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2018 (10) TMI 1973 - ITAT CHENNAIAccrual of income - Recognition of income - Choice of assessment year - AO who had treated the subscription fees received in advance during the relevant assessment year as the income of the relevant assessment year - HELD THAT:- As per the provisions of the Act, there is no concept with respect to deferred expenditure. Therefore the entire expenditure incurred for earning revenue for the relevant assessment year and the revenue spilled over to the succeeding assessment year is allowable as deduction for the relevant assessment year when the expenditure incurred in the relevant assessment cannot be apportioned towards the income earned in the subsequent assessment year. At this juncture we are reminded of the various decisions of the Higher Judiciary wherein it was held that expenditure incurred towards advertisement is allowable as deduction in the relevant assessment year though certain benefit arising out of the same can be attributable to subsequent years. As per Mercantile System of Accounting, only the accrued income for the relevant assessment year can be treated as the income for the relevant assessment year. In the case of the assessee, there is no dispute that the amount received by the assessee pertains to the services to be rendered in the immediate succeeding assessment year. Hence the assessee has rightly recognized its revenue in the succeeding assessment year. Therefore the addition made by the Ld.AO which is further sustained by the Ld.CIT(A) by treating the fees received in advance for the succeeding assessment year as the income of the assessee for the relevant assessment year is erroneous. Hence we hereby set aside the order of the Ld.CIT(A) and direct the Ld.AO to delete the addition made by him Further it is pertinent to mention that the facts in the case of the assessee are not identical to the facts of the cases relied by the Ld.Revenue Authorities. Appeal of the assessee is allowed.
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