Case Law Details
ITO Vs Nayak Chaudhari Construction Pvt. Ltd. (ITAT Mumbai)
Introduction: In the case of ITO Vs. Nayak Chaudhari Construction Pvt. Ltd., the Income Tax Appellate Tribunal (ITAT) in Mumbai confirmed the deletion of an addition made by the Assessing Officer. The addition was based on Accounting Standards-9 (AS-9) for advances. This case pertains to the assessment year 2008-09.
Detailed Analysis: The central issue in this case involved the treatment of advances as per AS-9, which governs revenue recognition. The assessee, engaged in the business of building development, followed AS-9 principles while preparing its financial statements. According to AS-9, revenue is recognized based on the proportionate completion of a service.
In this case, the assessee accounted for revenue of Rs. 9,79,79,884 in accordance with the proportionate completion of the project. The remaining amount of Rs. 2,26,08,779 was considered as an advance. The Assessing Officer, in response to information in Form 26AS, initiated proceedings under section 147 of the Income Tax Act. The AO disallowed proportionate Tax Deducted at Source (TDS) credit of Rs. 4,98,520, as it was claimed for the entire amount received, even though income recognition followed AS-9 principles.
Subsequently, the Commissioner of Income Tax (CIT) set aside the assessment order, directing a reassessment. The CIT held that the entire amount received was towards the contract cost, and TDS had been claimed on the full amount. The AO assessed the additional income as per the CIT’s directions.
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