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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

Zee Entertainment Enterprises Limited, Mumbai vs. JCIT(TDS)(OSD)-2(3), Mumbai

In the result, we confirm the appellate order passed by the CIT (A) for assessment year 2013 – 14 and dismiss all the grounds raised by the assessee in this appeal

ITA 2095/MUM/2023[2017-18]Status: DisposedITAT Mumbai31 Oct 2023AY 2017-18

Bench: Shri Prashant Maharishi, Am & Shri Sandeep Singh Karhail, Jm

For Appellant: Shri Madhur Agarwal Advocate and Shri Jay Bhansali ARFor Respondent: Shri ram Krishna Kedia Sr DR
Section 133ASection 201Section 40

deduction at source provisions. viii. Assessee explained its accounting entries and stated that assessee is required to prepare books of account following the mercantile system of accounting and accounting standards. Accordingly, the provision is made at the year-end on the basis of some reasonable estimate, as the invoices

Zee Entertainment Enterprises Limited, Mumbai vs. JCIT(TDS)(OSD)-2(3), Mumbai

In the result, we confirm the appellate order passed by the CIT (A) for assessment year 2013 – 14 and dismiss all the grounds raised by the assessee in this appeal

ITA 2094/MUM/2023[2016-17]Status: DisposedITAT Mumbai31 Oct 2023AY 2016-17

Bench: Shri Prashant Maharishi, Am & Shri Sandeep Singh Karhail, Jm

For Appellant: Shri Madhur Agarwal Advocate and Shri Jay Bhansali ARFor Respondent: Shri ram Krishna Kedia Sr DR
Section 133ASection 201Section 40

deduction at source provisions. viii. Assessee explained its accounting entries and stated that assessee is required to prepare books of account following the mercantile system of accounting and accounting standards. Accordingly, the provision is made at the year-end on the basis of some reasonable estimate, as the invoices

Zee Entertainment Enterprises Limited, Mumbai vs. JCIT(TDS)(OSD)-2(3), Mumbai

In the result, we confirm the appellate order passed by the CIT (A) for assessment year 2013 – 14 and dismiss all the grounds raised by the assessee in this appeal

ITA 2093/MUM/2023[2015-16]Status: DisposedITAT Mumbai31 Oct 2023AY 2015-16

Bench: Shri Prashant Maharishi, Am & Shri Sandeep Singh Karhail, Jm

For Appellant: Shri Madhur Agarwal Advocate and Shri Jay Bhansali ARFor Respondent: Shri ram Krishna Kedia Sr DR
Section 133ASection 201Section 40

deduction at source provisions. viii. Assessee explained its accounting entries and stated that assessee is required to prepare books of account following the mercantile system of accounting and accounting standards. Accordingly, the provision is made at the year-end on the basis of some reasonable estimate, as the invoices

Zee Entertainment Enterprises Limited, Mumbai vs. JCIT(TDS)(OSD)-2(3), Mumbai

In the result, we confirm the appellate order passed by the CIT (A) for assessment year 2013 – 14 and dismiss all the grounds raised by the assessee in this appeal

ITA 2092/MUM/2023[2014-15]Status: DisposedITAT Mumbai31 Oct 2023AY 2014-15

Bench: Shri Prashant Maharishi, Am & Shri Sandeep Singh Karhail, Jm

For Appellant: Shri Madhur Agarwal Advocate and Shri Jay Bhansali ARFor Respondent: Shri ram Krishna Kedia Sr DR
Section 133ASection 201Section 40

deduction at source provisions. viii. Assessee explained its accounting entries and stated that assessee is required to prepare books of account following the mercantile system of accounting and accounting standards. Accordingly, the provision is made at the year-end on the basis of some reasonable estimate, as the invoices

Zee Entertainment Enterprises Limited, Mumbai vs. JCIT(TDS)(OSD)-2(3), Mumbai

In the result, we confirm the appellate order passed by the CIT (A) for assessment year 2013 – 14 and dismiss all the grounds raised by the assessee in this appeal

