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TMI Blog2014 (11) TMI 480X X X X Extracts X X X X X X X X Extracts X X X X ..... brid method in a manner that does not reflect the correct income - The Finance Act, 1995 has amended section 145 of the Income Tax Act to provide that income chargeable under the head ''Profits and gains of business or profession'' or ''Income from other sources'' shall be computed only in accordance with either the cash or the mercantile system of accounting, regularly employed by an assessee - Prior to this amendment, the first proviso to sub-section (1) of section 145 gave an option to the assessee to determine the income by adopting any one of the methods - the assessee are justified insofar as following one system of accounting for the purpose of books of accounts and another for the purpose of determination of tax – Decided in favour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hire purchase finance charges on Sum of Digits (SOD) technique and has offered the sum on Equated Monthly Instalment (EMI) technique while computing the income for the purpose of tax in respect of the two assessment years in question. This was rejected by the assessing officer, who added the differential amount of hire purchase finance charges between the Sum of Digits technique and Equated Monthly Instalment technique and determined the tax liability thereon. Aggrieved by that, the assessee went on appeal to the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) also held against them. Thereafter, when an appeal was brought before the Tribunal, the Tribunal also, upholding the order of the Commissioner of Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned standing counsel for the respondent-Revenue has relied upon the Circular Text (1995) 215 ITR (Stat) 0070 with regard to the methods of accounting and accounting standards for computing income vide the Finance Act, 1995 to say that when the income shall be computed only in accordance with either the cash or the mercantile system of accounting regularly employed by an assessee with effect from the assessment year 1997-98 and subsequent years, these two appeals pertaining to the assessment years 1995-96 and 1996-97 may be allowed in favour of the assessee, as prior to deletion of the first proviso to sub-section (1) of Section 145 by the amendment, the assessee could adopt the hybrid method for the purpose of computation of income. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the head ''Profits and gains of business or profession'' or ''Income from other sources''. These accounting standards will be laid down in consultation with expert bodies like the Institute of Chartered Accountants. 44.3. The amendment will take effect from 1st April, 1997 and will, accordingly, apply in relation to the assessment year 1997-98 and subsequent years.'' 6. On perusal of the aforesaid circular, for the purpose of deciding these two appeals in respect of the assessment years 1995-96 and 1996-97 are concerned, we are of the firm view that prior to this amendment, the first proviso to sub-section (1) of section 145 gave an option to the assessee to determine the income by adopti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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