← All Phrases

“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 Cir 23(3), Mumbai vs. Shirish M Dalvi, Mumbai

Accordingly, we uphold the finding of Ld CIT(A). The ground No. four of the appeal of the assessee is accordingly dismissed

ITA 4317/MUM/2014[2010-11]Status: DisposedITAT Mumbai31 Oct 2022AY 2010-11

Bench: Shri Om Prakash Kant () & Shri Sandeep Singh Karhail () Assessment Year: 2010-11 Shirish M. Dalvi, Dcit Circle-23(3), D’ Block, 1St Floor, Zojwala 3Rd Floor, C-10, Pratyaksha Vs. Complex, Sahajanand Kar Bhavan, Bandra East, Chowk, Kalyan-421 301. Mumbai-400051. Pan No. Aadpd 0358 H Appellant Respondent Assessment Year: 2010-11 Dcit Circle-23(3), Shirish M. Dalvi, Room No. 402, 4Th Floor, C-10 D’ Block, 1St Floor, Zojwala Vs. Bldg., Pratyakshakar Complex, Sahajanand Bhavan, Bandra Kurla Chowk, Kalyan-421 301. Complex, Bandra (E), Mumbai-400051. Pan No. Aadpd 0358 H Appellant Respondent Assessment Year: 2012-13 Shirish M. Dalvi, Dcit-29(3), D’ Block, 1St Floor, Zojwala Room No. 402, 4Th Floor, C- Vs. Complex, Sahajanand 10, Pratyaksha Kar Chowk, Kalyan-421 301. Bhavan, Bandra Kurla Complex, Bandra, Mumbai-400051. Pan No. Aadpd 0358 H

assessee Is to be assessed on the basis of accounting system followed by him. The assessee is following Shirish M. Dalvi mercantile system of accounting and therefore amount of Rs. 1,76,32,000/- is subjected to tax in this Assessment Year in which the land is actually sold

Bsr Infratech India Limited, Bangalore vs. Deputy Commissioner of Income Tax, Central Circle-2(1), Bangalore

In the result, the appeal of the assessee is partly allowed

ITA 697/BANG/2022[2017-18]Status: DisposedITAT Bangalore27 Oct 2022AY 2017-18

Bench: Shri Chandra Poojari & Smt. Beena Pillaiassessment Year: 2017-18

For Appellant: Shri Madhusudhan, A.RFor Respondent: Shri Praveen Karanth, D.R
Section 199Section 234ASection 270ASection 43Section 43C

Infratech India Ltd., Bangalore Page 3 of 38 13.The Ld. CIT (Appeals) ought to have considered the fact that your Appellant following the mercantile system of accounting had offered the income to tax in the year under appeal and thus, was rightfully eligible to claim the TDS credit available ... same had been made subject to issue of completion certificate and the completion of defect liability period. Since the assessee is following the mercantile system of accounting, so the income was required to be declared by it as soon as the income had accrued to it i.e. when the bills

JCIT (OSD) Circle-8(3)(1), Mumbai vs. M/S. Tridoss Laboratories Private Ltd., Mumbai

In the result, appeal of the assessee is partly allowed and appeal of the Revenue is partly allowed

ITA 1489/MUM/2018[2002-03]Status: DisposedITAT Mumbai20 Oct 2022AY 2002-03
Section 143(3)Section 36(1)(iii)Section 37

whole transaction was in order to evade the tax. [Para 23] There was also no dispute that the assessee was following the mercantile system of accounting, and that the accounting year for the assessment year 1980-81 was from 1-7-1978 to 30-6-1979. The High Court

M/S. Tridoss Laboratories Private Ltd., Mumbai vs. ACIT Cent. Cir. - 14, Mumbai

In the result, appeal of the assessee is partly allowed and appeal of the Revenue is partly allowed

ITA 1462/MUM/2018[2002-03]Status: DisposedITAT Mumbai20 Oct 2022AY 2002-03
Section 143(3)Section 36(1)(iii)Section 37

whole transaction was in order to evade the tax. [Para 23] There was also no dispute that the assessee was following the mercantile system of accounting, and that the accounting year for the assessment year 1980-81 was from 1-7-1978 to 30-6-1979. The High Court

