JUDGMENT B.P. Jeevan Reddy, C.J.
1. The Income-tax Appellate Tribunal, Allahabad, has stated the following question for the opinion of this court under Section 256(2) of the Income-tax Act, 1961 :
"Whether, on the facts and in the circumstances of the case, the Tribunal was, in law, justified in upholding the Appellate Assistant Commissioner's decision allowing the assessee's claim for bifurcation of receipts on account of administrative charges and commission over the period of hire-purchase duration ?"
2. The respondent-assessee, U. P. State Agro Industrial Corporation Limited, Lucknow, is a company incorporated under the Companies Act, 1956. The assessment year concerned is 1969-70. During the relevant assessment year, the assessee purchased tractors, pumping sets and other implements from the manufacturer/dealer with a view to supply them to the farmers on a hire-purchase basis. Since the assessee made bulk purchases of these items, the manufacturer/dealer gave certain discount in the price. The Corporation, however, sold the said goods at their full value to the farmers. The price of the goods was payable by the farmers over a period of 3 to 7 years. Further, the price of the goods sold to the farmers not only included the profit of the Corporation but it also included the "administrative charges". Administrative charges were recovered from the purchasers at the rate of 1 - per cent, of the cost.
3. In its return, the Corporation distributed the discount amount, profits and administrative charges over the period of the hire-purchase duration. So far as the profit is concerned, there is no dispute before us now and justifiably so because the profit was not realised at once but it accrued from year to year when instalments were paid by the farmers.
4. The only question before us is whether the Corporation was justified in distributing the administrative charges and discount amount over the hire-purchase period. We shall first deal with the question of discount amount. It is true that the Corporation did not pay the full price to the manufacturer/dealer ; it paid the price after deducting the discount, and it sold the goods to the farmers at their full value, but it cannot be said that it realised or earned the discount amount the moment it purchased or sold the goods. It realised it from farmers along with the price in instalments. In other words, discount is like the profit margin charged by the Corporation. We, therefore, think that the Corporation was justified in distributing the discount (commission) amount over the period of the hire-purchase duration.
5. We may now deal with the question relating to administrative charges. The first enquiry which we must make in this behalf is what does the expression "administrative charges" signify. According to the Income-tax Officer, this represents the charges collected towards the legal formalities at the time of entering into the hire-purchase transaction. The Tribunal has, however, understood the said concept in a different manner. It has observed that this amount is collected not only to meet the legal charges but also to meet the expenses which the Corporation has to incur over the period of the hire-purchase transaction towards the expenses of recovery and in filing suits, etc. It appears that the farmers/purchasers are spread over several villages and the Corporation has to employ persons for collecting the dues who have to visit the villages frequently. The Corporation has also got to take legal proceedings for recovering the amounts due. The Tribunal says that the administrative charges are meant to cover all these expenses. If this is the meaning of the expression, the assessee would not be unjustified in distributing and spreading this amount over the period of the hire-purchase transaction. We recognise that had the administrative charges meant what the Income-tax Officer said in his order, the situation would have been different. But since we are accepting the connotation of the expression as given by the Tribunal, the distribution of the administrative charges over the duration of the hire-purchase transaction becomes permissible.
6. For the above reasons, the question referred is answered in the affirmative, i.e., in favour of the assessee and against the Revenue. No costs.