Accounting Standard 7 profit recomputation requires fresh examination, while TDS credit fails for unrecognised mobilisation advance income.

Recomputation of profits under Accounting Standard 7 requires fresh examination where the assessee contests the treatment of reimbursements payable under third-party contracts as business expenditure and submits supporting material. The profit-related addition is remitted to the Assessing Officer for de novo adjudication after providing an opportunity to the assessee. Tax deducted at source credit on mobilisation advances is not available in the relevant year where the corresponding income has not been recognised or offered to tax during that year. The denial of that credit therefore remains undisturbed.

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Issues: (i) Whether the addition based on recomputation of profits by applying Accounting Standard 7 required fresh adjudication; (ii) Whether credit for tax deducted at source on mobilisation advances could be allowed where the corresponding income was not offered in the relevant year.

Issue (i): Whether the addition based on recomputation of profits by applying Accounting Standard 7 required fresh adjudication.

Analysis: The addition was challenged on the basis that the profit computation incorrectly included reimbursements payable under third-party contracts as business expenditure and that the application of Accounting Standard 7 did not accord with the facts. The material and evidence warranted a de novo examination.

Conclusion: The addition is remitted for fresh adjudication by the Assessing Officer after affording opportunity to the assessee; this issue is in favour of the assessee.

Issue (ii): Whether credit for tax deducted at source on mobilisation advances could be allowed where the corresponding income was not offered in the relevant year.

Analysis: The claim concerned tax deducted at source on mobilisation advances which had not been recognised as income during the year. The lower authorities' rejection was found consistent with the governing statutory provisions.

Conclusion: Credit for the claimed tax deducted at source amount is not allowable for the relevant year; this issue is against the assessee.

Final Conclusion: The profit-related addition requires reconsideration on the assessee's evidence, while the denial of tax deducted at source credit for advances not recognised as current-year income remains undisturbed.

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