- (1.) The question referred to the High Court u/S. 256(2) of the Income-tax Act 1961 was as under :- "Whether on the facts and in the circumstances of the case the Tribunal was legally correct in holding that the sums of Rs. 12,80,428/- and Rupees 2,23,480/- were not rightly included in the total income of the assessee". The High Court answered the question in the negative and against the assessee.
(2.) The appellant-assessee (Agro Corporation) entered into a contract with the State Trading Corporation of India (Trading Corporation) for the sale of tractors imported by the Trading Corporation. The Agro Corporation under the terms of contract were not to charge from the customers purchasers of the tractors price more than the ceiling price as approved by the Trading Corporation. During the accounting year ending March 31, 1972 relevant for the assessment year 1972-73 the Agro Corporation sold a number of tractors imported through the Trading Corporation. The sale price realised by the Agro Corporation from the sale of such tractors exceeded the total amount which it was entitled to realise from the customers in accordance with the ceiling fixed by the Trading Corporation. It is not disputed that the excess amount realised by the Agro Corporation for the relevant year was Rs. 15,45,504/-. On August 5, 1971, the Trading Corporation wrote to the Agro Corporation asking it to refund the excess amount realised by them from the customers. It is, however, not disputed that the refund was not made in the relevant year. The Agro Corporation at the end of the relevant accounting year debited its sale by a sum of Rs. 15,45,504/- showing it as an amount which it had been required to refund to its customers. It, however, approached the Government of India claiming that it was entitled to add the excess amount to the sale price. It is not disputed that the Government of India, on August 28, 1973, rejected the request of the Agro Corporation and permitted it to retain Rs. 700/- per tractor as assembling charges.
(3.) In the assessment proceedings, before the Income-tax Officer, the Agro Corporation claimed deduction of the excess amount realised by them. The Income-tax Officer disallowed the deduction and added the same in the income returned by it for the year 1972-73. The appeal filed before the Appellate Commissioner was dismissed. Further appeal filed by the Agro Corporation before the Tribunal was, however, allowed on the following reasoning :- "After considering the above facts, we hold that on the basis of the mercantile system of accounting, followed by the assessee and the contract with the S.T.C. dated 10-9-1970, the sum of Rs. 12,80,428/- were not rightly included as income of the assessee during the year and, therefore, they are deleted.";