2018 (1) TMI 1622 - AT - Income Tax

Addition on account of motor accident claims - HELD THAT - As decided in own case 2013 (1) TMI 758 - ITAT AHMEDABAD issue is covered in favour of the assessee wherein the Tribunal has held that merely because the MACT awards are booked by the assessee at a later point of time than the date of the award cannot be reason enough to decline the claim for deduction in respect of these awards. It is sometimes possible, rather its inherent mechanism of the system as it exists, that sometimes there is considerable delay in communicating the awards granted by MACT. The awards are generally conveyed through the lawyers representing the assessee and it does take time in many cases. It is not the case of the AO that the subsequent claims are duplication of claims in respect of the same liability, and the assessee does not stand to gain as a result of this delay in accounting. In any event, the quantification of claims is verified by the statutory auditors as also the CAG audit teams, and the same method of accounted is being followed by the assessee for last 50 years. As there is no change in method of accounting, as there is no duplication of claims, and, as assessee does not anyway gain anything from delaying accounting for these claims, we see no reasons to reject the claims merely because these claims are accounting for, in the books of accounts, at a point of time later than awards being granted i.e. when the assessee gets to know about the same. Grievance of the AO, regarding crystallization of liability, does not, therefore, survive any longer. In view of these discussions, as also bearing in mind entirety of the case, we approve the conclusions arrived at by the CIT(A) and decline to interfere in the matter - Decided in favour of assessee. Income from license fees of canteen - business income OR income from house property - HELD THAT - As decided in own case 2013 (1) TMI 758 - ITAT AHMEDABAD Admittedly, the major part of the income for the licence fee of canteen is not from staff, but from outsiders and hence this judgment is not applicable to this receipt at all, and even for the receipt of rent on account of staff quarter, the judgment is not applicable because it could not be shown by the learned AR of the assessee that the facts are identical. Regarding the argument that this income was taxed under the head income from business in earlier years, we find that on the plea of consistency, it cannot be held that if a mistake is committed by the AO in earlier years, the same should be perpetuated. This is not case of the assessee that the rental income is not in respect of house property owned by the assessee, and hence in our considered opinion, this rental income is taxable under the head income from house property, as has been held by the authorities below, and hence, we do not find any reason to interfere with order of the learned CIT(A) on this issue, and this ground of the appeal of the assessee is dismissed. - Decided in favour of revenue.

Summary

Issues involved:
1. Addition of motor accident claims of earlier years
2. Treatment of income from license fees of canteen

Analysis:

Issue 1: Addition of motor accident claims of earlier years
The appeal was filed against the order passed by the CIT(A) regarding the assessment under section 143(3) of the Income-tax Act, 1961, for the assessment year 2012-13. The Assessing Officer raised a grievance regarding the deletion of an addition made on account of motor accident claims of earlier years. It was noted that the issue was previously addressed in the assessee's own case for the assessment year 2009-10, where the Tribunal held that delays in accounting for MACT awards do not necessarily invalidate the deduction claims. The Tribunal emphasized that as long as there is no duplication of claims and the liability is verified by auditors, delays in accounting do not impact the validity of the claims. The Tribunal upheld the CIT(A)'s direction for verification of claims based on the crystallization of liability. Consequently, the grievance of the Assessing Officer was rejected, citing consistency with the prior decision.

Issue 2: Treatment of income from license fees of canteen
In the second ground raised by the Assessing Officer, the issue pertained to the treatment of income from license fees of a canteen as business income. The Tribunal referred to a previous order for the assessment year 2005-06, where it was determined that the income from license fees of the canteen should be considered taxable under the head of income from house property. The Tribunal differentiated between income from staff quarters and income from outsiders in the context of rental income. It was emphasized that the rental income from the canteen was primarily from outsiders, making it distinct from income related to staff quarters. The Tribunal upheld the decision that the income in question should be taxed under the head of income from house property, as consistent with prior rulings. Therefore, the grievance of the Assessing Officer was allowed in this regard.

In conclusion, the appeal was partly allowed, with the first ground being dismissed based on previous decisions favoring the assessee and the second ground being upheld in favor of the Revenue. The judgment provided detailed reasoning for each issue, relying on precedents and legal interpretations to arrive at the final decision.