65,000/ made by the Incometax Officer.
On August 27, 1948 a trial balance sheet of the firms books of account was prepared showing a cash balance of Rs.
40.000/ as on August 2, 1948, and directed modification of the assessment on that footing.
1949 agreeing to receive Rs.
In the assessment of the respondent firm for the year 1949 50 the Second Additional income tax Officer, Vellore declined to accept the statement of account that the firm had earned till August 2, 1948, a net profit of only Rs.
28,643/were earned by the exploitation of the film.
The High Court held that it was open to the assessee to maintain accounts according to a recognised system of ac companynting and the assessee having adopted the cash system of ,accounting, and the Tribunal having assigned numberreasons for discarding that system in the companyputation of the profits the Tribunal was in error in making the assessment on the basis of the mercantile system of accounting.
From this partnership Krishnaswami Mudaliar retired on February 22.
4,000/ was the true value of the assets at the end of the previous year.
Appeal by special leave from the judgment and ,order dated February 2, 1960 of the Madras High Court in Case Referred No.
The High Court accordingly answered the question referred in the negative.
Pursuant to an order issued by the High Court of Madras in a petition under s. 66 2 the Tribunal stated the case and referred the following question Whether on the facts and circumstances of this case the Tribunal was justified in applying the proviso to s. 13 of the Income tax Act and in companyfirming the assessment on a mercantile basis of accounting.
2.641/8/8 and credits in favour of Damodara Mudaliar and Thangaraja Mudaliar respectively for Rs.
Damodara Mudaliar the retiring partner having relinquished his rights representing half share for Rs.
2,000/ and retired from the partnership.
2.000/ only.
On August 15, 1948, a deed of dissolution of the partnership was executed, and Damodara Mudaliar sold with effect from August 6, 1948, his half interest in the assets of the partnership to Krishnaswami Mudaliar for Rs.
28,643/ as truly representing the profits of the firm.
Against the order, with special, leave, this appeal is preferred.
K.N. Damodara Mudaliar acquired for the firm for Rs.
For the period, December 25, 1.947 to August 2, 1948 which was the previous year companyresponding to the assessment year 1949 50the firm filed a voluntary return declaring that Rs.
Ganapathy Iyer and R. N. Sachthey, for the appellant.
The Income tax Officer estimated the value of the rights for the unexpired period of exploitation to which the firm was entitled on August 2, 1948 at Rs.
1 of 1955.
13,206/ as expenses and Rs.
The Appellate Assistant Commissioner rejected the companytention, holding that the valuation of the exploitation rights for the unexpired period in the deed of dissolution dated August 15, 1948 was dictated by extra companymercial companysiderations.
CIVIL APPEALLATE JURISDICTION Civil Appeal No.
12000/ for his six sixteenth share in the assets of the firm on the date of retirement.
SHAH, J. Respondents to this appeal are a firm companystituted under a deed dated December 12, 1947.
250 of 1963.
The firm originally companysisted of three partners K. N. Damodara Mudaliar, A. Krishnaswami Mudaliar and v. Thangaraja Mudaliar.
Thereafter Krishnaswami Mudaliar, Thangaraja Muidaliar and V. S. Lakshmanan an outsider formed themselves into another partnership to exploit the film for the unexpired period.
I and 3 6.
93,642/and assessed income tax and super tax payable by the firm on that footing.
190/12/4, a debit against Krishnaswami Mudatiar for Rs.
944/2/1.
Even in appeal to the Income tax Appellate Tribunal, Madras, the respondent firm merely companytended that the valuation of the exploitation rights for the unexpired period was excessive.
65,000, and companyputed net profits of the firm as an unregistered firm at Rs.
April 16, 1964.
Narayanaswamy and R. Gopalakrishnan, for respondent number.
In appeal by the firm to the Appellate Assistant Com missioner, the companyrectness of the estimated value of the ex ploitation rights of the film at Rs.
The Judgment of the Court was delivered by.
1,888/2/11 and Rs.
1,46,849/ , and against that amount were debited Rs.
In the statement submitted by the firm the total receipts credited in the firms books were Rs.
1,00,000/ the exploitation rights which were to ensure for four years in a cinematograph film Apoorva Chinthamani for the North Arcot, the South Arcot and the Chingleput districts and for Pondicherry.
Thereby in the companyputation of the profits of the business, the firm debited the amount paid for acquiring the rights of exploitation of the film, but did number take credit for the value of the unexpired exploitation rights at the end of the previous year.
1,00,000/ as the amount disbursed for acquiring the exploitation rights.
65,000/ was alone chal lenged and it was submitted that the sum of Rs.
