COMMISSIONER OF INCOME TAX Vs. SUPREME KURIES AND LOANS P LTD
HIGH COURT OF KERALA
COMMISSIONER OF INCOME TAX
Supreme Kuries And Loans P Ltd
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(1.) A common question of law, namely, whether the profits arising under various heads of terminated Kuries accrues in the year in which the Kuri has terminated, arises for consideration in all these cases. All these appeals and references are at the instance of the Revenue. Though assessees in some of the cases are different, as already stated, since the question involved in all these cases is, by and large same, all these cases are disposed of by this common judgment.
(2.) THE respondent -assessee in ITA Nos. 12 and 14 of 1999 is the same, namely, M/s Oriental Kuries (P) Ltd., Trichur, The respondent -assessee in ITA Nos. 13 and 48 of 1999 is the same, namely, Assyrian Charities Kuri Ltd., Thrissur. In all the other cases, the respondent -assessees are different, who are conducting Kuries at Thrissur. The assessment orders concerned in all these cases are for any one of the assessment years from 1988 -89 to 1992 -93. Since the details of the assessment orders have not much relevance for the purpose of this case, they are not set out in detail.
The brief facts necessary for disposal of these cases are as follows. The respondent -assessees in all these cases are conducting Kuries at Thrissur. The question as already noted is as to whether the respondent -assessees are liable to return the profits arising out of the various Kuries conducted by them as accruing on the date of termination of the Kuries. The various items which formed the profit of the Kuri business other than commission are Veetha palisa and auction discount. The assesses had been disclosing the said receipts as income for assessment only after expiry of three years from the date of' termination of the, Kuri. According to the assessee, this is a practice which is being followed by them consistently ever since they started the Kuries, and that this was being accepted by the AOs concerned till the assessment years with which we are concerned. According to the AO, Veetha palisa amount which had been forfeited had become the income of the assessees on the date of forfeiture and at any rate, the said amount accrued to the assessees on the termination of the respective Kuries. In this view of the matter, the AO had brought amounts which are kept in the Veetha palisa account and in the auction discount account, as the income of the assessees during the previous year, on which the said Kuries were terminated. Being aggrieved by the assessment orders, the assessees filed appeals before the CIT(A). Except in the case of two assessees for two assessment years, the CIT(A) allowed the case of the assessees by holding that the amount of Veetha palisa and the auction discount belong to the defaulted subscribers and that it acquired the character of income only after a period of three years from the termination of the Kuri, which is the period of limitation provided for recovery of money due and further that since the assessees have followed a particular method of accounting consistently for over a period of years, the AO was not justified in upsetting the said method by introducing his own method. The CIT(A) also relied on the decisions of the Tribunal in the case of some of the assessees and in other cases for taking the above view. However, in two cases (in the case of the assessee in ITR Nos. 33 and 36 of 2000 and in the case of the assessee in ITA No. 13 of 1999), the CIT(A) has taken a contrary view upholding the order of the AO. The Department took up the matter in appeal in all cases where the CIT(A) allowed the claim of the assessee. The assessees who were aggrieved by the CIT(A) order in three cases mentioned above had also filed appeals. The Tribunal disposed of the appeals by separate orders except in one or two cases. The appeals filed by the Department were dismissed and the appeals filed by the assessees were allowed. In all these appellate orders, the Tribunal had relied on its earlier decisions, and held that when the assessee was following a particular method of accounting relating to the income from Kuries, it is not for the Revenue to substitute its own method of accounting because that method was more palatable, Against the order of the Tribunal, the Revenue has sought reference of certain questions of law and the same was referred in ITR Nos. 33, 36 and 39 of 2000. The question of law referred in ITR No. 33 of 2000 reads as follows :
'Whether, on the facts and in the circumstances of the case and in the light of the finding of the AO that the profit on terminated Kuries accrues in the year in which the Kuri has terminated and Veetha palisa outstanding in respect of the terminated Kuries in the relevant previous years has to be included in the assessee's income the Tribunal is right in law in holding differently and in directing the officer to assess the profit on the basis of the actual realisation in accordance with the method consistently followed by the assessee ?'
The question of law referred in the other two references and in the appeals are also by and large similar to the one extracted above.
(3.) THE learned Central Government standing counsel for taxes appearing for the applicants/appellants in all these cases submitted that the Veetha palisa due to the defaulted subscribers were forfeited as per the Variyola governing the chit and had become the income by accrual on the date of forfeiture and that at any rate, such income accrues to the assessees on the termination of the respective chits. He further submitted that since the assessees in all these cases had been following the mercantile system of accounting, they were bound to return the income which arose from the forfeited Veetha palisa or auction discount in the year in which the respective Kuries were terminated. The standing counsel submitted that the method adopted by the assessee in returning such profits long after the termination of the Kuries was not justified and, therefore, the AO is entitled to treat the said profits as the income of the assessees of the previous year relevant to the assessment years in question. The Tribunal, according to the standing counsel, was not justified in relying on the decisions of this Court in CIT v. Trichur Kuri Syndicate Ltd : 211ITR365(Ker) and CIT v. Popular Kuries Ltd : 214ITR38(Ker) for allowing the claim made by the assessee, since the said decisions were rendered by this Court on the basis of the concrete findings of fact entered by the Tribunal in these cases. The standing counsel accordingly submitted that the Tribunal has decided all the appeals which are subject -matter of these cases erroneously and, therefore, the same has to be set aside.;
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