Decided on January 29,1982



A. Krishnamurthy, Judicial Member - (1.) THE appeal of the assesses and interveuers involves question of far-reaching importance vitally affecting particularly individual assessees engaged in profession who maintain their accounts on what is called "the cash system". THE question has been referred to the Special Bench in view of conflict of views by different Benches of the Tribunal and also its considerable general importance to persons engaged in profession, either individually or in partnership with others. We have, therefore, had the benefit of hearing not only the counsel appearing for the particular assessee, but also hearing the counsels for interveners, representatives including professional bodies and associations like the Institute of Chartered Accountants of India and the Bombay Chartered Accountants' Society, who sought permission, and were allowed to intervene. Counsel for another assessee, Y. P. Trivedi in WT Appeal No. 197 (Bom.) of 1980, on somewhat different facts, was also heard as involving some identical issue and it was understood that whatever was the ultimate decision in regard to the point raised in the appeal in WT Appeal No. 769 (Bom.) of 1980 would govern that appeal also in regard to the said point. We shall, therefore, take up the particular appeal [WT Appeal No. 769 (Bom.) of 1980] relating to the assessee, N.M. Shah, who is chartered accountant and is a partner in the firm of Shah & Co., Chartered Accountants.
(2.) The firm of Shah & Co., Chartered Accountants, maintains its accounts in what is called "cash basis" and, therefore, it took into its accounts only the professional fees which were actually received, and not professional fees which were outstanding as on the valuation date which coincides with the end of the accounting year 13-11-1974, relevant for the income-tax assessment for the year 1975-76. The return of net wealth submitted by the assessee, therefore, did not include the assessee's share of the outstanding professional fees of the firm. The assessee's claim before the WTO in this respect was that his share in the outstanding fees of the firm cannot be included as the firm follows cash system of accounting, and he relied in support of his claim on some orders of the Tribunal and also the decision of the Orissa High Court in CWT v. Vysyaraju Badreenarayana Moorthy Raju [1971] 79 ITR 330. The WTO negatived the claim, following another order of the Tribunal wherein it was held that the outstanding fee in the case of a professional is an asset and, accordingly, includible in the taxable wealth* and further that though such outstanding fees are includible, no deductions can be allowed on account of income-tax liabilities in respect of the same. He, therefore, added to the wealth declared by the assessee the sum of Rs. 20,000 as the estimated amount in respect of the assessee's 20 per cent share of the outstanding fees of the firm. The AAC rejected the contention of the assessee before him in the appeal preferred, following the decision of the Calcutta High Court in the case of Dipti Kumar Basil v. CWT [1976] 105 ITR 450.
(3.) AGGRIEVED by the order of the AAC, the assessee is in further appeal before us.;

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