THE COMMISSIONER OF INCOME TAX vs. M/S.KERALA KAUMUDI (P) LTD.

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ITA/48/2007HC KeralaKLHC01025042200714 December 2017Author: HONOURABLE MR.JUSTICE K.VINOD CHANDRAN,HONOURABLE MR. JUSTICE ASHOK MENON3 pages
AI SummaryDismissed

What did the High Court hold?

The Tribunal decided that the assessee could carry on a hybrid system of accounting. The reasoning was based on a binding precedent from the High Court for an earlier assessment year. This precedent had found that the assessee's consistent practice of following a hybrid system of accounting, which involved accounting for advertisement and newspaper sales to agencies on a cash basis while using the mercantile system for other transactions, was permissible prior to 1997. The ratio decidendi is that a consistent practice of hybrid accounting, followed by the assessee, can be permitted if it was permissible under the law at the relevant time. The appeal is rejected, and the question is answered in favour of the assessee and against the Revenue. No costs were awarded.

What were the facts?

The Commissioner of Income Tax, Thiruvananthapuram (the Revenue) has filed an appeal against the order of the Income Tax Appellate Tribunal (ITAT), Cochin Bench. The assessee, M/s. Kerala Kaumudi (P) Ltd., a newspaper company, followed a hybrid system of accounting. While generally adhering to the mercantile system, the assessee accounted for transactions related to advertisement and newspaper sales to agencies on a cash basis for all years. This practice was consistent. The Assessing Officer's order is dated 31-03-1997, the Commissioner of Income Tax (Appeals) order is dated 16-09-2002, and the ITAT order is dated 01-04-2005. The appeal concerns the assessment year(s) not explicitly stated but implied to be prior to the amendment in 1997.

What were the issues?

1. Whether the assessee can carry on a hybrid system of accounting, specifically accounting for advertisement and newspaper sales to agencies on a cash basis while following the mercantile system for other transactions, as a question of law. The Revenue's contention is not explicitly recorded in the judgment. The Assessee's contention, implied by the Tribunal's decision, is that the hybrid system of accounting was permissible prior to 1997 and had been consistently followed by the assessee. The Tribunal's decision relies on a binding precedent from this court for an earlier assessment year, which permitted the consistent practice of hybrid accounting.

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON THURSDAY, THE 14TH DAY OF DECEMBER 2017/23RD AGRAHAYANA, 1939 ITA.No. 48 of 2007 ------------------ AGAINST THE ORDER/JUDGMENT IN ITA 9/COCH/2003 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 01-04-2005 APPELLANT(S)/APPELLANT: ----------------------- THE COMMISSIONER OF INCOME TAX, THIRUVANANTHAPURAM.

BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S)/RESPONDENT: ------------------------ M/S.KERALA KAUMUDI (P) LTD., PETTAH, THIRUVANANTHAPURAM.

R1 BY ADV. SRI.M.PATHROSE MATTHAI (SR.) R1 BY ADV. SRI.SAJI VARGHESE THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 14-12-2017, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

ITA.No. 48 of 2007 ------------------ APPENDIX APPELLANT(S) ANNEXURE: --------------------- ANNEXURE A: TRUE COPY OF THE ORDER OF THE ASSESSING OFFICER DATED 31-03-1997. ANNEXURE B: TRUE COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 16-09-2002. ANNEXURE C: TRUE COPY OF THE ORDER OF THE APPELLATE TRIBUNAL DATED 01-04-2005. RESPONDENT(S) ANNEXURE ---------------------- NIL dkr

K.VINOD CHANDRAN & ASHOK MENON, JJ. ------------------------------------------- I.T.Appeal No. 48 of 2007 ------------------------------------------- Dated this the 14th day of December, 2017 J U D G M E N T Vinod Chandran, J. The petitioner is the revenue and the respondent-assessee is a news paper company. The question raised in the above appeal is as to whether the assessee can carry on hybrid system of accounting. The assessee was carrying on mercantile system of accounting, except the transactions with respect to advertisement and also news paper sales to agencies. The assessee used to account it on cash basis for all the years. The question for an earlier assessment year was raised before this court and it was found that the assessee was following the hybrid system of accounting as permissible prior to 1997 and on the basis of the consistent practices followed by the assessee, the same could be permitted. In view of the binding precedent, we respectfully follow the aforesaid decision, and reject the Income Tax Appeal, answering the question in favour of assessee and against the revenue. No costs. Sd/-

K.VINOD CHANDRAN Judge Sd/-

ASHOK MENON Judge dkr

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