1964 (4) TMI 7 - SUPREME COURT

Whether in the computation of the income of the firm under the head " Profits and gains of business " the Income-tax Officer was bound by the method of accounting in which the cost of acquisition of the film of which the exploitation rights were held was debited at the commencement of the year, but the value of the film at the end of the year was ignored?

Held that:- There is no warrant in this case for assuming that the revenue authorities and the Tribunal had sought to displace the method of accountancy adopted by the assessee. By applying the proviso to section 13, they made the computation upon the basis and in the manner in which in their opinion profits would be properly deduced. That they were entitled to do. We are, therefore, of the view that the High Court was in error in holding that because the assessee had maintained his accounts in the cash system it was not open to the Income-tax Officer to add to the receipts from the business the value of the stock-in-trade at the end of the year for the purpose of properly deducing the profits of the business for the year in question.

The appeal, therefore, must be allowed and the answer to the question referred to the High Court will be in the affirmative