ITA 2091/MUM/2023[2013-14]Status: DisposedITAT Mumbai31 Oct 2023AY 2013-14

Bench: Shri Prashant Maharishi, Am & Shri Sandeep Singh Karhail, Jm

For Appellant: Shri Madhur Agarwal Advocate and Shri Jay Bhansali ARFor Respondent: Shri ram Krishna Kedia Sr DR
Section 133ASection 201Section 40

deduction at source provisions. viii. Assessee explained its accounting entries and stated that assessee is required to prepare books of account following the mercantile system of accounting and accounting standards. Accordingly, the provision is made at the year-end on the basis of some reasonable estimate, as the invoices

M/S Sanofi India Ltd (Formerly Known As Aventis Pharma Ltd, Mumbai vs. The ACIT RG 8(1), Mumbai

In the result, appeal filed by the Revenue is dismissed

ITA 1606/MUM/2007[2003-2004]Status: DisposedITAT Mumbai31 Oct 2023AY 2003-2004

Bench: Shri Vikas Awasthy, Hon’Ble & Shri S. Rifaur Rahman, Hon'Ble

Section 271(1)(c)

Sanofi India Ltd 50. However, the A.O. rejected the above plea by stating that the assessee is to follow the mercantile system of accounting and the receipts to be bound to account for those which have accrued. The A.O. also rejected the plea that interest gets nullified on the passing

ACIT- 3(1)(1), Mumbai vs. Mm/S Sanofi India Limited (Formerly Known As Aventis Pharma Ltd)., Mumbai

In the result, appeal filed by the Revenue is dismissed

ITA 1302/MUM/2007[2003-2004]Status: DisposedITAT Mumbai31 Oct 2023AY 2003-2004

Bench: Shri Vikas Awasthy, Hon’Ble & Shri S. Rifaur Rahman, Hon'Ble

Section 271(1)(c)

Sanofi India Ltd 50. However, the A.O. rejected the above plea by stating that the assessee is to follow the mercantile system of accounting and the receipts to be bound to account for those which have accrued. The A.O. also rejected the plea that interest gets nullified on the passing

Atc Logistical Solutions Private Limited, Delhi vs. Deputy Commissioner of Income Tax Circle-1, Amritsar

In the result, appeal of the assessee ITA No

ITA 241/ASR/2023[2017-18]Status: DisposedITAT Amritsar31 Oct 2023AY 2017-18

Bench: Dr. M. L. Meena & Sh. Anikesh Banerjee

Section 115JSection 139Section 143(1)Section 143(3)Section 154Section 250Section 36(1)(va)Section 37(1)Section 40ASection 40A(7)

Assessee according to the method of accounting regularly employed by it. In short, a I.T.A. No. 241/Asr/2023 12 Assessment Year: 2017-18 mercantile system of accounting cannot be looked at when a deduction is claimed under this Section, making it clear that incurring of liability cannot allow for a deduction ... constituted income. This is the reason why every assessee(s) [employer(s)] was entitled to deduction even prior to 1-4-1984, on mercantile system of accounting as a business expenditure by making provision in his books of accounts in that regard. In other words, if an assessee(s) [employer

Shree Narmada Khand Udyog Sahkari Mandali Ltd., Narmada vs. Income Tax Officer, Ward - 2(1), Bharuch

In the result, the grounds of appeal raised by the assesse are allowed

ITA 104/SRT/2023[2014-15]Status: DisposedITAT Surat31 Oct 2023AY 2014-15

Bench: Shri Pawan Singh & Dr. Arjun Lal Saini

Section 234ASection 254(1)Section 271(1)(c)Section 28Section 37Section 37(1)

basis of which the profits and gains are computed under the head “Profits and gains of business or profession”. The assessee is following mercantile system of accounting. Final price of sugarcane was fixed by Board vide their Shree Narmada Khan Udyog Sahkari Mandali Ltd. Vs ITO Resolution on 27/08/2012, much ... after profit came to be quantified. The additional price paid on finalization of accounts under Section 43(2) is an allowable expense in mercantile system of accounting. 10. The ld. Senior Counsel for the assessee further submits that the Hon’ble Supreme Court recently in Kolhapur Zilla Sahkari Dudh Utpadak

