Pro rata booking of turnover & purchases

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

20 January 2016 Hi Everyone,

Our Company is engaged in Providing Subscription based Cloud Service packages. We purchase and subsequently resale cloud base IT subscription Services. These services are provided on Annual Basis and can be cancelled by the customer at any time by giving notice.

Since the services are cancellable at any time, we book Sales and Purchases in our Books of Accounts on Pro-rata basis (No. of Days Basis) and claim the TDS in proportion to the Sales booked.

Is such method of accounting is acceptable under the provisions of Income Tax Act, 1961?

If Yes, Pl. provide the supporting provisions and/or Case Laws in favour of the same.

Thanks in Advance

Guest

Guest (Expert)

20 January 2016 Yes. this is accepted under AS 9. Also Under ICDS services are to be accounted under percent of completion only. Since ICDS is new concept, I cant quote case laws.

Message likes : 1 times

Querist : Anonymous

Querist : Anonymous (Querist)

21 January 2016 Dear Mr Kartikeyan,
Thanks for your valuable guidance. Actually, our case is pending before Income Tax Deptt. for Assessment Year 2013-14. So, can you please provide reference to any supporting provisions or case laws?

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Guest

Guest (Expert)

21 January 2016 It is difficult to get case laws exactly to your business. However you can say that this is according to accounting principles as envisaged in AS 9.

Querist : Anonymous

Querist : Anonymous (Querist)

22 January 2016 Dear Mr. Karthikeyan,
The we agree with your point of view. But for the purpose of Income Tax Act, can we give reference to Section 145 regarding Method of Accounting regularly employed by the assessee. Is there any case law w.r.t. Section 145 for our case?

Guest

Guest (Expert)

22 January 2016 Yes. You can quote Madras HC judgment in CIT Vs SAS Hotels & Entertainment Ltd wherein it was held that AO should not reject the method of accounting regularly employed by assessee if it is in accordance with Accounting standards