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Tax Publishers Asstt. CIT v. Computer Lab [ITA Nos. 207, 208 & 209/CTK/2019, dt. 26-11-2020] : 2020 TaxPub(DT) 4992 (Ctk-Trib) Revenue recognition -- Mirror imaging -- TDS credit thereon *Facts:* Assessee firm was doing certain contractual jobs on Information technology side like biometric identification/capturing of data etc. to ECIL/BEL under a tendered contract. As per the contract they recognized only the certified work of ECIL/BEL. ECIL/BEL on the other hand accounted for the entire contractual value and deducted TDS on the whole amount but paid only the certified portion of the work. It was the case of the assessing officer that the difference of the consideration shown in 26AS and that of the assessee be taxed as income. Assessee's contention was -- 1. They were following percentage of completion method for work certified. 2. They had not accounted the respective expenditure on the uncertified portion of work. 3. If they had not claimed the entire TDS credit they would loose the credit to the extent of the postponed or the uncertified revenue which is yet to be recognized or recognized in the subsequent year. Assessing officer sustained the additions. On appeal Commissioner (Appeals) concurred with the views of the assessee and annulled the additions but on the TDS claim he took the additional income in the 26AS minus the assessee's reported income and applied the uniform Net profit rate of 16.22% citing that if the TDS credit was being taken the profit element on the same ought to be taken otherwise the assessee gets an unfair benefit. Revenue's plea was that the cancellation of the disallowances were incorrect and the net profit should not be applied thus but should be applied taking into the salary and interest paid to the partners or in short the gross profit before the partner's salary/interest. On higher appeal by the revenue. Held against the revenue that the addition of the entire income was not warranted. On the gross profit/net profit ratio the case was remanded back to the assessing officer for fresh consideration as the ITAT concurred with the view that the gross profit before partner's interest and capital ought to have been taken. *Editorial Note:* The case makes an interesting reading due to mismatch in the revenue recognition between the biller and the payer. Now there is a column in the return for postponing the TDS credit to match to the year of income in the respective assessment years. Such a column did not exist for the appeal asst. years though assessee at the time of assessment could have sought the same and had the revenue disagreed to it that by itself would have also been an appealable point.

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Asstt. CIT v. Computer Lab [ITA Nos. 207, 208 & 209/CTK/2019, dt. 26-11-2020] : 2020 TaxPub(DT) 4992 (Ctk-Trib)

Revenue recognition -- Mirror imaging -- TDS credit thereon

Facts:

Assessee firm was doing certain contractual jobs on Information technology side like biometric identification/capturing of data etc. to ECIL/BEL under a tendered contract. As per the contract they recognized only the certified work of ECIL/BEL. ECIL/BEL on the other hand accounted for the entire contractual value and deducted TDS on the whole amount but paid only the certified portion of the work. It was the case of the assessing officer that the difference of the consideration shown in 26AS and that of the assessee be taxed as income. Assessee's contention was --

1. They were following percentage of completion method for work certified.

2. They had not accounted the respective expenditure on the uncertified portion of work.

3. If they had not claimed the entire TDS credit they would loose the credit to the extent of the postponed or the uncertified revenue which is yet to be recognized or recognized in the subsequent year.

Assessing officer sustained the additions. On appeal Commissioner (Appeals) concurred with the views of the assessee and annulled the additions but on the TDS claim he took the additional income in the 26AS minus the assessee's reported income and applied the uniform Net profit rate of 16.22% citing that if the TDS credit was being taken the profit element on the same ought to be taken otherwise the assessee gets an unfair benefit. Revenue's plea was that the cancellation of the disallowances were incorrect and the net profit should not be applied thus but should be applied taking into the salary and interest paid to the partners or in short the gross profit before the partner's salary/interest. On higher appeal by the revenue.

Held against the revenue that the addition of the entire income was not warranted. On the gross profit/net profit ratio the case was remanded back to the assessing officer for fresh consideration as the ITAT concurred with the view that the gross profit before partner's interest and capital ought to have been taken.

Editorial Note: The case makes an interesting reading due to mismatch in the revenue recognition between the biller and the payer. Now there is a column in the return for postponing the TDS credit to match to the year of income in the respective assessment years. Such a column did not exist for the appeal asst. years though assessee at the time of assessment could have sought the same and had the revenue disagreed to it that by itself would have also been an appealable point.