Shree Narmada Khand Udyog Sahkari Mandali Ltd., Narmada vs. Income Tax Officer, Ward - 2(1), Bharuch

In the result, the grounds of appeal raised by the assesse are allowed

ITA 103/SRT/2023[2013-14]Status: DisposedITAT Surat31 Oct 2023AY 2013-14

Bench: Shri Pawan Singh & Dr. Arjun Lal Saini

Section 234ASection 254(1)Section 271(1)(c)Section 28Section 37Section 37(1)

basis of which the profits and gains are computed under the head “Profits and gains of business or profession”. The assessee is following mercantile system of accounting. Final price of sugarcane was fixed by Board vide their Shree Narmada Khan Udyog Sahkari Mandali Ltd. Vs ITO Resolution on 27/08/2012, much ... after profit came to be quantified. The additional price paid on finalization of accounts under Section 43(2) is an allowable expense in mercantile system of accounting. 10. The ld. Senior Counsel for the assessee further submits that the Hon’ble Supreme Court recently in Kolhapur Zilla Sahkari Dudh Utpadak

Shree Narmada Khand Udyog Sahkari Mandali Ltd., Narmada vs. Income Tax Officer, Ward - 2(1), Bharuch

In the result, the grounds of appeal raised by the assesse are allowed

ITA 102/SRT/2023[2012-13]Status: DisposedITAT Surat31 Oct 2023AY 2012-13

Bench: Shri Pawan Singh & Dr. Arjun Lal Saini

Section 234ASection 254(1)Section 271(1)(c)Section 28Section 37Section 37(1)

basis of which the profits and gains are computed under the head “Profits and gains of business or profession”. The assessee is following mercantile system of accounting. Final price of sugarcane was fixed by Board vide their Shree Narmada Khan Udyog Sahkari Mandali Ltd. Vs ITO Resolution on 27/08/2012, much ... after profit came to be quantified. The additional price paid on finalization of accounts under Section 43(2) is an allowable expense in mercantile system of accounting. 10. The ld. Senior Counsel for the assessee further submits that the Hon’ble Supreme Court recently in Kolhapur Zilla Sahkari Dudh Utpadak

C & C Corporate Services Ltd, New Delhi vs. ITO Ward 5(4), New Delhi

ITA 3261/DEL/2019[2013-14]Status: DisposedITAT Delhi30 Oct 2023AY 2013-14

Bench: Sh. N.K.Billaiya & Sh. Anubhav Sharmam/S. C & C Corporate Vs. Income Tax Officer, Services Limited Ward-5(4), 74, Hemkunt Colony, New Delhi New Delhi-110048 Pan : Aadcc3058J (Appellant) (Respondent)

Section 143(3)

above said amount on the ground that previous year expenses cannot not be allowed during the year as the assessee follows mercantile system of accounting. CIT (Appeals) in its order held as under: “Uniform Expenses are already claimed in the P&L A/c. These are revenue expenditure and all uniforms ... made disallowance on his observation that they were previous years expenses, therefore, could not be allowed during the year as assessee is following mercantile system of accounting. The Bench is of considered view that since assessee had claimed the uniforms to be stock and certainly uniform have deplete in utility

