9911796707
TMI Blog2012 (12) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the cross objections filed by the assessee for A.Y. 2006-07 being CO No.403/Del/2011 are not pressed for. In view of above the cross objections filed by the assessee are rejected. 4. Now coming to the appeals filed by the Department, we consider it prudent to discuss the facts of the appeal for A.Y. 2006-07. The grounds of appeal taken by the department for A.Y. 2006-07 are as under:- "1. In the facts and circumstances of the case, the Ld. CIT(A) has erred in law and on facts in deleting addition of Rs.29740/- on account of disallowance of extra depreciation on computer peripherals/accessories ignoring that as per the IT Rules 60% depreciation is allowable only on computer and computer software and not on computer peripherals and accessories. 2. The Ld. CIT(A) has erred on facts and in law in deleting addition of Rs.10846479/- on account of advance from customers ignoring that income tax proceedings of one year are not binding on other year and each year is independent from the other." 5. In respect of ground No.1 of the appeal the relevant facts are that the assessee claimed depreciation @ 60% under the head "Computer" in respect of computer accesso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs (hereinafter to be referred in short MATE). The AO has stated that the assessee was asked to produce the documentary evidence in support of advance given by the MATE and the assessee submitted a copy of purchase order from MATE. The AO has stated that the assessee, during hearing, submitted a detailed note on manufacturing process along with standard time taken in each process. As per the details submitted, it takes about 5 to 6 months for the assessee to produce the required finished product. The AO has stated that the assessee received a total amount of Rs.11,51.77,698/- from MATE as per purchase order and the assessee has shown the sum of Rs.8,03,44,294/- as advance, even though it was received around 9 months back before the close of the financial year. The AO has stated that the assessee had received the majority of the total amount due from MATE and there was sufficient time for it to provide the required sales and service in lieu of this payment, still the assessee preferred not to recognize the profit from this transaction which is not acceptable. The AO has stated that the assessee's net profit ratio for the year under consideration w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sent to the customers for their testing online in the works of the client. During it's testing on the online production, deficiencies/discrepancies/inadequacies of these moulds and dyes are assessed and the same are received back for further work thereon. It was submitted that the time flow chart is only an indicative chart and it is well nigh impossible to adhere to this schedule. The assessee also explained through the charts the accounting of the assessee company and stated that as per Schedule-14, being significant accounting policies to the Balance-sheet, Accounting Policy No.4 "Revenue recognition - sales and services are recognized upon the transfer of significant risk and rewards of ownership to the customers." The profit is recognized on the basis of "the transfer of ownership/significant risk and rewards of ownership to the customers and not on/with reference to receipt of advances." It was also submitted that the assessee company has been following the method of recognizing revenue consistently and the chart of Annexure-3 indicates the valuation of the closing work in progress as on 31st March, 2006 was the same followed in earlier and sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It appears that the A.O. has strictly gone by the payment terms and the estimated time indicated in the time flow chart given by the Assessee. The A.O. has not considered the aspect that these are excisable goods and cannot leave the factory without excise duty being paid on it. 3.7 It has also been brought to my notice that this method of accounting has been accepted by the department in the subsequent years, and the sales declared have been accepted by the dept. Since the co has been regularly following this method of accounting, the results of one year cannot be disturbed by picking up and applying another method in isolation. I am therefore of the view that the addition made on this account is not justified and is therefore directed to be deleted." 13. During the course of hearing the learned DR submitted that he relied on the order of the AO. He further submitted that it is not factually correct that the department has accepted the same accounting treatment in respect of the advances received by the assessee from MATE in subsequent years because the department has also filed the appeals for A.Y. 2008-09 and 2009-10 which are also being heard al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unting is regularly and consistently followed by the assessee in respect of the job orders of the clients/parties. He submitted that the learned CIT(A) has rightly deleted the addition made by the AO. 14. We have carefully considered the orders of the authorities below and the submissions of the learned representatives of the parties. We have also perused the copy of the purchase order along with the terms and conditions placed on record. We do agree on perusal of the terms and conditions of the Purchase Order and the Chart placed on record that the assessee is following the percentage completion of the work as closing work in progress which is shown as opening work progress in next year. The assessee is following said method/policy consistently. On execution of the contract/purchase order, the assessee is showing the income of the said contract in the respective assessment year. Therefore, the assessee is recognizing revenue upon the completion of the contract i.e. transfer of the significant risk and rewards of ownership to the customers and not on/with reference to receipt of advances as per the Accounting Policy No. 4. The said fact ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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