangements:  "  Instead of calling for  amounts  from  you towards  ’Security  Deposit’ due to bales for which  we  are entering  into forward contracts with you and returning  the same to you from the said deposit then and there, as we  are doing now, and in order to make it feasible, we have decided to  demand from you a certain sum towards  Security  Deposit and  keep  the  same  with  us  so  long  as  our   business connections under forward contracts will continue with you."

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Under this arrangement a certain (1)[1953] S.C.R. 1057. 694 sum  was kept in deposit once and for all and  there.  after Lakshmanier  &  Sons  commenced to enter  into  the  trading transactions,  namely,  forward contracts for  sale-of  yarn with  the constituents who deposited the money.  The sum  so deposited  was  to be refunded with interest  at  three  per cent.  per  annum  at the end  of  the  business  connection between the parties, if necessary, after retaining there out any  amount due on the contracts made with  the  constituent which,  the  latter was at the termination of  the  business found  not to have paid.  Patanjali Sastri, C. J.,  observed at p.     1063  in  regard to the deposits made  under  this arrangement: "The  amount deposited by a customer was no longer  to  have any  relation  to  the  price fixed  for  the  goods  to  be delivered under a forward contract-either in instalments  or otherwise.   Such  price was to be paid by the  customer  in full  against delivery in respect of each contract  without, any  adjustment out of the deposit, which was to be held  by the  appellants as security for the due performance  of  his contracts  by the customer so long as his dealings with  the appellants by way of forward contract continued, the  appel- lants  paying interest at 3 per cent. in the meanwhile,  and having,  as appears from the course of dealings between  the parties’  the use of the money for their own  business.   It was only at the end of the " business connection " with  the appellants  that  an adjustment was to be made  towards  any possible  liability arising out of the  customer’s  default. Apart  from  such  a  contingency  arising,  the  appellants undertook  to repay an equivalent amount at the  termination of the dealings.  The transaction had thus all the essential elements of a contract of loan, and we accordingly hold that the deposits received under the final arrangement constitute borrowed money ". Having observed that the description of the payment made  by the  customer as a deposit made no difference for a  deposit included  as a loan, the learned Chief Justice further  said at p. 1064: "  The fact that one of the conditions is that it is  to  be adjusted against a claim arising out of a possible 695 default  of the depositor cannot alter the character of  the transaction.   Nor can the fact that the purpose  for  which the  deposit  is made is to provide a security for  the  due performance of a collateral contract invest the deposit with a  different  character.   It remains a loan  of  which  the repayment  in full is conditioned by the due fulfilment  of. the obligations under, the collateral contract ". In  coming  to  the  view that he did  with  regard  to  the arrangement  prevailing  in the third  period,  the  learned Chief Justice referred’ with approval to the case of  Davies v.   Shell  Company  of  China(1)  which  we  have   earlier mentioned. Now  it  seems to us that the reasons on which  the  learned Chief Justice based his conclusion that the deposits  during the  third  period were loans do not apply  to  the  present case.   In the present case, unlike in Lakshmanier  &  Sons’ case,  the  amount paid has a relation to the price  of  the goods  sold  ; it is part of that price as we  have  earlier said.  It was a condition of each transaction of sale by the appellant.   It was refundable to the wholesaler as soon  as he  returned  the  bottles  in which  the  liquor  had  been supplied  to him in the transaction in respect of which  the

