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7. The learned counsel for the appellant further submitted that the appellant had followed a method as contained in s. 209(3)(b) of the Companies Act as amended by the Government Notification of 16th May, 1989 and, therefore, it had to be held as a method recognised by law or a recognised method. In this connection, he referred to a decision of Honble Supreme Court in Collector of Central Excise vs. Parle Exports (P) Ltd. (1990) 183 ITR 624 (SC) wherein it is held that when a notification is issued in accordance with the power conferred by statute, it has statutory force and validity as if it were contained in the Act itself. The learned counsel for the appellant, having followed a method of accounting as recognised by s. 209(3)(b) of the Companies Act as amended by the notification, must also be deemed to have followed a recognised method of accounting and since it had been regularly followed, the income of the appellant from interest on loans and advances should also be computed according to the above method. The learned counsel for the appellant next submitted that the words income from interest appearing in the said notification referred to gross income before deducting any expenses relating thereto and not to net income as was wrongly understood by the lower authorities. In support of his contention, he relied on the following passage appearing at page 476 of Law of Income-tax by S. Iyengar, Vol. I (9th Ed.) :

12. In our opinion, the words income from interest appearing in the notification must necessarily refer to gross income otherwise the condition contained in the notification that the extra income on accrual basis should be disclosed by way of a note to the accounts loses its significance. This view is also supported by the authorities quoted by the learned author, S. Iyengar at page 476 of his Commentary on Income-tax Law. We also agree with the submission of the counsel for the appellant that there is no provision in the IT Act that if the income from interest is shown on cash basis, the payment of interest and other expenses must also be accounted on the same basis. While the income of the assessee is taxable under s. 28 of the Act, in so far as it relates to business or profession, the expenses relating thereto are allowable under ss. 30 to 43C as stated in s. 29 of the Act. Sec. 28 by itself does not bring to tax only net income (except in certain circumstances for which there is no separate provision in the Act for allowance). Since there are ss. 36(1)(iii) and 37(1) for deduction of interest and other expenses, s. 28 refers to only to gross interest. Further, criteria for allowance of payment of interest and other expenses have also been laid down in the above sections on the fulfilment of which alone they will be allowed irrespective of the fact whether they result in the earning of any income or not. In our considered opinion, therefore, the appellant has correctly shown the gross interest on loans and advances on cash basis and has shown the extra amount on accrual basis by way of a note to the annual accounts. Its accounts have also been checked by Comptroller & Auditor General of India and a host of other Govt. organisations, and none of them have pointed out that they have not been maintained in accordance with s. 209(3)(b) as demanded by the said notification. As held by the Honble Supreme Court in the case of Collector of Central Excise vs. Parle Exports (P) Ltd. (supra), a notification issued by the Government has statutory force and validity as if it were contained in the Act itself. Thus, the notification was binding upon the appellant and, therefore, it was compulsorily required to show only gross income from interest on cash basis in its accounts without disturbing any other income or any expenses which were required to be shown on mercantile basis in accordance with s. 209(3)(b) of the Companies Act. The various authorities cited before us on behalf of the appellant fully support the above finding arrived at by us. Further once the accounts are maintained in accordance with s. 209(3)(b) of the Companies Act as amended by the said notification, they have to be treated as having been maintained according to a recognised method of accounting within the provisions of s. 145(1) of IT Act, 1961. It has been held that the choice of selecting a method of accounting is with the appellant although that choice is subject to the provisions of s. 209(3)(b) r/w the said notification.