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Section 145 of the Income-tax Act, 1961 – Method of accounting – Change of - Assessment year 1970-71 – Whether an assessee can change method of according unilaterally – Held, yes – Assessee changed its method of accounting from mercantile system to cash system – However, interest on certain loan was included by authorities in assessment year in question on due 'basis', notwithstanding resolution passed by assessee-company that said interest would be credited not on due basis but on realization – Whether if assessee had regularly employed altered method of accounting, namely, cash system regarding its income from 'other sources', its income from other sources must be computed in accordance with cash system of accounting and, in such circumstances, aforesaid interest could not be included in accounting year relevant to assessment year in question – Held, yes (Case remanded to Tribunal to ascertain material facts and determine afresh whether interest in question was liable to be included in assessment year in question) FACTS The assessee company earned income from business and also from other sources and house property. In an earlier year, it had advanced a loan to a party. In 1967 the assessee passed a resolution deciding not to credit the interest on the aforesaid loan on due basis but to credit the same when realised and in terms of the said resolution it did not enter the interest on the said loan in its books as they were not received by the assessee. In two earlier assessment years the ITO brought the interest on the said loan to tax. The Tribunal confirmed those additions in the quantum appeals relating to those assessment years with a finding that the assessee did not forgo the interest and merely deferred their entry in its books by unilaterally changing its method of accounting, namely, from mercantile to cash system of accounting. In those appeals, the Tribunal also held that the assessee was not entitled to change its method of accounting unilaterally. The ITO had also brought the interest on the said loan to tax in the accounting year relevant to the assessment year in question, although it was not received by the assessee, nor it was entered in its…

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