2023 (10) TMI 1322 - HC - Income Tax

Accrual of income - Money received under Marketing Assistance Programme MAP - HELD THAT - A perusal of the clauses would show, as noted by the Tribunal, even for AY 2011-12 2018 (10) TMI 1888 - ITAT DELHI , that the amount received by the respondent/assessee in his capacity as a distributor was passed on to sub-contractors as and when they lifted the goods in issue. Clause 6 of the MAP agreement, would show that the amount received under the MAP agreement by assessee was conditional and was liable to be returned to Exxon in certain situations, as indicated in sub-clauses (a) to (f) of clause 6. It is also surprising that the AO chose to treat only the difference between the amounts received and spent, as income. In our view. if the amount received was income of the respondent/assessee, then the entire amount should have been treated as income. AO has noted that the aforementioned amount is treated as gross receipt of the respondent/assessee. AO, by treating sum as the gross receipts has, in a sense, indicated that the amount did not bear the attribute of income - no substantial question of law arises for consideration.

Summary

Issues involved: Application for condonation of delay in filing appeal, Assailing order of Income Tax Appellate Tribunal regarding additions to declared income.

Condonation of delay application: The appellant/revenue sought condonation of a 116-day delay in filing the appeal, which was allowed by the court considering the period of delay.

Assessment Year 2013-14 appeal: The appeal focused on challenging the Income Tax Appellate Tribunal's order regarding two additions to the declared income of the respondent/assessee. The additions were related to money received under a Marketing Assistance Programme (MAP) and disallowance of personal account expenses.

Money received under MAP agreement: The AO added Rs. 3,95,86,272/- to the income of the respondent/assessee, which was the difference between the amount received against the MAP agreement and the amount spent. The appeal was specific to this addition, which arose due to the respondent/assessee's obligations under the MAP agreement.

Previous assessment years: The Tribunal's decision on previous assessment years was mentioned, where appeals were not preferred to the court due to tax impact thresholds. The Tribunal's observations on the MAP agreement clauses were highlighted, emphasizing the conditional nature of the amount received by the respondent/assessee.

Interpretation of MAP agreement: The clauses of the MAP agreement indicated that the amount received was conditional and could be demanded back under certain circumstances. The court noted that if the amount received was income, the entire sum should have been treated as such, rather than just the difference between received and spent amounts.

Conclusion: The court found no substantial question of law for consideration and closed the appeal. Parties were directed to act based on the digitally signed copy of the order.