F. C. RUSTAGI, J. M.: Order Since, main dispute raised in these two appeal, on each by assessee and Revenue, pertained to receipts by assessee under Post Warranty Service Scheme for service and repairs of tractors, both were heard together and are disposed of by this consolidated order for sake of conveniences. 2 . assessment year involved is 1978-79. In assessee s appeal, grounds cover about eight pages but same are more or less arguments and facts in background of issue, though dispute is singular, whether amounts received by assessee under Post Warranty Service Scheme for services and repairs of tractors could be subjected to tax during accounting period ending 31st March 1978 which is relevant for year under consideration. In Revenue s appeal, ground raised in this aspect is that even amounts receive in earlier years under Post Warranty Service Scheme instead of taking over to balance-sheet, could have been subjected to tax during year under consideration. In Revenue s appeal, however, there is another dispute regarding addition on account of premium which, according to ITO, assessee receive din respect of tractors sold by it as it was well-known, according Revenue, that on said make of tractors, i.e., Massey Ferguson, in which assessee was dealing, there was premium. 3. For sake of convenience, we first take up issue pertaining to amounts received by assessee under Post Warranty Service Scheme and for sake of better and clearer understanding, we give here below brief background of issue. assessee had been dealer in Massey Ferguson tractors for district of Bhatinda. It received its quota from manufacturers M/s. Tractors and Farm Equipment, Madras, directly. said quota varied from year to year and it was since 1969 that assessee s business was established. During accounting year 1974-75 for first time, as per universal practice, adopted by other dealers of tractors of various makes, assessee had formulated Post Warranty Service Scheme under which customers who were to buy tractors from assessee had option of becoming members of said schema, which was bifurcated as Scheme `A and `B , which will be detailed out subsequently herebelow. jointing of said Scheme was absolutely voluntary. two schemes, as per Post Warranty Service Scheme schedule, can be detailed as below : "Schema `A 6 on farm or 9 `in workshop routine or emergency services per tractor per year. subscription for this scheme is Rs. 200 per year/or Rs. 300 for two years (payable in advance) on account of labour charges. Scheme `B 6 `on farm or 9 in workshop routine or emergency services with one engine overhaul per tractor per year. subscription for this scheme will be Rs. 360 for one year or. Rs. 540 for two years (payable in advance) on account of labour charges." Since scheme was voluntary, there was no compulsion, pressure or obligation of any type on customers to have opted for one or other scheme under Post Warranty Service Scheme . It was for customers to choose one or other type of services. amount, however, for membership was to be deposited in advance. Though main feature of scheme was that after expiry of sic months from purchase of tractor, during which period free warranty services were available at cost tof manufacturers, member could call for services which were to be rendered either at his farm, i.e. that of customer/member , or in workshop of assessee, depending upon nature of services to be rendered. As per said scheme, in service details, several jobs pertaining to diesel engine, power engine, clutch and brakes, hydraulic system and transmission, electrical system, front axle and steering and general, services were included and conditions for same were as given below : "1. contract will be valid for one/two years from date of first post warranty service. 2. This warranty shall be operative from date of first service to be communicated in writing by member. member shall be entitled to claim refund in full, if he does not avail of service under scheme, provided no member of right within three years of date of contract. After expiry of three years, member shall be entitled to refund of his deposit, on request. 3. Any job requiring dismantling of engine and overhauling, jobs will be done in our workshop only. 4. Material, spare parts etc., as required, will be charge extra or may be provided by owner. 5. any work done other tan shown in above scheme will be charged extra. 6. Should tractor not released for servicing to our mechanic even though prior information of this arrival is sent, you will be debited with he actual travelling expenses of our mechanic. 7. Tractors driven by our employee are entirely at owner s risk and responsibility." assessee, therefore, maintained deposits received from customers in separate accounts. Post Warranty Services could be claimed by members of scheme and assessee was obliged to render same during stipulated period. It will not be out of place to mention that stipulated period of services started only from first requisition i.e. making for first service by member. In case, no requisition of service was made at end of one or two years period, as case may be, member could opt for t h e refund of his deposit. However, in case member opted to get services, he was disentitled to refund. But undoubtedly during this stipulated period, after once he ask for services he could call for as many services as he required. It was only at end of stipulated period, if there was any credit balance, that it was taken by assessee to his P &L A/c. 4. According to assessee, though method of accounting adopted was mercantile but so far receipts under Post Warranty Service Scheme were