M/S. United Breweries Limited, Bangalore vs. Deputy Commissioner of Income Tax, Circle- 12(5), Bangalore

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

ITA 126/BANG/2020[2011-12]Status: DisposedITAT Bangalore20 Oct 2022AY 2011-12

Bench: Shri George George K. & Ms. Padmavathy S

For Appellant: Shri, K.R. Vasudevan, AdvocateFor Respondent: Shri Sankar K. Ganeshan, CIT(DR)(ITAT), Bengaluru
Section 143(2)Section 14ASection 36(1)(vii)Section 40Section 43B

plea of the assessee should not be entertained. 13. We have heard the rival submissions and perused the material on record. Under the mercantile system of accounting, the income is to be offered to tax on accrual basis and therefore it is the gross income that needs to offered ... proceeded to make a disallowance u/s. 40(a)(ia). 16. On further appeal, the CIT(Appeals) held that the assessee is following mercantile system of accounting and the assessee is supposed to credit the account of the service provider or supplier upon receiving the services after deducting tax at source

M/S. United Breweries Limited, Bangalore vs. Additional Commissioner of Income Tax, Range- 12, Bangalore

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

ITA 125/BANG/2020[2010-11]Status: DisposedITAT Bangalore20 Oct 2022AY 2010-11

Bench: Shri George George K. & Ms. Padmavathy S

For Appellant: Shri, K.R. Vasudevan, AdvocateFor Respondent: Shri Sankar K. Ganeshan, CIT(DR)(ITAT), Bengaluru
Section 143(2)Section 14ASection 36(1)(vii)Section 40Section 43B

plea of the assessee should not be entertained. 13. We have heard the rival submissions and perused the material on record. Under the mercantile system of accounting, the income is to be offered to tax on accrual basis and therefore it is the gross income that needs to offered ... proceeded to make a disallowance u/s. 40(a)(ia). 16. On further appeal, the CIT(Appeals) held that the assessee is following mercantile system of accounting and the assessee is supposed to credit the account of the service provider or supplier upon receiving the services after deducting tax at source

M/S Pkf Sridhar & Santhanam LLP, Chennai vs. DCIT, Chennai

In the result, the appeals filed by the assessee for assessment years 2018-19 & 2019-20 are allowed for statistical purposes

ITA 670/CHNY/2022[2019-2020]Status: DisposedITAT Chennai19 Oct 2022AY 2019-2020

Bench: Shri V. Durga Rao & Shri G. Manjunathaआयकर अपील सं./Ita Nos.: 669 & 670/Chny/2022 िनधा"रण वष" / Assessment Years: 2018-19 & 2019-2020

For Appellant: Shri. D. Palanevel, AdvocateFor Respondent: Shri. P. Sajit Kumar, JCIT

assessee has filed relevant details of unclaimed TDS brought forward from earlier years and claimed in the year on the basis of mercantile system of accounting. He further submitted that the AO has allowed TDS :-6-: ITA. No: 669 & 670/Chny/2022 credit as per Form 26AS without appreciating the fact that ... been offered to tax. Since, the assessee has offered to tax income relating to TDS credit on the basis of mercantile system of accounting, has rightly claimed credit for TDS and said particulars has been furnished in ITR-5 filed for the relevant AY. The AO without appreciating the fact

M/S Pkf Sridhar & Santhanam LLP, Chennai vs. DCIT, Chennai

In the result, the appeals filed by the assessee for assessment years 2018-19 & 2019-20 are allowed for statistical purposes

ITA 669/CHNY/2022[2018-2019]Status: DisposedITAT Chennai19 Oct 2022AY 2018-2019

Bench: Shri V. Durga Rao & Shri G. Manjunathaआयकर अपील सं./Ita Nos.: 669 & 670/Chny/2022 िनधा"रण वष" / Assessment Years: 2018-19 & 2019-2020

For Appellant: Shri. D. Palanevel, AdvocateFor Respondent: Shri. P. Sajit Kumar, JCIT

assessee has filed relevant details of unclaimed TDS brought forward from earlier years and claimed in the year on the basis of mercantile system of accounting. He further submitted that the AO has allowed TDS :-6-: ITA. No: 669 & 670/Chny/2022 credit as per Form 26AS without appreciating the fact that ... been offered to tax. Since, the assessee has offered to tax income relating to TDS credit on the basis of mercantile system of accounting, has rightly claimed credit for TDS and said particulars has been furnished in ITR-5 filed for the relevant AY. The AO without appreciating the fact

