Brief of the case:
The Hon’ble Kerala HC in the case of Kerala Kamudi P. Ltd. held that the assessee is allowed to follow hybrid system of accounting for different nature of transactions provided the same is followed consistently and income can be deduced from such accounting.
Facts of the case:
- The assessee company is engaged in publishing and selling newspaper named ‘Kerala Kaumudi’. The assessee is following mercantile system of accounting. However, for the purpose of accounting income from sale of newspaper and advertisement income the assessee accounted the same on receipt basis.
- During the course of assessment proceedings, AO pointed out such mismatch in income and expense recognition and concluded to tax the income from sale of newspapers and advertisement income also on mercantile basis.
- Tribunal allowed the appeal in favour of assessee by noting that the assessee consistent in recognizing expenses and incomes in hybrid manner, therefore, the same being method of accounting regularly employed cannot be interfered with.
- Against such of order of tribunal, Revenue is in appeal before Hon’ble High Court.
Contention of Assessee:
- The provisions of section 145 of the Income Tax Act, 1961, as it stood at the relevant time, the assessee was entitled to adopt either the mercantile system or the cash system or hybrid system.
- Reliance was placed on the decision this court in the case of Geo Tech Construction Corporation and also on the decision of Hon’ble Gujarat HC in the case of Ganga Charity Trust.
- Further, such hybrid accounting is adopted by assessee consistently and tribunal in earlier has upheld such practice which has been accepted by Revenue as well by not challenging the order of tribunal.
Contention of Revenue:
Paid content
Become a Basic or Premium Member, or log in if you are already a Basic or Premium member.
