Company can follow Cash system for Tax purpose, while keeping books of accounts on accrual Basis

The assessee, a company, followed, in accordance with s. 209(3) of the Companies Act, 1956, the mercantile system of accounting according to which the profits were Rs. 7.48 crores. However, for income-tax purposes, it followed the cash system of accounting according to which the profits were Rs. 4.76 crores and offered that sum to tax. The AO rejected the claim on the ground that u/s 209(3) of the Co’s Act, a company is obliged to follow the mercantile system and that is its’ “regular method” for purposes of s. 145.
ITAT had affirmed the conduct of the assessee.

DCIT vs. Stup Consultants (Mumbai ITAT)

While Kidnaping is an offence, paying ransom is not and hence Allowable as Business Expenditure.

The Assessee, engaged in manufacturing and sale of bidis, send its director to a forest area for purchasig tendu leaves. There the directors was kidnapped by dacoits and assessee pays Ransom for secure his release.  Assessee had claimed the Ransom money as business expenditure u/s 37(1), which was disputed by department. High Court had allowed the appeal in favour of asssessee.
M/s Khemchand Motilal Jain ( Madhya Pradesh High Court)

Case Study - CA Final - Indirect taxes - Nov 2011

Friends, You can download Case Study for CA Final Indirect taxes for Nov 2011 Term from the given link:
http://www.caclubindia.com/share_files/case-study-ca-final-indirect-taxes-nov-2011-41806.asp

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