2022 (3) TMI 1506

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....on the corporate tax front while passing the draft assessment order. 3. Aggrieved, the assessee raised its objections before the DRP who gave relief with regard to the transfer pricing adjustments directing the AO to delete the proposed adjustments. On the corporate taxes aspects, the DRP gave partial relief to the assessee. With regard to the additions on account of disallowance of claim u/s 40a(ia), the DRP gave a direction to the AO to examine the details furnished by the assessee with regard to subsequent TDS deduction and remittance, and to give relief as appropriate. With regard to deferred revenue, the DRP noted that in the draft assessment order no addition has been proposed (due to negative movement in the deferred revenue / Cost) and hence DRP did not issue any directions. The AO issued a final assessment order based on the directions of the DRP. In the final assessment order the AO retained the disallowance made u/s 40a(ia) and the observations made towards deferred revenue expenditure. There was mistake apparent on record in the order passed by the TPO u/s 92C of the Act and the assessee preferred a rectification application. As a result of the rectification of the s....

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.... 3.1 Without prejudice and notwithstanding the Appellants grounds on taxability of Deferred Revenue made in AY 2009-10, the Ld.AO and the Hon'ble DRP has erred in law and on facts not granting any relief to the Assessee with respect to the negative movement of Deferred Revenue account, as the positive movement of the same has been assessed to tax in earlier tax assessments (i.e. in AY 2008-09, AY 2009-10); and 3.2 The Ld. AO and the Hon'ble DRP has erred in law and on facts on one hand upholding the principles of taxation of amount of deferred revenue pronounced by the erstwhile AO in the assessment order of earlier AY's and on the other hand not granting the credit in respect of income recognized by the Appellant in AY 2011-12. 3.3 Without prejudice to the above, the Ld.AO and the Hon'ble DRP has erred in law and facts in not appreciating the fact that non-grant of relief in respect of negative movement of Deferred Revenue results in double taxation of same income in different years which is not permissible under the taxation laws. 3.4 The Hon'ble DRP and the Ld. AO, has erred in law and in facts in holding that the DRP is not empowered....

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.... the same amount is claimed as a deduction in the year under consideration u/s.40(i)(ia) based on the fact that tax is deducted and is remitted on the entire amount. The Ld AR also submitted that the party-wise detail of tax deduction at source (TDS) along with remittance with the acknowledgement for filing eTDS returns is furnished before the lower authorities (Page 147 to 216 of paper book). The Ld AR also submitted that in the proceedings initiated u/s.201(1) / 201(1A) for the previous year relevant to assessment year 2010-11, the same party-wise details of TDS remittance was submitted and is being perused by the ITO TDS (LTU) for computing the interest chargeable u/s.201(1A) as per the direction of the CIT(A) -14 (OGE in page 75 of the paper book). The Ld AR therefore contented that the details of TDS remittance on the sum of Rs. 55,27,89,460, is duly verified by ITO TDS (LTU) and hence the assessee is eligible to claim for deduction u/s.40(a)(ia) in the year under consideration. 12. The Ld DR relied on the written submissions. 13. We heard the rival submissions and perused the material on record. The provisions of Section 40(a)(ia) provides that - 40. Notwithsta....

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....riod of time (from 3 to 10 years) with various delivery/supply milestones as agreed with the customer. The pattern for transfer of risks and rewards to the customers and billing arrangements is determined as per the terms of the contract entered into with each customer. Given the significant size of the contacts, the long span of time for delivery/supply of services, terms for transfer of risks and rewards and billings, the cost and revenue in relation to such contracts are recognized in profit and loss account in accordance with the applicable accounting standards issued by the Institute of Chartered Accountants of India. The assessee separately tracks the amounts in respect of such contracts and the same are included in the financial statement under various heads like 'project in progress', 'finished goods inventory', 'stores and spare parts' and 'deferred revenue'. The assessee has been recognizing revenue expenses under the mercantile system of accounting in accordance with principle laid down by accounting standard 9 and the same has been consistently followed in its computation of taxable income as per the provisions of sec. 145 of the Act. 16. During the assessment year 2....