- (1.) THE Income -tax Appellate Tribunal, Jaipur Bench, Jaipur ('the Tribunal') has made reference for our answer to the following questions in D.B. Income -tax Reference No. 43/1989: (i) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in not upholding the disallowance of interest payment of Rs. 15,667 claimed by the assessee under the head 'Finance commission' and interest which did not pertain to the accounting period relevant to the assessment year under reference? (ii) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in not upholding the disallowance of Rs. 15,667 out of the total liability of Rs. 28,000 claimed by the assessee as having accrued during the year on account of hire -purchase commission ? (iii) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in not upholding that the liability of Rs. 28,000 claimed by way of accrued hire -purchase commission was in reality the amount of interest projected over the period of hire -purchase agreements, and that therefore only the interest relatable to the relevant account year was admissible as deduction ? And the following questions have been referred in D.B. Income -tax Reference No. 7/1990: (1) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in not upholding the disallowance of interest payment of Rs. 94,465 claimed by the assessee under the head 'Finance commission' which did not pertain to the accounting period relevant to the assessment year under reference ? (2) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in not upholding the disallowance of Rs. 94,465 out of the total liability of Rs. 1,20,380 claimed by the assessee as having accrued during the year on account of hire purchase commission ? (3) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in not upholding that the liability of Rs. 1,20,380 claimed by way of accrued hire -purchase commission was in reality the amount of interest projected over the period of hire -purchase agreements, and that therefore, only the interest relatable to the relevant accounting year was admissible as deduction ?
(2.) THE aforesaid questions have been referred for the same assessee on same set of facts. Thus, both the cases are taken up together for hearing and decided by this common order. The brief facts relevant to the issue are that the assessee has claimed deduction of finance commission which was charged as expenditure in the profit and loss account of the assessee. The aforesaid deduction was claimed in the same year in which the hire purchase agreement was entered by the assessee irrespective of the fact that actual payment was made even in the following years. The assessee had purchased trucks, trolleys etc. under an agreement with the finance companies, and as per the agreements for hire -purchase, the assessee was to make payment of the hire purchase amount and finance commission in instalments. As per the accounting system adopted by the assessee, the entire amount payable towards finance commission as per the hire -purchase agreement was claimed in the assessment year in which such hire -purchase agreement was entered into irrespective of the fact that actual payment was even made in the following years. The issue raised by the revenue is as to whether the entire amount towards finance commission can be deducted or can be claimed in the assessment year in which hire -purchase agreement was entered or the part of finance commission has to be shown for subsequent years in which actual payment was made.
(3.) LEARNED Counsel for the revenue submits that it being hire -purchase agreement, title of the vehicle was not passed on to the assessee and thereby, the amount of finance commission, which was actually paid in the subsequent years cannot be claimed as the expenditure in the year when the hire -purchase agreement was entered, thus, the deduction towards finance commission cannot be taken entirely in the year of the hire -purchase agreement rather same has to spread in the years in which the aforesaid commission was actually paid by the assessee in instalments.;