9911796707
TMI Blog2006 (12) TMI 118X X X X Extracts X X X X X X X X Extracts X X X X ..... eir business activity. The assessees were maintaining their accounts on mercantile basis and computing loss or profit, as the case may be, at the end of the chit period in respect of chits terminating in a particular previous year, following the completed contract method. Before the Assessing Officer, the assessees claimed that the discount arose at a particular point of time when the prized chit amount was received and the discount was a statutory and contractual liability incurred by the subscriber as a consideration for obtaining the sum total of all the contributions by way of subscription in an accelerated manner. According to the assessees, the discount was not an amount paid in advance like rent or interest, but was a single amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emaining period of the chit. The Assessing Officer rejected the method of accounting adopted by the asses sees and taxed the dividend in the year of receipt and allowed chit loss on proportionate time basis by distributing it over the remaining period subsequent to the bidding at the chit auction. On appeal by the assessees, the Commissioner of Income-tax (Appeals), while rejecting the completed contract method, held that dividend is taxable in the year of receipt and chit loss is allowable as a deduction in the year of bid itself. Aggrieved against the same, both the assessees and the Department went on appeals before the Income-tax Appellate Tribunal and the Tribunal, relying upon the instructions made by the Central Board of Direct T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9), batch, by common judgment dated June 19, 2006, held as follows: "A conjoint reading of the above provisions of law makes it clear that all income received or deemed to be received or accruing or arising during the previous year shall form part of the total income of the assessee and such income shall be computed in accordance with the accounting system which the assessee is regularly following. Here, on the facts of the case, the authorities have found that the assessees are following mercantile system of accounting. The mercantile system of accounting means, as discussed in Shiva Prasad Gupta v. CIT, AIR 1929 All 819, the amounts that have become recoverable are shown as the income actually received and the liabilities incurred are s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cles, bye-laws, agreement or resolution aforesaid, shall, to the extent to which it is repugnant to the provisions of this Act, become or be void, as the case may be', the definitions of the expressions, discount, dividend, prize amount, as extracted above, will prevail over the similar definitions as found in the Income-tax Act, because a non-obstante clause is generally appended to a section with a view to give the enacting part of the section in case of conflict, an overriding effect over the provision in the same or other Act mentioned in the non-obstante clause (vide: State of Bihar v. Bihar Rajya M.S.E.S.K.K. Mahasangh [2005] 9 SCC 129). Therefore the discount is not an interest payable on the prized amount, but it is a loss. As a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For the foregoing reasons, we hold that the dividend income has to be taxed on the basis of its accrual and accordingly, we answer the first question in favour of the Revenue and against the assessee. As regards the second question, we hold that the discount loss claimed should be allowed in the year of its accrual and hence, we answer the second question in favour of the assessee and against the Revenue. With regard to the third question, since the question is academic in nature, we need not go into the same." In view of the above, the above tax case appeals are disposed of answering the first question of law in favour of the Revenue and against the assessee and the second question of law against the Revenue and in favour of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
