Facts
a)
Assessee was a professional
dance director for cinematographic films. He was also producing films under a proprietorship
concern.
b)
Assessee followed cash system
of accounting in respect of his professional receipts whereas he was following
mercantile system of accounting for computing income from production of films.
c)
Assessing Officer (AO) took a
view that assessee was following hybrid system of accounting which was not
permissible in view of amendment made to section 145 of the Income-tax Act by the
Finance Act, 1995.
d)
The CIT(A) upheld the order of the
AO. Aggrieved by the order of the CIT(A), the assessee filed the instant appeal
before the tribunal.
The tribunal held in favour of assessee as under-
1)
Section 145 was amended by the Finance
Act, 1995 to provide that the income chargeable under the head business or
profession shall be computed in accordance with either cash or mercantile
system of accounting.
2)
Hence, in view of the
amendment, the hybrid or mixed method of
accounting was not permitted to be allowed for computing income under the Act.
However, the lawmakers still left the choice of regularly employing either of
the two methods, viz., cash method of accounting or mercantile method of
accounting.
3)
The words used in the section
145 do not cast any bar on following either cash basis or mercantile basis of
accounting by the assessee having more than one source of income within the
same head of income.
4)
In the instant case, the
assessee had two streams and sources of income under the head ‘income from
business or profession', viz., his professional income and also income from
production of films.
5)
Hence, following cash system of
accounting in respect of one source of income and mercantile system of
accounting for another source of income would not amount to following 'hybrid
system of accounting'- [2016] 67 taxmann.com 269 (Mumbai - Trib.)
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