TaxTMI 
TaxTMI 
2006 (10) TMI 143
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.... 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. 4,19,661 or only Rs. 91,268 is assessable in the assessment year 1978-79?" 2. The 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 bifurcate....
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....ntitled to claim refund in full, if he does not avail of the service under the scheme, provided no member shall be entitled to claim refund as a matter of right within three years of the date of contract. After the expiry of three years, the member shall be entitled to refund of this deposit, on request. 3. Any job requiring dismantling of engine and overhauling, jobs will be done in our workshop only. 4. Materials, spare parts, etc., as required will be charged extra or may be provided by the owner. 5. Any work done other than shown in the above scheme will be charged extra. 6. Should tractors be not released for servicing to our mechanic even though prior information of his arrival is sent, you will be debited with the a....
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....fficer 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, the same was liable to tax. He did not even see that the opening balance in this year itself amounted to Rs. 3,35,721 and only the increase in this year could be brought to tax. 5. On appeal, the Commissioner of Income-tax (Appeals) sustained the addition in respect of receipt during the year under reference but deleted the amount of Rs. 3,28,401 which was the balance carried forward in the 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 start....
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....me of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not." 8. A reference to the above section shows that the amount representing trading liability is deemed to be profits and gains of business if during the year, there is surplus of the amount received. 9. In CIT v. T. V. Sundaram Iyengar and Sons Ltd. [1996] 222 ITR 344, following question was considered by the hon'ble Supreme Court (page 347) : "Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in deleting the addition made by the Income-tax Officer representing unclaimed sundry credit balances written back to the profit and loss account by ....