| Case ID |
2b76884c-2b89-4f3c-8b72-21d33fbb493f |
| Body |
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| Case Number |
IT REFERENCE No. 268 OF 1977 |
| Decision Date |
Apr 21, 1980 |
| Hearing Date |
Apr 22, 1980 |
| Decision |
The Tribunal upheld the decision of the Appellate Assistant Commissioner (AAC) that the assessee's unilateral action in treating a particular transaction differently from the mercantile system of accounting was impermissible. The assessee had followed the mercantile system and could not switch to a cash basis for specific transactions without mutual consent. The case emphasized that once a method of accounting is chosen, it must be consistently applied unless agreed otherwise. The Tribunal confirmed that the interest receivable from the debtor must be included in the income for assessment purposes, as the method of accounting had been established as mercantile. |
| Summary |
In the case of Reform Flour Mills (P.) Ltd. v. Commissioner of Income Tax, the Calcutta High Court addressed the adherence to the mercantile system of accounting under the Income-tax Act, 1961, specifically Section 145. The case revolved around the assessment years 1968-69 and 1969-70, where the assessee sought to exclude interest receivable from its accounting due to the debtor's poor financial condition. The Tribunal ruled that the unilateral change in accounting treatment was not permissible under the law. This case highlights the importance of consistency in accounting methods and the requirement for mutual agreement when altering accounting practices. The court's ruling reinforces the necessity for businesses to adhere strictly to their chosen accounting methods to ensure compliance with tax regulations. The case is significant for tax law practitioners and businesses alike, as it clarifies the implications of switching accounting methods without proper consent. Key phrases include 'mercantile system', 'unilateral change', and 'tax compliance'. |
| Court |
Calcutta High Court
|
| Entities Involved |
Commissioner of Income Tax,
Reform Flour Mills (P.) Ltd.
|
| Judges |
Sabyasachi Mukharji,
Sudhindra Mohan Guha
|
| Lawyers |
Dr. D. Pal,
Sanjib Dutta,
R.N. Dutta,
N.N. Mukherjee,
Sidartha Chatterjee,
Ajit Kumar Sengupta,
B.K. Naha
|
| Petitioners |
Reform Flour Mills (P.) Ltd.
|
| Respondents |
Commissioner of Income Tax
|
| Citations |
1981 SLD 1990,
(1981) 132 ITR 184
|
| Other Citations |
CIT v. E.A.ET. Sundararaj [1975] 99 ITR 226 (Mad.),
CIT v. Confinance Ltd. [1973] 89 ITR 292 (Bom.),
British Paints India Ltd. v. CIT [1978] 111 ITR 53 (Cal.),
Shiv Prasad Ram Sahai v. CIT [1966] 61 ITR 124 (All.),
CIT v. Ram Kumar Agarwalla & Bros. [1977] 108 ITR 457 (Cal.)
|
| Laws Involved |
Income-tax Act, 1961
|
| Sections |
145
|