“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

Sony Pictues Netorks India P. Ltd., Mumbai vs. Addl/Jt/Dy/Asstt/CIT/ITO, National E-Assessment Centre Delhi (Now Known As National Faceless Assessment Centre), Delhi

In the result, both the appeals of the assessee are treated as allowed

ITA 925/MUM/2021[2016-17]Status: DisposedITAT Mumbai02 May 2024AY 2016-17

Bench: Justice (Retd.) C V Bhadang, Hon’Ble& Shri B.R. Baskaran: A.Y : 2015-16 : A.Y : 2016-17

For Appellant: Shri Percy Pardiwala with Shri Nitesh Joshi &For Respondent: Shri Salil Mishra – CIT-DR

Section 143(3)

7685/MUM/2019-A.Y.2015-16 ITA NO.925/MUM/2021- A.Y. 2016-17 Culver Max Entertainment Private Limited 15. Before Ld DRP, the assessee submitted that it is following mercantile system of accounting and hence it is required to provide for all known expenses. The assessee also explained the methodology for determining the amount of provision ... amount of (A) +(B) = Rs.156,38,27,668/- 17. There is no dispute with regard to the fact that the assessee is following mercantile system of accounting. Under the said system, it is required to provide for all known expenses and losses as at the yearend. Hence, it is required

Sony Pictures Networks India Pvt Ltd., Mumbai vs. Asst CIT CC 3 (2), Mumbai

In the result, both the appeals of the assessee are treated as allowed

ITA 7685/MUM/2019[2015-16]Status: DisposedITAT Mumbai02 May 2024AY 2015-16

Bench: Justice (Retd.) C V Bhadang, Hon’Ble& Shri B.R. Baskaran

For Appellant: Shri Percy Pardiwala withFor Respondent: Shri Salil Mishra - CIT-DR

Section 143(3)

The Baghat Urban Co-Operative Bank Limited, Solan vs. DCIT, Circle, Solan

In the result, the appeal of the Assessee is allowed

ITA 423/CHANDI/2023[2017-18]Status: DisposedITAT Chandigarh30 Apr 2024AY 2017-18

Bench: Shri A.D. Jain & Dr Krinwant Sahayआयकर अपील सं./ Ita No. 423/Chd/2023 "नधा"रण वष" / Assessment Year : 2017-18 The Baghat Urban Co-Operative Vs. The Dcit, Bank Limited, बनाम Circle Parwanoo, Head Office Baghat Bank Solan, Hp Parisar, Rajgarh Road, Solan Hp 173212 "थायी लेखा सं./Pan No: Aacat8221F अपीलाथ"/Appellant ""यथ"/Respondent (Virtual Hearing) "नधा"रती क" ओर से/Assessee By : Sh. Vishal Mohan, Sr. Advocate With Shri Adiyta Sood, Advocate. राज"व क" ओर से/ Revenue By : Smt. Garima Singh, Cit Dr सुनवाई क" तार"ख/Date Of Hearing : 29.04.2024 उदघोषणा क" तार"ख/Date Of Pronouncement : 30.04.2024 आदेश/Order Per Dr. Krinwant Sahay, A.M.:

For Appellant: Sh. Vishal Mohan, Sr. Advocate with Shri Adiyta Sood, AdvocateFor Respondent: Smt. Garima Singh, CIT DR

Section 43D

Code -801] as per the information given in the ITR. The Assessee is a co-operative bank engaged in banking activities and following mercantile system of accounting. During the course of assessment proceedings, the Assessing Officer has noted that the Assessee has not disclosed interest income receivable on loans treated ... sticky loans on accrual basis. According to Assessing Officer, declaring of such interest was mandatory as the Assessee was following mercantile system of accounting but the Assessee has failed to do so. Therefore, the Assessing Officer made an addition of Rs. 3,39,16,849/- on account of interest

Deputy Commissioner of Income Tax, Mumbai vs. Shivalik Solid Waste Management Ltd, Himachal Pradesh

