Law: Income Tax Act, 1922

Section: 10(1),13,6,

(a) Income tax Act (XI of 1922)---Ss. 10(1), 13 Rejection of accounts Mercantile method of account¬ing Assessment made from year to year on basis of such method of accounting regularly employed Assessee not competent to claim assessment to be made on cash method of accounting relating to assessment years 1963 64 and 1964 65, in respect of certain items of income taken out from balance sheet. (b) Income tax Act (XI of 1922) Ss. 6, 10 & 13 Business Assessee though a statutory corporation but run on business proposition Profits and gains out of business ¬Assessable under section 10. Commissioner of Income tax, Bombay v. Sarangpur Cotton Manufacturing Co. (1938) 6 I T R 36 (P C) ref. JUDGMENT SYED MUHAMMAD HUSAIN, J. This is an application at the instance of the House Building Finance Corporation under section 66 of the Income tax Act for a decision of this Court on the question whether the I. T. O., the Appellate Commissioner and the Tribunal were justified in assessing the income as a profit and gains from business as contemplated under section 10(I) of the Income tax, Act relying upon the method of Mercantile Accounting under section 13 of the Income tax Act, Two questions have been raised for the decision of this Court, namely whether the Income tax Department could refuse the cash method of accounting and instead could proceed upon the mercantile method of accounting and further whether the Income tax Department were justified in assessing the income only under one head being the profit gaiaed from business of the assessee. So far as the first question relating to the method of accounting is concerned before answering this question it is necessary to ascertain the nature of the organisation of the aseessee in question for the purpose of relevant assessment years 1963 64 and 1964 65. The then House Building Finance Corporation was estabilshed under the Central Act No. XVIII of 1952 for the purpose of providing financial facilities for the construction of houses in the towns and cities in Pakistan as is evident from the preamble to the act itself. Under section 3(2) , of the Act such Corporation was instead to be a body corporate having perpetual succession…

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