TaxTMI 
TaxTMI 
1998 (2) TMI 28
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....ash system of accounting. The assessee was engaged in a business under the name and style of "Srinivasa Circulation Scheme", which involved the assessee inviting a person to choose a gift and becoming entitled to that gift on his paying a sum of Rs. 5 and thereafter three persons, whom he was required to suggest paying Rs. 15 each for obtaining similar coupons and giving the names of other purchasers of similar coupons. The printed pamphlet sets out in detail the manner in which the said scheme operates. The relevant portion of the said pamphlet issued by the assessee is set out below : "Please get a coupon of our company from your friend or from the company by paying rupees five. Please mark your address and any one article you require ....
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....t on the purchase of gift articles. As the other calculations made by the Income-tax Officer are not relevant for the purpose of these cases, they are not referred to. The valuation of the closing stock of gift articles was disputed by the assessee, who claims that as the assessee had followed the cash system of accounting, the closing stock ought not to have been deducted, It was the further claim of the assessee that only the amount which represents the subscription from the completed cycle should be treated as the income and not the amount received from the subscribers, who did not complete the cycle. The Commissioner (Appeals) having accepted the assessee's appeal, the Income-tax Officer had chosen to file an appeal against the order....
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....ription relatable to broken cycles, when they have held that there is no obligation cast upon the assessee either to return the amount or to send the gift articles without receiving the full amount ? 3. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the assessee's income from, sales circulation business' should be computed by taking the gross receipts and allowing the gift articles relatable thereto especially when it is difficult to arrive at the value of the gift articles relating to broken cycles and incomplete cycle ?" Under the scheme operated by the assessee, the assessee received monies from all those who subscribed to the scheme. The assessee was liable to send gift....
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....the Supreme Court in CIT v. A. Krishnaswami Mudaliar [1964] 53 ITR 122, wherein it was held that whichever method of book-keeping is adopted, in the case of a trading venture for computing the true profits of the year the stock-in-trade must be taken into account. If the value of the stock-in-trade is not taken into account, in the ultimate result, the profit or loss resulting from trading is bound to get absorbed or reflected in the stock-in-trade unless the value of the stock-in-trade remains unchanged at the commencement of the year and at the end of the year. It was not the case of the assessee in these cases that the stock-in-trade remained the same at the commencement and at the end of the year, The closing stock-in-trade was there....