In these two appeals by assessee-Corporation, common issue are involved and as such they are disposed of by common order. main issue in these appeals relate to income of Corporation. claim of assessee is that in view of several cases of disputes, defaults in recovery, receipt of dues being irregular, it would only be proper to tax income on basis of actual cash receipts, as other wise, Corporation has been paying income tax on that portion of its income which is never realised which resulted in serious erosion of its finances. According to assessee's counsel for purpose of its accounts as required to be maintained under State Financial Corporation Act, method followed is mixed or hybrid system i.e. mercantile and cash, which has no relevance at all so far as taking of income is concerned. According to assessee, s. 145 of IT Act does not prescribe any method of accounting to b e followed by any assessee and talks only of computing of income from any b o o k s maintained by assessee. assessee, therefore, made application to IAC vide letter dt. 27th Sept., 1980, wherein it was submitted due to serious recovery problems faced by all financial institutions, it has been decided that for purposes of income tax, return shall be submitted on cash basis only for which approval of IAC was sought for. This application was made during accounting year as year closed on 31st day of March, 1981. It was further contended that change in method of filing of return of income has been sought for bona fide reasons, which bears approval of Board of Directors and assessee has right to make choice of Method of accounting of income for tax purpose. Reliance was placed on Juggilal Kamlapat Bankers vs. CIT (1975) 101 ITR 40 (All), CIT vs. Eastern Bengal Jute Trading Co. Ltd. (1978) 112 ITR 675 (Cal), CIT vs. Rajasthan Investment Co. P. Ltd. vs. CIT (1978) 113 ITR 294 (Cal), Reform Flour Mills Ltd. vs. CIT (1978) 114 ITR 227 (Cal), Commr. of Agrl, IT vs. Ram Kuvar and Ors. (1983) 141 ITR 85 (Bom), Morvi Industries Ltd. vs. CIT (1971) 82 ITR 835 (SC), Poonamchand Trilokchand vs. CIT (1982) 27 CTR (All) 320: (1982) 136 ITR 537 (All). said change having been followed in subsequent years, it has become regular system for and from asst. yr. 1982-83. It was argued by ld. departmental Representative that claim of assessee had been rejected by Department for reason that: (a) books are maintained on mercantile basis; (b) profit is around Rs. 1.40 crores; (c) return has been prepared on basis of adjustment to results shown by books which are all ad hoc; (d) even advance tax of Rs. 73.91 lakhs has been estimated as per books only. Sec. 145 talks of regularly employed method of accounting of income, which was all along mercantile and talks of deducting of taxable income from books of accounts maintained by assessee, as such claim of assessee is untenable in Law; (e) Board resolution is only for filing of return on cash basis, though accounts are continued on mercantile income and (f) in view of rulings contained in CIT vs. Cosmopoitan Trading Co. (No.2) 1978 CTR (All) 360: (1979) 116 ITR 815 (All) & CIT vs. Cosmopolitan Trading Co. 1978 CTR (All) 71: (1979) 116 ITR 728 (All), claim is totally unjustified in law. On this issue, we have heard extensively arguments of parties. main question that need to be answered is whether assessee, for purposes of income tax alone can have different method of accounting for its income, from one adopted by him to arrive at commercial profits? To answer this, we have to necessarily examine provision of scope of total income as spelt out in s. 5 of IT Act, is reproduced below: Sec. 5(1): Subject to provisions of this Act, total income of any previous year of person who is resident includes all income from whatever source derived which (a) is received is deemed to be received in India in such year by or on behalf of such person; or (b) accrues or arises or is deemed to accrue or arise to him in India during such year or (c) accrues or arises to him outside India during such year. reading of said section gives impression that income would include not only what is actually received but all those, which would be receivable. This is based on broad principle of commercial transactions of assessee. entire emphasis that is laid on s. 5 is manner in which business of assessee is carried on. In instant case, which is case of Financial Corporation, business of financing is carried on basis of accrual. meter for charging of interest commences, moment finances are provided to customers and similarly liability to pay on borrowals made by Corporation commences from day it receives advances. financial institution always follow system as otherwise they cannot exist on basis of cash system which is based on actual receipt of money. In fact, system that is followed by financial corporation as already observed above, is to charge interest from day loan is advanced to parties and to charge additional interest when instalment alongwith interest which is due on particular day is not paid by customers. emphasis is always on accrual specifying time by which amount so advanced to be repaid, rate of interest charged, amount of interest payable over years as well as date on which instalments as well interest are payable. intervals on which payments are required to be made by customers is only to indicate that on specified dates they are liable to make payment and till that date they would not be deemed to be defaulters. default would arise only when customer fails to honour his commitment of repayment of instalment together with interest on specified date, from which date that customer is liable to pay additional interest on delayed instalment payment as well as delayed payment of interest. If argument of assessee's counsel Mr. Ajmera has to be accepted that financial institution should be allowed to follow cash system of account, it would defeat very basic business policies adopted in providing of finances as all customers would be only too happy to either not pay advances so received or make payment as and when they please. entire financed structure being based on enforcement of right from day of entire financed structure being based on enforcement of right from day of advances, which enforcement is possible only when it follows system whereby customers are liable for payment of interest on loan so advanced from day loans are so taken by them. When right is so enforced, then it accrues from day advances are provided and when it so accrues, it becomes income and rather real income of assessee. Under IT Act emphasis is one of taxing of real income. One of novel arguments raised by assessee was under s. 145 irrespective of any method of accounting followed by assessee assessee has right of filing return of income on cash basis. In this regard, we reproduce s. 145 (1) as under: Sec. 145(1) "Income chargeable under head "Profits and gains of business or professions" or "Income from other sources", shall be computed in accordance with method of accounting regularly employed by assessee;" Reading of this section also goes to indicate that emphasis is only on computation of real total income of assessee. If these were not