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)