judgment

Kapadia, J. —

1.Leave granted.

2.This batch of civil appeals filed by the Department is directed against judgment of the Division Bench of the Madras High Court dated 19.6.2006 in which it has been held that in the matter of chit transaction, the Completed Contract Method of accounting adopted by the respondents-assessees was erroneously rejected by the Department and that the Tribunal had erred in directing the discount to be spread over the balance period of the chit on a proportionate basis. In other words, the controversy arising in the present appeals is whether the Completed Contract Method followed by the assessees and accepted by the Revenue in the past needed to be substituted by percentage of Completion Method as contended by the AO.

3.We are concerned with assessment years 1991-1992 to 1997-1998.

4.Assessees are private limited companies subscribing to chits as their business activities. They were maintaining their accounts on mercantile basis and they were computing profit/loss, as the case may be, at the end of the chit period following completed contract method, which was earlier accepted by the Department over several years.

5.Chit funds are basically saving sche