The appeal is dismissed

ITA 2744/MUM/2023[2017-18]Status: DisposedITAT Mumbai30 Apr 2024AY 2017-18

Bench: Shri Narender Kumar Choudhry & Shri Ratnesh Nandan Sahaydeputy Commissioner Of Shivalik Solid Waste Income Tax, Management Ltd. Cc-6(3), Village Majra, P.O., 19Th Floor, Dhabhota, Air India Building, Teh. Nalagarh, Vs. Nariman Point, Solan- 174101, Mumbai- 400021. Himachal Pradesh- 174101. Pan No. Aajcs7647D (Appellant) (Respondent) Assessee By : Shri Kirit Kamdar – Ca Revenue By : Shri Prashant Mahajan – Sr. Ar Date Of Hearing : 16.04.2024 Date Of Pronouncement : 30.04.2024 O R D E R Per Ratnesh Nandan Sahay: This Appeal Has Been Filed By The Deputy Commissioner Of Income Tax Central Circle– 6(3), Mumbai Against The Order Of The Ld. Cit Appeal- 54 Mumbai & Following Grounds Of Appeal Were Raised: -

For Appellant: Shri Kirit Kamdar – CAFor Respondent: Shri Prashant Mahajan – Sr. AR

Section 139Section 143Section 37(1)

above additions were made by the Assessing Officer on the ground that since the assessee was following mercantile system of accounting, the expenditure debited to the Profit & Loss Account was neither accrued nor paid during the year and only provisions for these expenses were made. When the Assessing Officer asked

DCIT, New Delhi vs. M/S. J.K. Technosoft Ltd., New Delhi

In the result, the Appeal of the Revenue in ITA No

ITA 6160/DEL/2016[2009-10]Status: DisposedITAT Delhi30 Apr 2024AY 2009-10

Bench: Sh. Pradip Kumar Kedia & Sh. Yogesh Kumar U.S.Dcit Vs. J. K. Techno Soft Ltd. Circle 13(2) A-2, Shopping Complex, C. R. Building Masjid Moth, Greater New Delhi Kailsah Part-Ii New Delhi Pan: Aaacj0381L Appellant Respondent Assessee By Shri Neeraj Jain, Adv & Sh. Himanshu Goel, Ca Revenue By Shri Rajesh Mahajan, Sr. Dr Date Of Hearing 18/04/2024 Date Of Pronouncement 30/04/2024 Order

Section 115J

date. It is further argued that this loss has been crystallized on the date of balance sheet, as the appellant is following the mercantile system of accounting. It is stated that there was no existing relationship between aforesaid derivative contracts and actual export transactions and accordingly, gain/loss on such options ... hence the loss incurred on the date of balance sheet, due to the adverse exchange fluctuations would be allowable under the mercantile system of accounting, notwithstanding that the same had not been actually paid. It is also stated that it is not a notional loss in view of the decision

I.T.O., Ward-1(2), Kolkata vs. M/S Mangalvani Commercial Pvt. Ltd., Kolkata

In the result, appeal of the revenue is allowed

ITA 785/KOL/2019[2012-13]Status: DisposedITAT Kolkata29 Apr 2024AY 2012-13

Bench: Dr. Manish Borad, Hon’Ble & Shri Anikesh Banerjee, Hon’Blei.T.A. No. 785/Kol/2019 Assessment Year: 2012-13 Income Tax Officer, Ward-1(2), M/S. Mangalvani Commercial Pvt. Kolkata Vs Ltd. 2B, Grant Lane Room No.-4K Kolkata - 700012 [Pan: Aaccl2310D] अपीलाथ"/ (Appellant) "" यथ"/ (Respondent) Assessee By : None Revenue By : Shri Kiran Chatrapoty, Jcit, Sr. D/R सुनवाई क" तारीख/Date Of Hearing : 01/02/2024 घोषणा क" तारीख /Date Of Pronouncement: 29/04/2024 आदेश/O R D E R Per Dr. Manish Borad: The Above Captioned Appeal Is Directed At The Instance Of The Revenue Against The Order Of The Learned Commissioner Of Income Tax (Appeals) - 1, Kolkata, (Hereinafter The “Ld. Cit(A)”) Dt. 15/01/2019, Passed U/S 250 Of The Income Tax Act, 1961 (“The Act”) For The Assessment Year 2012-13. 2. None Appeared On Behalf Of The When The Case Was Fixed For Hearing On 24/08/2022, 01/09/2022, 11/10/2022 & 01/08/2023. No Compliance Was Made Even When Notices Were Sent Through Rpad. Even Today Also There Is No Representation. It, Therefore, Seems That The Assessee Is Not Interested To Pursue This Appeal. We, Therefore Decide To Adjudicate The Issue Raised In The Instant Appeal On The Basis Of The Available Records & Hearing The Departmental Representative. 3. The Assessee Has Raised The Following Grounds Of Appeal:-

