TMI Blog2014 (6) TMI 472X X X X Extracts X X X X X X X X Extracts X X X X ..... warranty period cannot be considered as income - assessee would legally claim the amount only after the rendering the services - receipt was relatable to a particular period in future, it would fructify and mature into income during that period and not earlier - assessee has been following this principle of recognizing revenue in the past also - when the assessee has been following AS-9 and AS-29 and has been following consistent system of accounting, there is no need to interfere with the assessee’s method of accounting - Relying upon Commissioner of Income Tax Versus M/s Excel Industries Ltd. and Mafatlal Industries P. Ltd. [2013 (10) TMI 324 - SUPREME COURT] - there is no case of making the addition in the hands of thee assessee – thus, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... customer is Directorate General : All India Radio (herein after called as AIR) . The assessee , maintaining the earlier accounting policy , had credited 25 % of the total amount received as current year income towards his efforts to secure order, leaving 75 % of the amount Rs.49,23,437 as provisions to execute the order which involved installation, testing , commissioning of the system and to provide at site warranty support for three years. The assessing authority disallowed the provision for services charges amounting Rs.49,23,437.00 on the ground that i) The assessee is maintaining account on mercantile basis, even amount have been received by the assessee in the previous year. ii) No basis whatsoever have been provided by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a particular year as evident from the under proportionate completion only. In the case of assessee, order was not fully executed in the year under consideration and the same was in the nature of SITC (supply, installation, commissioning and testing) against which assessee got the amount from the foreign principal. As per the agreement with the foreign principal installation and commissioning was the responsibility of the assessee. Work of the commissioning was not completed in the previous year under consideration. Therefore the appellant was right in offering part of its receipts as income in the year under consideration only. Further more amount received by the assessee included remuneration towards the services to be provided during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be brought for the taxation. However, system of the adjustment of its revenue followed by the assessee has been found well reasoned scientific and in conformity with the accounting standard and consistent. Therefore I direct the Assessing Officer not to make any disallowance of the provisions of services off Rs. 49,23,437/-. 5. Against the above order the Revenue is in appeal before us. 6. We find that in this case the assessee is following AS-9 and AS- 29. In the Accounting Standard-9 issued by the ICAI provides that Revenue is recognised in a transaction involving rendering of services either under the completed service contract method or under the proportionate completion method. In this case work assigned to the assessee could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In this regard, we refer to the decision of the Hon ble Apex Court in Excel Industries 358 ITR 593 wherein in para 32 it has been expounded as under:- 32. Thirdly, the real question concerning us is the year in which the assessee is required to pay tax. There is no dispute that in the subsequent accounting year, the assessee did make imports and did derive benefits under the advance license and the duty entitlement pass book and paid tax thereon. Therefore, it is not as if the Revenue has been deprived of any tax. We are told that the rate of tax remained the same in the present assessment year as well as in the subsequent assessment year. Therefore, the dispute raised by the Revenue is entirely academic or at best may have a minor ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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