TMI Blog2012 (6) TMI 435X X X X Extracts X X X X X X X X Extracts X X X X ..... on the provisions of section 145 of the Income- tax Act, 1961? Held that:- the provisions of the Companies Act are meant for the requirement of the Companies Act and in case of infraction thereof necessary consequence as provided in the Companies Act itself follows. - Tribunal had no justification to discard the mixed accounting system resorting to the amended provision of the said Companies Act. - Decided in favor of assessee. - 33 of 2002 - - - Dated:- 2-7-2010 - SENGUPTA, CHAKRABORTY K., JJ. JUDGMENT 1. This appeal was admitted by an order of this court dated July 31, 2002, on the following substantial questions of law : "A. Whether the method of accounting referred to in section 145 of the Income-tax Act, 1961, prior ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assistance of Mr. Khaitan alone who appeared for the appellant. He submitted that the learned Tribunal had completely erred in restoring the order of the Assessing Officer so far as it relates to the addition of a sum of Rs. 1,38,424 being the income from interest is concerned. He submits that in accordance with the provisions of the Income-tax Act then applicable his client maintained the mixed system of accounting. As far as the receipt of interest income and also expenditure on account of the same head is maintained from actual basis not on accrual basis. But accounts on other heads are maintained on accrual basis. Indeed such mixed accounting system was accepted by the Commissioner of Income-tax (Appeals) in the previous assessment yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 278 ITR 59 (Cal) and the Madras High Court in the case of CIT v. Shriram Transport Finance Co. Ltd. reported in [2009] 311 ITR 165 (Mad) have held consistently that when the provisions of the Income-tax Act permits the assessee to maintain a mixed accounting system, viz., both mercantile as well as cash basis, it is for the assessee to exercise its option. Once it is done it is not for the income-tax authority without any reasoning to discard it altogether. 3. Accordingly, accounting system on cash basis in so far as income on account of interest is concerned should have been accepted by the learned Tribunal. He has relied on a decision of the Supreme Court CIT v. Bilahari Investment P. Ltd. reported in [2008] 299 ITR 1 (SC). In this judg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct and/or overriding effect over the provisions of the Income-tax Act. 6. Undisputedly, at the relevant point of time under the provisions of sec- tion 145 of the Income-tax Act, the assessee was given option to maintain mixed and/or hybrid accounting system and this will appear from section 145 as stood at the relevant point of time : "145.(1) Income chargeable under the head 'Profits and gains of business or profession' or 'Income from other sources' shall, subject to the provision of sub-section (2), be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. (2) The Central Government may notify in the Official Gazette from time to time accounting standard to be followed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h accounting system and in the absence of that the authorities of the Revenue can interfere. But, as there was no finding that the income should not be deduced from the accounts maintained by the assessee in the assessee's case, the interference by the Assessing Officer was not permissible. 8. Similar view was taken by the same Bench in the case of K. S. Mehta (HUF) v. CIT reported in [2005] 278 ITR 59 (Cal) and by the Madras High Court in the case of CIT v. Shriram Transport Finance Co. Ltd. reported in [2009] 311 ITR 165 (Mad), while accepting the view of this court held amongst others the hybrid system of accounting was permissible during the relevant year. Hence, such accounting system should be followed. 9. The Supreme Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operation of the law there shall not be any proper books of account being kept unless the mercantile system, viz., the accrual basis is followed. Obviously, the afore- said provision is apparently not consistent with the provision of section 145, as it stood at the relevant point of time, which permitted the mixed accounting system. 13. We have checked up the amending Act of the aforesaid amendment of section 209 and nowhere we find that the aforesaid provision has got over- riding effect over any other law nor the Companies Act elsewhere provided that the provision of the Companies Act has got the overriding effect over income-tax and fiscal statute. Under such circumstances, though there is slightly inconsistency in the method of accou ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
