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“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 2(3)(1), Mumbai vs. Hdfc Bank Limited, Mumbai

In the result, the assessee's appeal for AY 2016-17 to AY 2018-19 is allowed and the Revenue's appeal for AY 2016-17 to 2018-19 is dismissed

ITA 3371/MUM/2023[2018-19]Status: DisposedITAT Mumbai24 Jan 2024AY 2018-19

Bench: Shri Kuldip Singh, Jm & Ms Padmavathy S, Am

For Appellant: Shri Yogesh Thar a/w ShriFor Respondent: Shri Biswanath Das, CIT-DR
Section 14ASection 36(1)(viia)

Keshav Mills Ltd.(supra) support the case of assessee as the assessee has incurred a definite legal liability and on following the mercantile system of accounting, the discount on ESOPs has rightly been debited as expenditure in the books of account. We are in respectful agreement with the view taken

Hdfc Bank Limited, Mumbai vs. The Deputy Commissioner of Income Tax-2(3)(1), Mumbai

In the result, the assessee's appeal for AY 2016-17 to AY 2018-19 is allowed and the Revenue's appeal for AY 2016-17 to 2018-19 is dismissed

ITA 1785/MUM/2023[2018-2019]Status: DisposedITAT Mumbai24 Jan 2024AY 2018-2019

Bench: Shri Kuldip Singh, Jm & Ms Padmavathy S, Am

For Appellant: Shri Yogesh Thar a/w ShriFor Respondent: Shri Biswanath Das, CIT-DR
Section 14ASection 36(1)(viia)

Keshav Mills Ltd.(supra) support the case of assessee as the assessee has incurred a definite legal liability and on following the mercantile system of accounting, the discount on ESOPs has rightly been debited as expenditure in the books of account. We are in respectful agreement with the view taken

Hdfc Bank Limited, Mumbai vs. The Deputy Commissioner of Income Tax-2(3)(1), Mumbai

In the result, the assessee's appeal for AY 2016-17 to AY 2018-19 is allowed and the Revenue's appeal for AY 2016-17 to 2018-19 is dismissed

ITA 1784/MUM/2023[2017-2018]Status: DisposedITAT Mumbai24 Jan 2024AY 2017-2018

Bench: Shri Kuldip Singh, Jm & Ms Padmavathy S, Am

For Appellant: Shri Yogesh Thar a/w ShriFor Respondent: Shri Biswanath Das, CIT-DR
Section 14ASection 36(1)(viia)

Keshav Mills Ltd.(supra) support the case of assessee as the assessee has incurred a definite legal liability and on following the mercantile system of accounting, the discount on ESOPs has rightly been debited as expenditure in the books of account. We are in respectful agreement with the view taken

Hdfc Bank Limited, Mumbai vs. The Deputy Commissioner of Income Tax-2(3)(1), Mumbai

In the result, the assessee's appeal for AY 2016-17 to AY 2018-19 is allowed and the Revenue's appeal for AY 2016-17 to 2018-19 is dismissed

ITA 1783/MUM/2023[2016-2017]Status: DisposedITAT Mumbai24 Jan 2024AY 2016-2017

Bench: Shri Kuldip Singh, Jm & Ms Padmavathy S, Am

For Appellant: Shri Yogesh Thar a/w ShriFor Respondent: Shri Biswanath Das, CIT-DR
Section 14ASection 36(1)(viia)

Keshav Mills Ltd.(supra) support the case of assessee as the assessee has incurred a definite legal liability and on following the mercantile system of accounting, the discount on ESOPs has rightly been debited as expenditure in the books of account. We are in respectful agreement with the view taken

Dr.Raveendra M.Madraki, Bijapur vs. Income Tax Officer Ward-1, Bagalkot

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

ITA 670/BANG/2019[2014-15]Status: DisposedITAT Bangalore23 Jan 2024AY 2014-15

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

For Appellant: Shri Ashok A. Kulkarni, A.RFor Respondent: Shri Subramanian S., D.R

support his claim that the receipts were not received by him and only TDS was credited by Vaatsalya. Since, the assessee is following mercantile system of accounting, he ought to have offered the receipts to tax and the agreement dated 8/4/2014 cannot be shown as a reason for not doing ... opinion, the lower authorities have to examine whether payment of rent has been claimed by the tenant in their books of accounts on mercantile system of accounting relating to the previous year 2013-14 relevant to the assessment year 2014-15 or on cash basis in any assessment year

