AMC Revenue Recognition

The Chennai Bench of the ITAT held that income from Annual Maintenance Contracts cannot automatically be taxed fully in the year of receipt. 

Since maintenance services are rendered over the entire contract period and involve an uncertain number of service acts, Section 43CB and ICDS-IV require such income to be recognised over the period of the contract. 

The Tribunal observed that the tax authorities incorrectly relied on an earlier High Court ruling without considering the statutory amendment introduced in 2018. 

Accordingly, the addition made by the Assessing Officer was set aside and the assessee’s appeal was allowed.