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TMI Blog1987 (10) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... laimed by way of accrue hire-purchase commission was in reality the amount of interest projected over the period of hire-purchase agreements, and that therefore only the interest relatable to the relevant account year was admissible as deduction ?" 2. On behalf of the department, Mr. C. R. Meena was of the view that these are pure questions of law and, therefore, need to be referred. On the other hand, the argument of the counsel was that the department has accepted that the assessee has been following the consistent system of accounting of such hire-purchase commission being charged in the year of payment. According to the counsel for the assessee it is not for the department to change the method of accounting followed consistently by the assessee, as there are no powers provided under the statute to the department to do so. In these circumstances, the question of chargeability of the hire-purchase commission to the income of the assessee is pure question of a finding of fact as it follows the earlier finding of fact of consistent system of accounting. 3. We have given careful consideration to the arguments of the parties. The Tribunal in paragraph 3 of its order have given a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been incurred before it is actually disbursed. In the present case before us, there is no dispute to the fact that the liability has accrued and what is being disputed is that since it could not be paid at a subsequent point of time it should not be allowed as an expenditure. As already observed by Their Lordships in a mercantile system once a liability is legally incurred it is rightly chargeable as an expenditure irrespective of the fact as to when it is payable or paid. Since the question is settled by Their Lordships of the Supreme Court no referable question of law can said to arise out of the present reference. The reference application is accordingly rejected. Per Shri H. S. Ahluwalia, Judicial Member - I have had the benefit of going through the order proposed by my learned brother and to my mind, it would be safer to submit rather than to withhold this reference. The incidents of hire-purchase agreement are well known to everybody. Instead of charging regular interest, the financier adds certain commission to the actual cost of the vehicle and the total thereof is made payable over a number of years. In other words the interest for a number of years is added to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence ? 2. Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in not upholding the disallowance of Rs. 94,465 out of the total liability of Rs. 1,20,380 claimed by the assessee as having accrued during the year on account of hire purchases commission ? 3. Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in not upholding that the liability of Rs. 1,20,380 claimed by way of accrued hire purchase commission was in reality the amount of interest project over the period of hire purchase agreements, and that therefore only the interest relatable to the relevant account year was admissible as deduction ?" When the reference application came up for hearing before the Jaipur Bench, the learned Accountant Member, who wrote the leading order held that no questions of law arise out of the order of the Tribunal and rejected the reference application. The learned Judicial Member held that the questions of law do arise out of the order of the Tribunal and desired that a reference in the matter should be submitted to the High Court by framing an appropriate question. Hence there is thus a difference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,465 would be disallowed. 3. Aggrieved by this disallowance the assessee preferred appeal before the commissioner (A). It was contended before him that what was agreed to be paid was only finance commission and that the liability to pay the finance commission accrued under the terms of the agreement as soon as the agreement was entered into with the concerned parties and what would happen in the event of assessee failing to pay installments would be totally irrelevant to consider whether what was paid was finance commission or interest. It was further pointed out that in the earlier years commencing from 1973-74 huge amounts were claimed as finance commission and were allowed as a deduction and a departure from that system of accounting should not have been adopted by the Income-tax Officer. The system of accounting being mercantile, the liability to pay interest arise as soon as the agreement was entered into with the parties. The Commissioner (A) agreed with this view and directed the entire amount of Rs. 94,465 to be deleted. 4. The department then preferred a further appeal before the Tribunal contending for the restoration of the disallowance. After hearing both the sides, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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