concerned, assessee contended, it was money on trust. It may also be mentioned here that money could be refunded to member only in case he did mentioned here that money could be refunded to member only in case he did not prefer to come for services at all but that too after three years that refund could be claimed. deposit was also refunded to member on request. According to assessee, it was only after stipulated period in respect of each member that excess, if any, could be taken to P&L A/c. On basis of consistently adopted method of accounting assessee carried balance in Post Warranty Service Scheme account, opening balance being Rs. 3,35,721, to which was added amount received during year under consideration , i.e., Rs. 91,260 and on debit side of said account, there was refund amount of Rs. 7,320, which left net balance of Rs. 4,19661, as is detailed in para 5 of CIT (A) order. Refunds were given by assessee to customers who did not want to avail of said service scheme even in earlier and also subsequent yeaRs. On strength of scheme and on basis of method do accounting consistently adopted by assessee, Revenue accepted accounts till last year, i.e. upto 1977-78 asst. yr. said account since constituted of receipts on credit side and refunds on debit side the balance was considered to be trust money or advance towards services, in other words. 5. ITO during assessment year under consideration for fist time added total amount of Rs. 4,19661 being closing credit balance in Post Warranty Service Scheme account. contentions of assessee before ITO were same that money received in PWS account is nothing but amount towards services to be effected in future. ITO observing that there is no res judicata in IT proceedings and since as per his observations that none of tractors were ever serviced by assessee, he held that said amount could not be lying for father expenses to be incurred for services of tractors already sold in earlier yeaRs. He even observed that subsequently no tractor was ever serviced. According to ITO, money received for specific purpose should have been offered for tax, if that specific purpose was not fulfilled. ITO held that it was trading receipt and since it was not refunded, same was, therefore, taxable and he even not bothering that in said account, opening balance itself amounted to Rs. 3,35,721 taxed net balance, as above stated, in sum of Rs. 4,19,661. 6. When matter came before CIT (A) , he sustained addition in sum of Rs. 91,260 i.e. receipt of year under consideration. For still clearer understanding of finding of CIT (A), we may place Post Warranty Service Scheme account as under : Credit Debit . . side Side By opening To 3,35,721 7.320 balance refund By receipt To . 4,19,661 during year balance . 91,260 . . . 4,26,981 . 4,26,981 ld. counsel for assessee had relied on Amritsar Bench decision of Tribunal in case of Punjab Raactors Co-op Multi purposes Society Ltd. vs. ITO (1982) 13 TLR 181 (Asr) (Trib). CIT (A) distinguishing said decision observed as under, and sustained addition of Rs. 91,260 : "7. After considering facts of case, I hold that ITAT Asr Bench decision is not applicable to facts of present case. In case decided by ITAT, assessee had regularly followed system of adjusting PWS receipts towards income on basis of period when actual services were to be rendered and that such services were being rendered. In present case, however, ITO had discovered that no such services were rendered at all even in respect of advance received few years back. ITO has observed that scrutiny oft accounts for subsequent assessment years also reveals that no such adjustments were made as such out of advances on account of PWS receipts, It is therefore, clear that in respect of receipts which were obtained may years back and period of service contemplated in scheme had already expired and no refund was given by assessee, such receipts were therefore, taxable in year in which advance in respect of PWS was taken. ITO is, therefore, directed to consider possibility of assessing such PWS receipts in year of their "actual receipt on facts and circumstances of this case. ITO was not justified in treating entire balance in this account as income of year under consideration because in year under consideration only amount received in PWS a/c was Rs. 91,260 which alone could be taxed on facts of case as income of assessee. opening balance of Rs. 3,35,721 represents receipts in this a/c relating to earlier years and would be appropriately taxable in relevant years of receipts, I would, therefore, uphold addition to extent of Rs. 91,260 only out of total addition to extent of 91,260 only out of total addition of Rs. 4,19.661 made by ITO. refund of Rs. 7,320 in this a/c is in r/o earlier balance of Rs. 3,35,721 and it cannot be adjusted against receipt for this year of Rs. 91,260 as contended by assessee. It, therefore, implies that receipt in this a/c in earlier years which would be considered for action under s. 147 would be only Rs. 3,35.721 minus Rs. 7,320=Rs. 3,28,401. assessee, therefore, gets reduction or Rs. 4,19,661 minus Rs. 91,260=Rs. 3,28,401 on this score." It is this action of CIT (A) which left both assessee and Revenue aggrieved. assessee in its appeal has challenged sustenance of Rs. 91,260 whereas Revenue has disputed deletion of Rs. 3,28,401. 