Aaradhna Develpoers Pvt. Ltd., Surat vs. Income Tax Officer, Ward 1(1)(1), Surat

ITA 179/SRT/2023[2010-11]Status: DisposedITAT Surat30 Oct 2023AY 2010-11

Bench: Shri Pawan Singh & Dr. Arjun Lal Saini

Section 147Section 148Section 254(1)

calculate profit on the basis of registration deeds of flats in particular year, which is not possible as the assessee is following mercantile system of accounting. The ld AR for the assessee, thus on the basis of his submissions prayed for allowing all the appeal of the assessee on legal

Aaradhna Develpoers Pvt. Ltd., Surat vs. Income Tax Officer, Ward 1(1)(1), Surat

ITA 178/SRT/2023[2009-10]Status: DisposedITAT Surat30 Oct 2023AY 2009-10

Bench: Shri Pawan Singh & Dr. Arjun Lal Saini

Section 147Section 148Section 254(1)

calculate profit on the basis of registration deeds of flats in particular year, which is not possible as the assessee is following mercantile system of accounting. The ld AR for the assessee, thus on the basis of his submissions prayed for allowing all the appeal of the assessee on legal

Aaradhna Develpoers Pvt. Ltd., Surat vs. Income Tax Officer, Ward 1(1)(1), Surat

ITA 177/SRT/2023[2008-09]Status: DisposedITAT Surat30 Oct 2023AY 2008-09

Bench: Shri Pawan Singh & Dr. Arjun Lal Saini

Section 147Section 148Section 254(1)

calculate profit on the basis of registration deeds of flats in particular year, which is not possible as the assessee is following mercantile system of accounting. The ld AR for the assessee, thus on the basis of his submissions prayed for allowing all the appeal of the assessee on legal

Bona Sera Hospitality Private Limited, Mumbai vs. DCIT Range 7(2), Mumbai

In the result, appeal filed by the assessee is allowed

ITA 1750/MUM/2023[2011-12]Status: DisposedITAT Mumbai25 Oct 2023AY 2011-12

Bench: Shri Aby T. Varkey, Jm & Amarjit Singh, Am आयकर अपील सं/ I.T.A. No.1750/Mum/2023 (निर्धारण वर्ा / Assessment Year: 2011-12) Bona Sera Hospitality Pvt. बिधम/ Dcit, Range-7(2) Ltd. 6Th Floor, Aayakar Vs. M/S. Kalyaniwalla & Mistry Bhawan, M. K. Road, Llp, Esplanade House, 2Nd Mumbai-400020. Floor, 29, Hazarimal Somani Marg, Fort, Mumbai-400001. स्थधयी लेखध सं./जीआइआर सं./Pan/Gir No. : Aakcs7518L (अपीलार्थी /Appellant) .. (प्रत्यर्थी / Respondent) Assessee By: Shri M. M. Golvala & Shri Hormuzd Jamshedji Revenue By: Shri Manoj Kumar Sinha (Sr. Dr) सुनवाई की तारीख / Date Of Hearing: 10/08/2023 घोषणा की तारीख /Date Of Pronouncement: 25/10/2023 आदेश / O R D E R Per Aby T. Varkey, Jm: This Is An Appeal Preferred By The Assessee Against The Order Of The Ld. Cit(A)/Nfac, Delhi Dated 24.03.2023 For Ay. 2011-12. 2. The Main Grievance Of The Assessee Is Against The Action Of The Ld. Cit(A) Partly Allowing The Appeal Of Assessee By Directing Ao To Verify Addition Of Rs.1,91,956/- & Rs.4,74,558/-. & For Not Deleting Rs.3,67,773/- (Amount Assessee Could Has Not Reconcile).

