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2012 (7) TMI 770 - AT - Income TaxAddition made on the basis of percentage of completion method as per revised Accounting Standard-7 (AS-7) - CIT(A) deleted the addition holding that AS-9 is applicable - the method of accounting employed by the assessee is ‘Completed Contract Method’ - Held that:- As per the revised AS-7 of 2002 which is effective from 01/04/2003, a project completion method has been recognized and AS-7 has not approved completed contract method, although with certain riders, but in a situation when a contractor is also working as a developer, then the basis for recognition of Revenue should be relied on AS 9. AS-9 has prescribed that the recognition of Revenue requires that Revenue is measurable and that at the time of rendering of service it would not be unreasonable to expect ultimate collection. Where the ability to assess the ultimate collection with reasonable certainty is lacking, then Revenue recognition is to be postponed to the extent of uncertainty involved. It has therefore been prescribed vide para-9 that it is appropriate to recognize revenue only when it is reasonably certain that the ultimate collection will be made. As per the statement made from the side of the assessee, it was wrong on the part of the AO to assess the income irrespective of the year of completion of project when the amount received in advance has not reached certainty and that too the AO has merely estimated 10% as the recognition of Revenue of the construction contract, without assigning any specific basis of such an estimation, the such an estimation is not approved, resultantly the view taken by the ld.CIT(A) is upheld - in favour of assessee.
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