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TMI Blog2024 (10) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... venue under other current assets in the accounts. CIT(A) in A.Y. 2011-12 accepted the assessee s explanation after duly examining it. Method of accounting has been consistently followed and approved by the Tribunal in earlier years. Any deviation in method of accounting of revenue would lead to mismatch of the cost with the revenues. Addition in respect of advance received from customers under AMC contract. CIT(A) followed his predecessor s order for A.Y. 2005-06 and upheld the disallowance of unadjusted advances under the maintenance contract as income. Tribunal has consistently approved the method of accounting adopted by the Assessee. As per this method the assessee accounts for amount received for Annual Maintenance Contracts for elevators (AMC) as advance at the beginning of the year and the end of every month transfer the proportionate amount to the Revenue account. The method adopted by the assessee is in accordance with AS-9. This method has been approved by the Hon ble Tribunal of A.Y. 2008-09 wherein it followed its own orders of earlier years. Ground of assessee s appeal are sustainable. Disallowance debited under TDS recoverable written off in the books of account is co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome-tax (Appeals)-IX, New Delhi [ CIT(A) ] is bad both in law and on facts of the case. 2. That the learned CIT(A) has erred in making erroneous observations, assumptions, interpretations and conclusions, both on facts and in law. 3. That the learned CIT(A) has erred in upholding the additions of Rs. 15,23,35,414 crore made by the learned assessing officer in respect of 'Advance received from Customers' under the contracts entered into by the assessee, which does not constitute revenue/income of the relevant assessment year, without appreciating the submissions made by the assessee and documents/ details placed on record. 3.1 That the learned CIT(A) has failed to appreciate the system of accounting as followed, the terms of the contracts as entered into and the nature of business as carried on, while upholding the addition to the income of the amount received towards Advance under the contracts, based on irrelevant considerations and ignoring the audited financial statements. 3.2 That the learned CIT(A) has erred in ignoring the orders of the CIT(A) for earlier years in this regard and observations made therein as regards following of Accounting Standards by the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vt. Ltd. ITA No. 1182 ITA No. 1214 of 2018 for A.Y 2005-06, ITA No. 1233 of 2018 for A.Y 2006- 07 and ITA No. 1198 ITA No. 1269 of 2018 for A.Y 2007- 08. Copy of order(s) enclosed as Annexure 1 (Pg. 10 to 21). Covered by assessee's own order passed by Hon'ble ITAT for J.K 2005-06 to AY 2007-08 (See Vol-II Page 494-532). Covered by assessee's own order passed by Hon'ble ITAT for A.Y 2008-09 (Vol-II Page 518-532). For Asst. Year: 2008-09 titled as ThyssenKrupp Elevator (India) Pvt. Ltd. vs. DCIT in ITA Nos.987, 871 4708/Del/2014. Covered by assessee's own order for A.Y 2011-12, J.K 2014-15 and A.Y 2015-16 passed by Hon'ble CIT(A). From AY 2017-18 onwards the tax officer has accepted the accounting treatment of advances followed by the assessee as per applicable ICDS. 8. Learned. Authorized Representative for the assessee submitted that assessee is engaged in the business of designing, installing various types of elevators since year 2002. The details of advance from customers received by the assessee which has been treated as income of the year by Ld. AO and confirmed by Ld. CIT(A) is as under: - S. No. Particulars Addition (Rs. In Cr.) A. Advances from Custom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 520-523/Vol-II. The assessing officer, following his order for A.Y. 2008-09 and earlier years held that these advances are taxable receipts in the hands of the assessee. Ld. A.O. also brushed aside the assessee s contention that the assessee has been correctly maintaining its accounts in accordance with Accounting Standard 7 {paragraph 6 at 6.6 of Pg. 8). 11. The Ld. CIT(A) upheld Ld. AO s order treating unadjusted advances totalling Rs. 15,23,35,414 received from customers as on 31.3.2009 as income of the assessee for A.Y. 2009-10. He has sought to distinguish the CIT(A) s order for A.Y. 2008-09 (Pg 4 at 7- 11 of order). 12. In support of method of accounting as per AS-7, the assessee had filed detailed explanation with the A.O. (Pg. 211-300/Vol-l). However, on 6.2.2015 Ld. CIT(A) required the assessee to substantiate its claim that it followed Percentage Completion Method (PCM) as per AS-7 for booking revenues. The assessee filed detailed reply on 12.2.2015 (Pgs. 141-210/Vol-l). The assessee, inter-alia, filed by way of sample a few Contracts for sale and installation of elevators. Learned CIT(A) has commented on the contract with Swan Mills Ltd. Lanco Infrastructure. No further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the actual progress in execution of work on the basis of which income is recognized in the accounts. Method of accounting has been consistently followed by the assessee since inception and is in accordance with the matching principle prescribed in AS 7. The assessee raises bill on client as and when the Milestone event takes place. But, the revenue is recognized on the basis of actual percentage of completion of the work in a given year. As per clause 12, the assessee was to receive further sum of 20% of the contract value on delivery of material at High Sea and another 40% against receipt of the