“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

Dindayal Magasvargiya Sahakari Soot Girni Ltd, Waghwadi vs. Assistant Commissioner of Income Tax, Circle, Sangli., Nishant Colony

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

ITA 2325/PUN/2025[2013-14]Status: DisposedITAT Pune29 Jan 2026AY 2013-14

Bench: Shri Manish Borad & Shri Vinay Bhamoreआयकर अपील सं. / Ita No.2325/Pun/2025 िनधा"रण वष" / Assessment Year : 2013-14 Dindayal Magasvargiya Vs. Acit, Circle Sangli, Sahakari Soot Girni Ltd., Sangli. At Waghwadi, Post Kameri, Tal. Walwa, Sangli- 415403. Pan : Aaaad0254E Appellant Respondent Assessee By : Shri Pramod S. Shingte Revenue By : Shri R. Y. Balawade Date Of Hearing : 27.01.2026 Date Of Pronouncement : 29.01.2026 आदेश / Order Per Vinay Bhamore, Jm: This Appeal Filed By The Assessee Is Directed Against The Order Dated 01.08.2025 Passed By Ld. Cit(A)/Nfac For The Assessment Year 2013-14. 2. The Appellant Has Raised The Following Grounds Of Appeal :- “1. On The Facts & In The Circumstances Of The Case & In Law, Ld. Ao Erred In Initiating Reassessment Proceedings U/S 147 For Ay 2013-14, Being The Year Beyond 4 Years & For Which Assessment Order U/S 143(3) Has Already Been Passed, Thereby

For Appellant: Shri Pramod S. ShingteFor Respondent: Shri R. Y. Balawade

Section 143(2)Section 143(3)Section 147Section 148Section 37Section 43B

certain specific and peculiar conditions, copy of which are 7 produced by the assessee in the paper book. Since the assessee was following mercantile system of accounting the interest on above loan was provided in the books of accounts and also claimed in the profit and loss account. The Assessing ... that the assessee on its own cannot wave either interest on the loan amount and since the books of accounts were prepared on mercantile system of accounting the interest on the above loan was provided in the books of accounts and shown as payable in the balance sheet since last

Soni Somani Infrastructure, Pune vs. Assistant Commissioner of Income Tax Circle 1, Pune

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

ITA 2458/PUN/2025[2015-16]Status: DisposedITAT Pune28 Jan 2026AY 2015-16

Bench: Shri Manish Borad & Shri Vinay Bhamoreआयकर अपील सं. / Ita No.2458/Pun/2025 िनधा"रण वष" / Assessment Year : 2015-16 Soni Somani Infrastructure, Vs. Acit, Circle-1, Solapur. 560/31, South Sadar Bazar, Vinayak Nagar, Solapur- 413003. Pan : Abvfs4209B Appellant Respondent Assessee By : Shri Shriniwas G. Bhutada Shri Vishnu D. Bhutada Revenue By : Smt. Sailee Dhole Date Of Hearing : 08.01.2026 Date Of Pronouncement : 28.01.2026 आदेश / Order Per Vinay Bhamore, Jm: This Appeal Filed By The Assessee Is Directed Against The Order Dated 27.08.2025 Passed By Ld. Cit(A)/Nfac For The Assessment Year 2015-16. 2. The Appellant Has Raised The Following Grounds Of Appeal :- “Based On The Facts & In The Circumstances Of The Case, The Appellant Respectfully Craves Leave To Prefer An Appeal Under Section 253(1)(A) Of The Income-Tax Act, 1961 (Hereinafter Referred To As The 'Act'), Against The Order Dated 27Th Aug 2025 (Hereinafter Referred To As The Impugned Order') Passed By The Commissioner Of Income Tax (Appeal)- Nfac

For Appellant: Shri Shriniwas G. BhutadaFor Respondent: Smt. Sailee Dhole

Section 143(3)Section 250Section 253(1)(a)Section 271(1)(c)

Learned CIT A failed to appreciate that appellant is engaged in the business of construction activity follows mercantile system of accounting in-lieu-of-percentage of completion method for its construction project provides for expenditure of common amenities determined scientifically on the basis of certificate of civil engineer/architect and said

Bansilal Ramnath Agarwal Charitable Trust, Pune vs. CIT (Exemption), Pune

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

ITA 1357/PUN/2025[2020-21]Status: DisposedITAT Pune28 Jan 2026AY 2020-21

Bench: Shri R. K. Panda & Ms. Astha Chandraassessment Year : 2020-21 Bansilal Ramnath Agarwal Charitable Trust Cit (Exemption), 251, Budhwar Peth, City Post Chowk, Vs. Pune Pune – 411002 Pan: Aaatb4383K (Appellant) (Respondent) Assessee By : Shri Kishor B Phadke Department By : Shri Amol Khairnar, Cit-Dr Date Of Hearing : 11-12-2025 Date Of Pronouncement : 28-01-2026 O R D E R Per R.K. Panda, V.P:

