TaxTMI 
TaxTMI 
2024 (10) TMI 32
X X X X Extracts X X X X
X X X X Extracts X X X X
....ase was taken up under scrutiny as per notice u/s 143(2) of the IT Act was issued on 20/08/2010. A detailed questionnaire dated 01/02/2011 was sent to the assessee company along with notice u/s 142(1) on 06/07/2011. In response to the above notices, Authorized Representative on behalf of the assessee attended proceeding. On completion of assessment proceedings, Ld. AO passed order dated 22/03/2013. 3. Appellant/assessee preferred appeal before Ld. CIT(A), which was partly allowed. 4. Being aggrieved appellants, the Department of Revenue and the assessee company preferred present appeals. 5. The Assessee company pleaded ground of appeal as:- "1. That the order of learned Commissioner of Income-tax (Appeals)-IX, New Delhi ["CIT(A)"] is bad both in law and on facts of the case. 2. That the learned CIT(A) has erred in making erroneous observations, assumptions, interpretations and conclusions, both on facts and in law. 3. That the learned CIT(A) has erred in upholding the additions of Rs. 15,23,35,414 crore made by the learned assessing officer in respect of 'Advance received from Customers' under the contracts entered into by the assessee, w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ddition to the income of the amount received towards advance under the contracts, based on irrelevant considerations and ignoring the audited financial statements. Ld.CIT(A) has erred in ignoring orders of the CIT(A) for earlier years in this regard and observations made therein as regards following of Accounting Standards by the assessee. Ld. CIT(A) erred in merely following order passed in earlier years regarding addition in respect of advance received from customers under AMC contract, without appreciating that the observation made in the earlier year assessment orders and CIT(A)'s orders are factually erroneous. The issue is covered by in Assessee's own case in order(s) dated July 27, 2023 passed by Hon'ble High Court of Delhi in the case of PCIT vs ThyseenKrupp Elevator (India) Pvt. Ltd. ITA No. 1182 & ITA No. 1214 of 2018 for A.Y 2005-06, ITA No. 1233 of 2018 for A.Y 2006- 07 and ITA No. 1198 & ITA No. 1269 of 2018 for A.Y 2007- 08. Copy of order(s) enclosed as Annexure 1 (Pg. 10 to 21). Covered by assessee's own order passed by Hon'ble ITAT for J.K 2005-06 to AY 2007-08 (See Vol-II Page 494-532). Covered by assessee's own order passed by Hon'ble ITAT for ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....me-tax Act, 1961, makes no provision with regard to valuation. It charges for payment of tax, the income which is to be computed in the manner provided by the Act. The Assessing Officer is required to compute the Income in accordance with the method of accounting regularly employed by the assessee and in appropriate cases he has to make appropriate variations where the system adopted by the assessee does not indicate the profits." 10. This issue was decided by Hon'ble ITAT for A.Y. 2005-06, wherein para 21 of the order, it held that:- "21 This method of accounting cannot be found fault with as assessee is regularly following the same. In view of this, we direct the Id Assessing Officer to delete the addition of Rs. 20313101/- on account of advances received. " (Pg. 500-501/Vol-II) Once again the Tribunal reiterated it in its order for A.Y. 2008-09 in para 6 of the order at Pg. 520-523/Vol-II. The assessing officer, following his order for A.Y. 2008-09 and earlier years held that these advances are taxable receipts in the hands of the assessee. Ld. A.O. also brushed aside the assessee's contention that the assessee has been correctly maintaining its accounts in acc....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... held that the accounts were not maintained in accordance with AS -7. It is reiterated that Ld. CIT(A) made the observation without confronting the assessee. For this purpose the Ld. CIT(A) has compared terms of clause 12 with those of Cl. 10 of the Contract. The said clauses of the contract are at Pgs. 194-195/Vol-I. A(e) Ld. CIT(A) emphasized Schedule of Dates of Milestone Payments as per clause 12 read with completion period stipulated in clause 10 of the Contract read with annexures 3. It is an admitted position that as on 31.3.2009 the assessee had received only 20% of the contract value which clearly shows that only the first two milestones were achieved by that date and the remaining milestones like import and delivery of material at site were yet to be achieved. Therefore, no payment of more than 20% of the value of the contract was received during F.Y. 2008-09. (Pg. 228/PB). A(f) Ld. Ld. CIT(A) has confused 'Milestone Payments' stipulated in the contract for the purpose of billing with the actual progress in execution of work on the basis of which income is recognized in the accounts. Method of accounting has been consistently followed by the