COMMISSIONER OF INCOME TAX Vs. MODERN FARM SERVICES

JUDGEMENT

(1.) FOLLOWING question of law has been referred for opinion of this Court by the Tribunal, Chandigarh Bench, Chandigarh,

(2.) FACTS noticed in the statement of case are that the assessee has been a dealer in Massey Ferguson Tractors for the District of Bhatinda. It received its quota from the manufacturers directly. The assessee's business was established since 1969. As per universal practice adopted by other dealers of tractors of various makes, the assessee had formulated a 'Post Warranty Service Scheme' under which the customers who were to buy tractors from the assessee, had the option of becoming members of the said scheme, which was bifurcated as Scheme 'A' and 'B'. The joining of the said scheme was absolutely voluntary. The two schemes, as per "Post Warranty Service Scheme" schedule, can be detailed as below :

(3.) ON appeal, the CIT(A) sustained the addition in respect of receipt during the year under reference but deleted the amount of Rs. 3,28,401 which was balance carried forward in Post Warranty Service Scheme Account for the previous year. The Tribunal upheld the deletion and also set aside the addition. It was held that the amounts were received by the assessee for services to be started after six months of the Post Warranty Service Scheme and refund could also be obtained within six months. For the earlier years, the Revenue accepted the mode adopted by the assessee. Receipt was not the sole test of taxability. The amounts received were not free from encumbrances. The assessee, had provided for the contingency which may be required to be kept, and, therefore, the amount could be kept under separate account.