89. Accounts related Case laws

Kedarnath Jute Manufaqcturing Company Limited v.CIT

All liabilities payable under the law can be provided in accounts under mercantile system. Liability remains intact even if appeal has been filed against the demand.

CIT v. Swadeshi Mining and Manufacturing Company Limited

Control price, even if announced after close of year, is a liability of that year.

Vakharia v. Supreme General DFilm Exchange Limited(1948) Sugrabai Alibhai v. Amtee properties (1984)

A Director is entitled to take inspection of accounts personally or through an agent, provided that there is no reasonable objection to the  person chosen and the agent undertakes not to utilize the information for any purpose other than the purpose of principal

United Commercial Bank v. CIT

Certain provisions are different under Companies Act, 1956 and Income Tax. In such case, different accounts can be maintained.

CIT v. Bipinchandra Maganlal

Accounting profits and assessable profit as per Income Tax are conceptually different.

Indian Tube Company v.CIT(1992)

An amount set aside out of profits and other surplus, not to meet any liability, contingency commitment or diminution is the value of assets known to exist at the time of balance sheet is a “reserve”. Amount set aside out of profits and other surpluses to provide for any known liability of which amount could be determined with certainly, it is a “provision”.

State Bank of Patiala v. CIT (1996)

The amount set aside for bad and doubtful debts is “reserve”.

CIT v. Elgin Mills (1986)

The capital reserve and investment reserve are “reserves”.

CIT v. Travancore Titanium Products Limited(2000)

The amount set aside to meet a loan liability is a ‘provision’ and not reserve.

Kesoram Industries v. CWT (1966)

A debt is a present obligation to pay an ascertainable sum of money, whether the amount is payable in praesenti od in future. But the sum payable upon a contingency does not become a debt until the said contingency has happened.