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TMI Blog2023 (8) TMI 1509X X X X Extracts X X X X X X X X Extracts X X X X ..... he addition made on account of unearned revenue on the transaction of sale when the assessee company did not provide complete details to the Ld DRP and thus had approached the Ld CIT(A) with unclean hands 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was correct in not applying the provisions of Accounting Standard-9 pertaining to 'retail sale' specifically referred by the Ld. AO whereas the assessee company is a distributor and makes sales to end customer?" 3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the additions made on account of unearned revenue on the transaction of sale when unearned revenue on transaction of sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts requirements. Assessee filed its return of income on 25-11-2011, declaring NIL income after set-off of brought forward losses of Rs. 25,40,93,477/-. Thereafter, assessee filed a revised return on 27-03-2013 again at NIL, but after set-off of brought forward losses of Rs. 30,36,05,076/-. This reflects that either assessee has reduced its revenue or enhanced expenses, that why a higher figure of B/f. losses required to be absorbed. Case of the assessee was selected for scrutiny vide notice dated 02.06.2012. 3. It was observed by the AO that out of total revenue of Rs. 65,61,86,084/- assessee declared Rs. 35,53,56,525/- as current year's revenue and balance amount of Rs. 30,08,29,559/- was being carried forward through balance sheet as "Un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred its revenues, but has charged all the related expenses- training cost, marketing cost and other costs attributable to the sales without matching it with the revenue in the year of sale, which is in violation of "Matching Principle". The revenue recognition cannot be deferred in the instant case, even if certain services are required to be performed by the assessee, expenses on such maintenance services can be charged to P&L account on actual basis." 5. On this issue of Matching Principle, assessee submitted its explanation before the Ld. CIT (A) vide para 40, 41 and 42 of the Ld. CIT (A)'s order (Under the head assessee's submissions) on page 30 as under: "40. without prejudice to our submissions, the Ld. AO has also erred in observ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue relevant extract of coordinate bench's finding vide ITA No. 7210/Mum/2018 is reproduced herein below as under: "61. Upon careful consideration we find that assessee has been following consistent system of revenue recognition. The assessee is inter alia engaged in the business of marketing, promotion and sale of 'Red Hat subscriptions' to customers in Indian sub- continent to avail support services that are for the open-source software system during the subscription period ranging from one to seven year, which is established by the special services agreement or contract. As per the consistent policy of revenue recognition, the assessee accounts for the revenue for service which would be performed in future year in its books as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when services are provided by indeterminate number of acts over a period of specified time. Revenue may be recognized on straight line basis over specified period. The assessee has further relied upon the analogy from recently introduced section 43CB. In the light of the above assessee's contention is that subscription package agreed may involve various support services which cannot be pre-determined. Recipient of service can raise queries numerous times during the tenure of agreement. Similarly, any correction bug fixes etc. can be required by the customers any time during the duration of the agreement. In the light of the above submissions in our considered opinion the Assessing Officer has clearly erred in changing consistently foll ..... X X X X Extracts X X X X X X X X Extracts X X X X
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