“mercantile system of accounting”

ICDS & AccountingSection 145Section 1451,487 judgments

The decision most relied on for mercantile system of accounting is CIT v. Woodward Governor India Pvt. Ltd. (312 ITR 254), cited in 968 judgments on BharatTax.

Leading authorities on mercantile system of accounting

CIT v. Woodward Governor India Pvt. Ltd.

312 ITR 254 · 2009 · Supreme Court

968

citing judgments

Foreign exchange fluctuations, whether gains or losses, are inextricably linked to the underlying business transaction and must be accounted for under the mercantile system. The Supreme Court also affirmed the standard accounting principle of valuing stock at cost or net realisable value, whichever is lower.

CIT v. Excel Industries Ltd.

358 ITR 295 · 2013 · Supreme Court

935

citing judgments

When an income or expenditure is revenue neutral across different assessment years, where any benefit derived is offset by a corresponding liability or reversal, no additional tax liability arises, particularly concerning income recognition under the mercantile system of accounting.

Rotork Controls India Pvt. Ltd. v. CIT

314 ITR 62 · 2009 · Supreme Court

739

citing judgments

A provision for expenses, such as warranty, is a deductible liability for income tax purposes if it constitutes a present obligation arising from past events, and a reliable estimate of the amount of obligation is possible.

Kedarnath Jute Mfg. Co. Ltd. v. CIT

82 ITR 363 · 1971 · Supreme Court

654

citing judgments

Tax liability for an item of income or expenditure is determined solely by the provisions of the Income-tax Act. Entries in an assessee's books of account are not conclusive and do not govern the taxability or deductibility of an item, as the legal rights and obligations under the Act prevail.

Lalchand Bhagat Ambica Ram v. CIT

37 ITR 288 · 1959 · Supreme Court

570

citing judgments

Where an assessee maintains regular books of account, and these books are not rejected or found defective by the Assessing Officer, any cash deposits or available cash shown in the cash book, if sufficient to cover the transaction, cannot be treated as unexplained income or an addition under sections 68 or 69A.

Calcutta Co. Ltd. v. CIT

37 ITR 1 · 1959 · Supreme Court

341

citing judgments

When following the mercantile system of accounting, provisions for liabilities made on a scientific and rational basis are allowable as deductions, even if their actual quantification and discharge are deferred to a future date.

United Commercial Bank v. CIT

240 ITR 355 · 1999 · Supreme Court

314

citing judgments

Liabilities accrued on a notional basis are allowable as deductions under the mercantile system of accounting even if their exact quantification or discharge is deferred to a future date or if the demand itself is disputed.

M.M.Aqua Technologies Limited v. CIT

436 ITR 582 · 2021 · Supreme Court

308

citing judgments

Amendments to tax law that impose new obligations or change existing legal positions apply prospectively, even if stated to be "for the removal of doubts." The judgment also clarifies that deductions under Section 43B are allowed only on actual payment, overriding the mercantile system of accounting.

Judgments citing mercantile system of accounting

DCIT, New Delhi vs. M/S Ptc India Ltd., New Delhi

The appeals are allowed for statistical

ITA 2690/DEL/2016[2012-13]Status: DisposedITAT Delhi27 May 2024AY 2012-13

Bench: Shri G.S. Pannu, Vice- & Shri Anubhav Sharma

Section 14A

surcharge may or may not be paid or recovered or may eventually be waived, is entirely irrelevant as the assessee maintains a mercantile system of accounting. 6 ITA No. 809/Del/2015 & Ors. Aggrieved by the aforesaid finding, the assessee filed an appeal. The CIT(Appeals) vide order dated 06.11.2009, set aside ... follows:- "The issue involved and the submissions made by the appellant have been considered. It is undisputed that the appellant is following mercantile system of accounting: it is levying surcharge on delayed payment of bills by the consumers; the surcharge is taken as income as and when it is collected

