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TMI Blog2013 (3) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... stockist - whether becomes a sale on their despatch or on the happening of various events including the draw taking place? - Held that:- After going through the agreement the arrangement by which the assessee sent tickets to the stockists who in turn sold the same to their agents did not indicate that the sale took place at the point of dispatch of tickets to the stockists. Also the unsold tickets are to be returned to the organizing agent of the assessee at least one day before the actual date of the draw and any tickets received thereafter would not be accepted and treated as sold by the stockists. This makes it clear that those tickets which are returned by the stockists cannot be treated as having been sold. The corollary to this is that mere dispatch of tickets to the stockists would not entail a sale. Thus, till the date of the draw or just prior to the date of the draw it cannot be ascertained as to whether the dispatched tickets were actually sold or not -in favour of the assessee. Changed method of accounting adopted by the assessee - whether give a distorted picture of the business for the purpose of computing the taxable income or was acceptable even though the opening s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellate Tribunal was right in law in holding that the tickets sent to the stockist do not become a sale on their despatch but assumes the character of a sale on the happening of various events including the draw taking place? (3) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that "changed method" of accounting adopted by the assessee firm did not give a distorted picture of the business for the purposes of computing the taxable income of the assessee and was acceptable even though the opening stock and closing stock were valued by different methods? Assessment Year 1990-91: (1) Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the assessee firm was entitled to depreciation claim of Rs. 7,76,010/- only in respect of commercial vehicles acquired and leased out by it in the last week of the accounting period even though the said vehicles were not put to use during the relevant accounting period? (2) Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the tickets sent to the stockist do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Tribunal was right in law in directing the Assessing Officer to recompute the assessee's income?" 2. We shall first take up the questions in respect of the assessment year 1989-90. There are two sets of questions for this year. The first set comprises of three questions and the second set of the fourth which is essentially a consequential issue. 3. The assessee, during the relevant years, was engaged in the business of printing of lottery tickets and organizing lotteries on behalf of, inter alia, the Government of Sikkim. Additionally the respondent- assessee also carried on the business of leasing of vehicles for commercial use. In respect of the financial year ending on 31.3.1989, the assessee had changed its method of accounting which it had adopted earlier. In the earlier years, the respondent-assessee had shown all its dispatches of tickets to its stockists as sales without being concerned with the question of whether the tickets were sold to the ultimate customers or not or whether the draw had taken place or not. In other words, in earlier years any dispatches made by the respondent-assessee during the relevant accounting year were treated as sales. With effect from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the purposes of its business, which was leasing of vehicles. If any authority for this proposition were needed, the same would be supplied by the decision of this Court in CIT Vs. Bansal Credits Ltd. : (2003) 259 ITR 69 (Del.). Consequently, this question is answered in favour of the assessee and against the revenue. 6. We now move on to question No.2 which deals with the issue of the point of sale of the lottery tickets. According to the revenue, the moment the respondent-assessee dispatches the tickets to its stockists, a sale takes place. Therefore, the fact that the tickets were sent to the stockists within the accounting year would mean that the sales had been finalized during that year. It is also the contention of the revenue that it is irrelevant as to when the draw actually takes place. We notice that the Tribunal has held otherwise after examining the relevant clauses of the agreement of the respondent-assessee with the stockists. This would be clear from the paragraph 39 of the impugned order in respect of the assessment year 1989-90 which reads as under :- "39. In order to appreciate the arguments, it would be necessary on our part to set out certain relevant cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Agent shall have the right to adjust from the security all dues which are payable by the stockist to the Organising Agent." 7. We notice that the Tribunal, after going through the said agreement, had observed that the arrangement by which the respondent- assessee sent tickets to the stockists who in turn sold the same to their agents did not indicate that the sale took place at the point of dispatch of tickets to the stockists. We also notice that the unsold tickets are to be returned to the organizing agent of the respondent-assessee at least one day before the actual date of the draw and any tickets received thereafter would not be accepted and treated as sold by the stockists. This makes it clear that those tickets which are returned by the stockists cannot be treated as having been sold. The corollary to this is that mere dispatch of tickets to the stockists would not entail a sale. It is only those dispatches of tickets which are not returnable in the manner indicated above which would be recorded as sales. Thus, till the date of the draw or just prior to the date of the draw it cannot be ascertained as to whether the dispatched tickets were actually sold or not. We, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in law in holding that the interest income of Rs. 87,695/- included in Rs. 10,51,987/- shown as "other income" by the assessee was eligible for deduction u/s 32 AB of the I.T. Act, 1961? (5) Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that investment income amounting to Rs. 63,365/- shown by the assessee as "other income" was eligible for deduction u/s 32 AB of the I.T. Act 1961 even though the said income being interest received from the Bank on Short Term Fixed Deposit was assessable as income from other sources?" These questions arose in the backdrop of the factual situation that the respondent-assessee had to place certain funds as margin money in order to obtain the bank guarantee which was required by the State Government of Sikkim for the purpose of enabling the respondent-assessee to carry on the business of printing lottery tickets and for conducting lotteries on behalf of the State Government of Sikkim. The funds which were placed as margin money earned interest. The question which arose was whether these amounts would be placed under the head of "business income" or under the head of "income from other sources" ..... X X X X Extracts X X X X X X X X Extracts X X X X
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