TaxTMI 
TaxTMI 
2026 (3) TMI 943
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....o had responded to the same from time to time. Thereafter, the Assessing Officer passed the assessment order dated 20.03.2024 u/s. 143(3) of the Act wherein he added a sum of Rs. 4,26,66,144/- being the charges received by the assessee towards Annual Maintenance Contract (AMC). Aggrieved by the order of the Assessing Officer, the assessee preferred an appeal before the ld.CIT(A) and assailed the assessment order on various grounds. Subsequently, the ld.CIT(A) passed an order dated 08.10.2025 confirming the addition of the Assessing Officer. Aggrieved by the order of the ld.CIT(A), the assessee has preferred the present appeal. 3. The brief facts leading to the present appeal emanating from the records are that the assessee is a company engaged in manufacture, supply, erection, maintenance of elevators and escalators. For the year under consideration, the assessee's case was selected for scrutiny under CASS and notices were issued upon the assessee asking to furnish information for various issues. Among the many issues scrutinised, the Assessing Officer accepted the assessee' explanations and did not propose any variation. However, for the issue pertaining to AMC, the Assessing O....
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.... year of receipt. The ratio of that decision is clearly distinguishable and inapplicable to the present case, as the lessor in that case was not required to render any further services after leasing the film, whereas in the present case, the Assessee is obligated to provide maintenance services continuously throughout the tenure of the AMC. The assessee further went on to submit that for the Assessment Year 2009-10, the Hon'ble Jurisdictional High Court, Madras, in assessee's own case, decided identical issue pertaining AMC in favour of the department [TCA No.54 of 2015] and that a Special Leave Petition against the decision is pending before the Hon'ble Supreme Court. The ld.CIT(A), followed the decision of the Hon'ble Madras High Court in the Assessee's own case (supra), wherein it was held that the entire advance receipts under the AMC should be offered to tax in the year of entering into the contract and confirmed the addition made by the Assessing Officer vide order dated 08.10.2025. 5. Before us, the ld.AR for the assessee argued that the Assessing Officer had not considered the fact that the assessee follows an accounting method which recognises revenue only when it a....
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....ire income accrued at the time of raising the invoice (para 110) and thus concluded that the AMC charges were taxable in the year of receipt. The taxing point under the Service tax laws cannot be imported to Income Tax as under Income Tax accrual of income depends on revenue recognition as per AS-9. Further while doing so, the Hon'ble High Court did not consider the consequential and settled principle that if the entire income is brought to tax upfront, the estimated expenditure expected to be incurred in relation to such income must also be allowed as a deduction, as laid down in Calcutta Co. Ltd. (37 ITR 1), Rotork Controls India (P) Ltd. (314 ITR 62, SC) and Bharat Earth Movers Ltd. Further, appropriate credit ought to be given for income already offered to tax in subsequent years. The ld.AR for assessee also submitted that the ld.CIT(A) did not apply Section 43CB of the Act in the present case. The said section is an insertion by the Finance Act, 2018 with retrospective effect from 01.04.2017 to give statutory authority to ICDS IV, in view of some court decisions not accepting ICDS. In the assessee's case, the AMC involves rendering of maintenance services through an indetermin....
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....ing from a construction contract or a contract for providing services shall be determined on the basis of percentage of completion method in accordance with the income computation and disclosure standards (ICDS) notified under sub-section (2) of section 145: Provided that profits and gains arising from a contract for providing services,- (i) with duration of not more than ninety days shall be determined on the basis of project completion method; (ii) involving indeterminate number of acts over a specific period of time shall be determined on the basis of straight line method. (2) For the purposes of percentage of completion method, project completion method or straight line method referred to in sub-section (1)- (i) the contract revenue shall include retention money; (ii) the contract costs shall not be reduced by any incidental income in the nature of interest, dividends or capital gains." 9. From the explanatory notes regarding this section, it can be seen that the intention of legislature in introducing this provision to legitimatise the notified IDCS and to regularise the compliance of such notified ICDS, since many taxpa....