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2015 (12) TMI 183 - AT - Income TaxAccrual of income - termination of contract - method of accounting - Held that:- There is no dispute to the fact that there was termination of contract and full uncertainty was there with respect to recoverability of the amount invoiced. In fact, the assessee has rightly followed the accounting principle by not recording the said impugned amount in the books of account. As per Accounting Standard ('AS') - 9 i.e. Revenue recognition, if there is uncertainty with regard to the collection of amount then recognition of said amount should be deferred in the books of account. The fact that the Assessee never recorded the impugned amount in its book of accounts shows that the Assessee never considered the said amount as accrued income. The raising of invoice is initial process of recovery after which the assessee realized that there is uncertainty with respect to receipt of impugned amount and terminated the contract. If assessee had given up its claim then it would not have received even ₹ 7,30 crores, which is merely 8.58 percent of total claim after a long legal fight. The fact that (i) the Assessee recovered only 8.58% of the total claim, and that too after a period of 4 years and that (ii) the addition confirmed by CIT(A) in this year had been allowed as a deduction by the AO in AY 2006-07 clearly shows that the said amount could not be said to have accrued in favour of assessee in the relevant assessment year under consideration. However, the AO is directed to bring to tax net the amount received in future in the year of actual receipt.- Decided partly in favour of assessee
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