TMI Blog1980 (6) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... had dealing with certain mills which were taken over as sick mills under the Sick Textile Undertakings (nationalisation) ordinance 1974 which came into force from 1st April, 1974 it had also dealing with two mills which were taken over by the Industrial Reconstruction Corporation of India Ltd. It was pointed out by the assessee to the ITO that the reason for the loss claimed by it stemmed from the fact that the assessee changed the method of accounting from mercantile system to cash basis in respect of its dealings with the sick mills from the beginning of the accounting year relevant to the asst. yr. 1975-76 it was for this reason that it was claimed that the sales amounting to Rs. 42,15,544 to the sick mills taken over by the Government a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t taken over by the T.R.C. of Indian Ltd. The ITO rejected the assessee s plea in respect of the amounts of Rs. 34,72,540 concerning seven sick mills as well as Rs. 7,43.004 concerning the two mills taken over by TRC of India Ltd. The ITO s stand was that the assessee should have maintained separate accounts in respect of purchase and sales to those mills and expenses relating to them In his opinion the assessee should have maintained a separate account in respect of the expenses incurred in respect of these sales also Mere bifurcation of the sales at the end of the accounting year did not amount to a change in the method of accounting according to the ITO. He found that there were sales with these mills even subsequent to the take over and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter the expiry of the relevant accounting year that the assessee made some change in the method of accounting and, therefore, the change should not have been permitted by the Commr. He referred to the Kerala High Court decision in the case of State Bank of Travancore 1975 CTR (Ker) 72 (1977) 110 ITR 336 (Ker) and pointed out that in that case the assessee which was a banking company and which did not credit in its accounts the interest that had accrued on sickly advances, could not succeed in saying that there was no accrual of income in respect of the sticky advances He also referred to the Allahabad High Court decision in the case of Cosmopolitan Trading Company 1978 CTR (All) 71; (1979) 116 ITR 728 (All) and pointed out that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pon the Madras high Court decision (1975) 99 IRR 226 (Mad). An assessee may assessment employ one method of accounting for one part of his business or one class of customers and a different method for another part of his business or another class of customers. He may also keep the accounts in respect of different parts of the same business on different basis. If such different methods were employed regularly and consistently the profits would have to be computed in accordance with the respective methods, provided it results in a proper determination of the true profits. These observations of the Madras High Court were rightly applied by the Commr. To the facts of the case before him in so far as the amount of Rs. 34,73,540 is concerned The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e treated as a class of customers in respect of which the method of counting could be changed from mercantile to cash in view of the financial conditions. As for the assessee not debuting the expenses separately in respect of these mills we concur in the reasoning of the Commr. The assessee had common overheads for the entire busyness and it was no possible to determine the precise amount of expenses attributable to dealings. with the sick mills. As rightly observed by the Commr., the assessee's failure to debit the overheads relating to the silk mills was not a serious impediment in recognising a new method or changed method of accounting. The liabilities for the expenses at the end of the year were said to be negligible in relation to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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