Section 57 — Revenue recognition for construction and service contracts
Old Act equivalent: Section 43CB of IT Act 1961 Sub-part: D.—Profits and gains of business or profession
Statutory Text
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(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 con tract 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. Special provision for computing profits and gains of business or profession on presumptive basis in case of certain residents.
Sub-sections
Sub-section (1)
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(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).
Sub-section (2)
(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 con tract 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.
Sub-section (3)
(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. Special provision for computing profits and gains of business or profession on presumptive basis in case of certain residents.
Provisos
None.
Explanations
None.
Tables
None.
Key Structure
- Applies to: Assessees engaged in construction contracts or service contracts.
- Scope: Revenue and costs to be recognised on percentage of completion method.
- Key rule: Contract costs not to be reduced by incidental income (interest, dividends, capital gains).
Cross-References
Amendment Notes
None noted from the extracted pages.