TaxTMI 
TaxTMI 
2006 (12) TMI 118
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....peals, are as under: The assessees are private limited companies subscribing to chits as their business activity. The assessees were maintaining their accounts on mercantile basis and computing loss or profit, as the case may be, at the end of the chit period in respect of chits terminating in a particular previous year, following the completed contract method. Before the Assessing Officer, the assessees claimed that the discount arose at a particular point of time when the prized chit amount was received and the discount was a statutory and contractual liability incurred by the subscriber as a consideration for obtaining the sum total of all the contributions by way of subscription in an accelerated manner. According to the assessees....
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....s a regular activity and received on a regular basis and the discount amount would run for the remaining period of the chit. The Assessing Officer rejected the method of accounting adopted by the asses sees and taxed the dividend in the year of receipt and allowed chit loss on proportionate time basis by distributing it over the remaining period subsequent to the bidding at the chit auction. On appeal by the assessees, the Commissioner of Income-tax (Appeals), while rejecting the completed contract method, held that dividend is taxable in the year of receipt and chit loss is allowable as a deduction in the year of bid itself. Aggrieved against the same, both the assessees and the Department went on appeals before the Income-tax Appell....
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....d 1993-94, in T.C. (A) Nos. 76 to 86 of 2003 etc. (Bilahari Investments P. Ltd. v. CIT [2007] 288 ITR 39), batch, by common judgment dated June 19, 2006, held as follows: "A conjoint reading of the above provisions of law makes it clear that all income received or deemed to be received or accruing or arising during the previous year shall form part of the total income of the assessee and such income shall be computed in accordance with the accounting system which the assessee is regularly following. Here, on the facts of the case, the authorities have found that the assessees are following mercantile system of accounting. The mercantile system of accounting means, as discussed in Shiva Prasad Gupta v. CIT, AIR 1929 All 819, the amounts t....
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....be, before or after the commencement of this Act; and (b) any provision contained in the memorandum, articles, bye-laws, agreement or resolution aforesaid, shall, to the extent to which it is repugnant to the provisions of this Act, become or be void, as the case may be', the definitions of the expressions, discount, dividend, prize amount, as extracted above, will prevail over the similar definitions as found in the Income-tax Act, because a non-obstante clause is generally appended to a section with a view to give the enacting part of the section in case of conflict, an overriding effect over the provision in the same or other Act mentioned in the non-obstante clause (vide: State of Bihar v. Bihar Rajya M.S.E.S.K.K. Mahasangh [2005]....