assessee sin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed 'Advance from Customers' and "Deferred Revenue" are shown as 'current liabilities' (Schd. 10 ofB/S at Ps. 14/Vol-I). whereas the amount of revenue recognised but not billed to the customer is shown as 'Unbilled Revenue' under 'other current assets' in the accounts. Thus, the Ld. CIT(A) in A.Y. 2011-12 accepted the assessee's explanation after duly examining it. It appears from the official website of the IT AT Delhi the Department is not in appeal for A.Y. 2011-12. The assessee has also not received any notice of revenue's appeal from the ITAT. B Lanco Infra. B(a) The Ld. CIT(A) has observed that "No evidence was produced by the appellant in support of its claim that the revenue was rightly recognized at an amount lower than the bills raised. " This adverse inference was drawn without giving the assessee any opportunity. The Ld. CIT (A) again confused the basis of billing and the basis of booking income as per AS-7. As desired by him, the assessee had submitted details of revenue from the contract recognized upto 31.3.2009 (Pg. 174/Vol.-I). These details clearly show advances received/ progress billing, estimated cost, cost incurred till 31.3.2009. The computat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Tribunal in para 10 & 11 of order of A.Y. 2008-09 wherein it followed its own orders of earlier years. (Pg. 524-526/PB-II). 15. Ld. Authorized Representative of Assessee submitted that learned CIT(A) has erred in upholding the disallowance of Rs. 8,51,913 debited under the accounting head 'TDS recoverable written off in the books of account, without appreciating the nature of the expenses and by mechanically following the orders passed by CIT(A) for earlier assessment years. (para 6.5 at Pg. 18 of order). The Ld. CIT(A) has upheld the disallowance even though the assessee had explained that the amounts equivalent to the TDS amount were withheld by the customers but were neither deposited in Govt, treasury & nor did the assessee claim credit of this amount in earlier years (para 6.5 at Pg. 18 of order). The assessee, had booked it as part of income in its accounts in the relevant year. These facts have not been questioned by the Ld. A.O. and Ld. CIT(A). The write off of such debts in allowable deduction u/s 36(l)(vii) r.w. S. 36(2) of Act. The Ld. CIT(A) however followed his predecessor's order for A.Y. 2008-09. The Hon'ble Tribunal has dealt with this issue in favour of assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
....atment of advances followed by the assessee as per applicable ICDS. 19. The advance of Rs. 15.23 Crore from customers received by the assessee which has been treated as income of the year by Ld. AO and confirmed by Ld. CIT(A). 20. Hon'ble High Court of Delhi in assessee's own case for AY 2005- 06, 2006-07 and 2007-08 has accepted the accounting treatment given by the assessee to 'Advance received from Customers' relying on the decision of Taparia Tools Ltd. (SC) (2015) 55 Taxmann.com 361. (Annexure -2 Pg. 22 to 33) observing as under:- "In order to determine the net income of an accounting year under the mercantile system of accounting, the revenue and other incomes are matched with the cost of resources consumed. The matching is to be done on accrual basis. Under this matching concept, revenue and income earned during an accounting period irrespective of actual cash in-flow is to be compared with expenses incurred during the same period irrespective of actual out-flow of cash. The Income-tax Act, 1961, makes no provision with regard to valuation. It charges for payment of tax, the income which is to be computed in the manner provided by the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ors (AMC) as 'advance' at the beginning of the year and the end of every month transfer the proportionate amount to the Revenue account. The method adopted by the assessee is in accordance with AS-9. This method has been approved by the Hon'ble Tribunal in para 10 & 11 of order of A.Y. 2008-09 wherein it followed its own orders of earlier years. (Pg. 524-526/PB-II). Accordingly, Ground Nos. 3 to 3.3 of assessee's appeal are sustainable. 24. Issue of disallowance of Rs. 8,51,913/- debited under 'TDS recoverable written off' in the books of account is covered by assessee's own case. Accordingly, Ground No.4 is also sustainable. 25. Ld. CIT(A) deleted disallowance of Rs. 2,71,50,036/- on account of depreciation claimed on intangible assets. The issue is covered by the assessee's own case in order dated 15th October, 2015 for AY. 2003-04 by the Hon'ble High Court. "3. The first question urged by the Revenue in this appeal is whether the ITAT was right in holding that the Assessee was entitled to depreciation on the 'contract maintenance portfolio' under Section 32(1)(ii) of the Act ? 4. The findings recorded by the ITAT is that the Assessee had acquired maintena....