The DCIT, Circle-2(1)(1), Ahmedabad vs. M/S. Flax Apparels Pvt. Ltd., Ahmedabad

The appeal of the Revenue is dismissed

ITA 1693/AHD/2019[2013-14]Status: DisposedITAT Ahmedabad19 Jan 2024AY 2013-14

Bench: Smt. Annapurna Gupta & Shri T.R. Senthil Kumarिनधा"रणवष"/Assessment Year: 2013-14 The Dcit Vs. M/S. Flax Apparels Pvt. Ltd., Circle-2(1)(1) 70, Balaji Estate Ahmedabad Nr.Budhalal Tamaku B/H. Hotel Moni Isanpur, Ahmedabad-382 443 Pan: Aaacf 4058 N अपीलाथ"/ (Appellant) अपीलाथ" "" यथ" "" यथ"/ (Respondent) अपीलाथ" अपीलाथ" "" "" यथ" यथ" Assessee By : -None- Revenue By : Shri Alok Kumar, Cit-Dr सुनवाई क" तारीख/Date Of Hearing : 30/10/2023 घोषणा क" तारीख /Date Of Pronouncement: 19/01/2024 आदेश आदेश/O R D E R आदेश आदेश Per Annapurna Gupta: This Appeal Filed By The Revenue Is Directed Against The Order Of Learned Commissioner Of Income-Tax (Appeals)-2, Ahmedabad [Hereinafter Referred To As “Ld.Cit(A)” For Short] Dated 14/08/2019 Passed For Assessment Year (Ay) 2013-14. 2. Earlier, This Appeal Was Dismissed On Account Of Low Tax Effect Vide

For Appellant: -None-For Respondent: Shri Alok Kumar, CIT-DR
Section 37Section 43B

earlier year, hence cannot be allowed as expenditure under Section 43B of the Act. The AO has observed that as appellant is following mercantile system of accounting, expenditure claimed is prior period expenditure hence same is not allowable as deduction under Section 37 of the I. T. Act, 1961. Accordingly ... brief as emerged from the corresponding assessment order passed u/s.143(3) r.w.s. 147 dated 22.12.2009 were that the assessee company is following the 'Mercantile" system of accounting. It was noted by the Assessing Officer that for the year under consideration an amount of Rs.65 ,24,121/ - was written

Deputy Commissioner of Income Tax, C-1(1)(1), Bangalore vs. Algonomy Software Private Limited (Formerly Known As Manthan Software Services Pvt Ltd), Bangalore

In the result, all the appeals filed by the revenue stands dismissed and the cross objections being C

ITA 946/BANG/2023[2015-16]Status: DisposedITAT Bangalore19 Jan 2024AY 2015-16

Bench: Shri Laxmi Prasad Sahu & Ms. Madhumita Roy

For Respondent: Ms. Neera Malhotra, CIT-DR
Section 143(3)Section 147Section 148Section 40

Keshav Mills Ltd. supra support the case of assessee as the assessee has incurred a definite legal liability and on following the mercantile system of accounting, the discount on ESOPs has rightly been debited as expenditure in the books of account.” The Ld.DR relied upon the order passed

Deputy Commissioner of Income Tax, C-1(1)(1), Bangalore vs. Algonomy Software Private Limited (Formerly Known As Manthan Software Services Pvt Ltd), Bangalore

In the result, all the appeals filed by the revenue stands dismissed and the cross objections being C

ITA 945/BANG/2023[2014-15]Status: DisposedITAT Bangalore19 Jan 2024AY 2014-15

Bench: Shri Laxmi Prasad Sahu & Ms. Madhumita Roy

For Respondent: Ms. Neera Malhotra, CIT-DR
Section 143(3)Section 147Section 148Section 40

Keshav Mills Ltd. supra support the case of assessee as the assessee has incurred a definite legal liability and on following the mercantile system of accounting, the discount on ESOPs has rightly been debited as expenditure in the books of account.” The Ld.DR relied upon the order passed

Deputy Commissioner of Income Tax, C-1(1)(1), Bangalore vs. Algonomy Software Private Limited (Formerly Known As Manthan Software Services Pvt Ltd), Bangalore

