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89. Method of accounting.
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89. Method of accounting.—(1) The income chargeable under the head "Income from business" or "Income from residuary sources" shall, except as otherwise provided in this section, be computed in accordance with either cash or mercantile system of accounting regularly employed by the person.
(2) The Central Government may from time to time notify accounting standards to be followed by any class of persons or in respect of any class of income.
(3) The valuation of purchase of goods and inventory for the purposes of determining the income chargeable under the head "Income from business" shall be—
(a) in accordance with the method of accounting regularly employed by the person ; and
(b) further adjusted to include the amount of any tax, duty, cess or fee (by whatever name called) actually paid or incurred by the person to bring the goods to the place of its location and condition as on the date of its valuation.
(4) The value of sale of goods for the purposes of determining the income chargeable under the head "Income from business" shall be determined—
(a) in accordance with the method of accounting regularly employed by the person ; and
(b) further adjusted to include the amount of any tax, duty, cess or fee (by whatever name called) leviable on the sale of the goods.
(5) The interest on bad or doubtful debts of any financial institution shall be included in the total income of the financial year in which the interest is credited to the profit and loss account of, or is actually received, by the financial institution, whichever is earlier.
(6) The interest received by a person on compensation or an enhanced compensation shall be included in the total income of the financial year in which it is received.
(7) In this section,—
(a) any tax, duty, cess or fee (by whatever name called) under any law for the time being in force, shall include all such payment notwithstanding any right arising as a consequence to such payment ;
(b) "bad or doubtful debts" shall be such debts as may be prescribed, having regard to the guidelines issued by the Reserve Bank of India or the National Housing Bank, as the case may be, in relation to such debts.
Clause 89 relates to the method of accounting.
Sub-clause (1) of the said clause provides that the income chargeable under the head "Income from business" or "Income from residuary sources" shall, except as otherwise provided in the clause, be computed in accordance with either cash or mercantile system of accounting regularly employed by the person.
Sub-clause (2) of the said clause provides that the Central Government may from time to time notify the accounting standards to be followed by any class of persons or in respect of any class of income.
Sub-clause (3) of the said clause provides that the valuation of purchase of goods and inventory for the purposes of determining the income chargeable under the head "Income from business" shall be in accordance with the method of accounting regularly employed by the person and further adjusted to include the amount of any tax, duty, cess or fee actually paid or incurred by the person to bring the goods to the place of its location and condition as on the date of its valuation.
Sub-clause (4) of the said clause provides that the value of sale of goods for the purposes of determining the income chargeable under the head "Income from business" shall be determined in accordance with the method of accounting regularly employed by the person and further adjusted to include the amount of any tax, duty, cess or fee leviable on the sale of the goods.
Sub-clause (5) of the said clause provides that the interest on bad or doubtful debts of any financial institution shall be included in its total income of the financial year in which the interest is credited to the profit and loss account or is actually received, whichever is earlier.
Sub-clause (6) of the said clause provides that the interest received by a person on compensation or on an enhanced compensation shall be included in the total income of the financial year in which it is received.
Sub-clause (7) of the said clause defines the term "bad or doubtful debts".
Chapter IV deals with special provisions relating to the computation of total income of non-profit organisations.
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