TMI Blog2010 (4) TMI 217X X X X Extracts X X X X X X X X Extracts X X X X ..... rue only when it becomes due and, therefore, there cannot be a charge to such income until such time that it becomes due – claim of bad debts is consistent with the provisions of Section 36(1)(viia) which refer to “an amount not exceeding ten per cent of the aggregate average advances made by the rural branches of such bank” - though in a given case the entire payment may be received in advance, the assessee accounted for the payment as it accrues over a period of time. The Assessing Officer made an addition of Rs.3.46 crores on the ground that the change in the method of accounting resulted in lower profits to that extent. – view of AO is incorrect – change in method of accounting is not detrimental to interest of revenue. - 3093 OF 2009 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as justified in deleting the addition made on account of advance income received by way of commission, exchange and discount, including locker rent? 2) In so far as the first question is concerned, the Tribunal has followed the order of the Jodhpur Bench for assessment years 2001-02 and 2001-02. The Jodhpur Bench held that the liability on account of excess cash received at the cash counters of the bank represents the liability to pay the customers as and when they may demand payment. The Tribunal, therefore, held that it cannot be considered as the income of the assessee. On this ground, the addition was directed to be deleted. We have perused the order of the Jodhpur Bench of the Tribunal for assessment years 2000-01 and 2001-02 which h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded the matter to the Assessing Officer, no substantial question of law, as such would arise. We would like to clarify that upon remand, due regard would be given to the relevant provisions of the law, including the judgments which hold the field. 4) In so far as the third question is concerned, it is brought to our notice that in assessment years 1991-92 and 1992-93, this issue was considered by the Jodhpur Bench of the Tribunal. The Jodhpur Bench held that interest on Government securities can be said to accrue only when it becomes due and, therefore, there cannot be a charge to such income until such time that it becomes due. Counsel appearing on behalf of the Revenue has stated before the Court that he has written instructions to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g followed by the assessee, while continuing with the mercantile system of accounting, the assessee has accounted for the receipts in relation to the year in which payment has accrued. Consequently, though in a given case the entire payment may be received in advance, the assessee accounted for the payment as it accrues over a period of time. The Assessing Officer made an addition of Rs.3.46 crores on the ground that the change in the method of accounting resulted in lower profits to that extent. The Commissioner (Appeals), however, directed a deletion of the amount. This has been confirmed by the Tribunal. 7) Section 145 (2) provides that income chargeable under the head "profits and gains of business or profession" or "income from other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lace; (iii) Any change in an accounting policy which has a material effect in the previous year or in years subsequent thereto, shall be disclosed; (iv) The impact of, and the adjustments resulting from, such change, if material, shall be shown in the financial statements of the period in which such change is made to reflect the effect of such a change; (v) The accounting policies adopted by the assessee should represent a true and fair view of the state of affairs of the business, profession or vocation in the financial statements prepared and presented on the basis of such accounting policies and that for this purpose, norms of 'prudence', 'substance over form' and 'materiality' shall be adopted. The expression 'accrual' has been defined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e advised to incorporate the amendment in the listing agreements immediately and to report compliance. The Commissioner (Appeals) observed in the present case that the Assessing Officer had not given any finding that any of the entries in the books of account are incorrect or that the assessee was not employing a method of accounting on a regular basis and it was not the finding of the Assessing Officer that the trading results could not be deduced from the entries in the books of account regularly maintained. The Commissioner (Appeals) also observed that out of the four items, bank locker rent was received for a period of upto three years and other charges are received for about six to nine months. The locker rent of one year alone ought t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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