TaxTMI 
TaxTMI 
2019 (3) TMI 1536
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....s services in the form counselling to employees of the clients' organization like psychological aspects of the employee, stress management etc. It is not in dispute that as per the sales ledger maintained by the assessee, the total value of sales for the relevant previous year i.e., the value of services for which the assessee had contracts with the clients was a sum of Rs. 3,15,97,038. The AO, however, found that from and out of the total sales, the assessee had reduced a sum of Rs. 1,50,84,240. When the assessee was asked to explain why the aforesaid sum was reduced from the sales figure, the assessee explained that the counselling done on the clients' employee by the assessee is for the purpose of maximizing the performance of employee of the assessee's client. Since it was intangible in nature, the assessee recognizes accrual of income only when the bills are raised on the clients for services rendered. This position was not accepted by the AO, as according to the AO, such reduction from the sale value was not permissible in law. 3. Before the CIT(Appeals), the assessee made detailed submissions with regard to the nature of the amount debited in the profit & loss account by ....
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....efore the revenue can be recognized only when services are substantially rendered by the assessee and when the bills are raised. This, in substance, is the conclusion of the CIT(Appeals). 6. Aggrieved by the order of the CIT(Appeals), the assessee has preferred the present appeal before the Tribunal. 7. We have considered the rival submissions of the ld. counsel for the assessee, who reiterated the submissions as were made before the lower authorities. The ld. counsel also filed before us a statement showing the reconciliation of reversal of provisional entry against the actual invoice booking. The ld. DR relied on the order of CIT(Appeals). At the time of hearing, the ld. counsel for the assessee, without prejudice to his submissions made before the CIT(Appeals) which were reiterated before the Tribunal, submitted that in the event of Tribunal not accepting the stand taken by the assessee, then the income which was not recognized by the assessee in the present assessment year and which was postponed and recognized in the subsequent assessment year, will suffer double taxation. His submission was that in such an event, where the same income is taxed in this year and offered t....
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....p, the revenue is the amount of commission and not the gross inflow of cash, receivables or other consideration. 4.2 Completed service contract method is a method of accounting which recognises revenue in the statement of profit and loss only when the rendering of services under a contract is completed or substantially completed. 4.3 Proportionate completion method is a method of accounting which recognises revenue in the statement of profit and loss proportionately with the degree of completion of services under a contract. Explanation 5. Revenue recognition is mainly concerned with the timing of recognition of revenue in the statement of profit and loss of an enterprise. The amount of revenue arising on a transaction is usually determined by agreement between the parties involved in the transaction. When uncertainties exist regarding the determination of the amount, or its associated costs, these uncertainties may influence the timing of revenue recognition 7. Rendering of Services 7.1 Revenue from service transactions is usually recognised as the service is performed, either by the proportionate completion method or by the completed s....
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....ation receivable for the sale of goods, the rendering of services or from the use by others of enterprise resources is reasonably determinable. When such consideration is not determinable within reasonable limits, the recognition of revenue is postponed. 9.5 When recognition of revenue is postponed due to the effect of uncertainties, it is considered as revenue of the period in which it is properly recognised. 10. Revenue from sales or service transactions should be recognised when the requirements as to performance set out in paragraphs 11 and 12 are satisfied, provided that at the time of performance it is not unreasonable to expect ultimate collection. If at the time of raising of any claim it is unreasonable to expect ultimate collection, revenue recognition should be postponed. 11. In a transaction involving the sale of goods, performance should be regarded as being achieved when the following conditions have been 135 fulfilled: (i) the seller of goods has transferred to the buyer the property in the goods for a price or all significant risks and rewards of ownership have been transferred to the buyer and the seller retains no effective control of th....
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....unting regularly employed by the assessee. (2) The Central Government may notify in the Official Gazette from time to time Accounting standards to be followed by any class of assessees or in respect of any class of income. (3) Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (1) or Accounting Standards as notified under sub-section (2) have not been regularly followed by the Assessee, the Assessing Officer may make an assessment in the manner provided in section 144. 12. Vide Notification No. 9949, dated 25-1-1996 [(1996) 130 CTR (St) 33], Accounting Standard I relating to disclosure of accounting policies and Accounting Standard II relating to disclosure of prior period and extraordinary items and changes in accounting policies had alone been notified as Accounting Standards to be followed by an Assessee and no other accounting standard has been notified. 13. AS-9 has not been notified u/s.145 of the Act and hence does not have statutory force. The Assessee follows mercantile system of Accounting. AS-9 cannot be said to be either Cash system o....