9911796707
TMI Blog1982 (4) TMI 207X X X X Extracts X X X X X X X X Extracts X X X X ..... ia. The number of such articled clerks is also regulated. The result is engagement of such articled clerks is not left to the sweet will of the chartered accountant. At one time the apprentices were paying a premium to the chartered accountant, which was to be appropriated by the chartered accountant and later made compulsorily refundable. With the development of the profession, this practice was considered unethical and an anachronism. Since this is a professional course and the chartered accountants are deriving a benefit in the shape of unpaid work and due to the persistent demands made by the articled clerks, the Institute amended the regulations to provide in regulation 32B of the Chartered Accountant Regulations, 1964 as under: "(1) Every member engaging an articled clerk on or after 1st July, 1973 shall pay to such clerk a minimum monthly stipend at the rates specified in sub-regulation (2) or in sub-regulation (3) hereof, as the case may be. (2) If the normal place of service of an articled clerk is situated in Bombay, Calcutta, Delhi, New Delhi, Kanpur, or Madras, the following shall be the minimum rates of the stipend payable under sub-regulation (1): (a) in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red accountant, who by that account computes the income that is liable to tax as per his understanding of the facts and the provisions of the law. In this computation sheet of adjusted profit and loss account, the liability was provided for and claimed as a deduction for the first time in the assessment year 1975-76. In the assessment year 1974-75 this liability was not claimed as, we are told by them, things were too late. In the assessment years 1975-76, 1976-77 and 1977-78 the liability claimed through the adjusted profit and loss account was, however, disallowed by the income-tax department. The assessee contested the disallowance by way of an appeal for the assessment year 1976-77, but in vain. For the assessment year 1977-78 also an appeal was filed before the Commissioner (Appeals) against the disallowance, but in vain. The reason shown by the revenue in support of the disallowance of the claim made by the assessee was that it did not make any provision in its accounts for the liability and no such provision could have been made because the assessee had been following the cash system of accounting. So, the Commissioner (Appeals) dismissed the assessee's claim only on the gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme Court in Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363 was not available to the assessee. Then an argument was addressed before him based upon the Madras High Court decision in CIT v. E.A.E.T. Sundararaj [1975] 99 ITR 226 that it is open to an assessee to employ different methods of accounting for different sources of income or one method of accounting for one part of its business or one class of customers and a different method of accounting for another part of business or another class of customers. The High Court in the very same case warned that such different methods are permissible only when the assessee employs them regularly and consistently and not otherwise. The Commissioner rejected this argument on the ground that making a provision for the liability amounted to adopting different method of accounting in respect of the stipends payable to the articled clerks and there was only casual deviation and not a regularly and consistently employed method of accounting. Re-emphasising the fact that in cash system of accounting there was absolutely no scope for claiming deduction in respect of a provision made towards expenses which had not been disbursed, he rejected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of accounting employed must be such that it must be regularly followed and capable of correct profit being deduced. If an assessee who is following cash system of accounting, for the sake of commercial expediency - comes across an occasion where he has to convert it into mercantile system of accounting or such a method of accounting as to adopt cash system for certain classes of income or certain classes of persons and mercantile system of accounting for certain other classes of income or certain classes of persons, even that is permissible subject to the condition that it is regularly and consistently followed thereafter. Therefore, the emphasis upon the regularity and consistency in the employment of a method of accounting is not only of the past but also of the future. The question of changing the method of accounting would arise only when it was consistently followed in a particular way. If after the change it is followed consistently thereafter, then the method of accounting thus changed would become the method of accounting regularly followed and consistently applied. This is a trite law and we do not have to discuss the judicial pronouncements on the subject, except to mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we may point out that even in the case of cash system of accounting it is open for the assessee to make a provision for outstanding expenses at the end of the accounting year in order to arrive at the true and correct income. For example, as on the date of the close of the accounting year there may be outstanding expenditure towards salaries, rents, telephone, taxes, stationery, etc., and myriad other such line of expenses. It is open to an assessee, even though he has maintained his accounts in cash system, to make a provision for all these outstanding expenses as in the case of professional men like authors, artistes, lawyers, chartered accountants and doctors (via---a decision of Lord Denning). In all such cases what is happening in practice is not cash system---pure and simple---but a system of accounting where provisions were made for outstanding expenses also. Therefore, that system of accounting assumed the role of a hybrid system of accounting. When such a thing is permissible and is being in vogue, we are unable to appreciate how it can be said in the case of the assessee herein that it is following cash system of accounting and it is not open to it to make a provision for ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
