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TMI Blog2016 (5) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... st revenue Addition on account of sales and maintenance of software - CIT(A) deleted the addition - Held that:- The assessee is following the mercantile system of accounting and as per the accounting standard 9, the net effect of the accounting treatment was for only that part of the annual maintenance contract receipt was taken into consideration which pertained to the year under consideration. This method has consistently been followed by the assessee. We, therefore, do not find any reason to interfere with the order of the learned Commissioner of Income-tax (Appeals). Ground fails against revenue X X X X Extracts X X X X X X X X Extracts X X X X ..... ontract to the extent of ₹ 50,80,754. The Assessing Officer required the assessee to explain why the said sum should not be treated as capital expenses. The assessee pointed out that this sum represented the amount of software purchases, annual maintenance contract (AMC) for hardware and software and the expenses towards consultancy. As regards the software purchases, the assessee submitted that they were to the extent of ₹ 8,25,488. The assessee further submitted that the software so purchased had been sold out and it was only the trading activity of the assessee. The assessee also submitted that the software purchases to the extent of ₹ 5,19,011 had been sold for ₹ 9,59,924. The assessee filed the bills of purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld to customer and was not used by the assessee, have not been controverted by the Department. We, accordingly, confirm the order of the Commissioner of Income-tax (Appeals) on this issue. 7. The brief facts apropos ground No. 2 are that the assessee had debited a sum of ₹ 33,61,059 as provision for sale and maintenance of software. The Assessing Officer required the assessee to explain as to how it was an ascertained liability. The assessee submitted that it enters into annual maintenance contract with customers while selling the software for a period of one year. Annual maintenance contract is received and credited to the profit and loss account. The provisions for sale and maintenance represented the annual maintenance contract re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 366 (All), wherein under similar facts the assessee's claim was upheld. 9. The learned Commissioner of Income-tax (Appeals) allowed the assessee's claim by observing as under : "6.5. I have considered the assessment order as well as the written submission of the appellant. The reason the Assessing Officer did not accept the contention of the appellant was because the annual maintenance contract has been received by the assessee at once and it is not to be paid back. It appears that the Assessing Officer has not understood the accounting treatment being given to receipt of the annual maintenance contract consistently by the appellant. It is seen that the provision for sale and maintenance of software is the reversal of i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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