Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2021 (3) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (3) TMI 672 - AT - Income TaxAccrual of Income - Method of accounting - taxation of an amount as income, in respect of contracts accounted under "Percentage of Completion" (POC) Method - appellant was following a regular method of accounting sanctified by Accounting Standards - HELD THAT:- As decided in own case [2019 (4) TMI 873 - ITAT MUMBAI] the undisputed position that emerges is that the assessee is following consistent method of accounting to recognize the revenue under these contracts. The percentage of completion of the project has been worked out as per total cost incurred on the project to date vis-à-vis total budgeted cost and that fraction is applied to the contract value for the purpose of revenue recognition. Similar formulae have been adopted by the assessee in preceding two years which has been accepted by the revenue. No case of revenue leakage has been established before us. Nothing on record suggest that remaining income under the project has not been offered by the assessee in subsequent years, following the same method of accounting. Simply because progress billing was more than the stage of percentage of completion, the same, in itself, could not be the basis to usurp the consistent method of accounting being followed by the assessee. Therefore, the additions made by the revenue, under the circumstances, could not be sustained. Addition on account of under-statement of profits - AO rejected the completed contract method of accounts followed by the assessee - HELD THAT:- As decided in own case [2019 (4) TMI 873 - ITAT MUMBAI] we find that the assessee has accumulated cost as well as revenue under these projects in the Balance Sheet by following completed contract method. The revenue has accepted such accumulation during AYs 2004-05 & 2005-06 and this is the third year of accumulation under the projects. It is not the case of the revenue that the income under these projects have not been offered to tax in subsequent years. No case of revenue leakage has been established before us. Therefore, the action of revenue in disturbing the consistent method of accounting being followed by the assessee could not be held to be justified. Hence, we delete the impugned additions and allow these grounds of appeal. Disallowance of expenditure towards Repair and Maintenance - addition holding that the repairs and renovation carried out by the appellant led to major renovation, and was capital in nature - whether repair is in the nature of revenue expenditure or capital expenditure? - HELD THAT:- In the instant case, the said expenditure has been incurred by the assessee for maintaining its business, for increasing its efficiency and for preserving its already existing asset. Thus the expenditure hereinabove is revenue in nature and therefore allowable. Disallowance u/s 40(a)(ia) ability incurred on account of Education Cess and Higher and Secondary Education Cess - HELD THAT:- The above additional ground is squarely covered in favour of the assessee by the decision of the Hon’ble Bombay High Court in the case of Sesa Goa Ltd. [2020 (3) TMI 347 - BOMBAY HIGH COURT] and Chambal Fertilizers & Chemicals Ltd.[2018 (10) TMI 589 - RAJASTHAN HIGH COURT]. As per the above decisions, the amount of education cess and higher & secondary education cess is not tax as covered u/s 40(a)(ii) and accordingly allowable as deduction in computing the income from business or profession. Following the above decisions, we admit and allow the additional ground of appeal filed by the assessee.
|