2021 (3) TMI 644 - AT - Income Tax

Change in method of revenue recognition - Non recognizing income by changing the method - Accounting standard - change from proportionate completion method to completed contract method - bonafide change - HELD THAT - As decided in own case of Assessee, he is at liberty to change the method of accounting provided the change in the method of accounting is bonafide and is being consistently followed subsequently. But the method followed by the Assessee in the present case of postponing revenue recognition without postponing the cost incurred for earning the revenue cannot be said to be proper. There is no valid explanation for claiming expenses related to the CAS services rendered by the Assessee when recognition of income therefrom is postponed. The change in the method of accounting was therefore not bonafide and was rightly rejected by the revenue authorities.We find no merit in the claim of the Assessee in this regard. - Decided against assessee. Denial of TDS Credit on advances received - whether credit for TDS has to be provided to the Appellant irrespective of the year to which the income relates? - HELD THAT - We deem it appropriate to direct the Assessing Officer to give credit as per reconciliation statement submitted by the assessee after due verification. This ground is remitted to the file of Assessing Officer for consideration afresh. Non-grant of depreciation on Foreign Exchange Loss disallowed as Capital Expenses - HELD THAT - We remit this issue to the file of Assessing Officer for verification with records and decide accordingly as per law. Levy of interest u/s.234B of the Act, is consequential in nature.

Summary

Issues Involved:
Transfer Pricing Issues, Change in method of revenue recognition, Denial of TDS Credit, Non-grant of depreciation on Foreign Exchange Loss, Levy of interest u/s.234B.

Transfer Pricing Issues:
The appeal challenged the adjustment made by the authorities regarding an international transaction in the certification segment under Section 92CA of the Income-tax Act, 1961. The grounds of appeal included errors in determining the adjustment, rejecting TP documentation, comparability analysis, consideration of financial data, treatment of foreign exchange fluctuation, application of filters, threshold limits, and adjustments made by the Appellant. The Tribunal remitted the issue back to the AO/TPO for fresh consideration based on previous rulings and directions.

Change in Method of Revenue Recognition:
The issue revolved around the change in the method of revenue recognition from proportionate completion method to completed contract method. The AO and DRP concluded that the change was not bona fide, leading to proposed adjustments. The Tribunal upheld the revenue authorities' decision, emphasizing that the change was not bona fide as it postponed revenue recognition without postponing related costs. The Tribunal dismissed the grounds raised by the assessee, maintaining a consistent view with previous rulings.

Denial of TDS Credit:
The AO was criticized for not granting TDS credit as per reconciliation submitted by the Appellant or Form 26AS, and for denying credit on advances received. The Tribunal directed the AO to provide credit as per the reconciliation statement submitted by the assessee after verification, remitting the issue for fresh consideration.

Non-grant of Depreciation on Foreign Exchange Loss:
The AO and DRP were faulted for not granting consequential depreciation on foreign exchange loss disallowed as capital expenses for the Assessment Year 2009-10. The issue was remitted to the AO for further verification and decision in accordance with the law.

Levy of Interest u/s.234B:
This issue was deemed consequential in nature and was not discussed in detail. The Tribunal partly allowed the appeal for statistical purposes, providing relief on certain grounds while remitting others for fresh consideration by the authorities.