DCIT, New Delhi vs. M/S. Ptc India Ltd., New Delhi

The appeals are allowed for statistical

ITA 809/DEL/2015[2011-12]Status: DisposedITAT Delhi27 May 2024AY 2011-12

Bench: Shri G.S. Pannu, Vice- & Shri Anubhav Sharma

Section 14A

Tapovan Education Trust, Vadodara vs. The ACIT, CPC, Banglore

In the result, the appeal of the assessee is allowed for statistical purposes

ITA 2349/AHD/2017[2013-14]Status: DisposedITAT Ahmedabad20 May 2024AY 2013-14

Bench: Smt. Annapurna Gupta& Shri Siddhartha Nautiyal

For Appellant: Shri M. K. Patel, AdvocateFor Respondent: Dr. Darsi Suman Ratnam, CIT D.R. & Shri

Section 11Section 12ASection 80G

following ITA Nos. 2310&2311/Ahd/2017 & 2349/Ahd/2017 Tapovan Education Trust vs. ACIT Asst. Year –2013-14 a cash system of accounting (and not mercantile system of accounting) and the trust accounts for only those fees which are received during the financial year, irrespective of whether it pertains to any financial year

Tapovan Education Trust, Vadodara vs. Commissioner of Income Tax-1, Vadodara

In the result, the appeal of the assessee is allowed for statistical purposes

ITA 2311/AHD/2017[N.A.]Status: DisposedITAT Ahmedabad20 May 2024

Bench: Smt. Annapurna Gupta& Shri Siddhartha Nautiyal

For Appellant: Shri M. K. Patel, AdvocateFor Respondent: Dr. Darsi Suman Ratnam, CIT D.R. & Shri

Section 11Section 12ASection 80G

Tapovan Education Trust, Vadodara vs. Commissioner of Income Tax-1, Vadodara

In the result, the appeal of the assessee is allowed for statistical purposes

ITA 2310/AHD/2017[N.A]Status: DisposedITAT Ahmedabad20 May 2024

Bench: Smt. Annapurna Gupta& Shri Siddhartha Nautiyal

For Appellant: Shri M. K. Patel, AdvocateFor Respondent: Dr. Darsi Suman Ratnam, CIT D.R. & Shri

Section 11Section 12ASection 80G

Deputy Commissioner of Income Tax Circle-2(1)(1), Bengaluru vs. Enzen Global Solutions Pvt Ltd, Bengaluru

In the result, the appeal of the Revenue is dismissed

ITA 718/BANG/2024[2018-19]Status: DisposedITAT Bangalore20 May 2024AY 2018-19

Bench: Shri Chandra Poojari & Shri Soundararajan K

For Appellant: Shri V Chandrashekar, AdvocateFor Respondent: Ms. Neera Malhotra, JCIT(DR)

Section 143(3)Section 250

held as trading assets). 5. The Ld. CIT(A) has failed to take note of the fact that the assessee company is following mercantile system of accounting ITA Nos.696 & 718/Bang/2024 Page 4 of 13 and 'hence premium accrued during a financial year (at the rate of 16.5% per annum) would ... when the assessee has a right to receive periodic payments can it be said that income has accrued to an assessee under the mercantile system of accounting. For example, if the sum paid by the assessee is loan and as per the terms of the loan agreement, certain rate

Deputy Commissioner of Income Tax, Circle-2(1)(1), Bengaluru vs. Enzen Global Solutions Pvt Ltd, Bengaluru

In the result, the appeal of the Revenue is dismissed

ITA 696/BANG/2024[2017-18]Status: DisposedITAT Bangalore20 May 2024AY 2017-18

Bench: Shri Chandra Poojari & Shri Soundararajan K

For Appellant: Shri V Chandrashekar, AdvocateFor Respondent: Ms. Neera Malhotra, JCIT(DR)

Section 143(3)Section 250

Microchip Technology (India) Private Limited, Bengaluru vs. DCIT Circle 4(1)(1), Bmtc Building, Koramangala

In the result, the appeal filed by the assessee stands partly allowed for statistical purposes

ITA 817/BANG/2023[2018-19]Status: DisposedITAT Bangalore16 May 2024AY 2018-19

Bench: Shri Chandra Poojari & Smt. Beena Pillaiassessment Year : 2018-19

For Appellant: Shri Sumeet Khurana, CAFor Respondent: Shri Biju M.K., CIT-DR

Section 143(2)Section 143(3)Section 25oSection 270ASection 37Section 92C

payment basis which is not allowable u/s 37(1) as the above expenses is the prior period expenses and assessee has followed the mercantile system of accounting. As per the Companies Act, 2013 every company has to follow a mercantile system of accounting. and all income and expenses will ... Section 145 of the Income Tax Act clearly mandates that the computation of income should be either cash or mercantile system of accounting regularly employed by the assessee and in accordance with sub-section (2) of Section 145 of the Income Tax Act. There is no bonafide reasons submitted