Idea Cellular Ltd, Mumbai vs. DCIT 3(2), Mumbai

In the result, appeal of the Revenue in ITA No

ITA 2285/MUM/2014[2008-09]Status: DisposedITAT Mumbai12 Oct 2022AY 2008-09
Section 143(3)Section 194HSection 40

proper quantification of such liability at that stage. The very point of incurring the liability enables the assessee to claim deduction under mercantile system of accounting. We have noticed the mandate of the Hon'ble Supreme Court in Bharat Earth Movers (supra) that if a business liability has definitely arisen

DCIT 3(2), Mumbai vs. Idea Cellular Ltd, Mumbai

In the result, appeal of the Revenue in ITA No

ITA 2273/MUM/2014[2008-09]Status: DisposedITAT Mumbai12 Oct 2022AY 2008-09
Section 143(3)Section 194HSection 40

proper quantification of such liability at that stage. The very point of incurring the liability enables the assessee to claim deduction under mercantile system of accounting. We have noticed the mandate of the Hon'ble Supreme Court in Bharat Earth Movers (supra) that if a business liability has definitely arisen

Anchor Health & Beuty Care Pvt. Ltd., Mumbai vs. DCIT Central Circle-7(2), Mumbai

In the result, appeal filed by the assessee is allowed

ITA 1496/MUM/2019[2015-16]Status: DisposedITAT Mumbai04 Oct 2022AY 2015-16

Bench: Shri B.R Baskaran () & Smt. Kavitha Rajagopal ()

Section 143(3)Section 37(1)

during the previous year relevant to the impugned year and the same are allowable as revenue expenses in the impugned year by following mercantile system of accounting as per section 37(1) of the I.T. Act, 1961. The assessee company further stated that the impugned expenditure does not amount

The Deutsche Investments India P.Ltd, Mumbai vs. Pr CIT 12, Mumbai

In the result, appeal of the assessee is allowed

ITA 3169/MUM/2017[2011-12]Status: DisposedITAT Mumbai30 Sept 2022AY 2011-12
Section 143(3)Section 263Section 92C

reliance was placed on the decision of various Supreme Court‟s decisions to argue that in a Mercantile system of accounting liability is allowable once it has been incurred even though the actual disbursement may be at a later date. 5 The Deutsche Investments India Pvt. Ltd., 8. With regard

Swiber Offshore Construction Pte. Ltd. (Judicial Managers Appointed), Mumbai vs. Asst Clt (It) Cirlce- 4 (2)(2), Mumbai

ITA 7847/MUM/2019[2016-17]Status: DisposedITAT Mumbai29 Sept 2022AY 2016-17
For Appellant: Shri Jigar VoraFor Respondent: Shri Somendu Kumar Dash
Section 143(3)Section 144CSection 144C(13)Section 144C(5)Section 44B

under: “12. The main plank of the submissions of the learned Departmental Representative in this regard has been that the assessee was following mercantile system of accounting and as such the raising of invoice led to the accrual of income. It is noted that under the mercantile system of accounting ... when such amount accrues as income, the hitherto liability will get converted into income. Thus what is relevant to magnetize tax under the mercantile system of accounting is the fact of accrual of income during the year and not the receipt of any amount or non-receipt of income. Unless

DCIT-2(2)(1), Mumbai vs. M/S State Bank of India (Successor to State Bank of Bikaner and Jaipur), Mumbai

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

ITA 3033/MUM/2019[2015-16]Status: DisposedITAT Mumbai29 Sept 2022AY 2015-16

Bench: Shri Om Prakash Kant (Account Member) & Ms. Kavitha Rajagopal () I.T.A. No. 3033/Mum/2019 (A.Y. 2015-16) I.T.A. No. 2873/Mum/2019 (A.Y. 2015-16) Dcit-2(2)(1), Vs. M/S State Bank Of India Mumbai (Successor To State Room No. 545, Bank Of Bikaner & 5Th Floor, Ayakar Jaipur) Bhavan Financial Reporting & Mumbai-400020 Taxation, 3Rd Floor, Corporate Centre, Madam Cama Road Nariman Point, Mumbai- 400021 (Appellant) (Respondent)

