High Court Of Kerala
Kalpaka Films vs. CIT
K.S. Paripoornan & K.A. Nayar, JJ.
Original Petn. No. 10523 of 19871
24th January, 1989
P. Balachandran, for the Petitioner : P.K. Ravindranatha Menon & N.R.K. Nair, for the Respondent
K. A. NAYAR, J.:
This petition is under s. 256(2) of the IT Act, 1961, filed by the assessee. The assessee-firm is engaged in the business of distribution of cinema films. As per an agreement dated October 4, 1977, the assessee advanced Rs. 3,85,000 by way of deposit to the producers. By cl. 19 of the agreement, the assessee was to be paid a commission of 25per cent of the net realisation of the picture and this commission had to be deducted from the monthly net realisation from the picture and thereafter the balance had to be adjusted towards the amount advanced. The picture was released in January, 1978, and the total collections up to March 31, 1978, was Rs. 2,04,050. As per the terms of the agreement, the assessee would have appropriated 25per cent of the amounts as commission but the assessee credited the entire amount to the account of the producer to whom Rs. 3,85,000 had been advanced. It was contended before the ITO that as the total realisation from the film up to the end of March, 1978, was only a little over Rs. 2 lakhs, the assessee felt that there was no necessity to credit the commission. The ITO did not accept this stand taken by the assessee. He felt that the assessee was entitled to 25per cent of the net realisation as commission and the amount of the commission had accrued to the assessee as soon as the realisations were made. In that view of the matter, the assessee’s income as commission was brought to tax amounting to Rs. 51,012. The assessee appealed to the CIT (A).
The Commissioner of IT (A) held that the amount had been rightly brought to tax by the ITO. On second appeal before the Tribunal, the Tribunal found that the assessee was entitled to receive the commission at the rate of 25 per cent of the net realisations of each month. The conduct of the assessee is not appropriating any amount as its income which has already arisen to it is not material and is of no consequence. Therefore, the Tribunal agreed with the order of the CIT (A). The assessee thereafter filed a petition under s. 256(1) for referring the questions of law referred to in para.6 of the original petition. The Tribunal, by its order dated June 18, 1987, held that no referable questions of law arose and, therefore, rejected the application. Aggrieved by that order, the assessee filed this original petition under s. 256(2) of the IT Act.
We heard counsel for the petitioner as well as the Revenue. Admittedly, the assessee is following the mercantile system of accounting. 25 per cent of the net realisations of each month accrued to the assessee. The Tribunal only followed the decision of the Supreme Court in E. D. Sassoon & Co. Ltd. vs. CIT (1954) 26 ITR 27(SC). There is no case that the amount advanced is unrealisable. The only case is that it is not appropriated in the year in question towards commission. The decision CIT vs. Devi Films (P) Ltd.(1982) 31 CTR (Mad) 341:(1983) 143 ITR 386 (Mad) has not dealt with this aspect of the matter. We, therefore, feel that no referable questions of law arise out of the aforesaid order of the Tribunal.
The, original petition is, therefore, dismissed.
[Citation : 177 ITR 414]