Revenue recognition for leases: lease treated as income not sale; lessor taxed on rent and entitled to depreciation.
ICDS IV recognises revenue when risk and rewards transfer, so leases are not sales: lease rent is taxable income and the lessor may claim depreciation. Under hire purchase, both parties cannot claim depreciation on the same asset; substance-over-form principles indicate the owner giving the asset on hire should recognise sale while the hirer is entitled to depreciation.

Revenue recognition under ICDS IV applies to real estate developers and BOT operators absent a specific exclusion.
In the absence of any specific ICDS notified for real estate developers, BOT projects and leases, the relevant provisions of the Income tax Act and applicable ICDS (including ICDS III and ICDS IV) apply to revenue recognition, income computation and disclosure for those transactions.

Work-in-progress treatment: costs to secure construction contracts must be capitalised and not deducted until related work is performed.
Precontract costs to secure construction contracts must be treated as an asset and characterised as work-in-progress, representing amounts due from customers, and therefore should not be claimed as a deduction in the year of incurrence but carried forward and recognised when the related construction or installation work is performed.

Incidental income in construction contracts: deduct from contract costs; investment returns taxed separately under income provisions.
Incidental incomes arising from construction contracts are not part of contract revenue and must be reduced from contract costs; examples include sale of surplus materials and disposal of plant and equipment. Income in the nature of interest, dividends and capital gains is excluded from incidental income and is taxed separately under applicable law.

Proviso to section 36(1)(iii) inapplicable to construction contracts; interest on contract borrowings is deductible for execution purposes.
Proviso to section 36(1)(iii) does not apply to borrowings by contractors for executing construction contracts because such borrowings are not for acquisition of an asset; therefore interest on capital borrowed attributable to a construction contract is not barred by the proviso and is allowable as a deduction under ICDS III.

Retention money recognition: recognise as revenue only when reasonable certainty of ultimate collection exists under ICDS construction rules.
Retention money within a construction contract is part of contract revenue and should be recognised as revenue on billing only when there is reasonable certainty of its ultimate collection, based on the contract's performance criteria and para 9 of ICDS on construction contracts.

Contract revenue recognition: recognize only costs incurred when outcome is not reliably estimable; early-stage limit applies.
When the outcome of a construction contract cannot be estimated reliably, revenue is recognized only to the extent of costs incurred, subject to an early-stage completion limit specified in the Income Computation and Disclosure Standard on Construction Contracts.

Percentage of completion method recognizes construction contract revenue, expenses and profit by proportion of work completed.
Recognition of revenue and expenses for construction contracts under ICDS III is governed by the percentage of completion method, whereby revenue, costs and profit are recognized by reference to the stage of completion of contract activity on the reporting date and reported in proportion to work completed.

Bad debt deduction available without book write off when previously taxed income becomes irrecoverable under the statutory proviso.
If contract revenue was offered to tax under ICDS but not recorded in the books and later becomes irrecoverable, it cannot be written off in the absence of a book entry; instead, deduction may be claimed under the statutory proviso allowing bad debt deduction without book write off where the amount was taken into account in computing income in the previous year in which it became irrecoverable or an earlier year.

Retention money recognition as revenue requires reasonable certainty of ultimate collection under ICDS on construction contracts.
Retention money, as part of overall contract revenue under the ICDS on construction contracts, shall be recognised as revenue only when the contingency tied to performance is satisfied or there is reasonable certainty of its ultimate collection.

Inventory recording requirement under ICDS II now mandates service providers to maintain inventories and disclose valuation for tax purposes.
Service providers are required to maintain records of inventories under the ICDS II standard on valuation of inventories, extending mandatory inventory recognition, valuation and disclosure obligations to entities providing services for purposes of income computation.

Valuation of Inventories: ICDS II applies to traders and dealers of primary commodities while excluding producers.
ICDS II governs valuation of inventories for income computation and disclosure. The standard is excluded for a producer of primary goods like livestock, agricultural and forest products, mineral oils, ores and gases, but it applies to persons who trade or deal in those commodities; therefore the producer/dealer distinction determines whether ICDS II applies.

ICDS II valuation excluded for closely held company shares when ICDS VIII classifies them as securities outside its scope.
Shares of a company in which the public are not substantially interested are excluded from ICDS II valuation even if held as inventory, because ICDS VIII's definition of securities expressly includes such shares, placing them outside ICDS II's scope.

ICDS II applicability to derivatives: derivatives held as inventory fall under ICDS II because securities exclusion applies.
Where an assessee holds derivatives as part of inventory, the valuation and related provisions of ICDS II apply because the definition of securities in ICDS VIII expressly excludes derivatives, so such instruments are governed by the inventory valuation standard rather than the securities disclosure regime.

Disclosure of accounting policies: ICDS requires taxpayers to disclose net ICDS effect in returns and tax audit report.
ICDS I mandates disclosure of significant accounting policies and requires the net effect on taxable income from application of ICDS to be disclosed in the Return of Income; ICDS disclosures are to be made in the tax audit report in Form 3CD, with no separate disclosure requirement for persons not liable to tax audit.

Marked-to-market gain recognition: ICDS I's non-recognition rule for MTM loss applies equally to gains.
Recognition of marked-to-market losses or expected loss is disallowed under ICDS I unless permitted by other ICDS provisions; the same conditional rule applies mutatis mutandis to recognition of marked-to-market gains or expected profit, so gains or anticipated income may not be recognised for income computation unless another ICDS expressly authorises recognition.

Accounting Policies: treat ICDS I as computation policies affecting taxable income computation, not books of account.
ICDS I should be read as prescribing computation policies for taxable income so that accrual, going concern, consistency, substance over form and non recognition of mark to market losses apply to income computation under business or other sources, and the disclosure requirement concerns the policies used in computing income rather than the policies used for maintaining books of account.

Interpretation of undefined tax terms: ICDS provisions generally govern unless declared ultra vires by a competent authority.
Where a term in the ICDS coincides with terminology in Accounting Standards, the AS interpretation generally applies; where no AS analogue exists, judicial tax-law interpretations ordinarily govern. If a current ICDS provision conflicts with earlier AS or judicial interpretations, the ICDS provision will prevail for tax computation and disclosure unless declared ultra vires by a competent court or authority.

ICDS applicability: ICDS do not apply to MAT on book profit but apply to AMT on adjusted total income.
ICDS do not apply to MAT because MAT is computed on book profit as per the Profit and Loss Account under company law, with specific statutory adjustments; ICDS are not incorporated into that book profit basis. ICDS apply to AMT because AMT is calculated on adjusted total income derived from total income determined under the regular tax provisions, and ICDS affect that regular computation.

Income Computation standards: specific tax-rule provisions prevail over general ICDS when the two provisions conflict.
ICDS are subordinate general principles for computing income and do not override specific provisions of the Income-tax Rules; where a specific rule governs a particular circumstance, that rule prevails over any inconsistent ICDS guidance.