The Chartered Accountant

is contemplated by the said clause. Paragraph
9 of AS 22 merely provides for a liability
which arises on account of timing difference
as explained hereinabove. As stated above, it
is known on the balance-sheet date. One has
to therefore consider the matching principle
and fair valuation principles as important
concepts in accrual accounting. Further, as
stated above, recognition and measurement
is not covered by the provisions of the Companies
Act, therefore, one has to read the
provisions of the Companies Act along with
the impugned rule which adopts AS 22 as
recommended by the Institute” .” (Para 126
on page 290 of 297 ITR)
“In our view, paragraph 9 of AS 22 merely
represents a gap filling exercise, therefore,
there is no merit in the contention advanced
on behalf of the appellants that AS 22 is inconsistent
with the provisions of the Companies
Act including Schedule VI. It proceeds
on the principle that every transaction
ACCOUNTING
has a tax effect. The words "true and fair"
view in section 211(1) connotes the widest
law making powers and, in that context, we
hold that the impugned rule adopting AS 22
is intra vires as the said rule is incidental and/
or supplementary to the specific powers given
to the Central Government to make rules,
particularly when such power is given to fill
in details. The word "supplementary" means
something added to what is there in the Act,
to fill in details for which the Act itself does
not provide. It is something in the sense that
is required to implement what is there in
the Act. [See Daymond v. South West Water
Authority [1976] 1 All ER 39 (HL). There
is no merit in the contention advanced on
behalf of the appellants that the impugned
rule seeks to modify the essential features of
the Companies Act. The rules made on matters
permitted by the Act to supplement the
Act cannot be held to be in violation of the
Act. [See Britnell v. Secretary of State (for
Social Security) [1991] 2 All ER 726 (HL)].
THE CHARTERED ACCOUNTANT 971 DECEMBER 2008