Law:

Section:

Section 145, read with section 37(1) of the Income-tax Act, 1961 [Corresponding to section 13, read with section 10(2)(xv) of the Indian Income-tax Act, 1922] - Method of accounting - System of accounting - Assessment year 1953-54 - Assessee, who was following mercantile system of accounting, had not maintained any books of account but had prepared his returns and statements with help of duplicate bills and expense vouchers - Assessee claimed deduction of interest due to be paid to vendors on purchase of baling press on credit - Tribunal disallowed claim on ground that since no accounts were kept, system that should be deemed to have been adopted was 'cash' and, therefore, since no payment of interest was actually made by assessee during relevant year of account, he could not claim any allowance thereof - Assessee had adopted same method of accounting in case of receipts also and department had treated similar expenditure as permissible deduction in previous years - Whether fact that assessee had not maintained any books of account would not make any material difference in allowing assessee's claim for reason that it was with aid of duplicates of bills that returns were prepared both in regard to income and expenditure and this was accepted by department in prior years - Held, yes FACTS The assessee was following mercantile system of accounting for the assessment year 1953-54. The assessee claimed deduction of interest paid to the vendors of a baling press purchased on credit. He did not pay interest either in the prior accounting year or in the present accounting year. Though he claimed the interest due for that year as an expenditure, since he did not pay the amount in question in the present accounting year and did not make any adjustment of interest in the account of the baling press, as he had no accounts at all, the ITO disallowed the interest claimed. On appeal, the AAC allowed the assessee's claim holding that though the assessee had not maintained any books of account, he had prepared his returns and statements with the help of the duplicate bills and expense vouchers. On further, appeal, the Tribunal reversed the order of the AAC in the view that in a…

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