In the result, all the appeals filed by the revenue stands dismissed and the cross objections being C

ITA 944/BANG/2023[2013-14]Status: DisposedITAT Bangalore19 Jan 2024AY 2013-14

Bench: Shri Laxmi Prasad Sahu & Ms. Madhumita Roy

For Respondent: Ms. Neera Malhotra, CIT-DR
Section 143(3)Section 147Section 148Section 40

Keshav Mills Ltd. supra support the case of assessee as the assessee has incurred a definite legal liability and on following the mercantile system of accounting, the discount on ESOPs has rightly been debited as expenditure in the books of account.” The Ld.DR relied upon the order passed

Deputy Commissioner of Income Tax, C-1(1)(1), Bangalore vs. Algonomy Software Private Limited (Formerly Known As Manthan Software Services Pvt Ltd), Bangalore

ITA 943/BANG/2023[2012-13]Status: DisposedITAT Bangalore19 Jan 2024AY 2012-13

Bench: Shri Laxmi Prasad Sahu & Ms. Madhumita Roy

For Appellant: Shri Narendra Kumar JainFor Respondent: Ms. Neera Malhotra, CIT-DR
Section 143(3)Section 147Section 148Section 40

IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH : BANGALORE BEFORE SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER AND MS. MADHUMITA ROY

M/S. Parimala Agro Foods & Feeds (P) Ltd., Shivamogga vs. Assistant Commissioner of Income-Tax, Circle-1, Shivamogga

In the result, appeal of the assessee is partly allowed

ITA 879/BANG/2023[2017-18]Status: DisposedITAT Bangalore16 Jan 2024AY 2017-18

Bench: Shri George George K. & Shri Chandra Poojariassessment Year: 2017-18

For Appellant: Shri Narendra Sharma, A.RFor Respondent: Shri Nischal B., D.R
Section 143(3)Section 144Section 145Section 145ASection 250

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 [Income computation and disclosure

ACIT (TDS), Gurgaon vs. Artemis Medicare Service Ltd., New Delhi

ITA 554/DEL/2016[2012-13]Status: DisposedITAT Delhi16 Jan 2024AY 2012-13

Bench: Shri M. Balaganesh & Shri Anubhav Sharmaacit (Tds), Vs. Artemis Medicares Services Ltd, 414/1, 4Th Floor, Dda Gurgaon Commercial Complex, District Centre, Janakpuri, New Delhi (Appellant) (Respondent) Pan: Aafca0130M

For Appellant: Ms. Shaily Gupta, CAFor Respondent: Shri Kanv Bali, Sr. DR
Section 133ASection 192Section 194JSection 201(1)

bills were raised by them in the next financial year. Accordingly, the assessee had booked those expenses on provision basis in accordance with mercantile system of accounting regularly followed by the assessee and had reversed the very same expenditure on 1st April of the next financial year. It was submitted

Platinum Properties, Raigad vs. ITO Ward 5, Panvel

In the result, the ground no

ITA 2681/MUM/2023[2014-15]Status: DisposedITAT Mumbai15 Jan 2024AY 2014-15

Bench: Shri Aby T Varkey & Shri Amarjit Singhplatinum Properties Vs. Ito, Ward-5 Plot No. 6, G-20-24, Panvel, Taloja, Midc, Tal Panvel, Thane Taloja Raigad-410208 Maharashtra स्थायी लेखा सं./जीआइआर सं./Pan/Gir No:Aajfp4159N Appellant .. Respondent Appellant By : Prateek Jain Respondent By : H.M. Bhatt Date Of Hearing 05.01.2024 Date Of Pronouncement 15.01.2024

For Appellant: Prateek JainFor Respondent: H.M. Bhatt
Section 139(1)Section 143(2)Section 143(3)Section 43B

make a nice distinction between Chowringhee's case and instances where Profit and Loss accounts and Service Tax accounts are maintained separately following mercantile system of accounting. As rightly noticed therein, it is not for the Income Tax department to make out a case relating to the correctness or otherwise ... mercantile system of accounting, resorted to and maintained by an assessee. The acceptability or otherwise of the accounts in a mercantile system would obviously be a matter of concern for other taxation authorities. 6. In the case in hand, as already noted, the fact situation that the Assessing Authority

