Bona fide change in accounting method is permitted, but actual adoption must be proved as a question of fact.

A bona fide change from one regularly employed method of accounting to another is permissible under Section 13, but the assessee must prove that the former method was abandoned and a new regular method was adopted at a definite point of time. The tax authorities may require proper proof of that change, and accounting practice cannot be varied merely from year to year for convenience. Whether a method was in fact regularly employed, or whether it was actually changed, is a question of fact rather than a referable question of law under Section 66(3). On that basis, the article notes that no reference lies where the dispute depends on factual determination.

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Issues: (i) whether the assessee could compel a reference on the question whether the accounting method shown in the later years had become the regular method of accounting; (ii) whether an assessee who has regularly employed one method of accounting may change to another method, and if so on what basis such change is to be recognised.

Issue (i): whether the assessee could compel a reference on the question whether the accounting method shown in the later years had become the regular method of accounting.

Analysis: Under Section 66(3), a reference lies only on a question of law. Whether a particular method of accounting has been regularly employed, or whether it has in fact been changed, depends on the evidence and is a pure question of fact. The refusal of the Income-tax authorities to accept the alleged change therefore did not itself raise a referable question of law.

Conclusion: The issue was decided against the assessee. No referable question of law arose.

Issue (ii): whether an assessee who has regularly employed one method of accounting may change to another method, and if so on what basis such change is to be recognised.

Analysis: Section 13 requires income to be computed according to the method of accounting regularly employed by the assessee, but it does not prevent a bona fide change from one regular method to another. The assessee must show that the former regular method has been abandoned and a new regular method has been adopted at a definite point of time. The Income-tax authorities are entitled to insist on proper proof of such change, and the method cannot be altered merely from year to year to suit convenience.

Conclusion: The issue was decided in favour of the assessee in principle, but it did not assist the present applications because the alleged change was a matter of fact not open to reference.

Final Conclusion: The applications were not maintainable as reference questions because the controversy turned on a factual determination as to whether the accounting method had in fact been changed, and both applications therefore failed.

Ratio Decidendi: A bona fide change in the regularly employed method of accounting is permissible under Section 13, but whether such a change has actually been made is a question of fact for the income-tax authorities, not a question of law referable to the Court.

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