The Supreme Court has dismissed the appeal of the Commissioner of Income Tax against the judgment of the Madras High Court in the case of chit fund companies (Commissioner vs Bilahari Investment Ltd).
The companies were following the completed contract method of accounting and the authorities had so far accepted this method. But now, they have turned around and insisted that they should have adopted the percentage of completion method of accounting.
Rejecting this argument, the Supreme Court said: Every assessee is entitled to arrange its affairs and follow the method of accounting which the department had earlier accepted. It is only in those cases where the department records a finding that the method adopted by the assessee results in distortion of profits that the department can insist on substitution of the existing method.
This was not the case here, and the change would be revenue neutral even if the new method is adopted.