TMI Blog2016 (12) TMI 1891X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounting adopted by the assessee in recognizing revenues was in consonance with AS 1 read with AS-9 issued by ICAI and notified by the Central Government? - HELD THAT:-There is no merit in the contention of the ld. counsel that the aforesaid advance/unearned revenue has been duly disclosed and offered to tax in the subsequent year. The assessee is free to take remedial measures permissible in law in the A.Y. 2008-09 where it has claimed to have offered the said income. Hon'ble Supreme Court in Tuticorin Alkali Chemicals Fertilizers Ltd [ 1997 (7) TMI 4 - SUPREME COURT] has held 'It is true that this court has very often referred to accounting practice for ascertainment of profit made by a company or value of the assets of a company. But when the question is whether a receipt of money is taxable or not or whether certain deductions from that receipt are permissible in law or not, the question has to be decided according to the principles of law and not in accordance with accountancy practice. Accounting practice cannot override section 56 or any other provision of the Act. The order of the ld. CIT(A) upholding the addition made by the AO is confirmed. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee in recognizing revenues was in consonance with AS 1 read with AS-9 issued by ICAI and notified by the Central Government. Also it is stated that the aforesaid advance/unearned revenue of ₹ 1,02,33,944/- had been duly disclosed and offered to tax in the subsequent year and, therefore, there was no leakage of revenue. 3.1 The Assessing Officer (AO), during the course of assessment proceedings, found that the assessee had the following unearned revenues during the financial year 2006-07 relevant to the assessment year 2007-08: Unearned revenue Annual Maintenance ₹ 23,14,430/- Unearned Revenue Subscription Charges ₹ 79,19,514/- Total ₹ 1,02,33,944/- The assessee argued before the AO that they have not rendered the services and hence, part of the receipts was kept under the head Current Liability in the Balance Sheet. Further, it was argued before the AO that out of the total unearned revenue, the company in future AY 2008-09, had reversed such unearned revenues by treating it as income for the said year because the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear, for example where the invoice is raised very close to March 31 of the financial year, even though the invoice for these services was raised during the relevant financial year. It is further stated that as per Schedule N to the Balance Sheet for the year ended March 31 2007, the company had the following accounting policy with regard to revenue recognition for the data base service and maintenance support services. Revenue Recognition . iii) Subscription revenue from data base products is recognized equally over subscription period. iv) In respect of Software Consultancy and Support Services, income is recognized based on proportionate completion method as per specific agreements with the customers. It is also submitted that as per AS-II notified by the Central Government a change in accounting policy shall be made only if adoption of a different accounting policy is required by statute or if it is considered that the change would result in a more appropriate preparation or presentation of financial statements by an assessee. The ld. counsel of the assessee drew our attention to p.13 of the Paper Book(PB) which mentions ₹ 1,02,33,944/- as une ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 55 (Ker.), CIT vs. Smt. Pushpa Vijoy [2012]206 Taxman 22 (Ker.) and ITO vs. Shri Anupallavi Finance Investments [2011] 9 taxmann.com 163 (Chennai) wherein it has been held that a tax credit can be given only in cases where the tax is paid on the income in respect of which deduction has been made at source and which is offered for assessment. The issue here is the taxability of ₹ 1,02,33,944/- in A.Y. 2007-08 or A.Y. 2008-09. The assessee has claimed TDS on the above amount in A.Y. 2007-08. The AO wants to bring the above income to tax in A.Y. 2007-08. The ld. counsel of the assessee submits that the said income be taxed in A.Y.2008-09. We also brought to the notice of the ld. counsel of the assessee the implication of section 199 of the Act. At the request of the ld. counsel the case was fixed for hearing on 25.11.2016. Besides the decisions mentioned at para 3.3 here-in-above, the ld. counsel relied on the decision in the case of DCIT vs. Rajeev G. Kalathil (2014) 51 taxmann.com 514 (Mumbai-Trib.). 