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C I T Central Kanpur v. Motor Sales Ltd - INCOME TAX REFERENCE No. 146 of 1985  RD-AH 840 (21 September 2004)
Court No. 37
INCOME TAX REFERENCE NO. 146 OF 1985
Commissioner of Income Tax (Central), Kanpur.
M/s Motor Sales Ltd., Lucknow.
Hon'ble R.K. Agarwal, J.
Hon'ble K.N. Ojha, J.
The Income Tax Appellate Tribunal, Allahabad, has referred the following two questions under Section 256(1) of the Income Tax Act, 1961 (hereinafter referred to as the Act) for opinion to this Court:
"1. Whether on the facts and in the circumstances of the case, the Tribunal was legally correct in holding that the sale of vehicles under the hire purchase agreement is concluded only when the terms of agreement are fully complied with by the hirer or option to purchase is exercised?
2. Whether on the facts and in the circumstances of the case , the I.T.A.T. was correct in law in holding that the entire dealer's margin or profit under the hire purchase agreement did not accrue to the assessee on the execution of agreement by the hirer?
The present reference relates to the Assessment Year 1978-79. The respondent assessee deals with motor vehicles. There had been a change in the method of accounting in the Assessment Year 1976-77, which resulted in the profit in which assessment order in question being lower by Rs. 4,82,803/- and thus there had been an addition of the like amount towards contingency account no. IV representing dealer's margin on sale of vehicle on hire purchase basis. The Commissioner of Income Tax (Appeals) confirmed the addition of Rs. 4,82,803/- representing as dealer's margin. The Tribunal, however, deleted, the addition.
We have heard Sri Govind Krishna, learned Standing Counsel for the Revenue. Nobody has put in appearance for the assessee.
Similar question came up for consideration in I.T.R. No. 108 of 1995 which relates to the Assessment Year 1976-77 and this Court vide judgment and order dated 14.9.2004 held that the sale of vehicles under the hire purchase agreement is concluded only when the terms of the agreement are fully complied with by the hirer or option to purchase is exercised and no profit accrue before the sale is complete.
Respectfully following the aforesaid decision, we answer the aforesaid question of law referred to us in the affirmative i.e. in favour of the assessee and against the Revenue. However, there shall be no order as to costs.
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