Twara Diam, Bhavnagar vs. PCIT Ahmedabad-1, Ahmedabad

In the result, the appeal filed by the assessee is dismissed

ITA 90/AHD/2022[2017-18]Status: DisposedITAT Ahmedabad15 May 2024AY 2017-18

Bench: Ms. Suchitra Kamble & Shri Waseem Ahmed

For Appellant: Shri Tushar Hemani, Sr. Adv., Shri Parimalsinh BFor Respondent: Shri Karun K Ojha, CIT D.R

Section 115BSection 133ASection 143(3)Section 263Section 69A

gospel truth and no inquiry with regard thereto conducted at all. The Assessing Officer does not record that the Assessee was adopting the mercantile system of accounting. Asstt. Year- 2017-18 7 72. Also, the fact that income from agricultural source was disproportionately high, only in the year in question ... orchard, (c) there was income from the orchard, (d) agent invested the amount in LIC, (e) Assessee had been adopting the mercantile system of accounting and as such there was no settlement of accounts. All this, despite the Assessee having categorically disclosed therein, that a sum of Rs. 15 lakhs

Amalgam Foods Limited, Kochi vs. The DCIT, Circle-1, Alappuzha

In the result, the assessee’s appeal is partly allowed

ITA 561/COCH/2022[2001-2002]Status: DisposedITAT Cochin14 May 2024AY 2001-2002

Bench: Shri Sanjay Arora, Am & Ms. Kavitha Rajagopal, Jm Amalgam Foods Limited Dy. Cit, Circle-1, Alappuzha Amalgam House, Bristow Road, Vs. Willingdon Island, Kochi-682 002 [Pan:Aabca 8283D] (Assessee) : (Respondent) Assessee By : None Respondent By : Smt. J. M. Jamuna Devi Date Of Hearing : 14.02.2024 : 14.05.2024 Date Of Pronouncement O R D E R Per Bench: This Is An Appeal By The Assessee, Directed Against The Order Dated 28.03.2022 By The Commissioner Of Income-Tax (Appeals), Income Tax Department [Cit(A)], Dismissing The Assessee’S Appeal Contesting It’S Assessment Under Section 143(3) Read With Section 254 Of The Income-Tax Act, 1961 (The Act) Dated 26.12.2019, For Assessment Year (Ay) 2001-2002. 2. None Appeared For & On Behalf Of The Assessee-Appellant When The Appeal Was Called Out For Hearing. Taking Note Of The Request Dated 05.02.2024 By Sri R. Srinivasan, Ca, The Learned Counsel For The Assessee, That His Personal Appearance May Be Dispensed With & The Matter Decided After Considering Written Submissions, Enclosed Along With, The Hearing In The Matter Was Proceeded With.

For Appellant: NoneFor Respondent: Smt. J. M. Jamuna Devi

Section 143(3)Section 254

even as reported in the audit report, as a prior period expense, i.e., relating to an earlier year/s. The assessee, admittedly following mercantile system of accounting, it’s claim that the loss could not be ascertained at the time of finalizing it’s accounts for the year ending ... adduced at any stage, that is relevant. Be that as it may, the said date/s is found irrelevant as the assessee, following mercantile system of accounting, is entitled to the loss incurred by way of increase in the trade liability during the 8 | P a g e Amalgam Foods Limited

DCIT, Circle-8(1), Kolkata vs. Itc Limited, Kolkata

In the result appeals of the assessee are partly allowed for statistical purposes and the appeals of the revenue are dismissed

ITA 1223/KOL/2017[2011-12]Status: DisposedITAT Kolkata10 May 2024AY 2011-12

Bench: Shri Rajesh Kumar & Shri Sonjoy Sarma]

