As per Section 145 of the Income Tax Act, any assessee having taxable income under the heads “Profits and gains from business or profession” or “Income from Other Sources” has to compute their taxable income in accordance with cash or mercantile system of accounting.
Furthermore, the section states that the Central Government may notify from time to time if it is to be followed by any class of taxpayer or in any class of income.
Below is the list of ICDS and corresponding notified AS:
1. Events occurring after the end of Previous Year
2. Prior Period Expense
4. Intangible Asset
The ICDS have been derived from the existing AS with specific deviations. However, there are no explanations and examples given in the ICDS, as given in AS.