Sub Section 145 of Income tax Act, 1961 provides that the incomes chargeable under the heads “Profits and gain of business or profession” or “ Income from other sources” shall be subject to the provisions of the Sub- section 2 be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. Sub section 2 of Section 145 provides that the Central Government may notify Income Computation and disclosure Standards for any Class of assessee or of any class of income.
Firstly the Central Boards of Direct Taxes constitutes a committee which comprised of departmental officers, professionals etc. in December 2010 to suggest standards for purpose of notification under Section 145 (2) of the Act. The Committee submitted its first interim report in August 2012 and was placed for public comments.
Secondly then on receiving such suggestions from stake holders and examinations of the same by CBDT, the draft standards which were submitted by the committee mentioned above were revised.
The new draft of 12 income computation and disclosure has been uploaded on the Finance Ministry website and Income tax department website for comments of stakeholders and public.