INCOME TAX ACT, 1961

Section 145

Accounting method - Business income - Assessee following percentage of completion method -

Assessee was engaged in the business of supply of processes; designing, construction and commissioning of complete plants for chemical fertilizers, petrochemicals, refining and other related industries. It was following a regular method of accounting sanctified by Accounting Standards. AO and CIT(A), however were of the view that taxation of an amount as income, in respect of contracts accounted should be under 'Percentage of Completion' Method.Held: As decided in assessee's own case (2019 TaxPub(DT) 2654 (Mum-Trib)), the undisputed position that emerges was that the assessee was following consistent method of accounting to recognize the revenue under these contracts. The percentage of completion of the project had been worked out as per total cost incurred on the project to date vis-a-vis total budgeted cost and that fraction was applied to the contract value for the purpose of revenue recognition. Similar formulae had been adopted by the assessee in preceding two years which has been accepted by the revenue. No case of revenue leakage had been established. Nothing on record suggest that remaining income under the project had not been offered by the assessee in subsequent years, following the same method of accounting. Simply because progress billing was more than the stage of percentage of completion, the same, in itself, could not be the basis to usurp the consistent method of accounting being followed by the assessee. Therefore, the additions made by the revenue, under the circumstances, could not be sustained.

Followed:Thyssenkrupp Industrial Solutions (India) Private Limited v. Addl. CIT 2019 TaxPub(DT) 2654 (Mum-Trib).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. :

INCOME TAX ACT, 1961

Section 145

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