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2016 (4) TMI 471 - AT - Income TaxAddition on account of change in the accounting method of the company - Held that:- As from an incorrect and flawed accounting Policy Company has now adopted a sound accounting policy. Secondly, when in subsequent years, the revenue itself has accepted the changed accounting policy of the company on period basis. The assessee being company which is required to maintain its books of accounts in accordance with section 209 of The Companies Act, 1956 on accrual basis. The principle of accrual is violated if the revenue is recognized at the time of raising of the bill irrespective of period of rendition of services. Therefore according to us this policy is also in accordance with the Companies Act 1956. Merely because there is down fall in profit of the company due to change in accounting policy cannot lead to a conclusion that it is not bonafide. Regarding additional evidences filed by the assessee as submitted by the learned DR, we are of the view that the assessee has submitted the copies of those bills only to explain the accounting of the Annual maintenance Income. Further the comparative chart was verified by CIT (A) was to know about any leakage of revenue. Hence, we are of the view that the accounting policy followed by the company is bonafide and consistent with the accounting standard 9 of ICAI on 'Revenue Recognition', Income Tax Act as correct profit would be deduced on following this policy and section 209 of The Companies Act, 1956. Therefore, we confirm the order of CIT (A) in deleting the addition - Decided in favour of assessee Addition on account of provision for license purchases - Held that:- On query by the bench, Ld. AR was asked to show how the purchase provision is made. In response to that he submitted a statement which was before lower authorities, wherein details of the provision of ₹ 6154283/- and the details of reversal from that account of ₹ 2310623/- was available which was a wrong accounting entry. Therefore actual provision was of ₹ 38,43,660/- only. This amount tallies with the statement submitted by the assessee. We have perused statement where the details of sales invoice, date of invoice, party wise amount payable and a product wise bifurcation, amount of sales, name of the supplier, date of payment made to supplier was available. In view of this, we are of the opinion that the liability provided by the assessee is quantified, crystallized and not based on estimates. Hence, we do not see any reason for the confirming the disallowance of this amount. - Decided in favour of assessee Addition on account of provision for commission - Held that:- Agreement assessee was liable to pay 18% of the license fee earned as a commission to that particular party and this commission expenditure is being paid since assessment year 2003-2004, and there is no change in the circumstances of the case. It was further submitted that the moment the sale price is billed to customer commission accrues to the service provider. Therefore, the commission is based on sales effected by the company. CIT (A) also considered that a sale of ₹ 1,28,36,798/-has been booked and commission at the rate of 18% calculated and is payable in terms of that particular agreement, therefore, there is a crystallized liability and was not a contingent liability and the fact of payment of commission at the rate of 18% on sales is available with the assessing officer and commission expenditure exactly matches with the agreement. We also could not find that what new evidence were available with the CIT (A) and not with AO when the percentage of commission is fixed and the recipient of income is also fixed. The genuineness of the expenditure is not at all doubted and the facts that commission expenditure is paid to the party since AY 2003-04 is not disputed, therefore, we confirm the order of the CIT (A) deleting the disallowance on account of the commission expenditure - Decided in favour of assessee
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