TMI Blog2022 (3) TMI 426X X X X Extracts X X X X X X X X Extracts X X X X ..... - SUPREME COURT] We are of the opinion that the percentage completion method tries to attain periodic recognition of income in order to reflect current performance and, accordingly, the revenue recognized during AY 2005-06 to AY 2007-08 would be relevant for determining the recognizable revenue from BSNL project till AY 2008-09 and not the final figure when the project is actually completed, which would otherwise lead to impossibility of performance. We also note that the Assessing Officer has not disputed that during the relevant period, estimate of revenue under BSNL project was INR 1606,85,17,755/- and 97.76% of the project was completed and, thus, the recognizable revenue of the Assessee from BSNL project was INR 1570,82,26,462/-. Therefore, it was not open for the Ld. CIT(A) to take a contrary view in the remand proceedings without any corroborative evidence on record. This is second round of litigation before this Tribunal and all the necessary factual details are available on record. After duly considering the material evidence on record and the order of the Ld. CIT(A) we observe that the CIT(A) has missed to take into consideration the revenue from BSNL project wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd, we deem it appropriate to set aside the orders of the AO on the issues, i.e. revenue under BSNL project including percentage of completion, and remand it back to the file of the AO for read-judication. Needless to say that the assessee will be given adequate opportunity of being heard and to provide necessary details / working in this behalf. The AO shall consider the same afresh in accordance with law. These grounds of the assessee are allowed for statistical purposes. 2.1 Post the aforesaid decision of this Tribunal, the Assessing Officer passed the appeal effect order dated 26.06.2015 under section 143(3) read with section 254 of the Income Tax Act, 1961 ( Act ) and observed: 8.9 I have carefully considered the assessee s reply on this issue. Regarding the recognition of revenue from BSNL project, the assessee has stated that though this office had correctly determined the total revenue to be recognized over the life of the BSNL (Phase IV) project (i.e. from AYs 2005-06 to 2008-09) in the assessment order for the subject AY (which is same as computed by Nortel India), yet this office did not allow deduction for the revenues already taxed in the assessment orders u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e time, the assessee agitates taxing of AMC revenue during the subject AY 2008- 09 on the ground that the same has already been taxed in the earlier years. The matching principle as pointed out by the assessee itself requires that revenue and cost must be matched to arrive at the true income. 8.13 The entire AMC revenue amounting to ₹ 44,36,24,597/- has been recognized by the assessee during the year under consideration, which means that going by percentage completion method, the revenue credited for the year @ 97.76% (percentage of completion for the subject AY) taken by the assessee would come to ₹ 43,36,87,406/-. Out of total AMC revenue of ₹ 44,36,24,597/- based on percentage completion method, 98.4605% of this revenue amounting to ₹ 43,67,94,996/- has already been taxed upto AY 2007-08. Hence, to set off double taxation, in compliance to the directions of the Hon ble ITAT, the assessee s income is reduced by the amount of ₹ 43,67,94,996/-. At the same time, it is observed that the assessee has also claimed the entire deferred AMC cost amount to ₹ 66,45,67,172/- in the AY 2008-09. Following the matching principle, as the revenue is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant has computed as per percentage completion method and, therefore, the excess amount taxed, should be reduced from the income of the year under consideration by giving the set off of the said income. The appellant has worked out such excess revenue at ₹ 39,77,95,919/- as per the chart. 3.2 However, the perusal of the facts and details given by appellant reveal that the appellant has misled by giving the incorrect and selective figures of the revenue recognized and as taxed by the AO to arrive at the final figure. The perusal of assessment order of A.Y. 2005-06, which is the first year of the execution of project, reveals that total revenue under BSNL contract (based on purchase orders raised by BSNL) was estimated by appellant at ₹ 1617,62,89,128/-, not at Rs, 1606,85,17,755/- as claimed by him in the chart. Against it, as mentioned above, the aggregate amount of ₹ 1629,35,75,658/- has already been recognized by revenue for taxation in A.Y. 2005-06 to 2007-08 and this figure has reached finality after the decisions of ITAT/CIT(A) in respective years. However, taking onto consideration this excess recognization of revenue, the AO during the present asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts and in the circumstances of the case and in law, the learned CIT(A) has failed to appreciate that for AYs 2005-06 to 2008-09, revenue of INR 15,70,82,26,462/- has been offered to tax by the Appellant under BSNL project on project completion basis, whereas the learned AO has taxed higher revenue of INR 16,10,60,22,380/- for the said AYs, resulting in taxation of excessive revenue amounting to INR 39,11,95,919 under BSNL project up to the subject AY. 1.1.2. