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TMI Blog1961 (6) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... o the members of the Tribunal-that much of the confusion in this case appears to have arisen because of the manner in which these cases were disposed of on appeal by the Tribunal in a brief and somewhat summary order. The Tribunal was simply content to observe : We agree with the Appellate Assistant Commissioner that such commission accrued, and became payable, to the assessee in the two relevant accounting periods as indicated by the Appellate Assistant Commissioner and did not accrue or become payable on March 31, 1949, and March 31, 1950, respectively, as contended for by him. The reasons which the Appellate Assistant Commissioner has given in this behalf appear to us sound . The confusion was worse confounded when in the statement of case submitted by the Tribunal to this court it further opined : Since the amounts under review were being included on accrual basis the occasion for finding whether or not such amounts could be included on 'receipt basis' did not arise . A brief narration of the relevant facts is necessary in order to appreciate the points involved. Under a deed of lease dated 15th June, 1936, executed by the assessee company of the first part a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment year 1950-51. In regard to the sum of ₹ 6,143 the assessee's stand was that although the amount had accrued and become payable to the assessee during the previous year 1950-51, yet even that sum could not be included in its taxable income on the ground that the assessee company had discontinued its business on the 31st March, 1949, that is, before the appointed day, April 1, 1950, when the Indian Income-tax Act was extended to Part B States which included the territory of Mewar. The Income-tax Officer did not entertain the above contentions of the assessee. He held that the assessee's system of accounting was not mercantile but on the cash basis , since it credited the amounts received from the lessee company, not on the date when it became due, but on the date when it was actually realised or near about the date when the amount so payable to the assessee was passed and allowed to be paid by the directors of the lessee company. The above fact also appears to have been admitted before the said officer by the representative of the assessee in a recorded statement dated April 17, 1954, maintained on the file. Therefore, in view of the above sums h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne before us, it had an important bearing, which would influence our answer to the question referred. The method of accounting employed by the assessee was a question of fact and we were unable to agree with the opinion of the Tribunal that the question did not arise. Indeed, the Income-tax Officer had decided the case on the receipt basis , namely, that the system of accounting followed by the assessee was on the cash basis and since the amounts had been actually received during the relevant financial years they were liable to be included in the taxable income of the assessee. Accordingly, by our order dated September 13, 1960, we called for a supplementary statement of the case from the Appellate Tribunal. A supplementary statement was submitted by the Tribunal on 24th November, 1960, and copies of the relevant entries in the books of accounts of the assessee and Mewar Sugar Mills Ltd., the lessee company, form annexures to the statement. The sum and substance of the statement is that in the opinion of the Tribunal the assessee's system of accounting was a hybrid system, it being neither mercantile nor cash . We have, therefore, now to deal with the case on the above statem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dit would relate back to the close of accounts at the end of the financial year concerned and not to the date of the audit. The process of auditing may quite possibly be delayed due to avoidable or unavoidable reasons but that cannot legitimately affect the accrual of the income itself. Similarly, the board of directors while passing the accounts would have no right to withhold payment of the ten per cent. of the profits to which the assessee was entitled under the terms of the agreement and if they procrastinated or delayed payment the assessee would be entitled to recovery of interest on the amounts due, as from the dates the accounts were closed, according to the system of accounting followed by the lessee-company, which in this case was the end of March each year. This would be the obvious result if a suit for recovery of the amount due had been instituted by the assessee; and we see no reason to hold why a different criterion should be adopted for purposes of assessment. It is unnecessary for us to discuss all the various cases cited at the Bar, except the decision of the Supreme Court in Cotton Agents Ltd. v. Commissioner of Income-tax [1960] 40 ITR 135 (SC) in which it was h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion in this form : Whether, on the facts and in the circumstances of this case, the amounts of ₹ 1,08,205 and ₹ 6,143 received on behalf of the assessee were liable to assessment as income during the previous years relevant for the assessment years 1950-51 and 1951-52 ? and answer the question in the affirmative. Another submission of the learned counsel for the assessee which requires notice is that the transaction between Mewar Sugar Mills Ltd. and the assessee company was in the nature of a joint business venture and the position of the assessee was merely that of a partner. Therefore, the profits payable to the assessee under the terms of the agreement became due to it as soon as it was entered in the books of Mewar Sugar Mills Ltd. and credited in favour of the assessee. Thus, the income so accrued to the assessee could not be assessed as income during the relevant previous years under consideration. It is submitted further that the fact that the assessee was entitled merely to 10 per cent. of the net profits could not form the premium for a lease, which is usually a fixed premium and not a fluctuating figure as in this case, which depended al ..... X X X X Extracts X X X X X X X X Extracts X X X X
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