3.5 The ld. counsel of the assessee submitted that he would not like to press for the admission of additional evidence as submitted on 18/12/2015. Therefore, the application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f certain equipments which were sold subject to condition of installation at premises of the customers. However, from relevant assessment year, assessee changed its accounting policy and recognized sales of its product/equipment on completion of installment and acceptance of equipments at customer s premises. The AO made certain addition rejecting such change. It was held by the Tribunal that since changed accounting policy was as per AS-9 and it had been consistently followed thereafter, addition made by the AO was to be deleted. In Dr. Aman Khera(supra), the issue was whether since the assessee had not rendered services for period of five years, entire amount could not be considered as income in year of receipt and, hence, assessee correctly declared his income in proportion to period for which services were rendered. In Mahindra Holidays and Resorts (India) Ltd. (supra), the issue was whether where assessee was engaged in business of selling timeshare units in its various resorts, entire amount of timeshare membership fee receivable by it at time of enrolment of member was not income chargeable to tax in initial year on account of contractual obligation that was fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d method so far as the change was concerned and on the earlier method if the liability in regard thereto had not already been allowed as deduction. In the above cases, the assessees have not claimed TDS during the concerned assessment year. The implication of section 199 of the Act is absent in the above cases. In the instant appeal, the assessee has claimed the credit for TDS in the year under consideration. There is definite application of section 199 of the Act in the instant appeal. Therefore, the case of the assessee is distinguishable from the decisions mentioned here-in-above relied on by the ld. counsel. In DCIT vs. Rajeev G. Kalathil (supra) relied on by the ld. counsel , the Tribunal has held that It is a fact that deduction of tax for the payment is one of the deciding facts for recognize the revenue of a particular year. But TDS in itself does not mean that the whole amount mentioned in it should be taxed in a particular year deduction of tax and completion of assessment are two different things while finalizing the tax liability of the assessee and AO is required to take all the facts and circumstances of the case not only the TDS certificate. Considering the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring an accounting period, irrespective of actual cash in-flow, is required to be compared with expenses incurred during the same period, irrespective of actual out- flow of cash. The crux of mercantile system of accounting is that revenue is recognized at the time when the invoice is raised to the customer. In the instant case, the assessee has raised invoice to the customer during the previous year 2006-07 relevant to the assessment year 2007-08. 3.7.4 The heart of AS 9 Revenue Recognition is that revenue is recognized at the time when the invoice is raised to the customer. In the instant case, the assessee has raised invoice to the customer during the previous year 2006-07 relevant to the assessment year 2007-08. 3.7.5 In Tanjore Permanent Bank Ltd. (supra), it has been held that a tax credit can be given only in cases where the tax is paid on the income in respect of which deduction has been made at source and which is offered for assessment. In the case of Madura Coats Ltd. (supra), it has been held that an assessee, in whose hands a particular income is not taxed, is not entitled to get the credit in respect of tax deducted at source in respect of such incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77 ITR 857 (CA), the Income-tax law does not march step by step in the footprints of the accountancy profession.' 3.7.8 In CIT. v Eli Lily Co. (2009) 312 ITR 225 (SC), the Hon ble Supreme Court has held that Consequently, it cannot be said that the TDS provisions which are in the nature of machinery provisions to enable collection and recovery of tax are independent of the charging provisions which determine the assessibility in the hands of the employee. Also it has been held therein that Sec. 4 is the charging section. Under s. 4(1), total income for the previous year is chargeable to tax. Section 4(2) inter alia provides that in respect of income chargeable under sub-s (1), income tax shall be deducted at source where it is so deductible under any provision of the 1961 Act, which inter alia brings in the TDS provisions contained in Chapter XVII-B. In fact, if a particular income falls outside s. 4(1) then TDS provisions cannot come in. In CIT v. B.C.Srinivasa Setty (1981) 128 ITR 294(SC), the Hon ble Supreme Court has held that the charging section and the computation provisions together constitute an integrated code. 3.7.9 The present factual matrix is to be tes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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