Section 26 : Method of deriving average of amounts includible and deductible under long-term contract

1) For purposes of computing the income earned by any person from any employment, business or investment in any income year, the estimated amounts includible and deductible according to the sum of sequential increase as per the percentage of completion of the contract under the long-term contract of that person, shall be deemed to have been received or spent.

Explanation: For purposes of this section, “long-term contract” means a contract of the following nature”:-

(a) A contract with a validity period of more than twelve months, and

(b) A contract with a deferred consideration except a contract which is concluded for production, installation or construction or for the discharge for relevant services for each of such works or which does not contain such elements.

2) A contract with a deferred consideration, a contract to be included according to the sum of sequential increase, a contract to be deducted according to the sum of sequential increase, an excluded contract and a contract of completion percentage shall be as prescribed.