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in not appreciating that revenue to be recognised and taxed upto the subject AY cannot exceed the revenue of INR 15,70,82,26,462 which was recognised by the Appellant upto the subject AY based on percentage completion method which has also been accepted by the learned AO. 1.1. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in holding that the Appellant has misled by giving incorrect and selective figures of revenue recognised and as taxed by the learned AO. 1.2 On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in computing net revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, testing and commissioning of GSM based cellular mobile network across North East-I and Southern Telecom Region in India. Revenue recognition under the project with BSNL was done as per Percentage Completion Method (PCM). 3.1 It was further submitted that in the appeal effect order dated 26.06.2015, the Assessing Officer accepted that during the relevant period, estimate of revenue under BSNL project was INR 1606,85,17,755/- and that 97.76% of the project was completed, and, thus, the recognizable revenue of the Assessee from BSNL project was INR 1570,82,26,462/-. However, the Assessing Officer did not reduce the amount of revenue under BSNL project which had already been taxed in the prior assessment years, i.e. AYs 2005-06 to 2007-08, on the premise that the Assessee had not accepted the assessment order of earlier years and the matter wassub-judice before the appellate authorities, thereby resulting in taxation of excess revenue under BSNL project. It was further submitted that even the Ld. CIT(A) had agreed to the submission of the Assessee that the Assessing Officer had already recognized/ taxed revenue of the Assessee from BSNL project for AY 2005-06 to AY 2007-08 at I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an ad hoc basis. The Ld. AR further pointed out that the proceedings for earlier assessment years (viz. AY 2006-07 and AY 2007-08) have been settled and have attained finality under the Direct Tax Vivid Se Vishwas Act, 2020 whilst accepting the income assessed by the Assessing Officer. Further, even the proceeding for AY 2005-06 has attained finality. Even the subsequent years i.e., AY 2009-10 and AY 2010-11 have attained finality, as the Assessing officer accepted the position of the Assessee and no addition was made on this account in the assessment order. 3.5 The Ld. AR, whilst referring to the Schedule L to Profit Loss Account at Page 127 of the paperbook and Annexure 3 to submission dated 19.12.2021 at Page 212 of paperbook, submitted that the Ld. CIT(A), in the impugned order, has inadvertently failed to take into account the revenue of INR 24,92,41,718 from BSNL project which was suo moto offered to tax by the Assessee and formed part of the total income from operations from sales and services of INR 114,25,07,931/- reflected in the audited financials. He argued that the revenue to be recognized and taxed upto AY 2008-09 cannot exceed the revenue of INR 1570,82,26,4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld keep on changing over the contract period. Thus, the myopic view taken by the Ld. CIT(A) in comparing the total estimated revenue from BSNL contract vis a vis the assessment order of AY 2005-06 (i.e., sum of INR 1617,62,89,128/-) and as claimed by the Assessee (i.e., sum of INR 1606,85,17,755/-) in the relevant AY 2008-09, is baseless and devoid of merits. Our view is fortified by the judgment of the Hon ble Supreme Court in CIT v. Bilahari Investment (P.) Ltd. (2008) 299 ITR 1 (SC), wherein, whilst enunciating the difference between completed contract method and percentage of completion method, it was observed as follows: 15. Recognition/identification of income under the 1961 Act is attainable by several methods of accounting. It may be noted that the same result could be attained by any one of the accounting methods. Completed contract method is one such method. Similarly, percentage of completion method is another such method. 16. Under completed contract method, the revenue is not recognised until the contract is complete. Under the said method, costs are accumulated during the course of the contract. The profit and loss is established in the last accounting per ..... X X X X Extracts X X X X X X X X Extracts X X X X
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