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2023 (11) TMI 752 - ITAT CHENNAIAccrual of income - Recognition of income - AO made the additions as Short Contract Revenue accounted based on the applications filed u/s 197 - Final Projections while making application u/s 197 - assessee is a foreign company incorporated in Singapore - Allegation of deviation from the accounting standard - HELD THAT:- We find that in the application made u/s 197, the assessee has merely projected the contract revenue and these estimations could not be taken to be the turnover of the assessee disregarding the actual revenue earned by the assessee. No defect in books of accounts has been pointed out by Ld. AO. The deviation in estimation and actual revenue stood explained by the fact that the duration of the project got extended to financial year 2020-21 which is much beyond the agreed original contract period. The revenue projections submitted in the course of Sec. 197 proceedings are merely based on the estimated work completion whereas the revenue shown in financial statements is based on actual work certified by contractor on the basis of survey of work performed. Therefore, the financial results were to be accepted. Assessee was unable to complete the project it had estimated and accordingly, it has recognized revenue only for the portion of the work that has been completed and certified. The same, in our considered opinion, is correct methodology. Also aggregate contract revenue has been offered to tax over the life of the contract period starting from financial years 2012-13 to 2022-23 which is evidenced by the details of invoices as placed on record. The same supports the argument of Ld. AR that there is no leakage of contract revenue and taxing more amounts in this year would result into bringing to tax contract revenues much more than the fixed price contract value to be received by the assessee over the life of contract. The same could not be held to be justified, in any manner. Thus we would hold that the impugned additions are unsustainable - Decided in favour of assessee.
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