The DCIT, Central Circle-3, Vadodara vs. M/S. Aarya Developers, Vadodara

In the result, the appeal filed by the Revenue is hereby dismissed

ITA 973/AHD/2019[2014-15]Status: DisposedITAT Ahmedabad12 Jan 2024AY 2014-15

Bench: SMT. ANNAPURNA GUPTA (Accountant Member), SHRI T.R. SENTHIL KUMAR (Judicial Member)

For Appellant: Shri Sudhendu Das, CIT. DRFor Respondent: Shri S. N. Soparkar, Sr. Advocate
Section 131Section 131(1)Section 133ASection 143(3)

firm commenced a project, namely Twin Towers for construction of 42 residential flats and 6 penthouses at Sewasi, Vadodara. The assessee firm follows mercantile system of accounting and offers construction income based on “percentage of completion method” at the end of each year. There was a survey action under Section

Addl. CIT, Special Range- 7, New Delhi vs. Ptc India Financial Services Ltd, New Delhi

In the result, appeal is dismissed

ITA 7517/DEL/2019[2016-17]Status: HeardITAT Delhi21 Dec 2023AY 2016-17

Bench: Shri Saktijit Dey, Vice- & Shri N.K. Billaiyaassessment Year: 2015-16 With Assessment Year: 2016-17 Ptc India Financial Services Vs. Addl. Cit, Ltd., Special Range-7, Telephone Exchange Building, New Delhi 8, Bikaji Cama Place, Delhi-110066 Pan :Aaecp0501C (Appellant) (Respondent) With Assessment Year: 2015-16 With Assessment Year: 2016-17 Addl. Cit, Vs. Ptc India Financial Services Special Range-7, Ltd., New Delhi 2Nd Floor, Nbcc Tower, 15, Bikaji Cama Place, Delhi-110066 Pan :Aaecp0501C (Appellant) (Respondent)

conditions mentioned by the Hon’ble Supreme Court in the above case with respect to allowability of an expenditure. • Consistently following Mercantile System of Accounting Appellant has consistently followed mercantile system of accounting and prepared its books as per available guiding principles. It has never been disputed by the Learned ... that Appellant is not following mercantile system of accounting and has not consistently pursued the same. Further, Learned AO has not made any observation with respect to inconsistency or any discrepancy in books of accounts of the Appellant. • Consistently following Nationally Accepted Accounting Standards Appellate has been consistent in following

Ptc India Financial Services Ltd., New Delhi vs. Addl.CIT, Special Range-7, New Delhi

In the result, appeal is dismissed

ITA 6913/DEL/2019[2016-17]Status: HeardITAT Delhi21 Dec 2023AY 2016-17

Bench: Shri Saktijit Dey, Vice- & Shri N.K. Billaiyaassessment Year: 2015-16 With Assessment Year: 2016-17 Ptc India Financial Services Vs. Addl. Cit, Ltd., Special Range-7, Telephone Exchange Building, New Delhi 8, Bikaji Cama Place, Delhi-110066 Pan :Aaecp0501C (Appellant) (Respondent) With Assessment Year: 2015-16 With Assessment Year: 2016-17 Addl. Cit, Vs. Ptc India Financial Services Special Range-7, Ltd., New Delhi 2Nd Floor, Nbcc Tower, 15, Bikaji Cama Place, Delhi-110066 Pan :Aaecp0501C (Appellant) (Respondent)

conditions mentioned by the Hon’ble Supreme Court in the above case with respect to allowability of an expenditure. • Consistently following Mercantile System of Accounting Appellant has consistently followed mercantile system of accounting and prepared its books as per available guiding principles. It has never been disputed by the Learned ... that Appellant is not following mercantile system of accounting and has not consistently pursued the same. Further, Learned AO has not made any observation with respect to inconsistency or any discrepancy in books of accounts of the Appellant. • Consistently following Nationally Accepted Accounting Standards Appellate has been consistent in following

Ptc India Financial Services Ltd, New Delhi vs. Addl. CIT, Special Range- 7, New Delhi

