B.P.JEEVAN REDDY,C.J. - (1.) THE Tribunal, Allahabad, has stated the following question for the opinion of this Court under S. 256 (2) of the IT Act,1961: "Whether, on the facts and in the circumstances of the case, the Tribunal was, in law, justified in upholding the AAC decision allowing the assessee's claim for bifurcation of receipts on account of administrative charges and commission over the period of hire -purchase duration ?"
(2.) THE respondent -assessee, U. P. State Agro Industrial Corporation Limited, Lucknow, is a company incorporated under the Companies Act, 1956. The assessment year concerned is 1969 - 70. During the relevant assessment year, the assessee purchased tractors, pumping sets and other implements from the manufacturer/dealer with a view to supply them to the farmers on a hire - purchase basis. Since the assessee made bulk purchases of these items, the manufacturer/dealer gave certain discount in the price. The Corporation, however, sold the said goods at their full value to the farmers. The price of the goods was payable by the farmers over a period of 3 to 7 years. Further, the price of the goods sold to the farmers not only included the profit of the Corporation but it also included the "administrative charges". Administrative charges were recovered from the purchasers at the rate of 1 3/4 per cent of the cost. In its return, the Corporation distributed the discount amount, profits and administrative charges over the, period of the hire -purchase duration. So far as the profit is concerned, there is no dispute before us now and justifiably so because the profit was not realised at once but it accrued from year to year when instalments were paid by the farmers.
(3.) THE only question before us is whether the Corporation was justified in distributing the administrative charges and discount amount over the hire -purchase period. We shall first deal with the question of discount amount. It is true that the Corporation did not pay the full price to the manufacturer/dealer ; it paid the price after deducting the discount, and it sold the goods to the farmers at their full value, but it cannot be said that it realised or earned the discount amount the moment it purchased or sold the goods. It realised it from farmers along with the price in instalments. In other words, discount is like the profit margin charged by the Corporation. We, therefore, think that the Corporation was justified in distributing the discount (commission) amount over the period of the hire -purchase duration.;