Revenue recognition for construction and service contracts

Tax2025570 sections23 chapters

Chapter IV COMPUTATION OF TOTAL INCOME

Statutory text

(1) The profits and gains arising from a construction contract or a contract for providing services, shall be determined on the basis of percentage of completion method, subject to provisions of sub-section (2), as per the income computation and disclosure standards notified under section 276(2).
(2) For the purposes of sub-section (1), the profits and gains arising from a contract for providing services shall be determined—
- (a) on the basis of project completion method, if the duration of such contract is not more than ninety days;
- (b) on the basis of straight line method, if the contract involves indeterminate number of acts over a specified period of time.
(3) For the purposes of percentage of completion method, project completion method or straight line method under this section,—
- (a) the contract revenue shall include retention money;
- (b) the contract costs shall not be reduced by any incidental income in the nature of interest, dividends or capital gains.

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