2003 (5) TMI 469 - AT - Income Tax

Summary

Issues Involved:
1. Proper method of accounting for income from chit business.
2. Rate of depreciation permissible to generators driven by petrol or diesel.

Summary:

Issue 1: Proper method of accounting for income from chit business

The appeal by the assessee, a company engaged in the chit business, concerns the proper method of accounting for its income. The assessee initially followed the mercantile system of accounting for the commission earned as a foreman but switched to the completion method from January 1, 1986. The authorities rejected this change, arguing that the commission accrued on the day of the chit auction. The Tribunal examined the Chit Funds Act, 1982 (CFA) and determined that the foreman's commission accrues and is payable at each monthly draw. The Tribunal concluded that the change in the method of accounting was not justified, as the CFA clearly stipulates the accrual and right to the commission at each draw. Therefore, the claim of the assessee was rejected.

Issue 2: Rate of depreciation permissible to generators driven by petrol or diesel

The second issue pertained to the rate of depreciation for generators driven by petrol or diesel. The authorities allowed a depreciation rate of 30% applicable to generators running on wind energy or other renewable energy devices and rejected the appellant's claim for a higher rate. The Tribunal upheld the authorities' decision, finding no reason to interfere with their orders.

Conclusion:

The appeal was dismissed, with the Tribunal rejecting the change in the method of accounting for the foreman's commission and upholding the authorities' decision on the rate of depreciation for generators.