1998 (9) TMI 67

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... assessed as 'income from business'? 2. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is correct in law in holding that in spite of adoption of cash system of accounting for interest accrued on loans advanced to various co-operative sugar factories, the income of the assessee can be properly deduced when the interest payable by it is being accounted for on accrual basis, and the assessee's case is not hit by the proviso to section 145(1) of the Income-tax Act, 1961?" The assessee, a public sector undertaking of the State Government, purchases large tracts of land, levelling the same, laying roads and creating infrastructural facilities like supply of power, water, drainage facilities, et....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....eration, namely, 1980-81, the assessee has chosen to account for such interest only on cash basis. The reason for this change is given in the directors' report. The directors had stated that for the year concerned, it had been decided to account for the interest on bridge loans advanced to co-operative sugar factories on receipt basis. The directors also passed a resolution to this effect and the interest due was not shown in the accounts. The Income-tax Officer was of the opinion that the interest on bridge loans cannot be accepted on cash basis. He pointed out that the assessee had been following the mercantile system of accounting in the past and it cannot change from this system in respect of a few of the transactions only. On app....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....uch that, in the opinion of the Income-tax Officer, the income cannot properly be deduced therefrom, then the computation shall be made upon such basis and in such manner as the Income-tax Officer may determine. The Income-tax Officer says that the assessee picked up a few transactions and chose to switch over from the mercantile basis to the cash basis only in respect of those transactions, and that the method employed by the assessee is such that the income of the assessee cannot properly be deduced therefrom and, therefore, she has added an addition of Rs. 52,42,580 in computing the income of the assessee invoking the proviso to section 145(1). The Tribunal held that the change in the method of accounting by the assessee in respect of....