Contract Revenue and TDS

This query is : Resolved 

13 December 2010

A company follows AS7(Revised)for recognising Income and it follows mercantile system of accounting as envisaged u/s145 of the Act. Now we have received TDS certificates for the fin year 2008-09, it includes TDS on Advance money received. Now the Assessing officer contends that Advance money received should be treated as Contract revenue and offered for Tax.

Merely because TDS has been claimed on advance receipts, whether the Assessing officer contention to tax it as contract revenue is correct.

Whether Sec 199 read with Rule 37 BA would be of any help

Kindly enlighten

Further to the above, If AO wishes to treat the advance money as income, then can we ask him to take proportionate expenses for the included turnover, thereby matching concept would be adhered to and net profit can be offered for tax.

Aditya Maheshwari (Expert)
13 December 2010

If u have claimed TDS and not shown income then you have done reverse of Sec 199 read with Rule 37 BA which states that TDS claim should be backed by income.

If TDS has not been claimed then the treatment is correct and no addition can be made.

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