2012 (12) TMI 65 - AT - Income Tax

Tribunal Upholds Revenue Recognition Method in Assessee's Favor for Multiple Assessment Years

Dy. /Asstt. Commissioner of Income-tax, Circle 3(1), New Delhi. Versus M/s. CTM India Ltd.,

Dy. /Asstt. Commissioner of Income-tax, Circle 3(1), New Delhi. Versus M/s. CTM India Ltd., - TMI Issues Involved:1. Deletion of addition on account of disallowance of extra depreciation on computer peripherals/accessories.2. Deletion of addition on account of advance from customers.Detailed Analysis:Issue 1: Deletion of Addition on Account of Disallowance of Extra Depreciation on Computer Peripherals/AccessoriesThe department's appeal for A.Y. 2006-07 contended that the CIT(A) erred in law and on facts by deleting an addition of Rs. 29,740/- related to the disallowance of extra depreciation on computer peripherals/accessories. The Assessing Officer (AO) had restricted the depreciation to 15%, arguing that only computer software is eligible for 60% depreciation as per Income-tax rules, not peripherals like printers and scanners. However, the CIT(A) relied on the Delhi High Court's decision in the case of CIT Vs. BSES Yamuna Power Ltd., which held that computer accessories and peripherals are integral parts of a computer system and thus eligible for 60% depreciation. The Tribunal upheld the CIT(A)'s order, noting no reason to interfere given the jurisdictional High Court's ruling. Consequently, the department's ground was rejected.Issue 2: Deletion of Addition on Account of Advance from CustomersFor A.Y. 2006-07, the department challenged the CIT(A)'s deletion of an addition of Rs. 1,08,46,479/- made by the AO, who had treated advances received from MATE as income. The AO argued that the assessee had sufficient time to recognize profit from these advances but failed to do so. The CIT(A) admitted additional evidence under Rule 46A, considering the assessee's consistent accounting method of recognizing revenue upon the transfer of significant risks and rewards of ownership to customers. This method was also accepted by the department in subsequent years. The Tribunal agreed with the CIT(A), emphasizing that the assessee's consistent accounting practice should not be disturbed for a single year. The Tribunal upheld the CIT(A)'s order and rejected the department's ground.Appeals for A.Y. 2008-09 and A.Y. 2009-10The department's appeals for A.Y. 2008-09 and A.Y. 2009-10 involved similar issues regarding the deletion of additions on account of advances from customers (Rs. 49,32,250/- and Rs. 54,16,984/-, respectively). The Tribunal noted that the facts and issues were identical to those in A.Y. 2006-07. For the same reasons mentioned in the detailed analysis for A.Y. 2006-07, the Tribunal upheld the CIT(A)'s orders for both years and rejected the department's grounds.ConclusionThe Tribunal dismissed all three appeals of the Department and the cross objections of the assessee for A.Y. 2006-07, upholding the CIT(A)'s orders across all assessment years. The consistent accounting method followed by the assessee was recognized and accepted, ensuring that revenue recognition aligned with the transfer of significant risks and rewards of ownership, not merely the receipt of advances.