Revenue recognition for construction and service contracts
Revenue recognition for construction and service contracts.
57. (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. |