intention, there was absolutely no necessity of adding words in proviso whereby ITO is compelled to compute income on different basis even though assessee's accounting be complete and correct. Sec. 145 cannot be read in isolation with s.5 and both sections are laying emphasis on manner of carrying on business by assessee. If in respect of business carried on by him real income is based on accrual, then for income tax purpose as well real income has to be on accrual. Though for business purposes income may be on accrual but assessee choose to maintain its books of accounts on cash basis, in that event it would become duty of ITO to disregard books of account as books of accounts though may be complete in so far as assessee is concerned, but does not disclose real and true income of assessee. real and true income of assessee is one which he would normally treat while carrying on business. If for purpose of business entire emphasis is on accrual, then real income is to be computed on basis of accrual only. accounts as maintained by assessee are not sacrosanct, i.e. to say that is not necessary that accounts as maintained by assessee should be considered to be fool-proof and in isolation to general nature of business conducted by assessee. Their Lordships of Supreme Court in case of Kedarnath Jute Manufacturing Co. Ltd. vs. CIT(1971) 82 ITR 363 (SC) made pertinent observation that entries in books efficient are not any way determinative of item of income o r expenditure. They observed whether assessee is entitled to particular deduction or not will depend on provision of law relating to that and not on view, which assessee might take of his rights, nor can existence or absence of entries in books of account be decisive or conclusive in matter. Supreme Court in case of Laxmipat Singhania vs. CIT (1969) 72 ITR 291 (SC) observed where assessee is assessable on accrual basis Revenue cannot tax him on cash basis. They observed that it is not open to ITO if income has accrued to assessee and is liable to be included in total income of particular year, to ignore accrual and thereafter to tax it as income of another year on basis of receipt. Both above ratios clearly lay emphasis on scope of real income of assessee which cannot be seen in isolation from real nature of business transaction of assessee. Therefore, if entire business is based on accrual, then assessee cannot choose to file his return of income on cash basis and claim it to be change in method of accounting. This is not permitted in law. Such change could only be permitted if entire manner of carrying on of business is changed or switched over from accrual system to cash system. We find support of our conclusion from case of Subramaniam Chettiar vs. CIT 2 ITC 261 at 365. Their Lordship observed "the assessee cannot for purpose of more conveniently carrying on his business adopts mercantile basis and then for purpose of income-tax assessment adopt cash basis. They further observed section relates to method of accounting regularly employed by assessee for his own purpose in this case for purposes of company's business and does not relate to method of making up statutory return". two case laws relied on by ld. D.R. (1979) 116 ITR 815 (All) and (1979) 116 ITR 728 (All) (supra) of Allahabad High Court, in case of Cosmopolitan Trading Co., go to indicate that in cases of actual difficulty of assessee realising dues in respect of interest from debetors for which purpose assessee changed its method of accounting in its books of account from accrual to cash basis was held to be permissible as it was based on commercial expediency. case laws relied by assessee only consider issue of s. 145 in relation of books being not reliable. One of arguments on basis of which assessee sought to support its claim was that Financial Corporation has to borrow not only to be liquid but also for purpose of payment of taxes, financial position of Corporation becomes rather difficult. We have only to observe that there is no denial that in mercantile system of business i.e. accrual at time there are defaults from several of customers and also customers are in deep trouble as far s their finance are concerned, thus recovery of finances is very serious problem to such financial institution. But, this does not mean that assessee can choose to have two different standards of evaluating its real income; One for its business and another for tax purposes. Since this is problem of several financial institutions it would be for all such institutions to come together and evolve system by which they are able to recover dues in time and also find such method of making liquid. This argument, to our mind, of assessee has no force at all. We therefore, reject ground as totally baseless. next common ground in both year is in respect of disallowance out o f entertainment which has been submitted by assessee as representing provision for tea to staff, which was practice for last several year. It was submitted that for earlier year Tribunal had held that to extent of amount relating to provisions for tea to staff, they should not be allowed for which argument of Department was that assessee had claimed under separate head for staff welfare expenses. On this issue, referring to para 9 of this Tribunal order in case of assessee dt. 20th May, 1984 observation was that there is no mention about any part of expenditure being related to staff for which purpose matter was remitted back to IAC for verification. In two years under review circumstances being same, we remit matter back to IAC for verifying whether any part of expenses could be said to be related to staff and has not been separately claimed under head staff welfare in which case only part of it could be considered for allowance by him. next common issue is disallowance out of advertisement and publicity expenses. According to assessee, expenses which have been disallowed are part of momentoes and gift articles which were given to various customers on occasion of Silver Jubilee Celebration of Corporation. According to assessee, this is in nature of business and no part of it should have been disallowed. For Department it was argued that since these were presentation articles issued on occasion of Silver Jubilee celebrations, r. 6B of IT Rules apply and excess over Rs. 50 have been disallowed on which assessee cannot have any grievance. On this issue, we are convinced that action of Department in disallowing part of expenses is wholly justified as in case of presentation articles what is allowable is only upto value of Rs. 50 and any amount over and above Rs. 50 is rightly disallowable. We accordingly confirm action of parties concerned. last common issue is in respect of interest under s. 215 which according to assessee should not have been levied at all. prayer of assessee before CIT (A) was that interest under s. 215 should have been reduced consequent to relief that would be allowed to him. Therefore, this being consequential ground to above grounds, under s. 215 would have to be recalculated. appeal is accordingly partly allowed on these terms. *** RAJASTHAN FINANCIAL CORPORATION v. INSPECTING ASSISTANT COMMISSIONER OF INCOME TAX