Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2023 (1) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (1) TMI 397 - ITAT BANGALOREUnearned revenue - Disallowance made by the AO towards ‘unearned income’ shown by the assessee as current liability in the balance sheet - Assessee claimed that, the amount shown as ‘unearned revenue’ is offered to tax in the subsequent year in which the services are rendered. The AO did not accept the contentions of the assessee and added the entire amount - HELD THAT:- Vide Notification No. 9949, dated 25-1-1996, Accounting Standard I relating to disclosure of accounting policies and Accounting Standard II relating to disclosure of prior period and extraordinary items and changes in accounting policies had alone been notified as Accounting Standards to be followed by an Assessee and no other accounting standard has been notified. In the present case, CIT(Appeals) has recorded a finding that the reconciliation substantiating the recognition of revenue in subsequent years was not produced by the assessee. Further, we agree with the argument of the ld. DR that the claim of the assessee requires to be factually verified in terms of the matching concept. We also notice that in the decision relied on by the AR in the case of Ericsson India Pvt. Ltd. 2022 (3) TMI 674 - DELHI HIGH COURT the decision was rendered in favour of the assessee by the Hon’ble High Court after factual verification of the details pertaining to the advance payments. It is clear that the following facts are to be verified before coming to the conclusion on the treatment of ‘unearned income’ in the hands of the assessee. (i) The financials of the assessee is to be verified to substantiate that the accounting practice is consistently followed. (ii) Revenue neutrality in terms of income deferred is offered to tax subsequently needs to be examined (iii) Whether the revenue earned is contingent upon the assessee performing its obligations and rendering services to the pre-paid customers. The additional evidence in the form of invoices and the party wise breakup of the ‘unearned income’ that is produced before us requires verification by the lower authorities to decide the case on merits. In view of the above, we remit the issue back to the AO for de novo consideration of the issue afresh in accordance with law, after giving reasonable opportunity of being heard to the assessee. Assessee is directed to produce all the required documents in support of its claim and cooperate in the remand proceedings. This ground of the assessee is allowed for statistical purposes. Disallowance u/s. 40(a)(ia) - assessee in the computation of total income has deducted a sum on the reason that this amount was disallowed in the preceding previous year as TDS was not done and in the current year the expenses were reversed - HELD THAT:- This fact has not been properly presented before the lower authorities. The lower authorities have to examine whether the year-end provision made on 31st March 2012 is fully reversed on 1st April 2012 and the expenses against which the provision was created is debited to the profit and loss account on payment after deducting TDS. This verification need to be carried out based on the journal entries and ledger copies produced by the assessee for the year under consideration. If the accounting practice of the assessee to reverse the expenses on the 1st day of April of the year under consideration is substantiated by the evidences submitted by the assessee whereby it is demonstrated that there is no doubt allowance expenditure then the assessee would be entitled to claim the amount disallowed in the previous assessment year as otherwise it would amount to double disallowance. We therefore remit the issue back to the AO to verify the ledger and general entries of the assessee for the year under consideration and allow the expenditure in accordance with law. The assessee may be given a reasonable opportunity of being heard in this matter. The appeal is allowed in favour of the assessee for the statistical purposes. Treatment of ‘unearned revenue’ - AR submitted the additional evidence of partywise breakup and the invoice details for these years also before us. Considering our decision we admit the additional evidence and remit the issue to the AO with similar directions as given for assessment 2013-14. Further for the assessment year 2015-16 the AO is directed to take into consideration the amendment made with effect from 1/4/2015 to section 145(2) while deciding the issue.Appeals of the assessee are allowed for statistical purposes.
|