By Jagdish D. Shah, Jagdish T. Punjabi, Chartered Accountants
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Part B — Unreported Decisions
(Full texts of the following Tribunal decisions are available
at the Society’s office on written request. For members desiring that the
Society mails a copy to them, Rs.30 per decision will be charged for
photocopying and postage.)
26 ACIT v. Mehul J. Somaiya
ITAT ‘B’ Bench, Mumbai
Before N. V. Vasudevan (JM) and
Karunakara Rao (AM)
ITA No. 7118/Mum./2006
A.Y. : 2002-03. Decided on : 10-12-2008
Counsel for revenue/assessee : G. Gurusamy/
C. N. Vaze
S. 145 of the Income-tax Act, 1961 — Method of accounting —
Assessee having more than one source of income under the head ‘Business income’
— Whether the assessee has the option to follow different method of accounting
in respect of each of the different sources of income under the head — Held,
Yes.
Per N. V. Vasudevan :
Facts :
During the year the assessee had returned income under the
head salary, business and income from other sources. In respect of income under
the head business, he had three different sources of income viz., (i)
Remuneration from partnership firm where he was a partner; (ii) income from
proprietary concern; and (iii) consultancy fee. In respect of the first two
sources of business income, the assessee was following mercantile system of
accounting, while in case of the latter, the assessee claimed that it was
following cash method of accounting. Accordingly, from the consultancy fee of
Rs.7.87 lacs receivable, he offered to tax the sum of Rs.41,344 i.e., the
sum equal to the tax deducted at source by the client and for which the TDS
certificate was received by him, for tax.
According to the AO, the assessee was not allowed to adopt
different methods of accounting for different sources of income falling under
the same head. Therefore, he brought to tax the entire consultancy fee of
Rs.7.87 lacs. On appeal, the CIT(A) allowed the appeal of the assessee.
Held :
The Tribunal noted that the object of the amendment of S. 145
made by the Finance Act, 1995 was only to do away with the mixed system of
accounting, by which certain transactions relating to a particular source
were recorded following one system and the other transactions following the
other system of accounting. According to the Tribunal, if there were more than
one sources of income falling under the same head of income, and the assessee
follows either cash or mercantile system of accounting for different sources
income, it cannot be said that the hybrid system of accounting for different
sources of income is being followed. According to it, so long as for a
particular source either cash or mercantile system was followed, there can be no
objection. Thus, as noted by the CIT(A), since the assessee was consistently
following the cash system of accounting for his consultancy income, it accepted
the submission of the assessee and dismissed the appeal filed by the Revenue.
