COMMISSIONER OF INCOME TAX Vs. PONDICHERRY INDUSTRIAL PROMOTION DEVELOPMENT INVESTMENT CORPORATION LIMITED

JUDGEMENT

(1.) THE assessee which is a corporation set up by the State to promote industrial development and investments, adopted the hybrid system of accounting before the close of the accounting year 1980-81, with regard to the interest and rent receivable as it found that large amounts under these two heads had remained unrecovered for a long period of time, and it was considered desirable to adopt the cash system of accounting with respect to those two heads. Such a hybrid system was followed in the following assessment year as well. THE Assessing Officer and the appellate authority having held that the assessee could not have changed the system of accounting to a hybrid system, the assessee took up the matter in further appeal to the Tribunal. THE Tribunal having agreed with the view of the assessee, this reference before us has been brought by the Revenue.

(2.) COUNSEL for the Revenue fairly invited our attention to the decision of the Supreme Court in the case of UCO Bank v. CIT [1999] 237 ITR 889, wherein the Supreme Court was concerned with the case of hybrid accounting. In that case the assessee had while following the mercantile system of accounting considered the income by way of interest pertaining to doubtful loans as not real income in the year in which it accrued, but only when it was realised. Such a mixed system of accounting was held by the court to be in accordance with the accounting practice.