9911796707
TMI Blog1982 (4) TMI 210X X X X Extracts X X X X X X X X Extracts X X X X ..... icled 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 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 by providing under Regulation 32B of the Chartered Accountants Regulations, 1964 that: (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 of the first year of articled training : Rs. 60 per month. (b) In respect of the second year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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 asst. yr. 1975-76. In the asst. yr. 1974-75, this liability was no claimed as, we are told by them thing were too late. In the asst. yr. 1975-76, 1976-77 and 1977-78 the liability claim through the adjusted profit and loss account was, however, disallowed by the IT Department. The assessee contested the disallowance by way of appeal for the asst. yr. 1976-77 but in vain, For the asst. yr. 1977-78 also an appeal was filed before the CIT (A) 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 made any provision in its account for the liability and no such provision could have been made because the assessee had been following the case system of accounting. So, the CIT (A) dismissed the assessee's claim only on the ground that the claim was not made on the basis of a provision or expenditure debited in the accounts and an expenditure claimed without making an entry in the accounts was not allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... araraj (1975) 99 ITR 226 (Mad) 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 no otherwise. The CIT rejected this argument on the ground that making a provision for the liability amounted to adopting a different method of accounting in respect of the stipends payable to the articled clerks and there was only causal 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 the provision made towards expenses which had not been disbursed, he rejected the argument advanced before him by the assessee. He directed eventually the ITO to disallow the provision made for outstanding stipends and pass a revised assessment order. 6. It is against this order of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where he has to convert it not 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 person, 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. It 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 make a reference to the decision of the Madras High Court in the case of CIT vs. E.A.E.T. Sundaraj (1975) 99 ITR 226 (Mad) which has been cited before the CIT and passage form which have also been extracted. The relevant passage which the CIT was refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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, artists, lawyers chartered accountants and doctors (vide a decision of Lord Denying). 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 the liability of payment of stipends and convert the system of accounting into hybrid system of accounting. If the conversion was not for a bona fide reason, then the assessee is out of bounds. But the conversion ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
