COMMISSIONER OF INCOME TAX Vs. SHRIRAM INVESTMENTS LTD.

JUDGEMENT

(1.) ALL the above tax case (appeals) are filed by the Revenue as against the order of the Income -tax Appellate Tribunal raising a common issue. The key issue that needs to be decided in the above appeals is the manner in which the additional finance charges (AFC) also known as overdue charges (ODC) has to be taxed in the light of section 145 of the Income -tax Act, 1961, which provides the method of accounting. The brief facts of the case are as follows:

(2.) AGGRIEVED by the said order of the Assessing Officer, the assessee preferred appeals before the Commissioner of Income -tax (Appeals). The Commissioner of Income -tax (Appeals) deleted the addition on the ground that the assessee was entitled to show the income arising out of the AFC as and when the said income is received. In other words, the Commissioner of Income -tax (Appeals) rejected the stand of the Assessing Officer that if the assessee was following the mercantile system of accounting, it was bound to show the income arising out of AFC even though the said amount was not actually received.

(3.) THE Tribunal, however, placed much emphasis on the earlier decision of the Tribunal on the assessee's own case in respect of the assessment year 1996 -97 in I.T.A. No. 1222/MDS/1998 and also relying upon the decision of the Tribunal in the case of Annamalai Finance Ltd. v. Addl. CIT in I.T.A. Nos. 99 to 103 (Mds)/2002, which was later on upheld by this court in the decision reported in CIT v. Annamalai Finance Ltd. : [2005] 275 ITR 451 (Mad).