For Appellant: NoneFor Respondent: Shri Kiran Chatrapoty, JCIT, Sr. D/R

Section 131Section 143(2)Section 250Section 68

that the assessee is a private limited company and has to maintain its books of accounts on mercantile basis. In the system of mercantile system of accounting, the entries can be through cash book, bank book and journal book. Under the journal entries, fresh credits can be received during

DCIT, Circle 4(2), New Delhi vs. Cds Infra Projects Ltd., New Delhi

In the result, appeal of the Revenue is dismissed

ITA 1998/DEL/2023[2018-19]Status: DisposedITAT Delhi29 Apr 2024AY 2018-19

Bench: Shri Saktijit Dey & Shri M. Balaganeshassessment Year: 2018-19

Section 115BSection 143(3)Section 68

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “B”: NEW DELHI BEFORE SHRI SAKTIJIT DEY, VICE PRESIDENT AND SHRI

M/S. Humara India Credit Co-Operative Society Limited, Kolkata vs. A.C.I.T., Circle - 33, Kolkata

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

ITA 135/KOL/2023[2017-2018]Status: DisposedITAT Kolkata23 Apr 2024AY 2017-2018

Bench: Shri Rajesh Kumar, Hon’Ble & Shri Sonjoy Sarma, Hon’Bleassessment Year: 2017-18 M/S. Humara India Credit Acit, Circle-33, Co-Operative Society Limited Kolkata 101, 227/2 Mangal Jyoti Vs Ajc Bose Road, Kolkata- 700020. Pan: Aaaah 8186 M (Appellant) (Respondent) Present For: Assessee By : Shri Parveen Kumar Bansal, Ar Revenue By : Shri S. Datta, Cit, Dr Date Of Hearing : 13.03.2024 Date Of Pronouncement : 23.04.2024 O R D E R Per Sonjoy Sarma, Jm: This Appeal Of The Assessee For The Assessment Year 2017-18 Is Directed Against The Order Dated 19.12.2022 Passed By The Ld. Commissioner Of Income-Tax, Appeals, Nfac, Delhi [Hereinafter Referred To As ‘The ‘Ld. Cit(A)’].

For Appellant: Shri Parveen Kumar Bansal, ARFor Respondent: Shri S. Datta, CIT, DR

Section 143(2)Section 2(24)(x)Section 36(1)(va)Section 40

from the "note on accounts to the audited financial statements "for the relevant financial year 2016-17 that the appellant society follows the mercantile system of accounting and recognizes Income and Expenditure on accrual basis. This is clearly stated in Part I clause 3. In respect of the Cooperative Educators ... nothing prevented its management and the auditor to recognize the same in its financial accounts, which by its own admission follows mercantile system of accounting. The current year proceedings cannot be compared with previous AY 2016-17 proceedings, in which case, loss returns were filed, whereas in the current year

