TaxTMI 
TaxTMI 
2004 (1) TMI 19
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.... section 143(1)(a). In the preceding years, the assessee-company carried on business of trading in jute goods and shares and debentures of companies. The assessee also earned service charges and export handling commission for rendering various services to the parties. The assessee further earned interest on fixed deposit, debentures/bonds and dividends on shares apart from income from agricultural activities. Heard Mr. J.P. Khaitan, learned counsel for the appellant, and Mr. Dipak Deb, learned counsel for the Revenue. The contention of the appellant is that the assessee, as stated hereinabove, had a number of sources of income and one of them was export handling. In respect of such export handling the assessee all along maintained its ac....
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....h 29 of its judgment and confirmed the view of the Commissioner of Income-tax (Appeals) and the contention of the assessee in this regard was rejected. The contention of the appellant is that the assessee all through is following the said practice of maintaining accounts in respect of export handling business on the mercantile system in respect of the expenditure and on the cash system in respect of its receipts and the law recognises such maintenance of accounts in hybrid system under section 145 of the Income-tax Act, 1961, as it was prevailing at the relevant point of time. This practice has been disapproved subsequently when the said section 145 was amended with effect from April 1, 1997. But in respect of the relevant year, the said a....
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....the Revenue, relied on the judgments in the cases of CIT v. British Paints India Ltd. [1991] 188 ITR 44 (SC); CIT v. UCO Bank [1993] 200 ITR 68 (Cal) and Veerayee Ammal v. Seeni Ammal, AIR 2001 SC 2920. Learned counsel also dealt with the judgments cited on behalf of the appellants contending that those judgments did not deal with the provisions of section 145 particularly the provisions contained in the first proviso to the said old section. After considering the aforesaid contentions, we find that the question falls for our consideration is as to whether the hybrid system of accounting followed by the assessee is permissible or not. On behalf of the assessee, it has been argued that in respect of the export handling business of the asse....
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....f his business or another class of customers. He may also keep accounts in respect of different parts of the same business on difference basis. If such different methods are employed regularly and consistently the profits have to be computed in accordance with the respective methods, provided it results in a proper determination of the true profits." In the case of North Arcot District Co-operative Spinning Mills Ltd. [1984] 148 ITR 406 (Mad), the hybrid system has also been approved when the Division Bench of the Madras High Court held as follows: "Based on the payment recorded in November 1968, the deduction has been claimed in the assessment year 1970-71, as in the earlier years. The same method of accounting had been followed by the a....
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....about the fact that there are also innumerable other systems of accounting besides these two systems. Such systems are commonly known as 'hybrid systems of accounting'. In such a system, there is certain element of both cash and mercantile systems. An assessee following such a system may employ one method of accounting for one class of business or one class of customers or transactions and a different method for another class. If an assessee follows such a hybrid system and in respect of certain loan transactions does not follow the mercantile system of accounting for debiting interest to the accounts of the parties and crediting the same to the profit and loss account, no fault as such can be found with the system followed by the assessee.....