2006 (10) TMI 134

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..... he appellant. JUDGMENT The judgment of the court was delivered by P. D. Dinakaran J. - The above tax case appeal is directed against the order of the Income-tax Appellate Tribunal dated June 30, 2005, made in I. T. A. No. 494/Mds/2000 for the assessment year 1993-94, setting aside the orders of the authorities below. 2. The facts in a nutshell are that the assessee, a company wholly owned by the State Government, filed its return of income for the assessment year 1993-94 admitting an income of Rs. 49,40,823, and the assessment was completed under section 143(3) of the Income-tax Act on a total income of Rs. 56,19,300. On noticing that some income escaped assessment, a notice under section 148 of the Act was issued to the asses .....

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..... v. Pondicherry Industrial Promotion Development Investment Corporation Ltd. [2002] 254 ITR 748, wherein it is held that cash system of accounting can be followed in so far as the interest and rent are concerned, held that the assessee is entitled to follow the cash system of accounting with regard to interest, thereby setting aside the orders of the authorities below and upholding the claim of the assessee. Hence, the present appeal by the Department raising the following substantial questions of law : "(i) Whether, on the facts and circumstances of the case, the Tribunal was right in holding that interest from Andhra Pradesh Financial Corporation should be taxed only on cash basis, while the assessee was following the mercantile system .....

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..... Promotion Development Investment Corporation Ltd. [2002] 254 ITR 748, having regard to the decision of the apex court, referred to supra, that it cannot be said that it was impermissible for the assessee to have followed a mixed or a hybrid system of accounting and that while following the mercantile system, it was permissible for it to adopt a cash system of accounting so far as interest and rent were concerned, held that the assessee cannot be held to be disentitled to change the method of accounting even when it is genuine solely on the ground that such a mixed system of accounting would result in loss to the Revenue for that year. 10. The ratio laid down in the decisions referred supra, is squarely applicable to the facts and cir .....

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