TaxTMI 
TaxTMI 
2015 (4) TMI 139
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....ed to Profit & Loss account. 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....
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....venue, inter alia, submitted that CIT(A) erred in deleting 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 assess....
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....sessee of the various transactions entered into clearly 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. Commis....
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....ued merely on the ground that the assessee had followed the mercantile system of accounting. Even if the assessee makes a debit entry to that effect no income could be said to have accrued to the assessee. In the case no income has accrued there can be no liability 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 cha....
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....as accrued, so as to require inclusion in taxable income. Matching principle in accounting does not make legal sense in every case. The Pune ITAT Bench in the case of Dana India Pvt. Ltd. ITA No. 375/PN/09 A.Y. 2004-05 dated 09.02.2011 by referring to the decision in the case of E.D. Sasson and Co. Ltd. Vs. (1972) 86 ITR 757 (SC) on similar set of facts held that the Assessing Officer was not justified in preponing the amount and deleted the addition to income. 4.2 In the case before us, work relate to the installation and erection of the equipment has been completed in subsequent years as the time taken varies between 1 month to 21 months. Therefore, the accrual of income earned happened only in subsequent years and not in the impugned ....