ORDER–Whether assessee could follow two different systems of accounting, i.e., mercantile and cash for a particular source of income–Tribunal giving no definite finding but merely followed its earlier view–Question does not arise out of the order of
Application :
Also to current assessment years.
Citation :
Income Tax Act 1961 s.256(2)
JUDGMENT
1. Heard Mr. A.K. Ray, learned standing counsel for the Income-tax Department, and Mr. B.K. Mahanti, for the assessee.
2. On being moved by an application under Section 256(2) of the Income-tax Act, 1961 fin short, “the Act”), this court had directed the Income-tax Appellate Tribunal, Cuttack Bench (in short, “the Tribunal”), to state a case and refer the following questions for opinion :
“(i) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in coming to the conclusion that the assessee-Corporation changed its method of accounting from mercantile to cash even though it found that the assessee was crediting the accrued interest from the sticky loans to an account called ‘interest suspense account’ and even though there was no evidence to show that the assessee had applied for such change in the system of accounting for the assessment year 1974-75 onwards ?
(ii) Whether, on the facts and in the circumstances of the case, the assessee-Corporation could follow two different systems of accounting, i.e., mercantile and cash for a particular source of income ?”
3. Pursuant to the direction, the Tribunal has stated a case. The dispute revolves round the method of accounting adopted by the assessee-corporation in respect of certain loans styled as sticky loans. The interest chargeable in respect of such loans was credited to an account called “interest suspense account”. The legality of this method came up for the consideration of this court in the assessee’s case in S. J. C. No. 155 of 1988 disposed of on February 4, 1992. For the reasons indicated in the said judgment, we answer the first question in the affirmative, in favour of the assessee and against the Revenue.
4. So far as the second question is concerned, we find that the Tribunal has not given any definite finding and has merely followed its earlier view. Therefore, strictly speaking, the question does not arise out of the order of the Tribunal and we decline to answer the same.
5. The reference is, accordingly, disposed of. No costs.