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deposit had been made.  The deposit in the present case  was really  not  a security at all ; it did not  secure  to  the appellant anything.  Unlike Lakshmanier & Sons’ case, in the present  case  a deposit was made every time  a  transaction took  place  and it was refundable under the terms  of  that transaction  independently  of other  deposits  under  other transactions.  In Lakshmanier & Sons’ case, the deposit  was in the nature of the assee’s trading structure and  anterior to  the trading operations, as were the deposits  considered in  Shell Company case(1).  In the case in hand the  deposit was  part of each trading transaction.  It was re.  fundable under  the  terms  of the contract  relating  to  a  trading transaction  under which it had been made; it was  not  made under an independent contract nor was its refund conditioned by a collateral contract, as happened in Lakshmanier & Sons’ case. (1)  (1951) 32 Tax Cas. 133. 696 We therefore think that the present case is governed by  the arrangement  covering the second period and: not  the  third period  mentioned in Lakshmanier & Sons case (1), and,  come to  the  conclusion  that  the amounts  with  which  we  are concerned were trading receipts. Mr.  Sastri  also referred us to Morley  v.  Pattersall  and contended that the amounts with which we are concerned, were of  the same kind as those consideredin that case  and  were not  income.   It seems to us that there  is  no  similarity between  the  two cases at all.  Tattersall was a  firm  who sold horses of its constituents on their behalf and received the  price which it was liable to pay them.  It so  happened that  in the course of years various customers did not  come and  demand the amounts due to them.   Initially  Tattersall showed  those amounts in its accounts as  liabilities  which they really were.  Later it thought that it would never have to pay back these amounts and thereupon transferred them  to the  credit of its partners.  The Revenue sought to tax  the amounts so transferred as Tattersall’s income.  The question was  whether the amounts upon transfer  became  Tattersall’s income.   It  was  never contended  that  the  amounts  when received  as  price of the constituent’s  horses  sold  were Tattersall’s  income and the only contention was  that  they became  income upon being transferred to the credit  of  the partners.   It  was held that the amounts had not  by  being entered on the credit side, become income of the firm.   Sir Wilfrid Greene said at p. 65 : " Mr. Hill’s argument was to the effect that, although  they were not trading receipts at the moment of receipt, they had at   that  moment  the  potentiality  of  becoming   trading receipts.   That proposition involves a view of  Income  Tax Law  in  which  I  can discover  no  merit  except  that  of novelty." Then again he said: "  It seems to me that the quality and nature of  a  receipt for Income Tax purposes is fixed once and for all when it is received.  What the partners did in (1) [1953] S.C.R. 1057. (2) (1938) 22 Tax Cas. 51. 697 this  case, as I have said, was to decide  among  themselves that what they had previously regarded as a liability of the firm  they  would not, -for practical reasons, regard  as  a liability;  but that does not mean that at that moment  they received  something,  nor does it mean that at  that  moment they imprinted upon some existing asset a quality  different from  what it had possessed before.  There was  no  existing

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asset at all at that time." All  that this case decided was that moneys which  were  not when received, income-and as to this there was no  question- could  never later become income.  With such a case  we  are not concerned.  The case turned on the fact that the  moneys received by Tattersall were never its moneys; they had  been received on behalf of others and that receipt only created a liability towards them.  Now it seems to us quite impossible to say that the amounts with which we are concerned were not the  appellant’s moneys in the sense that the  constituent’s moneys in the hands of Tattersall were not its.  The amounts in this case were not received on account of any one but the appellant.  No doubt these moneys might have to be  refunded if certain things happened which however might never happen, but  that  did not make them the moneys of those  who  might become entitled to the refund. Mr.  Sastri referred us to the observations of  Sir  Wilfrid Greene,  M. R., in Morley v. Tattersall (1) at p. 65 to  the effect that, " The money which was received was money  which had not got any profit making quality about it; it was money which, in a business sense, was a client’s money and  nobody else’s"  and  contended  that the amounts  involved  in  the presentcase  were  of  the same nature.  We  are  unable  to agree.   If we are right in our view that the  amounts  were trading  receipts, it follows that they must have  a  profit making quality about them.  Their payment was insisted  upon as a condition upon which alone the liquor would be supplied with an agreement that they would. be repaid oil the  return of the bottles.  They (1)(1938) 22 Tax Cas. 51. 88 698 were  part  of  the transactions of  sale  of  liquor  which produced  the profit and therefore they had a profit  making quality.   Again, a wholesaler was quite free to return  the bottles  or not as he liked and if he did not  return  them, the  appellant  had no liability to refund.  It  would  then keep the moneys as its own and they would then certainly  be profit.   The  moneys  when  paid were  the  moneys  of  the appellant and were thereafter in no sense the moneys of  the persons who paid them. Having given the matter our anxious consideration which  the difficulties  involved  in  it require, we  think  that  the correct  view  to  take  is that the  amounts  paid  to  the appellant  and described as " Empty Bottles Return  Security Deposit " were trading receipts and therefore income of  the appellant  assessable to tax.  We agree with the High  Court that  the question framed for decision in this case,  should be answered in the affirmative. In  the  result  the appeal fails  and  is  dismissed.   The appellant will pay the costs in this Court.                         Appeal dismissed.