TMI Blog2016 (5) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... Held that:- The assessee is following the mercantile system of accounting and as per the accounting standard 9, the net effect of the accounting treatment was for only that part of the annual maintenance contract receipt was taken into consideration which pertained to the year under consideration. This method has consistently been followed by the assessee. We, therefore, do not find any reason to interfere with the order of the learned Commissioner of Income-tax (Appeals). Ground fails against revenue - I. T. A. No. 2359/Del/2011 - - - Dated:- 18-1-2016 - S. V. Mehrotra (Accountant Member) And Suchitra Kamble (Judicial Member) For the Petitioner : Amrit Lal For the Respondent : Himanshu Sinha, Satyam Rastogi ORDER S. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales and maintenance of software. 4. The brief facts, apropos ground No. 1 are that the assessee had debited software/annual maintenance contract to the extent of ₹ 50,80,754. The Assessing Officer required the assessee to explain why the said sum should not be treated as capital expenses. The assessee pointed out that this sum represented the amount of software purchases, annual maintenance contract (AMC) for hardware and software and the expenses towards consultancy. As regards the software purchases, the assessee submitted that they were to the extent of ₹ 8,25,488. The assessee further submitted that the software so purchased had been sold out and it was only the trading activity of the assessee. The assessee also sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ils and copies of purchase invoices and sales of software invoices it was evident that software was purchased and subsequently sold to customer and was not used by the assessee, have not been controverted by the Department. We, accordingly, confirm the order of the Commissioner of Income-tax (Appeals) on this issue. 7. The brief facts apropos ground No. 2 are that the assessee had debited a sum of ₹ 33,61,059 as provision for sale and maintenance of software. The Assessing Officer required the assessee to explain as to how it was an ascertained liability. The assessee submitted that it enters into annual maintenance contract with customers while selling the software for a period of one year. Annual maintenance contract is received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee relied on the decision of the hon'ble Allahabad High Court in the case of CIT v. Hindustan Computers Ltd. [1998] 233 ITR 366 (All), wherein under similar facts the assessee's claim was upheld. 9. The learned Commissioner of Income-tax (Appeals) allowed the assessee's claim by observing as under : 6.5. I have considered the assessment order as well as the written submission of the appellant. The reason the Assessing Officer did not accept the contention of the appellant was because the annual maintenance contract has been received by the assessee at once and it is not to be paid back. It appears that the Assessing Officer has not understood the accounting treatment being given to receipt of the annual maintenance contr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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