2019 (5) TMI 408 - AT - Income Tax

Difference in amount as revenue from operations as against the TDS certificate and claimed credit of TDS - HELD THAT - The assessee in its service tax return has accounted the gross revenue as ₹ 3,10,81,172/-. CIT(A) upheld the action of the AO the reasons for which has been reproduced in the preceding paragraphs. It is the submission of the assessee that the assessee in the subsequent year has offered the balance amount to tax which has been accepted in the order passed u/s 143(3) and, therefore, taxing the same in the impugned assessment year will amount to double taxation. Merely because the other party has declared the same as expenditure, it does not automatically become the income of the assessee and the certificate issued by the payer company which has been countersigned by the assessee company is binding on both the sides. It is also his submission that total receipts and expenditure are fully matching as per the matching concept. Alternate submission of the assessee that the matter may be restored to the file of the Assessing Officer with a direction to verify as to what statement has been given by Hindustan Motors in their accounts. We find some force in the argument of the assessee regarding the alternate contention. A perusal of the Consulting Service Agreement shows that the stamp paper was purchased on 26th March, 2013 and the date in the Consulting Service Agreement is blank. Since this certificate was furnished at the time of hearing and was not available before the AO or the CIT(A), therefore, we deem it proper to restore the issue to the file of the AO with a direction to obtain further information from Hyundai Motor India Ltd. regarding the nature of the agreement. He should also keep in mind the order passed u/s 143(3) in the subsequent assessment year. The grounds raised by the assessee are accordingly allowed for statistical purposes.

Issues Involved:
1. Recognition of Revenue
2. Treatment of Advance Payments
3. Double Taxation
4. Consistency in Accounting Methods
5. Verification of Agreements and Statements

Detailed Analysis:

1. Recognition of Revenue:
The primary issue revolves around the correct recognition of revenue for the assessment year 2013-14. The assessee declared a total income of ?6,61,520/- and recognized revenue from operations at ?99,53,591/-. However, the Assessing Officer (AO) noted discrepancies between the gross revenue as per TDS certificates (?3,10,81,172/-) and the service tax (?38,41,632/-). The AO argued that the income/receipt for the year should be taken at ?3,10,81,172/- based on the invoice raised and the service tax paid. The AO emphasized that the revenue has to be recognized on the basis of the invoice raised up to 31.03.2013, as the payer company (Hyundai Motors India Ltd.) treated the payment as an expenditure and not as an advance.

2. Treatment of Advance Payments:
The assessee contended that the income is recognized at cost plus 8%, and the remaining amount was treated as an advance to be adjusted in future months. The assessee argued that taxing the advance receivable amount of ?2,11,27,581/- in the year ending 31st March 2013 would lead to double taxation, as the income would be recognized in future years. The AO, however, rejected this argument, stating that the invoice did not mention the word 'advance' and that the amount received was immediately remitted to the holding company in Korea.

3. Double Taxation:
The assessee argued that recognizing the advance as income in the year under scrutiny would result in double taxation, as the income has been recognized in subsequent years. The CIT(A) upheld the AO's decision, stating that the assessee cannot choose when and how much income is to be treated as per its whims and wishes. The CIT(A) emphasized that once an invoice is raised, the payment is legally due, and the income must be recognized accordingly.

4. Consistency in Accounting Methods:
The assessee maintained that it has consistently followed the approach of recognizing income based on the cost plus 8% margin as per the Consultancy Service Agreement (CSA). The CIT(A) dismissed this argument, stating that the CSA is an undated agreement made on a stamp paper dated 26.03.2013, suggesting it was a product of afterthought. The CIT(A) further noted that the agreement between two parties under the same umbrella of 'Hyundai Groups of Companies' cannot override basic accounting principles.

5. Verification of Agreements and Statements:
The Tribunal considered the argument that the agreement was signed on 26th March 2013 and is binding on both parties. The Tribunal found merit in the alternate contention that the matter should be restored to the AO for further verification. The AO was directed to obtain further information from Hyundai Motor India Ltd. regarding the nature of the agreement and to consider the order passed u/s 143(3) in the subsequent assessment year. The AO was instructed to decide the issue as per fact and law, after giving due opportunity of being heard to the assessee.

Conclusion:
The appeal filed by the assessee was allowed for statistical purposes. The Tribunal directed the AO to verify the nature of the agreement with Hyundai Motor India Ltd. and consider the subsequent year's assessment order. The AO was to decide the issue based on facts and law, ensuring that the assessee is given a fair opportunity to present its case.

← Previous Next →