1978 (9) TMI 91 - AT - Income Tax

Summary

Issues:
1. Determination of the point of time when commission income accrued to the assessee.
2. Intimation of commission determination and its impact on the relevant assessment years.
3. Allowability of expenditure incurred in the rice account for the assessment year 1975-76.
4. Addition of Rs. 5,000 in the potato trading account for the assessment year 1975-76.

Analysis:

Issue 1:
The first issue revolves around determining the point of time when the commission income accrued to the assessee. The agreement between the assessee and Bengal Auto Distributors specified that the bonus commission would be paid upon receipt of corresponding bonus by the distributors. The Tribunal found that the commission could only accrue to the assessee upon intimation by the distributors regarding the determined amount. As per the terms of the agreement, the bonus commission did not accrue at the end of any specific period but upon determination by Bengal Auto Distributors.

Issue 2:
The second issue concerns the intimation of the commission determination and its impact on the relevant assessment years. The Tribunal analyzed the correspondence between the assessee and Bengal Auto Distributors to ascertain when the intimation regarding the commission amount was received. It was established that the intimation was received only with a letter dated 4th November 1974. Consequently, the commission income of Rs. 66,927 was deemed to have accrued to the assessee in the previous year relevant to the assessment year 1975-76, leading to the cancellation of the reassessment for the assessment year 1974-75.

Issue 3:
Regarding the allowance of expenditure incurred in the rice account for the assessment year 1975-76, the Tribunal noted that the expenditure of Rs. 13,951 was paid in this assessment year. The correspondence with the Government of Assam indicated a dispute over the payable amount, which was eventually settled when the payment was made on 22nd June 1974. The Tribunal concluded that the expenditure accrued only when the payment was made, making it allowable as a deduction for the assessment year 1975-76.

Issue 4:
The final issue pertains to the addition of Rs. 5,000 in the potato trading account for the assessment year 1975-76. The Tribunal observed discrepancies in the trading results of the assessee, particularly in the quantity of potatoes sold compared to recorded figures. Despite the assessee receiving a rebate at the time of purchase for potential losses, the Tribunal found that the addition made by the Assessing Officer was reasonable and confirmed the addition of Rs. 5,000 in the potato trading account.

In conclusion, the Tribunal directed the Assessing Officer to recompute the total income for the assessment year 1975-76 and authorized amendments to the assessments of the partners accordingly. The reassessment for the assessment year 1974-75 was canceled, and the respective appeals were allowed.