material at site. These events took place during the next financial year and were duly accounted for and the income was offered to tax in A.Y. 2010-11. A(g) In appellate proceedings of A.Y. 2011-12, Ld. CIT(Appeal) re-examined the treatment of income from Swan Mills Contracts (Pg. 536/Vol-II), as the activities relating to such project were also executed in the said year. After quoting the assessee s submissions and also the order of his predecessor for A.Y. 2009-10, Ld. CIT(A) discusses the issue in detail at pages 21-36 of his order. He finally disagree with his predecessor and dele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ost, cost incurred till 31.3.2009. The computation of revenue recognised in F.Y. 2008-09 together with ledger accounts and the Agreement was also furnished to the Ld. CIT(A). (page 174-185/ Vol-I). B(b) In respect of work to be performed for Unit 1 based on the percentage completion at 56.22%, the revenue was recognized to the extent of Rs 22,39,576 as against the advance received/progress billing amounting to Rs. 41,85,000 out of total contract value of Rs. 46,50,000 (Pg. 174/Vol-I). The same is given in tabular form below:- Sr. No. Particulars Unit -1 Unit -2 1 Agreed consideration / value as per contract 46,50,000 46,50,000 2. * Consideration (net of tax) 39,83,638 39,83,638 3. Total estimated cost 26,69,572 26,69,572 4. Cost actually incurred up to 31.3.2009 15,00,816 12,98,059 5. Amount Billed upto 31.3.2009 41,85,000 41,85,000 6. Cost on percentage of completion 56.22% 48.62% 7. Revenue recognized based on percentage of completion 22,39,576 19,37,013 8. Over billing 19,45,424 22,47,987 13. The revenue has been recognized in proportion of cost incurred. Method of accounting has been consistently followed and approved by the Tribunal in earlier years. Any deviation in method of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntative for respondent/assessee submitted that Ld. CIT(A) rightly deleted disallowance of Rs. 2,71,50,036/- made by AO on account of depreciation claimed on intangible assets. The issue is covered in assessee s own case for AY. 2008-09. 17. Learned Authorized Representative for Revenue relied on Oder of Ld. CIT(A). The Ld. Authorized Represent for Department of Revenue submitted that Ld. CIT(A) erred in deleting the disallowance of Rs. 2,71,50,036/- made by AO on account of depreciation claimed on intangible assets. Ld. AO in para 7.1 and 7.2 observed that the assessee claimed deprecation allowance on intangible assets for the previous years. On perusal of assessment record for the year 2004-05 filed that is was not allowed in that assessment year and the appeal of the assessee against disallowance was dismissed on 06/11/2007. So appeal of Department may be allowed. 18. From the examination of record in light of aforesaid rival contention, it is crystal clear that Learned Authorized Representative for the assessee submitted that Ld. CIT(A) erred in upholding addition of Rs. 15,23,35,414/- made by Ld. AO in respect of Advance received from Customers under the contracts entered into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee and in appropriate cases he has to make appropriate variations where the system adopted by the assessee does not indicate the profits. 21. This issue was decided by Hon ble ITAT for A.Y. 2005-06, wherein para 21 of the order, it held that:- 21 This method of accounting cannot be found fault with as assessee is regularly following the same. In view of this, we direct the Id Assessing Officer to delete the addition of Rs. 20313101/- on account of advances received. (Pg. 500-501/Vol-II) Once again the Tribunal reiterated it in its order for A.Y. 2008-09 in para 6 of the order at Pg. 520-523/Vol-II. 22. In support of method of accounting as per AS-7, the assessee had filed detailed explanation with the A.O. (Pg. 211-300/Vol-l). However, on 6.2.2015 Ld. CIT(A) required the assessee to substantiate its claim that it followed Percentage Completion Method (PCM) as per AS-7 for booking revenues. The assessee filed detailed reply on 12.2.2015 (Pgs. 141-210/Vol-l). The assessee, inter-alia, filed by way of sample a few Contracts for sale and installation of elevators. Learned CIT(A) has commented on the contract with Swan Mills Ltd. Lanco Infrastructure. It may be noted that unadjus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce the warranty period expired. The ITAT has, in the impugned order, rightly noted that since the maintenance portfolio was purchased by the Assessee as part of the purchase by way of slump-sale , it constituted the basis income earning apparatus and was therefore entitled to depreciation under Section 32(1)(ii) of the Act. 5. The Court finds that the decision of this Court in Areva T D India Limited v. Deputy Commissioner of Income Tax (212) 345 ITR 421 (Del) answers a similar question in favour of the Assessee and against the Revenue. In that decision it was held that knonw-how, business contracts, business information, etc. acquired as part of a slump sale were entitled for depreciation under Section 32(1)(ii) of the Act. 6. As regards the second question urged by the Revenue in this appeal, viz., whether the goodwill is an asset within the purview of Section 32 of the Act, the question stands answered in favour of the Assessee and against the Revenue by the decision of the Supreme Court in Commissioner of Income Tax v. Smifs Securities Limited (2012) 348 ITR 302. 7. No substantial question of law. The appeal is accordingly dismissed. Therefore, Ground No. 1 of Department s Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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