COMMISSIONER OF INCOME TAX Vs. CANFIN HOMES LTD

JUDGEMENT

(1.) The above appeal was admitted to consider the following two substantial questions of law:-

(2.) Whether the Tribunal was right in holding that income from non-performing assets should be assessed on cash basis and not on mercantile basis despite the assessee maintaining mercantile system of accounting?

(3.) Insofar as the second substantial question of law is concerned, the learned counsel for the revenue contended in view of section 145 which came into force from 1-4-1997, when once the assessee computes his income in accordance with mercantile system of accounting regularly, the income accrued from non-performing asset, whether actually received or not, is to be taken into consideration in computing the total income and tax is payable thereon and therefore, he submits the question of exempting that income when the assessee is following mercantile system of accounting is contrary to section 145(2) of the Income-tax Act, 1961.