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TMI Blog2009 (9) TMI 619X X X X Extracts X X X X X X X X Extracts X X X X ..... 11.87 per cent of the estimated value of the contract on percentage completion method as per the norms of AS-7 issued by the ICAI. The AO found that there were differences in the certificates furnished by the assessee, hence, he held that the total contract receipt of Rs. 45,58,68,000 had to be taken as gross receipt and, accordingly, the difference of Rs. 7,74,14,352 was added to the income shown by the assessee company. 5. Aggrieved by this, the assessee carried the matter in appeal before the learned CIT(A), wherein, the factual aspects, the provisions of AS-7, were brought to the notice of the learned CIT(A). It was submitted that the total advance received from BALCO had been treated as income by the AO, however, the fact was that the advance was to be adjusted in the running bills and had been accounted for as income at the time of such adjustments and the balance amount of advance represented the revenue corresponding to the work yet to be performed. It was also submitted that AS-7 also required to recognize the revenue only to the extent of percentage of work completed upto the date of reporting, hence, the sum of Rs. 37,84,53,648 out of Rs. 45,58,68,000 had been recognize ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch it has received Rs. 13,70,52,000 after deduction of Rs. 1,52,28,000 being adjustment of advance to the extent of 10 per cent of invoice raised. In addition to the invoice raised, the appellant has done the contract work to the extent of Rs. 22,61,73,648 which remanded unbilled. Thus, the total amount of turnover determined by the appellant is Rs. 37,84,53,648. Position of advance received as on 31st March, 2004 is as under: Advance received Less: Advance adjusted against invoice raised Rs. 31,88,16,000 Balance Less: Unbilled amount Balance Rs. 1,52,28,000 ---------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f income. Withdrawal of additional compensation which was not disputed against the security bond, did not result in income. Moreover, the AS-7 issued by ICAI deals with recognition of revenue in case of construction contract which provides percentage completion method as one of the recognized method for recognition of revenue in case of long-term contract. In percentage completion method, the revenue should be recognized in the year in which part of the work has been completed. It does not dictate that the advance should be treated as revenue. Another principle of accounting i.e. 'matching concept' is also to be kept in mind to determine income in case of long-term contract. The advances which are to be adjusted against future supply cannot be regarded as income since no corresponding expenditure can be claimed against advances. In view of the factual and legal position, I am of the considered opinion that the amount of advance in quantum cannot be treated as income accrued to the appellant either under the IT Act or in view of AS-7 issued by ICAI. Therefore, the addition made by the AO is hereby deleted." 6. Being aggrieved by the order of the learned CIT(A), the Revenue is in ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the year under consideration were incorrectly considered as revenue because of the fact that it included mobilization advance which could not be the income of the assessee unless services were rendered by the assessee and, in fact, the assessee would not have rendered such services the said mobilization would have been returned. He further placed reliance on the decision of the Tribunal in the case of SNC-Lavalin/Acres Inc. vs. Asstt. CIT (2007) 110 TTJ (Del) 13 : (2007) 15 SOT 1 (Del), wherein the Tribunal had held that the tax was payable on the basis of accrual of income and not on the basis of entries made by the payer for deduction of tax from amount paid to the assessee. The learned counsel for the assessee further submitted that, in any case, the total mobilization amount had been shown as income in the subsequent year, hence, if it was included here, then, it would amount to double taxation. 9. We have considered the rival submissions, the orders of the authorities below and the materials available on record. It is noted that the assessee company is a contractor and from its client it has received mobilization amount of Rs. 31,88,16,000. Apart from the same, it has also ..... X X X X Extracts X X X X X X X X Extracts X X X X
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