9911796707
TMI Blog2007 (7) TMI 291X X X X Extracts X X X X X X X X Extracts X X X X ..... shya Sitaraman for the appellant. JUDGMENT The judgment of the court was delivered by K. Raviraja Pandian J.- Tax Case Appeal No. 752 of 2007 is filed against the order of the Income-tax Appellate Tribunal "B" Bench dated November 16, 2005, made in I. T. A. No. 1556/Mds/98. The relevant assessment year is 1994-95. The following substantial questions of law are formulated: 1. Whether, on the facts and circumstances 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, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal. The Tribunal, in a common order dated November 16, 2005, made in I. T. A. No. 1556 of 1998, decided the issue in favour of the assessee and dismissed the appeal. 3. In this appeal it is contended that the assessee had accounted for the additional finance charges on mercantile basis in their accounts filed with the Registrar of Companies, but, only for income-tax purpose it has accounted for it on cash basis, 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 it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e been received by the assessee-company, the same having been offered for taxation. Further, it is pertinent to mention that the hybrid system of accounting was permissible during the relevant year and such system was abolished with effect from April 1, 1997, by substitution of section 145 of the Finance Act, 1995. 5. A similar issue has been considered by the Division Bench of this court in the case of CIT v. Annamalai 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) : "I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreements which enable the assessee-company to demand overdue charges is only an enabling provision and that enabling provision does not guarantee the collection of overdue charges. It only gives a cause of action to the assessee. In such cases, it is very difficult to recognise the income against the overdue charges. We are, therefore, of the considered opinion that the Tribunal has rightly deleted the additions made towards 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow, have nothing to do with the issue involved in this appeal: 1. Whether, on the facts and circumstances 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? 9. Hence, this appeal is dismissed as nothing survives for adjudication i ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
