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TMI Blog2019 (3) TMI 1068X X X X Extracts X X X X X X X X Extracts X X X X ..... rest taxable in the first year. This SOD method even though adopted by the Assessee in its Book of Accounts on the basis of Guidelines issued by the Institute of Chartered Accountants of India was not adopted in the Returns of Income filed by it which consistently adopted EMI method for taxability of interest income all these years. Since, for the previous assessment years, this Court has already approved such bifurcation of income and has held that interest income (Finance charges) on consistently adopted basis of E.M.I. would be taxable in the hands of the Assessee, the mere change of Accounting method in its Book of Accounts on the basis of S.O.D. does not alter the position in the tax in the hands of the assessee. Since in the case of Ashok Leyland Finance Ltd., (supra) the Coordinate Bench of this Court has upheld the taxability with regard to interest income on EMI method, which has been consistently followed, there is no reason to take a different view in the matter for the present Assessment years, in this case. - Decided in favour of assessee. - Tax Case Appeal No. 158 of 2009 - - - Dated:- 5-3-2019 - Dr. Justice Vineet Kothari And Mr. Justice C.V. Karthikeyan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re purchase agreement and that the transaction had not in any manner undergone any change from the one which was the subject matter of consideration by the Tribunal for the earlier years, in respect of which, reference application filed by the Revenue was dismissed, the Tribunal came to the conclusion that the Assessing Officer had committed a serious error in ignoring the EMI method, to adopt SOD method. 19. We are in agreement with the reasoning of the Tribunal in this regard that when once the Revenue had accepted the character of the transaction as hire purchase transaction, the income that flows from the transaction has to necessarily follow the treatment that is given under the hire purchase agreement. Secondly, when the Revenue had not disputed the fact that on all the earlier years, the Revenue had treated the income as per the hire purchase agreement on EMI basis , there are no materials available as on record to show that following such method had really resulted in suppression of income, in other words, there was no true reflection of the income that has to be assessed under the Act. 3 . It was also observed in the aforesaid Judgement that the Tribunal relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.170/- Year As per books based on Indexing Method As per income tax return based on Mercantile System Principal Finance charges Total Principal Finance Charges Total 1 7 27 34 20 14 34 2 15 19 34 20 14 34 3 22 12 34 20 14 34 4 26 8 34 20 14 34 5 30 4 34 20 14 34 100 70 170 100 70 170 Receipt of finance charges for the first and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Examination of the above judgment reflects that the case before the Madras High Court differed from the present one on crucial factual aspects . The Madras High Court found on facts that the terms of the agreement in that case did not permit adoption of the Indexing System of accounting and therefore, use of the said system in the books of accounts was held to be contrary to the terms of the contract itself. In the present case, however, there is no indication of the assessee s hire purchase agreements reflecting bifurcation of the EMIs into principal and interest components. In the absence thereof, the common and accepted usage of the Indexing system of accounting in the hire purchase trade must be held to be valid as otherwise the rate of interest under the mercantile system in so far as the later EMIs are concerned would be far higher and contrary to the rate prescribed in the assessee s agreements. Further, as the assessee had itself employed this system of accounting in its books of account, applying the law laid down in SANJEEV WOOLEN MILLS (supra), the Department was bound to accept the same for the assessment proceedings. Viewed thus, we are of the opinion ..... X X X X Extracts X X X X X X X X Extracts X X X X
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