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Construction Contracts - only for AY 2016-17

ICDS - 03 (old) - Rule - Old - ICDS for AY 2016-17 (Since withdrawn) - Other Direct Tax / Income Tax - ICDS - 03 (old) - ICDS III - Construction Contracts [See: Notification No. 32/2015 Dated:- 31-3-2015] [ Came into force with effect from 1st day of April, 2015, - Only for AY 2016-17] Since Withdrawn vide notification no. 86/2016 dated 29-9-2016 C. INCOME COMPUTATION AND DISCLOSURE STANDARD III RELATING TO CONSTRUCTION CONTRACTS Preamble This Income Computation and Disclosure Standard is applic .....

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rmination of income for a construction contract of a contractor. Definitions 2 (1) The following terms are used in this Income Computation and Disclosure Standard with the meanings specified: (a) "Construction contract" is a contract specifically negotiated for the construction of an asset or a combination of assets that are closely interrelated or interdependent in terms of their design, technology and function or their ultimate purpose or use and includes : (i) contract for the rende .....

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st plus contract" is a construction contract in which the contractor is reimbursed for allowable or otherwise defined costs, plus a mark up on these costs or a fixed fee. (d) "Retentions" are amounts of progress billings which are not paid until the satisfaction of conditions specified in the contract for the payment of such amounts or until defects have been rectified. (e) "Progress billings" are amounts billed for work performed on a contract whether or not they have b .....

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nterrelated or interdependent in terms of their design, technology and function or their ultimate purpose or use. 4. Construction contracts are formulated in a number of ways which, for the purposes of this Income Computation and Disclosure Standard, are classified as fixed price contracts and cost plus contracts. Some construction contracts may contain characteristics of both a fixed price contract and a cost plus contract, for example, in the case of a cost plus contract with an agreed maximum .....

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Where a contract covers a number of assets, the construction of each asset should be treated as a separate construction contract when: (a) separate proposals have been submitted for each asset; (b) each asset has been subject to separate negotiation and the contractor and customer have been able to accept or reject that part of the contract relating to each asset; and (c) the costs and revenues of each asset can be identified. 7. A group of contracts, whether with a single customer or with seve .....

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al asset, the construction of the additional asset should be treated as a separate construction contract when: (a) the asset differs significantly in design, technology or function from the asset or assets covered by the original contract; or (b) the price of the asset is negotiated without having regard to the original contract price. Contract Revenue 9. Contract revenue shall be recognised when there is reasonable certainty of its ultimate collection. 10. Contract revenue shall comprise of: (a .....

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. Contract Costs 12. Contract costs shall comprise of : (a) costs that relate directly to the specific contract; (b) costs that are attributable to contract activity in general and can be allocated to the contract; (c) such other costs as are specifically chargeable to the customer under the terms of the contract; and (d) allocated borrowing costs in accordance with the Income Computation and Disclosure Standard on Borrowing Costs. These costs shall be reduced by any incidental income, not being .....

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ntract costs, provided (a) they can be separately identified; and (b) it is probable that the contract shall be obtained. When costs incurred in securing a contract are recognised as an expense in the period in which they are incurred, they are not included in contract costs when the contract is obtained in a subsequent period. 15. Contract costs that relate to future activity on the contract are recognised as an asset. Such costs represent an amount due from the customer and are classified as c .....

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ith the contract costs incurred in reaching the stage of completion, resulting in the reporting of revenue, expenses and profit which can be attributed to the proportion of work completed. 18. The stage of completion of a contract shall be determined with reference to: (a) the proportion that contract costs incurred for work performed upto the reporting date bear to the estimated total contract costs; or (b) surveys of work performed; or (c) completion of a physical proportion of the contract wo .....

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