Section 14A

plea that the Interest Income on securities has to be taxed on the due basis only without appreciating that as per the mercantile system of accounting followed by the assesse, interest on securities has to be taxed on accrual basis.". 2."On the facts and circumstances of the case

State Bank of India (Successor to State Bank of Bikaner & Jaipur), Mumbai vs. ACIT -Circle 2(2)(1), Mumbai

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

ITA 2873/MUM/2019[2015-16]Status: DisposedITAT Mumbai29 Sept 2022AY 2015-16

Bench: Shri Om Prakash Kant (Account Member) & Ms. Kavitha Rajagopal () I.T.A. No. 3033/Mum/2019 (A.Y. 2015-16) I.T.A. No. 2873/Mum/2019 (A.Y. 2015-16) Dcit-2(2)(1), Vs. M/S State Bank Of India Mumbai (Successor To State Room No. 545, Bank Of Bikaner & 5Th Floor, Ayakar Jaipur) Bhavan Financial Reporting & Mumbai-400020 Taxation, 3Rd Floor, Corporate Centre, Madam Cama Road Nariman Point, Mumbai- 400021 (Appellant) (Respondent)

Section 14A

plea that the Interest Income on securities has to be taxed on the due basis only without appreciating that as per the mercantile system of accounting followed by the assesse, interest on securities has to be taxed on accrual basis.". 2."On the facts and circumstances of the case

DCIT 27(1), Mumbai vs. Gopuram Developers, Mumbai

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

ITA 1408/MUM/2022[2013-2014]Status: DisposedITAT Mumbai28 Sept 2022AY 2013-2014
Section 133ASection 143(3)

appellant is such that it allows the appellant to postpone the tax liability. The undisputed fact is that the appellant is following mercantile system of accounting and the appellant is recognizing the revenue on the basis of percentage competition method since inception of the firm. There is no change

Skf Engineering & Lubrication India Private Limited, Bangalore vs. Joint Commissioner of Income Tax, Circle-4(1)(1), Bangalore

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

ITA 534/BANG/2022[2012-13]Status: DisposedITAT Bangalore26 Sept 2022AY 2012-13

Bench: Shri George George K. & Ms. Padmavathy S.Skf Engineering & Lubrication Vs. Jcit, Circle - 4(1)(1) India Pvt. Ltd. Bmtc Building (Formerly Lincoln Helios (India) Ltd & 80 Feed Road, 6Th Block, Skf Engineering & Lubrication India Ltd Koramangala No.249/250, Bommasandra Bengaluru 560095 Indl. Area, Phase 3, Hosur Road Bengaluru 560099 Pan – Aaacl2061P (Appellant) (Respondent) Assessee By: Shri Deepak Chopra, Ca Revenue By: Smt. Priyadarshini Baseganni, Addl. Cit

For Appellant: Shri Deepak Chopra, CAFor Respondent: Smt. Priyadarshini Baseganni, Addl. CIT
Section 143Section 143(3)Section 263

year ended, though the actual payment would happen on a later date. According to the learned A.R. the assessee is following mercantile system of accounting and therefore the 4 SKF Engineering & Lubrication India Pvt. Ltd. liability to pay liquidated damages which is accrued during the year under consideration ... would be paid only on delivery of lubrication systems or products, the liability, in our view, has to be provided for under the mercantile system of accounting. We see no merit in the contention that the provision made is an unascertained liability on the basis that the liability

