2023 (10) TMI 134 - AT - Income Tax

Revenue recognition - Additions based on TDS statement 26AS - Assessee claimed a part of the amount as received in Advance - entire Tax Deducted as Source (TDS) corresponding to the contractual receipts has been claimed by the Assessee - CIT(A) directed the AO to delete the addition and also restrict the TDS claim made by the assessee in the year under consideration only in respect of the income for the assessment year 2008-09 as per accounting policy followed by the assessee. - HELD THAT - As there is no dispute regarding the preparation of the financial statement by the assessee as per AS-9, wherein the assessee offered to tax the income to the extent of project completed and the balance amount was considered as advance, we are of the considered view that the learned CIT(A) correctly directed the AO to delete the addition which was declared as advance by the assessee in the year under consideration and offered to tax in the subsequent year on the basis of project completion. We also do not find any infirmity in the directions of the learned CIT(A) to restrict the credit of TDS only with respect to the income of Rs. 9,79,79,884 for the assessment year 2008-09 and the balance excess claim for TDS be allowed in the subsequent years in which the income has been offered to tax as per the consistent accounting practice followed by the assessee. Accordingly, the impugned order passed by the learned CIT(A) is upheld and the grounds raised by the Revenue are dismissed.

Summary

Issues involved:
The appeal filed by the Revenue challenging the order passed under section 250 of the Income Tax Act, 1961 for the assessment year 2008-09.

Issue 1 - Treatment of Contract Charges as Advance:
The Revenue disputed the deletion of addition based on entries in the books of accounts of the assessee regarding contract charges. The assessee recognized income of Rs. 9,85,88,663 from contractual payments received, while claiming TDS credit for the entire amount received. The AO disallowed proportionate TDS credit of Rs. 4,98,520. The CIT held that the entire payment of Rs. 12,05,88,663 was towards contract cost and work carried out by the assessee. The AO made an addition of Rs. 2,26,08,779, which was later deleted by the CIT(A) who directed to restrict the TDS claim only to the income of Rs. 9,79,79,884 for the assessment year 2008-09.

Issue 2 - Revenue Recognition and TDS Claim:
The Revenue raised concerns about revenue recognition and TDS claim when the entire TDS corresponding to the contractual receipts was claimed by the assessee. The CIT(A) found that the income from M/s Sigrun Realities Ltd was offered for assessment in multiple years and that the TDS claim did not exceed the total TDS deducted by the payer. The AO's addition of Rs. 2,20,68,779 was deemed as taxing the same income twice, leading to its deletion by the CIT(A) and a direction to restrict the TDS claim to the income of Rs. 9,79,79,884 for the assessment year 2008-09.

Conclusion:
The CIT(A) correctly directed the AO to delete the addition declared as advance by the assessee and offered to tax in subsequent years based on project completion. The restriction on TDS credit to the income of Rs. 9,79,79,884 for the assessment year 2008-09 was upheld. The consistent accounting practice followed by the assessee was considered, leading to the dismissal of the Revenue's appeal.