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2(b). The above method followed by the assessee was being accepted by the Department in past. In asst. yr. 1963-64, however, the validity and applicability of the said method to the assessee's case was challenged by the Department. However, the Tribunal, upheld the method adopted by the assessee by its order, dt. 16th February, 1965 in ITA No. 6080/64-65. Thereafter, in asst. yr. 1991-92, once more, the method of the assessee was challenged. It was contended in the assessment that the entire amount of receipts in the particular year constituted the income of the assessee as the said receipts arose out of the contracts entered into by the assessee. The AO thus, instead of taking into consideration the computation of engineering fees as adopted by the assessee, took into consideration the entire receipts of the assessee from engineering contracts (excluding the pure advance amounts) to represent the gross turnover of the assessee's business in this line. From the same, the expenses as claimed by the assessee were allowed. This method adopted by the AO in asst. yr. 1991-92 was upheld by the CIT(A). In however, a subsequent order passed under s. 154, the CIT(A) accepted the plea of the assessee that expenses to be incurred in future with regard to the payments received in this year were also required to be allowed. However, in the further appeal taken up by the assessee before the Tribunal, the Tribunal, Calcutta Bench, after making detailed discussions of the method adopted by the assessee, passed its order on 26th September, 1996 in ITA No. 1919 (Cal)/1995 and 1918/Cal/1995 r/w C.O. No. 18 (Cal)/1995, in which the Tribunal concluded that inasmuch as the assessee had been following a regular method consistently over a period of three decades, that the profits of the assessee being ascertainable properly on the basis of the said method, that the method of accounting being a recognised one as approved by the accounting standard Nos. 7 and 9 of the ICAI and finally that on the basis of the facts of the case, the method was squarely and fairly applicable for ascertaining the profits of the business of the assessee, there was no point in disturbing the said method by substituting the AO's own method of considering the actual receipts. For asst. yr. 1991-92, therefore, the Tribunal approved of the computation of income by way of engineering fees as adopted by the assessee.

2(d). The AO also held that the contention of the assessee of matching principles does not support its cause at all. The AO found out that the total engineering fees receivable or received by the assessee in pursuance of the contracts was of the order of Rs. 40,22,07,539. The AO thus added back the amount of Rs. 7,83,73,351 being the difference between this figure and the figure of Rs. 32,38,34,188 as considered by the AO as having been disclosed by the assessee as engineering fees for this year. It is required to be mentioned in this connection that with regard to this matter also, the AO has not taken into consideration the correct amount. In fact, the amount of Rs. 40,22,07,539 represents the aggregate amount of fees receivable by the company during the relevant year in respect of the major contracts as stated above. So far as the totality of the contracts of the assessee is concerned, the figure is somewhat higher.

3. In the appeal filed by the assessee before the CIT(A), Bangalore, the learned CIT(A) discussed the issue threadbare. He emphasised on the following points :

(i) Whereas the gross amount of engineering fees considered as income for the year by the assessee comes around the figure of Rs. 32,39,14,188, the total expenses of the assessee-company during the year, which can be considered to be mostly attributable to earning of such income, stands at Rs. 38,11,37,156 i.e. at a much higher figure than the gross income. Therefore, the assessee has tailored its gross income to show a gross loss from its engineering contracts.

So far as the question of the expenses exceeding the gross income by way of engineering fees as alleged by the CIT(A) is concerned, we find much substance in the argument of the learned counsel for the assessee that the expenses pertained to the entire activities of the assessee and looking to the issue from that angle, it cannot be said that the assessee has deliberately considered loss from the engineering contracts, although, we do not rule out a case in which such loss also may arise.

9. Let us now consider the method actually prescribed by the CIT(A) himself for computing the income of the assessee by way of engineering fees. The said method is prescribed in para 10 of his order which is being reproduced below :