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2019 (4) TMI 57 - MADRAS HIGH COURTIncome recognition - unrealized income - recognizing the income which cannot be recovered - method of accounting - unrealized revenue from sales toits customer - need not be recognized as per Accounting Standard-9 fr the AY 2013-14, as the assessee had filed a suit for recovery of money in April 2014 and the same is pending? - as per tribunal unrealised income need not be recognized on mercantile basis, when the corresponding expenses have been taken into account in the books of the assessee - Defendant has already become a bankrupt - Held that:- Admittedly, the assessee entered into service contract for providing software to a South African Government Undertaking called "Province" for three years. It appears that subsequently the above said undertaking become bankrupt which forced the assessee to file a suit against the said Undertaking in South Africa in the month of April 2014. From the factual narration found in the Orders of Assessing Officer and Commissioner of Income Tax, it could be seen that the amount assessed is not recognized. When the Defendant has already become a bankrupt, realisation of the amount cannot be certain. It will take its own time. There is an uncertainty in the ultimate collection of the revenue. Admittedly, there is a dispute with regard to the collection of the amount between the assessee and his client and the assessee client is also appears to be a bankrupt, certainty of recovering of amount cannot be reasonably expected within the assessment year. The Tribunal considered this aspect and found that there is no point in recognizing the income which cannot be recovered and subsequently writing of bad debts in the subsequent years and come to the conclusion that the Revenue need not be recognized for a sum of ₹ 18,94,96,500/- for the year ending 31.3.2013 for the relevant Assessment Year 2013-14. Accordingly, ordered deletion of the addition made for the relevant assessment year. The Tribunal has considered the factual aspects as well as the Accounting Standard-9 approved by the Central Government and arrived at right conclusion, we are of the view that there is no substantial questions of law involved in this matter. - Decided against revenue
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