TMI Blog2019 (4) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... tware 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 assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t unrealised revenue from sales toits customer, need not be recognized as per Accounting Standard-9 fr the Assessment Year 2013-14, as the assessee had filed a suit for recovery of money in April 2014 and the same is pending? 2. Whether the Appellate Tribunal right in holding that unrealised income need not be recognized on mercantile basis, when the corresponding expenses have been taken into account in the books of the assessee? 2. The brief facts leading to file this Appeal is as follows: 2.(a) Assessee is a Private Limited Company engaged in the business of software develpment. For the Assessment Year 2013-14 the assessee filed his Return of Income Tax declaring loss of ₹ 87,94,316/-. The case was selected for sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of assessee. Further, in the relevant year the recovery of the amount was uncertain. Accordingly allowed the appeal as against which the present Tax Appeal filed u/s.260A of the Income Tax Act, 1961. The Appellant have raised Substantial Questions of Law as referred above. 3. The learned Senior Standing Counsel for Income Tax Department Mr.T.R.Senthilkumar appearing for the Appellant would contend that the assessee is following the Mercantile system of accounting whenever the income accrued to the assessee is liable to offer for taxation. Further, the civil suit is filed only in April 2014 which is applicable to the next assessment year. Further, it is the contention of the learned Senior Standing Counsel, since the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue, then the revenue recognition is postponed and in such cases revenue should be recognized only when it becomes reasonably certain that ultimate collection will be made. IT also applies to the revenue arising out of escalation of price; export incentive, interest, etc., 5. 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 concl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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