ACIT, Circle- 2(2), New Delhi vs. Anthem Infrastructure Pvt. Ltd., New Delhi

Appeal is allowed

ITA 215/DEL/2020[2015-16]Status: DisposedITAT Delhi18 Apr 2024AY 2015-16

Bench: Shri G.S. Pannu, Hon’Ble & Shri Anubhav Sharmaassessment Year: 2015-16 Acit, Vs Anthem Infrastructure Pvt. Ltd., 04, 1St Floor, Jagriti Enclave, Circle-2(2), New Delhi. Vikas Marg Extn., New Delhi. Pan: Aaica7355D (Appellant) (Respondent) Assessee By : Shri Amit Goel, Ca Revenue By : Shri Kanav Bali, Sr. Dr Date Of Hearing : 27.02.2024 Date Of Pronouncement : 18.04.2024 Order Per Anubhav Sharma, Jm: This Appeal Is Preferred By The Revenue Against The Order Dated 24.10.2019 Of The Commissioner Of Income Tax (Appeals)-22, New Delhi (Hereinafter Referred As Ld. First Appellate Authority Or In Short Ld. ‘Faa’) In Appeal No.273/19-20/Cit(A)-22, New Delhi Arising Out Of The Appeal Before It Against The Order Passed U/S 143(3) Of The Income Tax Act, 1961 (Hereinafter Referred As ‘The Act’), By The Acit, Circle 2(2), Delhi (Hereinafter Referred To As The Ld. Ao). 2. Heard & Perused The Records. Ld. Ar Has Relied The Order Of Co- Ordinate Bench In The Case Of Assessee For Ay 2014-15, In Ita No. 5676/Del/2017 To Contend That The Issue Is Covered In Favour Of Assessee By The Order Dated 29/10/2021. Ld. Dr Could Not Dispute This Factual Aspect.

For Appellant: Shri Amit Goel, CAFor Respondent: Shri Kanav Bali, Sr. DR

Section 143(3)Section 144Section 145

profession" or "Income from other sources" shall, subject to the provisions of sub-section (2), be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. (2) The Central Government may notify in the Official Gazette from time to time 2 [income computation ... that the income chargeable under the heads 'Profits and gains of business or profession' shall be computed in accordance with either cash or mercantile system of accounting "regularly employed by the Assessee". It is only with effect from 1st April 2015 that a change has been brought about in Section

Axis Bank Limited, Ahmedabad vs. Assistant Commissioner of Income Tax, Circle-1(1)(1), Ahmedabad

The appeal of the assessee is partly allowed for statistical purposes

ITA 365/AHD/2022[2018-19]Status: DisposedITAT Ahmedabad10 Apr 2024AY 2018-19

Bench: Mrs. Annapurna Gupta & Shri T.R. Senthil Kumarिनधा"रण वष"/Assessment Year: 2018-19 Axis Bank Limited, Vs. Assistant Commissioner Of “Trishul”, 3Rd Floor, Opp. Income-Tax, Samartheshwar Temple, Nr. Law Circle 1(1)(1), Garden, Ellisbridge, Ahmedabad Ahmedabad-380006 Pan : Aaacu 2414 K अपीलाथ" अपीलाथ"/ (Appellant) अपीलाथ" अपीलाथ" "" "" यथ" "" "" यथ" यथ"/ (Respondent) यथ" Assessee By : Shri Tushar Hemani, Sr. Advocate & Shri Parimalsinh B. Parmar, Ar Revenue By : Dr. Darsi Suman Ratnam, Cit-Dr सुनवाई क" तारीख/Date Of Hearing : 29.11.2023/03.04.2024 घोषणा क" तारीख /Date Of Pronouncement: 10.04.2024 आदेश आदेश/O R D E R आदेश आदेश Per Annapurna Gupta: By Way Of This Appeal, The Assessee-Appellant Has Challenged Correctness Of The Order Dated 28Th July, 2022 Passed By The Assessing Officer Under Section 143(3) R.W.S. 144C(13) R.W.S. 144B Of The Income Tax Act, 1961 [Hereinafter Referred To As “The Act” For Short], For The Assessment Year (Ay) 2018-19. 2. Ground No.1 Raised By The Assessee Reads As Under:- “1. Disallowance In Respect Of Annual Technical Fees (Tax Effect - Rs. 16,84,276) 1.1 The Learned Drp Has Erred In Upholding Addition Made By Ao In Respect Of Treating Annual Technical Services (Ats) Fees Paid To Infosys Limited To The Extent Of Rs. 48.66 Lacs As Prior Period Expense. 1.2. It Is Submitted That The Expenditure Relates To Amount Payable To Infosys & No Part Of The Amount Was Claimed As Expenditure At Any Time In The 2 Axis Bank Limited Vs. Acit Ay : 2018-19

For Appellant: Shri Tushar Hemani, Sr. Advocate &For Respondent: Dr. Darsi Suman Ratnam, CIT-DR

