Income-tax---

----Income---Diversion by overriding title---Sugar industry---Amount credited to "Molasses Storage Fund" and "Spirit Storage Fund" under statutory obligation---Amount could be utilised only under directions of Government-- Amount diverted by overriding title---Not income assessable to tax.

The amount credited to the molasses storage fund and the spirit storage fund as part of the statutory obligation cast on the assessee came from out of the sale proceeds of molasses and ethyl alcohol effected in the accounting year and since the amount could be utilised only under the directions of the Government, they could not be assessed as the income of the assessee in the relevant assessment year.

C.I.T. v. Pandavapura Sahakara Sakkare Kharkane Ltd. (1992) 198 ITR 690 (Kar.) fol.

H. Raghavendra Rao for the Commissioner.

Jayakumar S. Patil, Ramadas and K. Gajendra Rao for the Assessee.

JUDGMENT

S.P. BHARUCHA, CJ. ---The only question to be considered in this reference relating to the assessment year 1982-83 reads thus:

"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that the amount which was credited to the molasses storage fund and spirit storage fund as part of the statutory obligation cast on the assessee came from out of the sale proceeds of molasses and ethyl alcohol effected in the accounting year under consideration and they should not be taken as income of the assessee in the relevant assessment year?"

Counsel are agreed that, in view of this Court's judgment dated September 11, 1991, C.I.T. v. Pandavapura Sahakara Sakkare Kharkane Ltd. (1992) 198 ITR 690 (I.T.R.C. No.47 of 1990), the question has to be answered in the affirmative and in favour of the assessee. It is so answered.

M.BA./2376/TQuestion answered.