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2016 (8) TMI 329 - HC - Income TaxAccrual of income - Selection of year of assessment - tds liability - Cash system of accounting - ITAT appears to have proceeded on the basis that since the services were to be performed by each of the Assessees for over a period of five years, the amount received from UGHPL had to be spread over a period of five years - Held that:- There is merit in the contention of the learned counsel for the Revenue that since admittedly no books of accounts were maintained by any of the three Assessees it had to be presumed that they followed the cash system of accounting. In that view of the matter, the question of income accruing or the right to earn income accruing only upon the performance of a service at the end of a period would not arise. As rightly pointed out by learned counsel for the Revenue, the matching principle or the application of AS-9 issued by the ICAI which deals with the principle of revenue recognition appear to apply only to companies and not individuals. Once it is clear that it is the cash system of accounting that is followed, the further question whether the sum received in one year could be spread over several years, and that too in the absence of any agreement at the time of such payment would not arise. The ITAT could not have overlooked the fact that the agreements produced before the CIT (A) regarding engaging the Assessees as hospital consultant was more than four years after the amount had been paid. Such agreements were not reliable pieces of evidence. Assessees had offered to tax in the later AYs the sum proportionate to the period of service, the fact remains that the entire sum was received upfront in the year in question and TDS was also deducted on that basis. The agreements purportedly entered into between each of the Assessees and UGHPL was a document drawn up four years after they received the entire remuneration upfront in December 2005. Consequently, the Court is of the view that the ITAT erred in concluding that the sum received in each of the AYs in question could be spread over five years on the basis of the subsequent agreements dated 15th June 2010 between the UGHPL and the Assessees. Significantly, what the Trust was being paid was only a monthly payment whereas over a sum of ₹ 4 crores as lump sum payment was made to the Assessees. The questions raised by the CIT (A) do not appear to have been satisfactorily answered by the Assessees. In the facts and circumstances, the Court is of the view that the CIT (A) was right in affirming the order of the AO to the extent of bringing the entire amount received by the Assessees to tax in the year in question. For the aforementioned reasons the question framed is answered in the affirmative i.e. in favour of the Revenue and against the Assessees.
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