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TMI Blog2018 (6) TMI 1585X X X X Extracts X X X X X X X X Extracts X X X X ..... y write it off as bad debts in the subsequent years. Therefore, we find merit in the arguments advanced by the Ld.AR. Considering the Accounting Standard 9 issued by the Institute of Chartered Accountants of India which is duly recognized by the Central Government, we are of the view that in the case of the assessee, revenue need not be recognized for ₹ 18,94,96,500/- for the year ending 31.03.2013 viz., the relevant assessment year 2013-14 as it is substantially uncertain to recover. Accordingly we hereby direct the Ld.AO to delete addition - decided in favour of assessee - I.T.A. No. 2638/Chny/ 2017 (Assessment Year: 201 3-14) - - - Dated:- 13-6-2018 - Shri A.Mohan Alankamony And Shri Duvvuru RL Reddy, JJ. Appellant by: Shri Subrith Parthasarathy, Advocate Respondent by: Shri Sailendra Mamidi, CIT ORDER A. Mohan Alankamony, This appeal by the assessee is directed against the order passed by the Commissioner of Income Tax (Appeals)-15, Chennai dated 31.08.2017 in ITA No.85/16-17/CIT(A)-15 for the assessment year 2013-14 passed U/s.250(6) r.w.s. 143(3) of the Act. 2. The assessee has raised several grounds in its appeal however the crux ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he financial years: 2011-12 and 2012-13. Also Refer Note 23(b). 4.1 Further in the note item No.23(b) it was stated as follows:- 23. (b) Trade Receivables from Department of Education-Limpopo Province During the previous year, the company entered into a contract with Department of Education Limpopo Province, for supply of Hey! Math solution (supply of hardware and license fee for use of Hey! Math software included in this hardware) to various schools in Limpopo Province over a period of three years. The Company recognized a revenue of ZAR 10,220.00 (equivalent INR 67,758.600) for sale of hardware and ZAR 28,500.000 (equivalent INR 182,880,000) towards annual license fee during the previous year during April and May 2011. This Department of Education was brought under the financial administration of the South African Government in terms of the local constitution during December 2011 and has been subjected to investigation, for certain financial irregularities, by the forensic section of the South African Government. The Administrator of the Department of Education, appointed by the South African Government, has expressed his inability to the Company to release payments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w that cash system or hybrid system of accounting is not permissible according to the provisions of the Act. 5. On appeal, the Ld.CIT(A) upheld the order of the Ld.AO by observing as under:- 4.3 I have carefully gone through the observation of the AO as mentioned above under para 4.1 and the contention of the appellant as mentioned above under para 4.2. 4.3.1 The appellant company had entered into a service contract for providing software to a South African Government Undertaking called Province for three years. Subsequent to an investigation conducted by the South African Government, the Government undertaking became bankrupt. As the South African Government undertaking did not pay the appellant company, the appellant company filed a suit in South Africa on 23/4/2014. The appellant company did not recognize the corresponding income from the said contract, although it raised a bill. The AO has observed that the appellant company was following mercantile system of accounting and it could not change the method of accounting only for one assessment year. With this observation, the AO assessed the income from the said contract as per the bill raised by the appellant company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue, then revenue recognition has to be postponed and has to be recognized only when it becomes reasonably certain that the ultimate collection could be realized. Accordingly it was pleaded that the addition made by the Ld.AO by recognizing the revenue income in the relevant assessment year which is not certain to be realized is erroneous. Hence it was pleaded that the addition made by the Ld.AO may be deleted. The Ld.DR on the other hand vehemently argued in support of the orders of the Ld. Revenue Authorities. 7. We have heard the rival submissions and carefully perused the materials on record. On examining the Accounting Standard 9, recommended by the Institute of Chartered Accountants of India and duly notified by the Central Government, specifically states that:- Revenue from sale of rendering services should be recognized at the time of the sale or rendering of services. However, if at the time of rendering of services or sale there is significant uncertainty in ultimate collection of the revenue, then the revenue recognition is postponed and in such cases revenue should be recognized only when it becomes reasonably certain that ultimate collection will be made. IT a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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