2019 (7) TMI 1743 - AT - Income Tax

Addition on account of motor accident claims of earlier years - HELD THAT - As decided in own case 2018 (1) TMI 1622 - ITAT AHMEDABAD 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 - 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.CIT(A) has given a categorical direction to the Assessing Officer for verification of claim on account of the liability having been crystallized in the relevant previous year. Grievance of the Assessing Officer, regarding crystallization of liability, does not, therefore, survive any longer. - Decided against revenue. Addition on account of capitalization of reconditioning of Buses assemblies etc. - HELD THAT - The issue is squarely covered in favour of the assessee by and under an order dated 24.01.2013 passed by the Co-ordinate bench 2013 (1) TMI 758 - ITAT AHMEDABAD in assessee s own case for A.Y. 2005-06 in appeal preferred by the Revenue. We have carefully considered the order passed by the Co-ordinate Bench as mentioned hereinabove. We find that identical issue has been decided in favour of the assessee Income from license fees of canteen - as business income OR income from house property - HELD THAT - As decided in own case 2018 (1) TMI 1622 - ITAT AHMEDABAD Admittedly, the major part of the income for the licence fee of canteen not from staff, but from outsiders and hence 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.

Summary

Issues:
1. Deletion of addition of motor accident claims
2. Deletion of addition of capitalization of reconditioning expenses
3. Treatment of income from license fees of canteen

Issue 1: Deletion of addition of motor accident claims

The Revenue challenged the deletion of an addition of ?58,40,04,189 made on account of motor accident claims of earlier years. The Tribunal referred to a previous judgment dated 29.01.2018 and agreed that the issue was covered in favor of the assessee. The Tribunal emphasized that the delay in accounting for MACT awards does not invalidate the claims, especially when there is no duplication of claims and no undue gain for the assessee. As there were no changed circumstances, the Tribunal rejected the Revenue's ground based on the precedent set in the earlier judgment.

Issue 2: Deletion of addition of reconditioning expenses

The Revenue contested the deletion of an addition of ?6,55,49,995 made on account of capitalization of reconditioning expenses. The Tribunal found that the issue was already decided in favor of the assessee in a previous judgment. The Tribunal noted that the expenditure was for preserving and maintaining existing assets, not for creating new assets, which aligned with the legal provisions. As there were no material differences in the present case, the Tribunal declined to interfere with the CIT(A)'s order, relying on the previous decision.

Issue 3: Treatment of income from license fees of canteen

The Revenue challenged the treatment of income from license fees of canteen as business income. The Tribunal referenced a judgment from a Co-ordinate Bench and agreed that the issue was covered against the assessee. It was noted that the income was predominantly from outsiders and not staff, making it taxable under the head income from house property. The Tribunal upheld the Revenue's grievance based on the precedent set in the earlier judgment, as there were no significant changes in the circumstances. Consequently, the Revenue's appeal was partly allowed.

This detailed analysis of the judgment highlights the key issues raised, the arguments presented, and the Tribunal's decisions based on legal precedents and interpretations of the Income Tax Act, 1961.