7. ld. counsel for assessee Mr. D. K. Gupta before us in respect of assessee s and Revenue s appeal not only stated facts in detail but submitted that issue in covered in favour of assessee not only by Amritsar Bench Tribunal decision, referred to above, but by this very Bench in another case of M/s. Singhal & Co. ITA No. 567/Chd/1980 dt. 29th Dec. 1981. He placed on assessee s compilation proforma agreement of Post Warranty Service Scheme and also consolidated chart right from 1974-75 to 1982-83 giving details of tractors sold, amounts received under PWS with amount of refunds made yearly, expenses on account of services rendered, number of customers to whom services were rendered and number of customers to whom refunds were made etc. 8. ld. senior Departmental Representative Mr. R. K. Bali, in other hand submitted that in light of case reported in Chowringhee Sales Bureau (P) Ltd. vs. CIT 1973 CTR (SC) 44 : (1973) 87 ITR 542 (SC) and Sirsa Industries vs. CIT (1983) 36 CTR (P&H) 130 : (1984) 147 ITR 238 (P&H), neither consistently method of accounting can help assessee nor it could hold money received from customers in trust, when it is actually its income. He also attempted to distinguish case from that of Amritsar Bench and this Bench decisions, relied upon by ld. counsel for assessee. 9 . In order to find out facts correctly, Tribunal had required assessee to furnish chart with date of contract, number of customers, date of completion of contracted period of three years, year of completion of services rendered, if any, amount of refund and date of first service etc., which assessee placed on its compilation right from 26th April, 1974 when scheme was started upto March, 1978. 10. After taking into considerations rival submissions going through voluminous paperbooks placed by both parties before us and case law relied upon by them respectively, we are unable to sustaining addition whatsoever on this account because it was scheme and as per terms and conditions of same amounts were received by assessee and services were to start after six months of post warranty manufacturers service and refund could also be obtained within six months. This was on basis of these conditions that assessee adopted this mode and did not offer any income in past years, which was accepted by Revenue. It is not question of res judicata. It is simple question of consistency of accounting method and scheme. As observed by us earlier while dealing with identical issue in case of M/s Signal & Co. (supra) who were dealers of Eicher tractors and who had similar Post Warranty Scheme, that receipt is not sole test of accessibility. We had in said case accepted assessee s contention in following words : " We have carefully considered rival submissions, facts of case and reasons recorded by authorities below in their respective ordeRs. It is not controverted that from day assessee started dealing in Eicher tractors, procedure described above, with regard to receipt and disbursement of Post Warranty Service charges was universally followed till scheme itself was abandoned by assessee. It is now well-settled that receipt is not sole test of taxability. Though assessee had received amounts in question during assessment year under appeal, yet they were not free of encumbrances so as to constitute income of assessee. When assessee entered in its books of a/c sale of tractor, sale proceeds consisted of two constituents-the main amount representing price of tractor and nominal amount fixed by assessee and charged for Post Warranty Services. From very beginning, assessee took latter amount as amount received with certain conditions to be fulfilled in respect of each tractor after first period was over. To this, assessee has given particular treatment and, in our opinion, this treatment was not given with purpose to rob Revenue of "its rightful due. assessee provided for contingency when it would be required to meet Post Warranty Services charges, which had been received from customeRs. actual expenditre on Post Warranty Services could vary depending upon when period was over n d whether it fell within particular accounting period. Therefore, to avoid difficulties, procedure adopted by assessee to take Post Warranty Services charges in separate a/c so levelled and kept it so against disbursements required for this purpose was justified on facts of case. In our opinion, this method followed by assessee was in accordance with law and authorities below erred in disturbing same. This also becomes apparent from fact that subsequently entire amount practically was spent by assessee and only sum of Rs. 6,316.68 which was left unexpended was transferred to P & L A/c in subsequent year. In this view of matter, addition made by ITO and partly sustained by CIT (A) is unjustified. We delete entire addition by reversing he order of CIT (A)." From above decision, there is hardly any difference looking to facts in facts in background, according to us instant case is on better footing and in way because of terms and conditions of Post Warranty Service Scheme . In short, what can be said very clearly, is that thought receipt under Post Warranty Service Scheme is revenue but it would become taxable only after finally period of refund or services is over, and not before. In another case of Massey Ferguson Tractors ld. Members of Amritsar Tribunal allowed assessee s appeal in M/s Punjab Tractors Co-op. Muli\tipurpose Society Ltd. (supra) thought it was against order of CIT under s. 263, but on identical issue, in following words : "14. Now question for consideration is whether CIT was justified in holding that Post Warranty Service charges had to be taken as assessee s income at time of receipt of such service charges and not at time when services were to be rendered under agreement. In present case there is no dispute that receipt is basically of revenue nature and is related to trade of assessee. question is about time when it has to be treated as