Per Shri A. Krishnamurthy, Judicial Member - These are three appeals by K. Sankarapandia Asari Sons, Sankarankoil, relating to its income-tax assessment for the years 1977-78 to 1979-80 involving common and identical objections. The first objection in each of the three years relates to certain addition made for each year of a sum on the ground of poor drawings. However, the learned counsel for the assessee stated that he does not wish to press this ground. Therefore, this ground is rejected.
2. The second and the only other common objection pertains to the determination of the income for the business of distribution of films. The question concerns the amortisation of the cost of films. The assessees method of accounting all along has been to write off the entire cost of distribution rights in the year of acquisition itself and valuing the closing stock at nil. It is also seen that the method adopted by the assessee as stated above has the blessing of the Madras High Court in the assessees own case in CIT v. K. Sankarapandia Asari & Sons : 130ITR541(Mad) . The assessment in the assessees case have all along been made up to the assessment year 1976-77 also on that basis. For the relevant years under appeal, however, the income-tax authorities declined to accept the method adopted so far and proceeded to apply the method prescribed in rule 9B of the Income-tax Rules, 1962 (the Rules). Applying this method, the ITO for the year 1977-78 allowed deduction of the cost of seven pictures detailed in Annexure I to his order at Rs. 68,654 against the total cost of Rs. 4,97,449 debited by the assessee in the accounts and treated the balance of Rs. 4,28,795 as the value of closing stock. It is seen from the assessment order further that in respect of pictures, cost of which were claimed in the earlier years but were not allowed in the assessment to the full extent, the portion of the cost not already allowed has also been allowed as mentioned in Annexures II and III to the assessment order. It is conceded by the assessee in the appeal before us that in view of the acceptance of the assessees method of write off in the past up to the assessment year 1976-77 on the basis of the orders in appeal and the high court decision, these amounts relating to the earlier years would be entitled to deduction in respect of those years where the entire cost has been claimed and, therefore, if the assessees claim for adoption of its method is to be accepted, the allowance relating to the earlier years will not need to be allowed again in this year as the assessee does not want to claim a double deduction. What the assessee is agitating is the acceptance all along in the past including by a decision of Madras High Court and not the determination of the amortisation under rule 9B. It is not necessary for us to advert to the figures for other years and we have referred to the figures for the year 1977-78 only for the purpose of illustration. The point that arises, therefore, for our decision is whether the amortisation of the cost of films should be on the basis of the accounting method employed by the assessee and which has been hitherto accepted by the department, or it should be according to rule 9B. Rule 9B was inserted by the Income-tax (Seventh Amendment) Rules, 1976. According to this rule, inter alia, amortisation for the cost of film is provided in the case of a film distributor who himself exhibits the films to the extent of full cost where the film is released for exhibition on commercial basis at least 90 days before the end of the previous year : and where it is not so released, the allowance is sought to be restricted to the realisation made on the exhibition of the film on a commercial basis, etc. The contention of the learned counsel for the assessee in this connection is that though the rule is in force and applicable to the relevant previous years under appeal, the determination in the assessees case has to be according to the method of accounting employed by it which has been approved and accepted all along in the past. It is argued that the assessee is entitled to determination of its income, profits or gains according to the method of accounting employed by it as laid down in section 145 of the Income-tax Act, 1961 (the Act) and the rule cannot control or override the provision of the said section. Support for this contention is sought in the order of the Special Bench of the Tribunal in the case of Amar Dye-Chem. Ltd. v. ITO  3 SOT 384 , and in particular the observations from paragraph 20 onwards. The learned departmental representative submitted that irrespective of the question as to whether the assessees method of accounting has been accepted in the past or not and also whether such method is a recognised one or not, the amortisation of cost of films has to be governed by rule 9B alone after its coming into force. It is submitted that the power to frame rules is vested in the Government under section 295(2) (a) of the Act, which provides for framing rules for the ascertainment and determination of any class of income. In this connection reliance is placed on the decision of the Supreme Court in Karimtharuvi Tea Estate, Ltd. v. State of Kerala : 48ITR83(SC) and on the observations at page 91 where the contention that for the purpose of definition of agricultural income one has to look only to its definition in the Indian Income-tax Act, 1922 (the 1922 Act) and not to the rules made thereunder, was rejected and it was observed that rule 24 of the Rules has been made under the powers conferred under section 59 of the 1922 act has effect as if enacted in that Act and when section 59 provides for the rules made under the Act to prescribe the proportion so prescribed must be taken as prescribed in the Act. Reference was also made to the decision of the Calcutta high court in Sardar Bahadur Saradar Indra Singh Trust v. CIT : 26ITR670(Cal) where it was held that the requirement of rules 36 and 37 of the Rules made under the 1922 Act were mandatory as they were to be read as part of the Act. It was, therefore, submitted that the rule being mandatory has to govern the determination of the question for which it provides and the provisions of section 145 have to yield such rules.
3. We have carefully considered the facts and the rival contentions of the parties. We find substantial merit in the assessees claim. there is no dispute that all along in the past the method of accounting employed by the assessee has been accepted and the assessment have been made accordingly. The determination of its income on such basis has also been upheld in the High Court decision mentioned above in the assessees own case. The provisions of section 145 clearly confer on the assessee a right to determination of its income according to the method of accounting employed by it. The section makes this position clear by no unambiguous term in stating that the income chargeable under the head Profits and gains of business or profession or Income from other sources shall be computed in accordance with the method of accounting regularly employed by the assessee. There are only two exception contemplated to it and they are circumstances stated in the provision to section 145(1) and in sub-section (2). Therefore, prima facie, the income has to be determined in the case of an assessee maintaining accounts for the sources of income indicated in section 145 according to the method of accounting regularly employed. That, in the assessees case, the method of accounting adopted by it is regularly employed and is a recognised one is not in dispute. The only question then that arises for consideration is as to whether Rule 9B can override the provision of section 145 so as to affect or alter the determination of profits in accordance with the method employed by the assessee and as provided in section 145. The decision relied on by the learned departmental representative no doubt lay down that the rules when lawfully framed have the same force as the provision of the Act. The rules, however, cannot govern or override the statutory provision of the enactment so as to affect the force or efficacy of the sections. They have to supplement the provision of the main section by carrying out the purpose of the section and cannot override or conflict with the main enactment and in case any inconsistency is noticed, the provisions of the section will prevail and not those of the rules. The other of the Special Bench of the Tribunal in Amar Dye-Chem. Ltd.s case (supra), referred to by the learned counsel for the assessee, supports this proposition. We may also note a decision of the Bombay High Court in Smt. Kusumben D. Mahadevia v. N. C. Upadhya : 124ITR799(Bom) where the validity of rule 1D of the Wealth-tax Rules came up for consideration. It was that not withstanding the facts that the rule was expressed in mandatory terms by use of the word shall it is not conclusive of the nature of the provision as to whether it is mandatory or directory. There can be no doubt that where rules are framed for determination of any particular class of income or assets which cannot be ascertained by reference to the provisions of the main enactment alone, then the rules will have the binding force and would be regarded as part of the main enactment, but where such rules conflict with the main enactment and run counter to them, the rules must yield to the main provisions of the statute and not control them. We, therefore, uphold the assessees claim and direct determination of the income according to the method of accounting employed by the assessee, which has been approved and accepted all along in the past.
4. In the result, the appeals are partly allowed.