THE COMMISSIONER OF INCOME-TAX, MADRAS. vs A. KRISHNASWAMI MUDALIAR AND OTHERS

The Supreme Court held that in computing the true profits of a trading venture, the stock-in-trade must be included regardless of the accounting method adopted by the assessee. The Court found that the Income-tax Officer had the authority under the proviso to Section 13 of the Indian Income-tax Act, 1922 to include the value of the stock-in-trade at the end of the year in the profit computation. The High Court's ruling that the cash system of accounting precluded this inclusion was overturned, affirming the Income-tax Officer's assessment.