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2022 (12) TMI 784 - ITAT CHANDIGARHRevenue recognition - Addition on account of operation and maintenance service charges of transmission lines - Charges neither supported by agreement nor even paid by the other party to whom the services were rendered - bill was raised but not accounted for in the books of accounts by the assessee company - why the said amount should not be treated as income of the assessee for the year under consideration particularly when the assessee company is following the mercantile system of accounting drawing drawn reference to the Audit Report submitted by the Statutory Auditor? - HELD THAT:- We therefore find that the assessee has suitably demonstrated that there were uncertainties regarding the determination of the amount in absence of any agreement with UT Electricity Department as well as its ultimate collection and once, there was resolution and acceptance thereof at the revised figure after indulgence by Central Electricity Authority, the revenue has been duly recognized in the books of accounts in the subsequent financial year. We find that the assessee has been consistent in following the said policy as can be seen from the audit report where bills raised for F.Y. 2010-11 have been accounted for in the year under consideration and which has infact, formed the basis for the action on part of the AO. AO cannot follow dual approach in taxing the revenues pertaining to earlier financial year and at the same time, disputing the deferment of revenues for the year under consideration on account of similar uncertainties involved. We see no justifiable basis to allow the disturbance of well-accepted accounting policy consistently followed by the assessee where the recognition of revenue is deferred where there are visible uncertainties involved in quantifying and realization of revenues. In the result, the addition on account of operation and maintenance service charges of transmission lines is hereby set-aside and the ground of appeal is allowed.
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