1991 (9) TMI 121

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....he earlier years." (2) "Without prejudice to the ground of appeal No.1 above, the learned CIT(A) erred in confirming the addition of Rs. 3,77,695 in respect of operating fee and Rs. 3,24,255 in respect of interest alleged to have been computed on accrual basis." 2. The assessee has been engaged in providing operational services and consultancy in management and running of hotels. For the purpose of accounts the year ends on 30th June. The books of accounts in this year are maintained on hybrid system as against mercantile system in earlier two assessment years, namely, asst. yr. 1981-82 and 1982-83. In this year the assessee did not account for the income by way of operating fees and interest on accrual basis because it changed its system....

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....not denied. He further emphasised the fact that in the report of the Directors to the shareholders, it was intimated that the Directors expected revenue from hotel Hans to rise substantially with optimum utilisation of capacity. Hence, the Commissioner(A) concluded that the change was not bona fide. The assessee had once opted for a mercantile system of accounting and it was not open for the assessee to change the system of accounting according to its own convenience. Besides the report of the Directors did not give any indication of there being any difficulty in the recovery of the amounts due from two hotels. No other evidence to support this statement of the appellant regarding difficulty in recovery of the amount due from these two hote....

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....ashmir. It was highlighted that the amount of operating fees was not determined and the same was to be determined only after discussions and consultations by the representatives of both the sides, besides clarifying the position that no amount was received till today. (iv) From the statement of income from operating fee and interest prepared separately on the basis of mercantile system as also cash system for the asst. yrs. 1981-82 to 1987-88, it was contended that though the assessee had accounted for the operating fees on mercantile basis in asst. yrs. 1981-82 and 1982-83, no amount was received till asst. yr. 1985-86, when a small amount was received on settlement. Again from the details of expenses prepared on the basis of accrual as a....

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....90) 182 ITR 1 (Mad) submitted that if the assessee desired to change over to cash system of income, then unless the expenses were also similarly changed, the change could not be permitted. 6. On going through the material placed before us to which our attention was drawn and considering the findings recorded by the tax authorities, we are of the opinion that the assessee's claim should be accepted. There is really no dispute with regard to the right of the assessee to change the method accounting for bona fide business considerations. The real dispute is only with regard to the narrow point on facts whether there was necessity for change on bona fide business considerations. On such matters normally only the businessman is the best judge t....