#Mercantile System

Madras High Court ruled that construction firms can adopt hybrid accounting methods and validated sale-and-leaseback transactions for cinematograph films, holding that tax-saving motives alone cannot invalidate lawful, documented transactions. The judgment reinforces the principle that the mercantile system allows flexibility in matching income and expenses, provided the transactions are genuine and properly recorded.

ITAT Kolkata rules that prior period expenses crystallising in the current assessment year are deductible under the mercantile system if evidence of crystallisation is furnished. The ruling clarifies that disallowance is unwarranted where the liability becomes certain during the year, impacting tax assessments for businesses with deferred liabilities.