For Appellant: Shri Kishor B PhadkeFor Respondent: Shri Amol Khairnar, CIT-DR

Section 11Section 142(1)Section 143(1)Section 143(2)Section 143(3)Section 2(15)Section 263

income does not result at all as there is neither accrual nor receipt of income, no tax can be levied. Even in mercantile system of accountancy an assessee could forge the whole or part of a debt, which was irrecoverable, and the same could not be added to the income ... materialize". At page 748 and 749, the Supreme Court further observed as under: 44 "Even though the assessee company was following the mercantile system of accounting and had made entries in the books regarding enhanced charges for the supply made to the consumers, no real income had accrued

DCIT Central Circle 8 2 Mumbai, Mumbai vs. Abhinand Ventures Private Limited, Mumbai

Accordingly all these appeals of revenue are to be treated, as dismissed

ITA 2172/MUM/2025[2019-20]Status: DisposedITAT Mumbai28 Jan 2026AY 2019-20

Bench: Shri Pawan Singh, Jm & Shri Arun Khodpia, Am

For Appellant: Shri Vijay Mehta, & Shri NarendraFor Respondent: C. O. No. 110/Mum/2025 in I.T.A. No. 2170/Mum/2025

Section 143(3)

inference by the ld. AO regarding the accounting system of the assessee being cash method of accounting vis-à-vis the mercantile system of accounting, the assessee preferred an appeal before the ld. CIT(A). Wherein, the issues are deliberated extensively and substantial relief has been granted to the assessee ... cash system as the method of accounting. However, the same had been rejected by the Department and assessments had been completed based on mercantile system of accounting in the case of the appellant-Trust for the earlier year (A.Y. 2013-14). The AO, Abhinand Ventures Pvt. Ltd. accordingly. issued

DCIT Central Circle 8 2 Mumbai, Mumbai vs. Abhinand Ventures Private Limited, Mumbai

Accordingly all these appeals of revenue are to be treated, as dismissed

ITA 2171/MUM/2025[2018-19]Status: DisposedITAT Mumbai28 Jan 2026AY 2018-19

Bench: Shri Pawan Singh, Jm & Shri Arun Khodpia, Am

For Appellant: Shri Vijay Mehta, & Shri NarendraFor Respondent: C. O. No. 110/Mum/2025 in I.T.A. No. 2170/Mum/2025

Section 143(3)

DCIT Central Circle 8 2 Mumbai, Mumbai vs. Abhinand Ventures Private Limited, Mumbai

Accordingly all these appeals of revenue are to be treated, as dismissed

ITA 2170/MUM/2025[2016-17]Status: DisposedITAT Mumbai28 Jan 2026AY 2016-17

Bench: Shri Pawan Singh, Jm & Shri Arun Khodpia, Am

For Appellant: Shri Vijay Mehta, & Shri NarendraFor Respondent: C. O. No. 110/Mum/2025 in I.T.A. No. 2170/Mum/2025

Section 143(3)

DCIT Central Circle 8 2 Mumbai, Mumbai vs. Abhinand Ventures Private Limited, Mumbai

Accordingly all these appeals of revenue are to be treated, as dismissed

ITA 2118/MUM/2025[2015-16]Status: DisposedITAT Mumbai28 Jan 2026AY 2015-16

Bench: Shri Pawan Singh, Jm & Shri Arun Khodpia, Am

For Appellant: Shri Vijay Mehta, & Shri NarendraFor Respondent: C. O. No. 110/Mum/2025 in I.T.A. No. 2170/Mum/2025

Section 143(3)

DCIT, Mumbai vs. Abhinand Ventures Private Limited, Mumbai

Accordingly all these appeals of revenue are to be treated, as dismissed

ITA 2117/MUM/2025[2014-15]Status: DisposedITAT Mumbai28 Jan 2026AY 2014-15

Bench: Shri Pawan Singh, Jm & Shri Arun Khodpia, Am

For Appellant: Shri Vijay Mehta, & Shri NarendraFor Respondent: C. O. No. 110/Mum/2025 in I.T.A. No. 2170/Mum/2025

Section 143(3)

Deputy Commissioner of Income Tax, Central Circle-1, Noida vs. Elixir Buildcon Pvt. Ltd., Noida

