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2017 (5) TMI 1271 - AT - Income TaxReopening of assessment - addition on accrual of income - deferred revenue - Held that:- The agreement could be terminated within a period of 6 years and amount had to be refunded.The assessee had allowed licensee to use the rights and therefore, the payment received by it has to be treated as royalty. The assessee is following mercantile system of accounting and is entitled to recognise his revenue on accrual basis.The rights of the TV Serial were to come back to the assessee after a period of 6 years.Thus, it is not a case of sale. But receipt is directly related to royalty received by the assessee from the licensee. AS-9 allows deferment of royalty income. Thus, in our opinion the assessee had rightly offered the incomes in six AY.s proportionately. Therefore, reversing the order of the FAA and considering the peculiar facts and circumstances of the case, we decide the effective Ground of appeal in favour of the assessee. Addition on account of value added tax(VAT) - Held that:- There is no evidence to prove that same was not part of the payment received from Moser Bayer. The amount received by the assessee included VAT. Therefore,we hold that the order of the FAA cannot be endorsed - Decided in favour of the assessee.
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