9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2024 (10) TMI 32 - AT - Income TaxAccrual of income - revenue recognition - Advance received from Customers under the contracts entered into by the assessee - method of accounting - HELD THAT - In support of method of accounting as per AS-7, the assessee had filed detailed explanation with the AO. However, on 6.2.2015 CIT(A) required the assessee to substantiate its claim that it followed Percentage Completion Method (PCM) as per AS-7 for booking revenues. Assessee filed detailed reply. The assessee, inter-alia, filed by way of sample a few Contracts for sale and installation of elevators. CIT(A) has commented on the contract with Swan Mills Ltd. Lanco Infrastructure. It may be noted that unadjusted Advance from Customers and Deferred Revenue are shown as current liabilities . whereas the amount of revenue recognised but not billed to the customer is shown as Unbilled Revenue under other current assets in the accounts. CIT(A) in A.Y. 2011-12 accepted the assessee s explanation after duly examining it. Method of accounting has been consistently followed and approved by the Tribunal in earlier years. Any deviation in method of accounting of revenue would lead to mismatch of the cost with the revenues. Addition in respect of advance received from customers under AMC contract. CIT(A) followed his predecessor s order for A.Y. 2005-06 and upheld the disallowance of unadjusted advances under the maintenance contract as income. Tribunal has consistently approved the method of accounting adopted by the Assessee. As per this method the assessee accounts for amount received for Annual Maintenance Contracts for elevators (AMC) as advance at the beginning of the year and the end of every month transfer the proportionate amount to the Revenue account. The method adopted by the assessee is in accordance with AS-9. This method has been approved by the Hon ble Tribunal of A.Y. 2008-09 wherein it followed its own orders of earlier years. Ground of assessee s appeal are sustainable. Disallowance debited under TDS recoverable written off in the books of account is covered by assessee s own case. Accordingly, Ground No.4 is also sustainable. Disallowance on account of depreciation claimed on intangible assets - The issue is covered by the assessee s own case in order dated 15th October, 2015 for AY. 2003-04 wherein held Court finds that the decision of this Court in Areva T D India Limited 2012 (4) TMI 79 - DELHI HIGH COURT answers a similar question in favour of the Assessee and against the Revenue. In that decision it was held that knonw-how, business contracts, business information, etc. acquired as part of a slump sale were entitled for depreciation u/s 32(1)(ii) of the Act. Also question whether the goodwill is an asset within the purview of Section 32 of the Act, the question stands answered in favour of the Assessee and against the Revenue by the decision of Smifs Securities Limited 2012 (8) TMI 713 - SUPREME COURT Decided in favour of assessee.
Issues Involved:
1. Addition of Rs. 15,23,35,414 as 'Advance received from Customers'. 2. Disallowance of Rs. 8,51,913 under 'TDS recoverable written off'. 3. Levy of interest under sections 234B & 234D and withdrawal of interest under section 244A. 4. Deletion of disallowance of Rs. 2,71,50,036 on account of depreciation claimed on intangible assets. Issue-wise Detailed Analysis: 1. Addition of Rs. 15,23,35,414 as 'Advance received from Customers': The assessee company contested the addition of Rs. 15,23,35,414 made by the AO and upheld by the CIT(A) as 'Advance received from Customers' under contracts, which the assessee argued did not constitute revenue/income for the relevant assessment year. The CIT(A) failed to appreciate the system of accounting followed by the assessee, the terms of the contracts, and the nature of the business. The CIT(A) ignored orders from earlier years regarding the following of Accounting Standards by the assessee. The High Court of Delhi had accepted the accounting treatment given by the assessee to 'Advance received from Customers' in earlier years, relying on the decision of Taparia Tools Ltd. (SC) (2015) 55 Taxmann.com 361. The Tribunal had also upheld this method of accounting in previous years, and any deviation would lead to a mismatch of cost with revenues. The Tribunal directed the deletion of the addition of Rs. 15,23,35,414. 2. Disallowance of Rs. 8,51,913 under 'TDS recoverable written off': The assessee argued that the CIT(A) erred in upholding the disallowance of Rs. 8,51,913 debited under 'TDS recoverable written off'. The CIT(A) mechanically followed orders from earlier assessment years without appreciating the nature of the expense. The amounts equivalent to the TDS were withheld by customers but were neither deposited in the government treasury nor claimed by the assessee in earlier years. The write-off was allowable under section 36(1)(vii) read with section 36(2) of the Act. The Tribunal had previously dealt with this issue in favor of the assessee for A.Y. 2008-09. Thus, the ground was sustainable. 3. Levy of interest under sections 234B & 234D and withdrawal of interest under section 244A: The assessee contended that the CIT(A) erred in confirming the levy of interest under sections 234B & 234D and the withdrawal of interest under section 244A. However, the judgment does not provide specific details on the Tribunal's final decision regarding this ground. 4. Deletion of disallowance of Rs. 2,71,50,036 on account of depreciation claimed on intangible assets: The Department of Revenue contended that the CIT(A) erred in deleting the disallowance of Rs. 2,71,50,036 made by the AO on account of depreciation claimed on intangible assets. The assessee argued that this issue was covered in its favor for A.Y. 2008-09. The High Court had previously held that the maintenance contracts acquired by the assessee as part of a slump sale constituted the basis of income-earning apparatus and were entitled to depreciation under section 32(1)(ii) of the Act. The Tribunal upheld this view, and the ground was not sustainable. Conclusion: The Tribunal dismissed the appeal of the Department of Revenue and allowed the appeal of the assessee. The order was pronounced on 27th September 2024.
|
