Rule of consistency sustained the presumptive tax method for non-resident film distributors beyond the later clarified cutoff.

The 3 March 1987 CBDT settlement for non-resident film distribution companies provided a presumptive tax basis of 25% of gross film receipts, and the Department had long continued to assess member companies on that basis. Despite later clarification that the settlement was intended for pending assessments up to 31 March 1987, the Tribunal noted repeated acceptance of the same method in earlier cases and the absence of any workable alternative. Applying the rule of consistency, it treated the settlement as applicable to assessment years after 1987-88 and rejected the Revenue's attempt to depart from that method by mere estimation.

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Issues: Whether the CBDT settlement dated 3 March 1987 continued to govern the computation of income of the MPA member companies for assessment years subsequent to 1987-88.

Analysis: The settlement was issued to resolve practical difficulties in completing assessments of non-resident film distribution companies and provided a presumptive basis of taxation at 25 per cent of gross film receipts. Although the Board later clarified that the settlement was intended for pending assessments up to 31 March 1987, the Department itself continued for several years to assess member companies on the same basis, and the Tribunal had repeatedly upheld that method in a series of cases even after considering the later clarifications. In these circumstances, the Department's departure from the accepted method for the years in question, by resorting only to estimation without demonstrating any better alternative, was not justified. The consistent past practice, coupled with the absence of any workable replacement method, attracted the rule of consistency and prevented the Revenue from disowning the settlement in the present assessments.

Conclusion: The settlement dated 3 March 1987 was held applicable to assessment years subsequent to 1987-88, and the Revenue's appeals were rejected.

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