TMI Blog1992 (2) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... on's coffee ? and 3. Is the decision of the Tribunal opposed to the principles laid down by the Hon'ble Supreme Court in 59 ITR 254 (State of Kerala v. Bhavani Tea Co. Ltd.) ? " The respondent is an assessee, assessed in the status of " tenants-in-common ", under the Kerala Agricultural Income-tax Act. We are concerned with the assessment year 1978-79 for which the accounting period was July 1, 1976 to June 30, 1977 (1976-77). Amongst others, the assessee returned income on coffee. The receipt during 1976-77 coffee season was accounted in the sum of Rs. 8,25,000. This represented value of 1,10,000 estimated points valued at Rs. 7.50 per point. The assessee was maintaining the accounts on " mercantile basis ". The assessing authority effected the assessment by order dated August 30, 1980. This was long after the accounting period. When the assessment came to be effected, it became known that the Coffee Board awarded value for 1976-77 season to the assessee at 1,16,531 points and at the rate of Rs. 12.10 per point. So, the assessing authority, as against the returned income of Rs. 8,25,000 on account of coffee, determined the value for 1,16,531 points, at Rs. 12.10 per point, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is common ground that the assessee maintains its accounts on the " mercantile basis ". It is also common ground that the sale of coffee is regulated by the Coffee Act, 1942. Analysing the provisions of the Coffee Act, 1942, in the light of the Madras Plantations Agricultural Income-tax Act, 1955, the Supreme Court of India in State of Kerala v. Bhavani Tea Produce Co. Ltd. [1966] 59 ITR 254 at page 260, stated thus : "The appellant-company maintains its accounts on the mercantile system. When it handed over coffee to the Coffee Board it entered the price of the coffee according to the valuation of the Coffee Board in its books of account although it did not receive payment immediately because as has been shown above, the payment is delayed unless immediate settlement is made ... In these circumstances, it is plain that the handing over of coffee by the planter amounts to a sale to the Coffee Board and the payment of the price is from the sale of all the coffee in the surplus pool unless the planter settles for immediate payment. The system of accounting must make a difference. If it, were a cash system, income would be taxable when actually received but in the mercantile system ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee has a further plea that the actual amount received by it in the later year for this accounting period is taxable in the later year consistent with the procedure followed by the assessee in accounting for the value of coffee. The plea of the assessee was that the estimate made by it in its accounts regarding the valuation of coffee should have been accepted. The fact that the coffee was sold at a higher rate or for larger points and such facts came to the notice of the assessing authority before the assessment was made cannot enable the assessing authority to look back and adopt the figure actually awarded which became known only long after the expiry of the accounting period. We are of the view that this submission by the assessee is unsustainable. In the mercantile system of accounting, the assessee is taxable on the income earned or accrued due though the receipt or payment may not be immediate and may be delayed. Since, in this case, the assessee was maintaining the accounts on mercantile basis and the agricultural income was derived by the assessee for the year in which the relevant entry was made in its accounts about the sale of coffee to the Coffee Board, we are of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court in Bhavani Tea Produce Co.'s case [1966] 59 ITR 254. We are of the view that the decision of the Supreme Court in Gajapathy Naidu's case [1964] 53 ITR 114, cited by counsel for the assessee will not, in any way, advance the plea that the income did not accrue or arise during the relevant accounting period. In the said case, the assessee had no legal right for the payment of the sum in issue therein (compensation) during the accounting year 1948-49 (assessment year 1949-50). He, however, made representations to the Government, after the close of the year, stating that he had incurred loss. The Government directed the payment of Rs. 12,447 to the assessee by way of compensation for the loss which was received by the assessee in the accounting year 195O-51 relevant to the assessment year 1951-52. A question arose as to whether the amount so received could be related back to the earlier assessment year ( 1949-50 during which year the assessee actually supplied the goods to the Government. Noticing that there was no legal right to the present sum (compensation) during the accounting period ( 1948-49 ) and that no such income accrued to the assessee during the said accou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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