CMA Intermediate · Direct and Indirect Taxation · Basic Concepts, Basis of Charge and Capital and Revenue Receipts
Under section 57 of the Income-tax Act, 2025, how are the profits of a contract for providing services determined if its duration is not more than ninety days?
Profits are determined on the project completion method, because section 57(2)(a) prescribes it for service contracts with a duration of not more than ninety days. The straight line method applies to indeterminate acts over a period.
- APercentage of completion method
- BStraight line method
- CProject completion methodCorrect
- DCash receipt method
Explanation
Section 57(2)(a) provides that profits from a service contract lasting not more than ninety days are determined on the project completion method. The straight line method applies to contracts with an indeterminate number of acts over a specified period.
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