1978-VIL-679-CAL-DT

Equivalent Citation: [1978] 112 ITR 575

CALCUTTA HIGH COURT

Date: 18.01.1978

COMMISSIONER OF INCOME-TAX

Vs

EASTERN BENGAL JUTE TRADING CO. LIMITED

BENCH

Judge(s)  : SUDHINDRA MOHAN GUHA., SABYASACHI MUKHERJEE 

JUDGMENT

SABYASACHI MUKHARJI J.-In this reference under section 256(2) of the Income-tax Act, 1961, the Tribunal has referred the following question as directed by this court :

" Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee could elect to be assessed on the basis of the cash system of accounting and in directing the Incometax Officer to make assessment on the basis." We are concerned in this reference with the assessment year 1966-67. The assessee is a company. Its income was mainly derived from interest. It had some dividend income also. The accounting year under consideration ended on the 30th June, 1965. The directors passed a resolution on the 28th March, 1965, stating that, with effect from the year starting with 1st of July, 1964, the company would change the method of accounting from mercantile basis to cash basis and that this new method should be regularly followed in maintaining the company's books of accounts year after year. The resolution was confirmed by the general body of the shareholders. As a result of this change, there was a loss of Rs. 942, but if the method previously followed had been followed then there would have been a profit of Rs. 14,151. The question involved in this reference is whether the assessee was entitled to change the method and insist on being assessed on the cash basis. Under section 291 of the Companies Act, the directors have power to change the method of accounting by themselves. The Tribunal has discussed the evidence and found that there was no mala fide motive in changing the method. Furthermore, the new method has been regularly followed and in the subsequent years the department has accepted the said method. Having regard to the facts and circumstances of the case, the Tribunal held that the assessee could elect to be assessed on the basis of cash system of accounting and directed the Income-tax Officer to make the assessment on that basis. There was evidence upon which the Tribunal could come to this conclusion. The findings of the Tribunal have not been challenged as perverse or as based on no evidence. In the aforesaid view of the matter, we are of opinion that the question referred to us must be answered in the affirmative and in favour of the assessee. Each party to pay and bear its own costs.

SUDHINDRA MOHAN GUHA J.--I agree.

 

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