ITA 2275/DEL/2023[2021-22]Status: DisposedITAT Delhi28 Jan 2026AY 2021-22

Bench: Shri Yogesh Kumar Us & Shri Brajesh Kumar Singh

Section 142(1)Section 143(3)Section 271ASection 68

project and has been so claimed and allowed in earlier years. It is submission of Ld. AR that the appellant is following mercantile system of accountancy and revenue has been recognized by considering the advance received from the buyer as revenue receipts (consideration) and payment of interest has been considered ... been so claimed and allowed in earlier years From the facts of the case, it has been found that the appellant is following mercantile system of accounting and revenue has been recognized by considering the advance received from the buyer as revenue receipts and payment of interest has been claimed

Shree Ram Minings, Na vs. Arivs.ITO Ward-5, Navsari

In the result, the appeal of the assessee is allowed

ITA 854/SRT/2025[2018-19]Status: HeardITAT Surat23 Jan 2026AY 2018-19

Bench: Dr. B.R.R. Kumar, Vice-Ms Suchitra Kambleshree Ram Minings, Income Tax Officer, Vs. Jamanpada Navsari, Ward-5, Navsari-396040. Navsari. [Pan : Acrfs4648B] (Appellant) .. (Respondent) Appellant By : Shri Rasesh Shah, Ar Respondent By: Shri Ajay Uke, Sr. Dr Date Of Hearing 21.01.2026 Date Of Pronouncement 23.01.2026 O R D E R Per Dr. B.R.R. Kumar, Vice-:-

For Appellant: Shri Rasesh Shah, ARFor Respondent: Shri Ajay Uke, Sr. DR

Section 250

return of income for Assessment Year 2018-19 declaring a loss of Rs.3,492/- and maintains its books of account under the mercantile system of accounting. During the course of assessment proceedings, the Assessing Officer disallowed an amount of Rs.58,69,491/- on account of compression and blasting expenses

Sai Shraddha Developers, Pune vs. Income Tax Officer Ward 7(1), Pune

ITA 2837/PUN/2025[2022-23]Status: DisposedITAT Pune23 Jan 2026AY 2022-23

Bench: Shri Manish Borad & Ms. Astha Chandra

For Appellant: Shri B.S. RajpurohitFor Respondent: Shri Aviyogi Ambadkar

Section 143(2)Section 43C

amount to double taxation. This contention of the assessee seems to be satisfactory. As provision of the Act, if the assessee has adopted mercantile system of accounting, then income is calculated on accrual basis as well as admissible expenses are deducted on accrual basis. Assessee is being followed cash accounting

Bajaj Auto Limited, Mumbai vs. The Principal Commissioner of Income-Tax - 3, Mumbai

ITA 2666/MUM/2025[2019-20]Status: DisposedITAT Mumbai23 Jan 2026AY 2019-20

Bench: Shri Om Prakash Kant () & Shri Narender Kumar Choudhry ()

For Appellant: Mr. P.J. Pardiwala a/wFor Respondent: Mr. Satyaprakash R. Singh, CIT-DR

Section 143(3)Section 144C(3)Section 145(2)Section 263Section 37(1)Section 40

violation of principles of natural justice. Secondly, it was submitted that, on merits, the provisions were ascertained liabilities and were allowable under the mercantile system of accounting. 5.2 On the issue of lack of opportunity, it was submitted that the ld PCIT referred to year-end provisions in paragraph ... deduction of tax at source. 6.3 It was submitted that the assessee follows the mercantile system of accounting and that the provisions were made in respect of expenses incurred up to 31st March for which invoices had not been received by the year-end. Detailed reliance was placed on Accounting

9X Media Private Limited, Mumbai vs. ACIT 16(1) Mumbai, Mumbai

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

ITA 4712/MUM/2025[2022-23]Status: DisposedITAT Mumbai21 Jan 2026AY 2022-23

Bench: Hon’Ble Shri Sandeep Gosain9X Media Private Limited Vs. Acit 16(1), Mumbai Ground Floor, Gala No. 1, Room No. 439, Aayakar Abel Estate, Saki Vihar Bhavan, Mk Road, Road, Saki Naka, Mumbai- Mumbai- 400020 400072 Pan/Gir No. Aabc15594D (Applicant) (Respondent)

Section 115BSection 234BSection 250Section 41(1)Section 69

installments, Dish TV would consider its dues settled, resulting in a discount of Rs.57,26,783. 6. Since the assessee was following the mercantile system of accounting, therefore as per the terms of settlement agreement the actual discount would accrue with the payment of the last installment due on 15/03/2024

Assertive Infrastructure Pvt. Ltd., Delhi vs. ITO Ward 3(3), New Delhi

In the result, appeal of the assessee is partly allowed

ITA 4200/DEL/2025[2014-15]Status: DisposedITAT Delhi21 Jan 2026AY 2014-15

Bench: Shri Mahavir Singh & Shri Manish Agarwal

Section 142(1)Section 143(2)Section 143(3)Section 194Section 250Section 40

ITA No.4200/Del/2025 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI “A” BENCH: NEW DELHI BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENT & SHRI