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TMI Blog2012 (12) TMI 897X X X X Extracts X X X X X X X X Extracts X X X X ..... interest of Rs.35.57 crores and Rs.34.58 crores for the assessment years 1989-90 and 1990-91 respectively on account of accrued interest on cash basis and payment of interest is allowable on mercantile basis is valid? 2. Whether on the facts and circumstances of the case, the Appellate Tribunal was deleting the additions made by the assessing officer of Rs.7,48,41,979/- related to the assessment year 1989-90 the interest expenditure on cash basis even though the assessee is following mercantile system of accounting is valid in law? 2. It is seen from the facts narrated herein that the assessee was following the cash system of accounting from the financial year 1980-81 and it had switched over to the mercantile system of accounting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of accounting certain items of expenditure and income for two years would find place in the year of change. The Commissioner pointed out that if the assessee's contention were to be rejected then the expenditure incurred in the year 1989-90 would not be deducted at all either from the income of assessment year 1989-90 or 1989-90. Following the decision of the Bombay High Court reported in 193 ITR 349 (C.I.T. Vs. West Coast Paper Mills Ltd.,) the Commissioner allowed the appeals. Aggrieved by this, the Revenue went on appeal before the Tribunal which confirmed the view of the Commissioner of Income Tax. Hence the present appeal by the Revenue. 4. Heard the learned Standing Counsel appearing for the Revenue and the learned counsel for the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P. Ltd.,) and 302 ITR 221 (All) (Commissioner of Income Tax Vs. Willard India Ltd.,). Going by the reasonings given in the above decisions, on the fact that the switching over from cash system of accounting to mercantile system was on account of statutory compulsion, we have no hesitation in agreeing with the assessee's contention that the interregnum period in the process of switching over would certainly have a mixed system, where there is a cash system of accounting in respect of certain expenditure while the receipts and other expenditure would be maintained under mercantile system of accounting. The revenue has not disputed the fact that the assessee had to follow the mercantile system and during the transition period alone the hybrid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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