In the result, appeal is dismissed

ITA 6081/DEL/2019[2015-16]Status: HeardITAT Delhi21 Dec 2023AY 2015-16

Bench: Shri Saktijit Dey, Vice- & Shri N.K. Billaiyaassessment Year: 2015-16 With Assessment Year: 2016-17 Ptc India Financial Services Vs. Addl. Cit, Ltd., Special Range-7, Telephone Exchange Building, New Delhi 8, Bikaji Cama Place, Delhi-110066 Pan :Aaecp0501C (Appellant) (Respondent) With Assessment Year: 2015-16 With Assessment Year: 2016-17 Addl. Cit, Vs. Ptc India Financial Services Special Range-7, Ltd., New Delhi 2Nd Floor, Nbcc Tower, 15, Bikaji Cama Place, Delhi-110066 Pan :Aaecp0501C (Appellant) (Respondent)

conditions mentioned by the Hon’ble Supreme Court in the above case with respect to allowability of an expenditure. • Consistently following Mercantile System of Accounting Appellant has consistently followed mercantile system of accounting and prepared its books as per available guiding principles. It has never been disputed by the Learned ... that Appellant is not following mercantile system of accounting and has not consistently pursued the same. Further, Learned AO has not made any observation with respect to inconsistency or any discrepancy in books of accounts of the Appellant. • Consistently following Nationally Accepted Accounting Standards Appellate has been consistent in following

Addl.CIT, Special Range-7, New Delhi vs. Ptc India Financial Services Ltd., New Delhi

In the result, appeal is dismissed

ITA 5654/DEL/2019[2015-16]Status: HeardITAT Delhi21 Dec 2023AY 2015-16

Bench: Shri Saktijit Dey, Vice- & Shri N.K. Billaiyaassessment Year: 2015-16 With Assessment Year: 2016-17 Ptc India Financial Services Vs. Addl. Cit, Ltd., Special Range-7, Telephone Exchange Building, New Delhi 8, Bikaji Cama Place, Delhi-110066 Pan :Aaecp0501C (Appellant) (Respondent) With Assessment Year: 2015-16 With Assessment Year: 2016-17 Addl. Cit, Vs. Ptc India Financial Services Special Range-7, Ltd., New Delhi 2Nd Floor, Nbcc Tower, 15, Bikaji Cama Place, Delhi-110066 Pan :Aaecp0501C (Appellant) (Respondent)

conditions mentioned by the Hon’ble Supreme Court in the above case with respect to allowability of an expenditure. • Consistently following Mercantile System of Accounting Appellant has consistently followed mercantile system of accounting and prepared its books as per available guiding principles. It has never been disputed by the Learned ... that Appellant is not following mercantile system of accounting and has not consistently pursued the same. Further, Learned AO has not made any observation with respect to inconsistency or any discrepancy in books of accounts of the Appellant. • Consistently following Nationally Accepted Accounting Standards Appellate has been consistent in following

Smt. Pratimaben V. Raja, Rajkot vs. The Income Tax Officer, Intl. Taxn., Rajkot

In the result, Ground No. 1 of the assessee’s appeal is allowed

ITA 51/RJT/2018[2006-07]Status: DisposedITAT Rajkot20 Dec 2023AY 2006-07

Bench: Shri Waseem Ahmed & Shri Siddhartha Nautiyal

For Appellant: Shri R. D. Lalchandani, A.RFor Respondent: Shri Shramdeep Sinha, CIT DR
Section 148Section 2(30)Section 68Section 69

volition or sweet will of an individual. The profits earned which were credited in the books of account according to the mercantile system of accounting were at best "treated as having been received" which is neither "received" nor "deemed to be received" and therefore not within the purview of section

Shri Vinodkumar Hiralal Raja, Rajkot vs. The Income Tax Officer, Intl. Taxn., Rajkot

In the result, Ground No. 1 of the assessee’s appeal is allowed

ITA 50/RJT/2018[2006-07]Status: DisposedITAT Rajkot20 Dec 2023AY 2006-07

Bench: Shri Waseem Ahmed & Shri Siddhartha Nautiyal

For Appellant: Shri R. D. Lalchandani, A.RFor Respondent: Shri Shramdeep Sinha, CIT DR
Section 148Section 2(30)Section 68Section 69

volition or sweet will of an individual. The profits earned which were credited in the books of account according to the mercantile system of accounting were at best "treated as having been received" which is neither "received" nor "deemed to be received" and therefore not within the purview of section