2013 (11) TMI 1517 - AT - Income Tax

Method of accounting - Current liability - Purchase of negative of flim - Held that - Amount of 10, 00, 000 was received as an advance by the assessee in the course of its business in the assessment year 2005-06. Even if the assessee following the cash system of accounting the said advance of 10, 00, 000 would be considered as income of the assessee in the year in which the assessee has performed the work. There is no material on record that the assessee has completed the work in the assessment year under consideration viz assessment year 2008-09. In view of the above we consider it prudent that this issue be set aside to the file of the Assessing Officer to consider whether the income has accrued to the assessee in the assessment year under consideration viz. assessment year 2008-09 in respect of the said advance amount received by the assessee in the assessment year 2005-06. The Assessing Officer will allow due opportunity of hearing to the assessee and decide the issue afresh after considering such evidences as may be furnished by the assessee by a reasoned order as per law - Matter remanded back - Decided in favour of assessee.

Summary

Issues:
Confirmation of addition of Rs. 10,00,000 on the ground of cash method of accounting.

Analysis:
The assessee, a story and screen play writer, appealed against the addition of Rs. 10,00,000 to his income for the assessment year 2008-09, following the order of the Commissioner of Income-tax (Appeals). The Assessing Officer contended that the amount should be considered as income as per the cash method of accounting. The assessee received the amount as an advance from a company for the purchase of negative rights of a film. The Assessing Officer added the amount to the assessee's income, rejecting the explanation provided. The first appellate authority upheld the decision. The Tribunal observed that the amount was received as an advance in the assessment year 2005-06, and even under the cash system of accounting, it should be considered as income in the year the work was performed. As there was no evidence that the work was completed in the assessment year 2008-09, the Tribunal set aside the issue to the Assessing Officer for further consideration. The Assessing Officer was directed to allow the assessee a hearing and decide the issue afresh based on the evidence provided.

The Tribunal concluded that the appeal was allowed for statistical purposes, and the issue was restored to the Assessing Officer for a fresh decision. The order was pronounced on November 27, 2013.