Section 115JSection 143(1)Section 37

premium/discount on forward exchange contracts over the period of contract in line with the principles of accrual and mercantile system of accounting and in line with the requirement of AS-11. The unexpired discount of Rs. 54,00,000/- in respect of the period /of the forward contracts which fell ... foreign contracts. The Hon'ble Jurisdictional Tribunal while allowing the expenses held that "The assessee has claimed the losses on the basis of mercantile system of accounting. Thus, in our considered view the assessee is very much eligible for the deduction of the impugned loss. In this connection, we find

DCIT, Circle-8(1), Kolkata vs. Itc Limited, Kolkata

In the result appeals of the assessee are partly allowed for statistical purposes and the appeals of the revenue are dismissed

ITA 1222/KOL/2017[2010-11]Status: DisposedITAT Kolkata10 May 2024AY 2010-11

Bench: Shri Rajesh Kumar & Shri Sonjoy Sarma]

Section 115JSection 143(1)Section 37

Itc Limited, Kolkata vs. ACIT, Range-8, Kolkata

In the result appeals of the assessee are partly allowed for statistical purposes and the appeals of the revenue are dismissed

ITA 1166/KOL/2017[2011-12]Status: DisposedITAT Kolkata10 May 2024AY 2011-12

Bench: Shri Rajesh Kumar & Shri Sonjoy Sarma]

Section 115JSection 143(1)Section 37

Itc Limited, Kolkata vs. ACIT, Range-8, Kolkata

In the result appeals of the assessee are partly allowed for statistical purposes and the appeals of the revenue are dismissed

ITA 1068/KOL/2017[2010-11]Status: DisposedITAT Kolkata10 May 2024AY 2010-11

Bench: Shri Rajesh Kumar & Shri Sonjoy Sarma]

Section 115JSection 143(1)Section 37

Shivam Builders Private Limited, Ahmedabad vs. The Deputy Commissioner of Income Tax, Circle-4(1)(1), Ahmedabad

In the result, appeal filed by the assessee is dismissed

ITA 317/AHD/2022[2015-16]Status: DisposedITAT Ahmedabad09 May 2024AY 2015-16

Bench: Ms. Suchitra Raghunath Kamble, Judical Member & Shri Narendra Prasad Sinhaआयकर अपील सं./I.T.A. No. 317/Ahd/2022 (िनधा"रण वष" िनधा"रण वष" िनधा"रण वष" / Assessment Years : 2015-16) िनधा"रण वष" Shivam Builders Private Deputy Commissioner Of बनाम/ बनाम बनाम बनाम Limited Income Tax Vs. 802, 8Th Floor, Rajvi Circle 4(1)(1), Ahmedabad Arcade, Nr. Gurukul Drive In Road, Memnagar, Ahmedabad, Gujarat 380052 "थायी लेखा सं./जीआइआर सं./Pan/Gir No. : Aaccs0296D (Appellant) .. (Respondent) Shri Hem Chhajed, A.R. अपीलाथ" ओर से /Appellant By : ""यथ" क" ओर से/Respondent By : Shri J L Bhatia, Sr. Dr Date Of Hearing 18/04/2024 09/05/2024 Date Of Pronouncement O R D E R Per Shri Narendra Prasad Sinha, Am: This Appeal Is Filed By The Assessee Against The Order Of The National Faceless Appeal Centre (Nfac), Delhi, (In Short ‘The Cit(A)’) Dated 27.07.2022 For The Assessment Year 2015-16. 2. The Assessee Has Raised The Following Grounds In This Appeal:

For Respondent: Shri J L Bhatia, Sr. DR

Section 143(2)Section 145(3)

materials consumed. The Tribunal found on facts that there was no discrepancy or defects in books of account maintained by assessee on mercantile system of accounting and that the books of account maintained by assessee were not found to be incorrect or incomplete and no material was brought on record

Bajaj Clothings Private Limited, Bangalore vs. The DCIT-1(1)(1), Bangalore

In the result, appeal of the assessee is partly allowed for statistical purposes

ITA 760/BANG/2023[2017-18]Status: DisposedITAT Bangalore08 May 2024AY 2017-18

Bench: Shri Chandra Poojari & Smt. Beena Pillai

For Appellant: Shri S.N. Agarwal, A.RFor Respondent: Shri Narendra Kumar Naik, D.R