For Appellant: Shri M. M. Golvala & ShriFor Respondent: Shri Manoj Kumar Sinha (Sr. DR)

Management System etc to these parties which details were furnished before the Ld. CIT(A); and assessee contended that the assessee was following mercantile system of accounting; and that when the assessee issued the invoices, it booked the sales/services in its books, but at times, the customers makes the payment

Vinay Parmanand Hariani, Mumbai vs. ITO (It), Ward-2(2)(1), Mumbai

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

ITA 985/MUM/2023[2015-16]Status: DisposedITAT Mumbai19 Oct 2023AY 2015-16

Bench: Shri Om Prakash Kant () & Ms. Kavitha Rajagopal () Assessment Year: 2015-16 Vinay Parmanand Hariani, Ito, Int. Taxation Ward 2(2)(1), Kempinski Private Residences Room No. 1725, 17Th Floor, Air Vs. Unit 40F Dki Jakarta, 10310 India Building, Nariman Point, Indonesia. Mumbai-400021. Pan No. Aabph 4179 A Appellant Respondent

For Appellant: Mr. Piyush ChaturvediFor Respondent: Mr. Anil Sant, Sr. DR
Section 115GSection 69A

Counsel Before us, the Ld. Counsel for the assessee submitted that the assessee submitted that assessee is following mercantile system assessee is following mercantile system of accounting of accounting and declared interest income from DBS account as and when it was due to the interest income from DBS account ... credited on 31.03.2014. Kindly note that the assessee is f as credited on 31.03.2014. Kindly note that the assessee is following mercantile system of accounting so interest has to be assessed in the mercantile system of accounting so interest has to be assessed in the mercantile system of accounting

Ramesh S Shah, Mumbai vs. The Dy CIT, CC-5(3), Mumbai

In the result, the appeal by the assessee is allowed

ITA 293/MUM/2021[2013-14]Status: DisposedITAT Mumbai19 Oct 2023AY 2013-14

Bench: Shri B.R. Baskaran & Shri Sandeep Singh Karhail

For Appellant: Shri Nishit GandhiFor Respondent: Smt. Mahita Nair
Section 143(3)Section 153CSection 153DSection 250

made. The AO, vide assessment order, did not agree with the submissions of the assessee and held that the assessee is following a mercantile system of accounting and if this transaction was legitimately undertaken, the said interest of Rs.16,90,166, should have been taxed during the year under consideration ... basis that the assessee has availed cash loan on which interest has been accrued and since the assessee is following a mercantile system of accounting made the impugned addition under section 69C of the Act. It is pertinent to note that for the application of provisions of section

Ramesh S. Shah, Mumbai vs. The Dy CIT, Ccc-5(3), Mumbai

In the result, the appeal by the assessee is allowed

ITA 292/MUM/2021[2012-13]Status: DisposedITAT Mumbai19 Oct 2023AY 2012-13

Bench: Shri B.R. Baskaran & Shri Sandeep Singh Karhail

For Appellant: Shri Nishit GandhiFor Respondent: Smt. Mahita Nair
Section 143(3)Section 153CSection 153DSection 250

made. The AO, vide assessment order, did not agree with the submissions of the assessee and held that the assessee is following a mercantile system of accounting and if this transaction was legitimately undertaken, the said interest of Rs.16,90,166, should have been taxed during the year under consideration ... basis that the assessee has availed cash loan on which interest has been accrued and since the assessee is following a mercantile system of accounting made the impugned addition under section 69C of the Act. It is pertinent to note that for the application of provisions of section

Concentrix Services India Private Limited (Formerly Known As Minacs Private Limited, Minacs Limited & Adity Birla Minacs Worldwide Limited ), Mumbai vs. Joint Commissioner of It (OSD)10(2)(2)Assistant Commissioner of Income Tax-9(2)(2), Mumbai

ITA 5764/MUM/2017[2012-13]Status: DisposedITAT Mumbai18 Oct 2023AY 2012-13
For Appellant: Shri Yogesh TharFor Respondent: Shri Ajit Pal Singh Daia
Section 143(3)Section 144C(3)Section 92(1)Section 92B

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 ... Officer was not justified in disallowance deduction for ‘Mark to Market’ loss a legitimate debit to the Profit & Loss Account as per the mercantile system of accounting regularly followed by the Assessee. Reliance was also placed on the judgments cited by the CIT(A) while allowing the claim