9911796707
TMI Blog2023 (8) TMI 1509X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Hat USA should also be allowed, because the same has been deferred by the assessee in the same ratio, in which receipts are being deferred. In that situation, the preposition which emerges is revenue neutral and no action is required. In the given situation we are not inclined to interfere in the order of Ld. CIT (A). Resultantly, all the grounds raised by revenue are dismissed. - SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI GAGAN GOYAL, ACCOUNTANT MEMBER For the Appellant :Smt. Riddhi Mishra, CIT-DR For the Respondent :None ORDER PER GAGAN GOYAL, A.M: This appeal by revenue is directed against the order of National Faceless Appeal Centre (for short NFAC ) dated 09.12.2022 u/s. 250 of the Income Tax Act, 1961 (in short the Act ) for A.Y. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... correct in not dealing with the point of contention that whether the assessee company, being only reseller of subscription and itself not providing the support services, is eligible to follow proportionate completion method in recognizing the revenue as per Accounting Standard- 9? 6. The Appellant pray that the order of CIT (A) on the above ground be set- aside and that of Assessing Officer be restored 7. The Appellant craves leaves to add, amend or alter any grounds of add new ground, which may be necessary 2. The brief facts of the case are that assessee RHIPL engaged in the business of marketing, promotion and distribution of Red Hat Subscriptions to customers. The Red Hat Subscription enables the subscriber to avail support services fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issions of the assessee. We observed that during the assessment proceedings, assessee vide its submission confirmed that they are following completed service contract method and relied upon the Accounting Standard-9, issued by the Institute of Chartered Accountants of India. As per Para 6 and 8 of the assessment order, we observed that these are the part of assessee s submission, which became part of the assessment order. Where as, vide para 12 of the Ld. CIT (A) s order (Under the head assessee s submissions) on page 15, it is mentioned that Appellant has never claimed Completed Service Contract Method as appropriate method to recognize revenue from subscription services. Rather, it is the Percentage Completion Method for recognition of re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nses recognized by the Appellant from AY 2011-12 onwards (i.e. the royalty and service fee charges) correspond to and link with the amount of revenue recognized by the Appellant and the corresponding expenses pertaining to the unearned revenue recorded by the Appellant in its books are recognized in the year in which such unearned revenues are recognized and offered to tax by the Appellant. 6. In view of above discussion, it can be pointed out that bone of contention between assessee and revenue is of two-fold, namely assessee is neither following correct method of revenue recognition and principle of matching cost and revenue is being violated. On this, we have analysed the earlier order of coordinate benches also for A.Y. 2012-13, 2013-14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion that will be derived. The Assessing Officer has also found fault with completed contract method claimed to have been followed by the assessee. 62. Assessee's contention in this regard is that the assessee never claimed that it is recognizing revenue from subscription under completed service contract method rather it is following the percentage competition method for recognition of revenue. Assessee has further reiterated that the assessee has been regularly recognizing revenue over a period to which such subscription relates. It has been claimed that the said practice of recognizing revenue is in accordance with percentage complete method of AS-9. The assessee has further placed reliance upon the Income Computation and Disclosure St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this regard. 7. We also respectfully concur with the findings of coordinate bench discussed (supra) as assessee is consistently following this practice of accounting and upheld the same by Ld. CIT (A) and Coordinate Benches. On the issue of violation of principle of Matching, it is noticed that assessee himself has offered the income before the Ld. CIT (A) vide page 30 of the Ld. CIT (A) s order, but the same with a rider that royalty and other charges payable to Red Hat USA should also be allowed, because the same has been deferred by the assessee in the same ratio, in which receipts are being deferred. In that situation, the preposition which emerges is revenue neutral and no action is required. In the given situation we are not incline ..... X X X X Extracts X X X X X X X X Extracts X X X X
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