Section 143(2)Section 143(3)Section 250Section 68

crystallized in the current year. The submission of the assessee is pursued and the same is not acceptable. The assessee is following a mercantile system of accounting. As per the mercantile system, the assessee ought to have created provision for claiming CST deduction in the previous years. The same should ... considered but declined to accept based upon the finding of the AO which is on a strong footing as the assessee is following mercantile system of accounting and accordingly the assessee would have created provision for claiming CST deduction in the previous years and same should have been added

Bajaj Clothings Private Limited, Bangalore vs. The DCIT-1(1)(1), Bangalore

In the result, appeal of the assessee is partly allowed for statistical purposes

ITA 759/BANG/2023[2013-14]Status: DisposedITAT Bangalore08 May 2024AY 2013-14

Bench: Shri Chandra Poojari & Smt. Beena Pillai

For Appellant: Shri S.N. Agarwal, A.RFor Respondent: Shri Narendra Kumar Naik, D.R

Section 143(2)Section 143(3)Section 250Section 68

Jaiprakash Associates Ltd., Noida vs. DCIT, Circle- 1, Noida

In the result, the appeal of the assessee in ITA No

ITA 3876/DEL/2018[2010-11]Status: DisposedITAT Delhi07 May 2024AY 2010-11

Bench: Ms. Madhumita Roy & Shri Naveen Chandra

For Appellant: Shri Ashwani Kumar Garg, AdvFor Respondent: Shri Sandeep Kumar Mishra, Sr. DR

Section 28

liability to pay the same crystallized in the current year and hence, these were allowable in the present year as per the mercantile system of accounting regularly followed by the appellant company. The provision of Section'35D, are not at all applicable in this case. The disallowance is liable

Assistant Commissioner of Income Tax-1(2)(1), Mumbai vs. Kumar Properties Pvt. Ltd., Mumbai

In the result, the appeal filed by the revenue as well as Cross

ITA 3248/MUM/2023[2016-17]Status: DisposedITAT Mumbai03 May 2024AY 2016-17

Bench: Shri Amarjit Singh & Shri Sandeep Singh Karhailassistant Commissioner Of Vs. Kumar Properties Private Income Tax – 1(2)(1) Limited, 21, Woudboy Room No. 535, 5 Th Floor, Road, Hazarimal Somani Aayakar Bhawan, New Marg, Opp. Mumbai Marine Line, M.K. Road, Gymkhana, Fort – Mumbai- 400020 400001 Maharashtra – 400001 स्थायी लेखा सं./जीआइआर सं./Pan/Gir No:Aabck8464E Appellant .. Respondent C.O. No.13/Mum/2024 (A.Y. 2016-17)

For Appellant: Rajan Vora a/wFor Respondent: P.D. Chougule

Section 143(2)Section 145(1)

reject the accounts of the assessee u/s.145(1) of the Act where, in fact, the assessee has been regularly following mercantile system of accounting and the AO did not disturb the system of accounting. 2. Whether in the facts and circumstances of the case and in law, the assessee ... reject the accounts of the assessee u/s. 145(1) of the Act where, in fact, the assessee has been regularly following mercantile system of accounting and the AO did not disturb the system of accounting. 2. “Whether in the facts and circumstances of the case and in law, the assessee

The Deputy Commissioner of Income Tax, Circle - 2(1), Mangalore vs. M/S the Mangalore Catholic Co-Operative Bank Limited, Mangalore

In the result, appeal of the revenue is dismissed

ITA 172/PAN/2018[2014-15]Status: DisposedITAT Bangalore02 May 2024AY 2014-15

Bench: Shri Chandra Poojari & Smt. Beena Pillaiassessment Year: 2014-15

For Appellant: Shri Balram R. Rao, A.RFor Respondent: Shri Narendra Kumar Naik, D.R

Section 145

system. By virtue of the provisions of section 145 of the Income Tax Act; the assessee is required to follow either cash or mercantile system of accounting to compute the real income. The CIT(A) deleted the amount ignoring the fact that the assessee is following the mercantile system ... wherein at para 8 of the judgement, it has been held as under: “Therefore, it is clear if an assessee adopts mercantile system of accounting and in his accounts he shows a particular income as accruing, whether the amount is really accrued or not is liable to bring said income