Method of accounting
85. (1) Income chargeable under the head "Income from business" or "Income from other sources" shall be computed in accordance with either cash or mercantile system of accounting regularly employed by the person.
(2) The Central Government may notify in the Official Gazette from time to time accounting standards to be followed by any class of person or in respect of any class of income.
(3) The valuation of purchase and inventory for the purposes of determining the income chargeable under the head "Income from business" shall, regardless of anything to the contrary contained in sub-section (1), be-
(a) in accordance with the method of accounting regularly employed by the person; and
(b) further adjusted to include the amount of any tax, duty, cess or fee (by whatever name called) actually paid or incurred by the assessee to bring the goods to the place of its location and condition as on the date of valuation.
(4) The value of sale of goods for the purposes of determining the income chargeable under the head "Income from business" shall, regardless of anything to the contrary contained in sub-section (1), be determined-
(a) in accordance with the method of accounting regularly employed by the assessee; and
(b) further adjusted to include the amount of any tax, duty, cess or fee (by whatever name called) leviable on the sale of the goods.
(5) The interest on bad or doubtful debts of any permitted financial institution shall, regardless of anything to the contrary contained in the foregoing provisions, be included in the total income for the earlier of,-
(a) the financial year in which the interest is credited to the profit and loss account of the permitted financial institution; and
(b) the financial year in which the interest is actually received by the permitted financial institution.
(6) The interest received by a person on compensation, or an enhanced compensation, shall, regardless of anything to the contrary contained in sub-section (1), be included in the total income of the financial year in which it is received.
(7) For the purposes of this section,-
(a) any tax, duty, cess or fee (by whatever name called) under any law for the time being in force, shall include all such payment regardless of any right arising as a consequence to such payment;
(b) 'bad or doubtful debts' shall be the debts as may be prescribed, having regard to the guidelines issued by the Reserve Bank of India or the National Housing Bank,as the case may be, in relation to the debts.
