Prior period items to be included in determination of net profit or loss

Numaligarh Refinery Ltd. Vs. DCIT (ITAT Guwahati) The issue under consideration is whether prior period items were to be included in the determination of the net profit or loss under Mercantile system of accounting? In the present case, the AO held that under scheme of the Act, tax is levied on income of the previous year. In mercantile system of accounting, only the income that has accrued during the previous year and the expenses incurred during the said period can only be considered in computing the taxable income of a particular previous year, each year being a separate self contained unit...