TMI Blog2006 (10) TMI 143X X X X Extracts X X X X X X X X Extracts X X X X ..... d claimed by any purchaser thereafter will be a permissible deduction during that relevant year - 12 of 1988 - - - Dated:- 18-10-2006 - ADARSH KUMAR GOEL and RAJESH BINDAL JJ. Dr. N. L. Sharda for the Commissioner. JUDGMENT 1. The following question of law has been referred for opinion of this court by the Tribunal, Chandigarh Bench, Chandigarh, arising out of its order dated August 10, 1985, R. A. No. 282/Chandi/1985, in respect of the assessment year 1978-79 : "Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the credit balance in the post-warranty service scheme is not liable to tax and if the answer to this question is in the negative, whether the whole sum of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hase of tractor, during which period free warranty services were available at the cost of the manufacturers, the member could call for services which were to be rendered either at his farm, i.e., that of the customer/member, or in the workshop of the assessee, depending upon the nature of the services to be rendered. The relevant conditions for these services were as under : "The contract will be valid for one/two years from the date of the first post-warranty service. 2. This warranty shall be operative from the date of the first ser-vice to be communicated in writing by the member. The member shall be entitled to claim refund in full, if he does not avail of the service under the scheme, provided no member shall be entitled to claim r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch member had expired, the excess could be taken to the profit and loss account. On the basis of consistently adopted system of accounting, the assessee carried over the balance in post warranty service scheme account at Rs. 3,35,721 to, which was added the amount received during the year under reference, i.e., Rs. 91,260 and on the debit side there was only a refund of Rs. 7,320, which left the net balance of Rs. 4,19,661. On the strength of the scheme and on the basis of the method of accounting, the Revenue accepted the accounts till last year but for this year, for the first time, the Income-tax Officer added the total amount of Rs. 4,19,661 in the income of the assessee, holding that it was trading receipt and since it was not refunded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee, and subsequently during any previous year the assessee has obtained, whether in cash or in any other manner, whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by him or the value of benefit accruing to him, shall be deemed to be profits and gains of business or profession and accordingly chargeable to income-tax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e treated as taxable income. In other words, the principle, appears to be that if an amount is received in the course of trading transaction, even though it is not taxable in the year of receipt as being of revenue character, the amount changes its character when the amount becomes the assessee's own money because of limitation or by any other statutory or contractual right. When such a thing happens, commonsense demands that the amount should be treated as income of the assessee." 11. A plea of the assessee in the present case that the amount had not been transferred to the profit and loss account, did not make a difference on principle. If no liability accrued during the year, the amount could not be kept in suspense account. The sam ..... X X X X Extracts X X X X X X X X Extracts X X X X
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