assessee s income. assessee has rightly followed system of adjusting it towards income on basis of period when actual services were to be rendered. There was nothing wrong in system followed by assessee. We take example. manufacturer may register claims of parties for supply of goods on payment of some advance and a r e supplied as and when they are manufactured and advance paid is adjusted towards cost at that point of time. question would arise whether advance paid should be treated as income at time when it is received s advance or when goods are manufactured and actually sold and advances are adjusted towards sale price. In our view, it can be taken as income when goods are supplied and advance is adjusted towards same. Similarly, in present case, services which are to be rendered under scheme do not start for full one year after amount is collected and it is only after that service being to be carried out according to agreement. Servicing of tractors under scheme would naturally be called upon to incur expenses for that purpose. For proper ascertainment of income, it would be reasonable to adjust income from Post Warranty Service charges would be ascertained. In our view, therefore, CIT was not correct in holding that amount had necessarily to be taken as assessee s income at time of receipt itself. It is true that servicing charges are paid in advance according to terms but at that point of time, it is merely advance and can be treated as assessee s income when it is adjusted towards servicing receipt of particular period." Reliance of ld. Senior Departmental Representative on case of Chowringee Sales Bureau (P) Ltd. (supra) is totally misplaced due to distinction in facts. That is case in which issue was regarding receipts of sales-tax under head sales-tax collection account . In instant case, there was regular Scheme, there were rights and obligations cast on customers, on one hand, and on assessee, on other hand. It was within stipulated time other hand. It was within stipulated time that refund could be secured, it was within stipulate time that customers could come for services. Since, as contended by ld. counsel for assessee, some of customers came very late, state of affairs continued but according to consistently adopted method of accounting by assessee. Then again, reliance of ld. Senior Departmental Representative on case of Sirsa Industries (supra) is misplaced. That was also case regarding sales-tax receipts in which earlier decision reported in (1973) 87 ITR 542 (SC) (supra) , was referred to. CIT (A) is in error when he observes that there was not single case which came for services. It is factual mistake. customers who joined scheme, many of them got refund who elected not to continue with same: whereas umber of them came in for services. Ultimatley, net balance in said account was appropriated by assessee in P&L A/c. It is on basis of scheme in background, consistency of accounting method and two Tribunal s decisions one that of Amritsar Bench and other of Chandigarh Bench to which one of us (Judicial Member) was party, we accept contentions raised by assessee in its appeal and reject those raised by Revenue in this regard in its cross-appeal. 1 1 . Now, what survives for our consideration, is second ground in Revenue s appeal, which is very interesting. addition was made by ITO in hands of assessee in sum of Rs. 2,40,000 on premise that Massey Ferguson tractors are sold like not cakes and there is premium on same. Since some of parties who bought them, first booked tractors with assessee, then filed affidavit, so much so delivery of tractors they got it registered with registering authority in their names but subsequently for reasons best known to them, they did not make themselves available to Revenue. ITO actually acted on promise that massy Ferguson tractors Revenue. ITO actually acted on promise that massy Ferguson tractors being hotly demanded item and since there was premium on it, it was assessee, dealer of same, who pocketed premium and therefore, added Rs. 2,400,000 @ Rs. 10,000 per tractor for 24 tractoRs. In regard to this, ld. counsel for assessee relied on order of CIT (A) whereas ld. Senior Departmental Representative relied on order of ITO. 1 2 . After taking into consideration rival submissions and thoroughly perusing facts and looking to nature of assessee s business, it is impossible to interfere in finding of CIT (A). assessee before us is not dealing in match-boxes and cigarettes. He is dealing in tractors which according to Revenue itself, were of important brand. Once it is tractors in which assessee deals, there is regular booking and affidavits are filled/furnished by purchasers at time of purchase and registration is made, we are unable to appreciate as to how on surmise and conjecture ITO could go to ignore documentary evidence in form of booking, affidavits etc. Some of purchases since came forward to deny haviang purchased any tractor, could be for any reason and reasons better known to them but not that it could dislodge assessee s case in presence of overwhelming and voluminous evidence, as observed by CIT (A) in form of contentions raised by assessee. world of surmise is very wild chase. As to who got premium is anybody s guess. So far assessee is concerned he had regular sale of tracers which were booked and in respect of which affidavits were obtained and said tractors were duly registered in names of purchaseRs. For reasons given by CIT (A) in his order, his action in this regard is hereby confirmed. 13. In result, assessee s appeal is allowed and that of Revenue is dismissed. *** MODERN FARM SERVICE v. INCOME TAX OFFICER