AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (6) TMI 1585
X X X X Extracts X X X X
X X X X Extracts X X X X
....issue is that the Ld.CIT(A) has erred in confirming the order of the Ld.AO who had made addition of Rs. 18,94,96,500/- in the hands of the assessee for not having recognized the revenue income in accordance with Mercantile System of Accounting though the accounting standard AS9 specifically states that revenue need not be recognized if there is uncertainty in realizing the income. 3. The brief facts of the case are that the assessee is a private limited company engaged in the business of software development, filed its return of income for the assessment year 2013-14 on 29.11.2013 admitting loss of Rs. 87,94,316/-. The case was selected for scrutiny under CASS and notice U/s.143(2) of the Act was issue on 03.09.2014. Finally assessment ord....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ery of these amounts, which aggregates to ZAR 57,000,000 equivalent Rs. 372,376,500 for services delivered during the financial years: 2011-12 and 2012-13. Also Refer Note 23(b)." 4.1 Further in the note item No.23(b) it was stated as follows:- "23. (b) Trade Receivables from Department of Education-Limpopo Province During the previous year, the company entered into a contract with Department of Education - Limpopo Province, for supply of Hey! Math solution (supply of hardware and license fee for use of Hey! Math software included in this hardware) to various schools in Limpopo Province over a period of three years. The Company recognized a revenue of ZAR 10,220.00 (equivalent INR 67,758.600) for sale of hardware and ZAR 28,500.000 (equi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....approval in this regard is awaited." 4.2 Based on the above notes, the Ld.AO queried as to why the amount of Rs. 18,94,96,500/- was not recognized as revenue income for the year ended 31.03.2013, against which the assessee has replied in its letter dated 24.03.2016 as follows:- "b. The Department of Limpopo province was declared bankrupt during fag end of the year 2011. The Limpopo Province was brought under intervention and financial administration of the South African National Treasury under Section 100(1)(b) of the constitution of South Africa in December 2011. We signed a contract with Department of Education Limpopo Province (Limpopo DOE) during 2011 for a period of 3 years, with a revenue of ZAR 28,50,000 each year for FY 2011-12, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ompany did not recognize the corresponding income from the said contract, although it raised a bill. The AO has observed that the appellant company was following mercantile system of accounting and it could not change the method of accounting only for one assessment year. With this observation, the AO assessed the income from the said contract as per the bill raised by the appellant company. 4.3.2 Before the CIT(A), the appellant's AR has contended that. the AO has refused to accept the Accounting Standard-9 as per which income which is not likely to arise to an assessee need not be recognized as per AS-9. 4.3.3 I have considered both the points of view. I have perused the appellant company's statutory audit report wherein it is....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erefore, the appellant cannot rely on the decision taken in the earlier assessment year. 4.3.4 In view of the above remarks, I concur with the AO in assessment of the income of Rs. 18.94 crore which was not recognized by the appellant although it was following mercantile system of accounting. For these reasons, the appellant's ground on this issue is dismissed." 6. Before us the Ld.AR relying on the Accounting Standard 9, vehemently argued stating that if there is a significant uncertainty in the ultimate collection of the revenue, then revenue recognition has to be postponed and has to be recognized only when it becomes reasonably certain that the ultimate collection could be realized. Accordingly it was pleaded that the addition made b....