TaxTMI 
TaxTMI 
2007 (7) TMI 291
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....rcumstances of the case, the Tribunal was right in holding that the assessee is entitled to account for only the "additional finance charges" on a cash basis, while it is otherwise following a mercantile system of accounting and also accounting for the very same transaction on a mercantile basis under company law? 2. Whether, on the facts and circumstances of the case, the Tribunal was right in holding that the assessee may be permitted to follow a mercantile system of accounting with respect to company law and a hybrid system of accounting with respect to income-tax? 2. The facts necessary for disposal of the appeal are as follows : The assessee is a non-banking financial company. It has been accounting all its income and expendit....
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....asis, which is impermissible in law. It is further contended that the respondent-assessee is supposed to maintain its accounts on a cash or mercantile basis and the assessee being a company could only maintain the accounts in one system, i.e., on a mercantile system of accounting. The respondent-assessee cannot choose specific items and account for the same on cash basis and other items on mercantile basis. The Tribunal rejected the plea of the Revenue on the reasoning that while considering an identical issue with regard to additional finance charges or additional lease rentals, which was otherwise known as overdue charges, in I. T. A. Nos. 99 to 103/Mds/2002, the Tribunal has taken the view that the assessee could have cash system of acco....
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....amalai Finance Ltd. [2005] 275 ITR 451. In that case, the Assessing Officer found that the change in the method of accounting of overdue charges from mercantile basis to cash system was not justified and added the overdue interest of mercantile basis. This court, while deciding the issue, observed as under (page 459) : "In the instant case, learned counsel for the Revenue is not in a position to demonstrate or satisfy us that due to the change of accounting method adopted by the respondent/assessee, which is permissible in law as per the ratio laid down in (i) CIT v. Matchwell Electricals (I) Ltd. [2003] 263 ITR 227 (Bom) and (ii) Hela Holdings P. Ltd. v. CIT [2003] 263 ITR 129 (Cal), the Revenue suffered any loss or such a change ....
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....rds overdue charges, acknowledging the change of method of accounting of overdue interest alone on cash basis." 6. The reason given in the abovesaid decision would squarely cover both the questions of law raised in this appeal. Thus, as the questions of law raised were already answered in the affirmative against the Revenue in the above case, this appeal is dismissed. 7. Tax Case Appeal No. 753 of 2007 is filed by the Revenue against the order (common) made in I. T. A. No. 1349/Mds/98 dated November 16, 2005, along with other appeal in I. T. A. No. 1556/Mds/98. In the said appeal (I. T. A. No. 1349/ Mds /98), at the instance of the assessee two issues were taken in the forefront which were: (1) Confirmation of computation of ....