TaxTMI 
TaxTMI 
2015 (4) TMI 139
X X X X Extracts X X X X
X X X X Extracts X X X X
....bsp; 2. The learned Commissioner of Income tax (Appeals) erred in holding that even in the Mercantile System of accounting wherein credit of tax deducted at source has been claimed during the year, such contingent income did not accrue as per the method of accounting regularly followed by the assessee. 3. The learned Commissioner of Income tax (Appeals) erred in holding that claim of expenditure by the principal and credit of income to the account of assessee after deduction of tax thereof are irrelevant considerations as per the method of accounting regularly followed by the assessee. 4. The appellant craves leave to add, alter or amend any or all the grounds of appeal. 2. The assessee is an individ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ting the addition of Rs. 32,72,500/- made on account of contingent income not credited to Profit & Loss account. The CIT(A) erred in holding that even in the Mercantile System of accounting wherein credit of tax deducted at source has been claimed during the year, such contingent income did not accrue as per the method of accounting regularly followed by the assessee. Accordingly, requested to set aside the order of CIT(A) be set aside and that of Assessing Officer be restored on the issue. On the other hand, the learned Authorized Representative has supported the order of CIT(A) on the issue. 4. After going through the rival submissions and material on record, we find that the assessee's main activity is that of commission agent/dealer fo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....reveals that the commission earned from Daikin have been offered for taxation on the basis of completion of the service and installation contract in the respective year and this method has been consistently followed year to year by assessee. This method is also seen in consonance with the accounting method AS-9 in respect of service contract and installation fee which states that revenue be recognized only when equipment is installed and accepted by customer. The transaction-wise details of amount shown as contingent income by assessee and its subsequent billing is revealed in chart of commission contingent income as under: Date of credit JV No. Bill Date Bill No. Commission Service Tax Bill Amount Mths Gap TDS Dt. of Re Mths Gap....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ility to tax on a hypothetical income. What is to be considered is whether the income has really accrued to the assessee. The question whether real income has materialized has to be examined in the context of commercial and business realities of the situation in which the assessee is placed and not with reference to system of accounting. The accrual of income does not depend on the accounts of assessee. Whatever the position of accounts, income would have to be referred back to the chargeable accounting period during which such profits or gains actually arose or accrued and the assessee would be liable to tax in respect of the same during the correct and proper chargeable accounting year. 4.1 The mercantile accounting system has some set r....