(1) Where a person follows the accrual method of accounting for income computed and classified as “Income from business”, the income arising from long-term contracts in an income year shall be calculated according to the percentage method of completion.

(2) The percentage of completion of long-term contracts in an assessment year shall be determined by comparing the estimated total contract costs at the beginning of the contract with the total allocated costs to the contract prior to the end of that assessment year and the costs incurred.

(3) For the purposes of this section—

(a) “long-term contract” means a contract for production, installation, or construction, or the performance of services related to each contract, which is not completed within the ¹[year] of
commencement of work under the contract, but all contracts other than such contracts which will end within approximately 6 (six) months from the date of commencement of work under the
contract;

(b) “percentage method of completion” means the universally accepted accounting principles under which revenue and expenditure covered by long-term contracts are recognized at the
stage of completion of the revised contract under sub-section (2).