Section 143(3)Section 144C

Annual Technical Service fees amounting to Rs.48,66,726/- related to the preceding year, and noting that the assessee was following the mercantile system of accounting, and applying the matching principle, the impugned expenses were proposed to be disallowed in the draft assessment order framed in terms of section 144C

Bal Krishan Das Mundhra, Kolkata vs. ITO, Ward-12(1), Kolkata

In the result, the appeal of the assessee is allowed

ITA 144/KOL/2024[2020-21]Status: DisposedITAT Kolkata09 Apr 2024AY 2020-21

Bench: Shri Rajpal Yadav, Vice-(Kz) & Shri Girish Agrawali.T.A. No. 144/Kol/2024 Assessment Year: 2020-2021 Bal Krishan Das Mundhra,…………………….Appellant 66, Purnadas Road, Kolkata-700029 [Pan:Aikpm4239P] -Vs.- Income Tax Officer,…………………………….…Respondent Ward-12(1), Kolkata, Assessment Unit, Income Tax Department, Aayakar Bhawan, P-7, Chowringhee Square, Kolkata-700069 Appearances By: Sm. Mita Rizvi, Ca, Appeared On Behalf Of The Assessee Smt. Ranu Biswas, Addl. Cit, D.R., Appeared On Behalf Of The Revenue Date Of Concluding The Hearing : April 08, 2024 Date Of Pronouncing The Order : April 09, 2024 O R D E R

Section 143(2)Section 57

component of interest. In other words, the stand of the ld. Counsel for the assessee was that the assessee has been following mercantile system of accounting. It has recognized interest income of Rs.1,32,22,133/- on accrual basis. Actually, this total amount was not received by the assessee before ... contentions and gone through the record carefully. There is no dispute with regard to the fact that the assessee has been consistently following mercantile system of accounting. It has accounted its interest income on 7 Bal Krishan Das Mundhra mercantile system and not on receipt basis. This stand

Apex Health Care Limited, Ankleshwar vs. The ACIT, Circle-2, Bharuch Present Juridiction the Dy.CIT, Central Circle-2, Vadodara

In the result, the appeal filed by the assessee is partly allowed

ITA 547/AHD/2023[2015-16]Status: DisposedITAT Ahmedabad05 Apr 2024AY 2015-16

Bench: Smt. Annapurna Gupta (Accountant Member), Shri T.R. Senthil Kumar (Judicial Member)

Section 143(3)Section 40A(2)(b)

disallowance. 9. Regarding Ground No. 6 addition of duty draw back incentive of Rs.98,558/-. The Ld. Counsel submitted that the assessee follows Mercantile System of Accounting and assessee offered the receipt of Rs.98,558/- in the subsequent year. Though Ld. CIT(A) directed the Assessing Officer to verify this

M/S. La Opala RG Ltd., Kolkata vs. DCIT, Cir-12(1), Kolkata.

In the result, both the appeals of the assessee are partly allowed

ITA 965/KOL/2023[2014-15]Status: HeardITAT Kolkata03 Apr 2024AY 2014-15

Bench: Shri Rajpal Yadav & Shri Girish Agrawal

For Appellant: Shri A. K. Tulsiyan, FCAFor Respondent: Shri Prabhakar Prakash Ranjan, Addl. CIT

Section 143(3)Section 250Section 80l

Opala RG. Ltd., AYs 2013-14 & 2014-15 taxmann.com 326 (SC). Assessee also contended that it is following mercantile system of accounting consistently and the foreign exchange loss is due to the reinstatement of account at the end of the financial year as per the Accounting Standard issued by ICAI

M/S. La Opala RG Ltd., Kolkata vs. DCIT, Cir-12(1), Kolkata-12(1), Kol., Kolkata

In the result, both the appeals of the assessee are partly allowed

ITA 964/KOL/2023[2013-14]Status: HeardITAT Kolkata03 Apr 2024AY 2013-14

Bench: Shri Rajpal Yadav & Shri Girish Agrawal

For Appellant: Shri A. K. Tulsiyan, FCAFor Respondent: Shri Prabhakar Prakash Ranjan, Addl. CIT

Section 143(3)Section 250Section 80l