TaxTMI 
TaxTMI 
1981 (12) TMI 59
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....ices of the Eicher Tractors dealt in by it, is justified ? 2. We have heard the parties. The facts which we have to take into consideration for determination of this issue are as under: The assessee Singhal & Co., is a registered firm consisting of two partners, namely, Dharam Chand and Suraj Prakash, having shares in the profits and losses of the firm in the ratio of 70 : 30. The assessee deals in Eicher Tractors. After a tractor is sold, there is a period provided for free service by the dealer the expenses of which are reimbursed by the manufacturers. However, there is a period of six months after the period during which free service is provided by the manufacturer when the assessee has to provide services, which is known as "post war....
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.... relevant to the assessment year 1979-80, the assessee collected an amount of Rs. 88,420 on account of post warranty service charges. Insofar as this amount of Rs. 88,420 is concerned, the first tractor on which post warranty service charge was levied was sold on 3-4-1978. As pointed out supra, for the first 6 months and 7 days, the post sale service is free. Therefore, the post warranty period in respect of this tractor ended on 10-4-1979. In respect of the tractor sold later on, the post warranty period ended even later. Whatever expenses the assessee incurred on the post warranty services up to 31-3-1979 were included in the sum of Rs. 18,406.30 which was deducted from the brought forward amount of Rs. 29,700 which had been received up t....
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.... 88,420 Less: Expenses incurred on post warranty services during assessment year 1979-80 18,406.30 &n....
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....p; 58,720 Post warranty service charges for the year 1978-79 29,700 ....
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....icular treatment and these amounts were carried through the books of account. The surplus, if any, left in the amount, was offered for taxation. It was thus a system followed by the assessee in a regular manner which has been unnecessarily challenged and the assessment of the assessee made on the basis which cannot be justified. It was contended further that it was after the period of post warranty services that the assessee could take these sums into consideration for the purposes of retaining back to the profit and loss account. For this the assessee had taken the necessary action and offered the amounts as shown in the respective accounts. For this reliance was placed on the Supreme Court judgment in the case of E. D. Sassoon & Co. Ltd. ....
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....n the assessee entered in its books of account the sale of a tractor, the sale proceeds consisted of two constituents---the main amount representing the price of the tractor and a nominal amount fixed by the assessee and charged for post warranty services. From the very beginning, the assessee took the latter amount as an amount received with certain conditions to be fulfilled in respect of each tractor after the first period of 6 months and 7 days when free service so provided was over. To this, the assessee has given a particular treatment and, in our opinion, this treatment was not given with a purpose to rob the revenue of its rightful due. The assessee provided for that contingency when it would be required to meet the post warranty se....