Dy CIT 10 (3)(1), Mumbai vs. M/S Navin Flourine International Ltd., Mumbai

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

ITA 6814/MUM/2019[2009-10]Status: DisposedITAT Mumbai22 Sept 2022AY 2009-10

Bench: Shri Pramod Kumar, Vp & Shri Aby T. Varkey, Jm आयकर अपील सं/ I.T.A. No. 6814/Mum/2019 (निर्धारण वर्ा / Assessment Year: 2009-10) Dcit-10(3)(1) बिधम/ M/S. Navin Flourine Room No. 217/212, 1St International Ltd. Vs. 2Nd Floor, Suntech Centre, Near Floor, Aayakar Bhawan, Churchgate, Mumbai- Garware Plastics, 37/40, 400020. Subhash Road, Vile Parle (E)], Mumbai-400057. स्थायी लेखा सं./जीआइआर सं./Pan/Gir No. : Aabcp0464B (अपीलाथी /Appellant) .. (प्रत्यथी / Respondent) Revenue By: Shri Chetan M. Kacha (Sr. Ar) Assessee By: Ms. Aastha Shah/Aamod Prabhudesai सुनवाई की तारीख / Date Of Hearing: 25/08/2022 घोषणा की तारीख /Date Of Pronouncement: 22/09/2022 आदेश / O R D E R Per Aby T. Varkey, Jm: This Is An Appeal Preferred By Revenue Against The Order Of The Ld. Commissioner Of Income Tax (Appeals)- 17, Mumbai Dated 20.08.2019 For Ay. 2009-10. 2. At The Outset, The Ld. Ar Of The Assessee Brought To Our Notice That The Ld. Cit(A) Has Given Relief To The Assessee Against The Action Of The Ao Who Passed The Re-Assessment Order Dated 26.03.2015 U/S 143(3) R.W.S. 263 Of The Income Tax Act, 1961 (Hereinafter “The Act”). According To The Ld. Ar, The Ao Passed The Re-Assessment Order Dated 26.03.2015 Pursuant To The Order Of The Ld. Cit-07, Mumbai Passed U/S 263 Of The Act Dated 24.01.2014 Wherein The Ld. Cit Found Fault With The Action Of The Ao In Respect Of Original Assessment Framed U/S 143(3) Of The Act Dated 29.12.2011 Wherein The Ao A.Y. 2009-10 M/S. Navin Flourine International Ltd. Assessed The Total Income Of Assessee At Rs.71,09,93,779/-. The Ld Cit U/S 263 Of The Act Found Fault With The Original Assessment On The Following Four (4) Issues: -

For Appellant: Ms. Aastha Shah/Aamod PrabhudesaiFor Respondent: Shri Chetan M. Kacha (Sr. AR)
Section 143(3)Section 145ASection 154Section 263

whereas no enquiry in this regard was conducted. 2 A.Y. 2009-10 M/s. Navin Flourine International Ltd. iv. The assessee is consistently following mercantile system of accounting and charging the expenditure of capital nature on scientific research related to the assessee's business transferred to the work-in- progress account

DCIT, CC-2(1), Chennai vs. M/S Enexio Power Cooling Solutions India Private Limited, Chennai

The appeal stands dismissed

ITA 869/CHNY/2020[2017-18]Status: DisposedITAT Chennai21 Sept 2022AY 2017-18

Bench: Hon’Ble Shri V. Durga Rao & Hon’Ble Shri Manoj Kumar Aggarwal, Am

For Appellant: Shri Saroj Kumar Parida (Advocate)-Ld. ARFor Respondent: Dr. S. Palanikumar (CIT) – Ld. DR
Section 143(3)

assailed the adjudication of Ld. CIT(A) and submitted that revenues were recognized in Books of Account as per mercantile system of accounting but the same has been adjusted in the computation of income. The Ld. AR submitted that the assessee is following consistent method of accounting to recognize revenue ... these receipts, added the balance Rs.1118.61 Lacs to the income of the assessee. Appellate Proceedings 5.1 The assessee explained that the assessee follows mercantile system of accounting. The assessee enters into contract with various customers for colling towers and cool condensers. In the contract, there is specific clause that

Dy. Commissioner of Income Tax, CC-7(3), Mumbai vs. M/S Macrotech Developers Ltd (Successor to M/S Lodha Impression Real Estate Pvt Ltd), Mumbai

In the result, all the appeals of the revenue are dismissed

ITA 1894/MUM/2022[2015-2016]Status: DisposedITAT Mumbai21 Sept 2022AY 2015-2016
Section 143(3)

account of interest cost retained in Inventory which was claimed as revenue expenditure by the assessee. The assessee company is following mercantile system of accounting and recognizing the revenue from the above project following Percentage of Completion Method. The assessee for the purposes of construction had borrowed interest bearing funds