‘completed contract method’
Last updated: 27 March 2008
Court :
The Supreme Court
Brief :
Citation :
The Supreme Court has dismissed the appeal of the Commissioner of Income Tax against the judgment of the Madras High Court in the case of chit fund companies (Commissioner vs Bilahari Investment Ltd).
The companies were following the ‘completed contract method’ of accounting and the authorities had so far accepted this method. But now, they have turned around and insisted that they should have adopted the ‘percentage of completion method’ of accounting.
Rejecting this argument, the Supreme Court said: “Every assessee is entitled to arrange its affairs and follow the method of accounting which the department had earlier accepted. It is only in those cases where the department records a finding that the method adopted by the assessee results in distortion of profits that the department can insist on substitution of the existing method.”
This was not the case here, and the change would be revenue neutral even if the new method is adopted.
CA. Amit Daga
Published in Income Tax
Views : 95
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