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2018 (9) TMI 790 - AT - Income TaxContributions received from consumers - whether to be treated as revenue receipts incidental for carrying on the business activity - Held that - As decided in assessee s own case 2018 (5) TMI 498 - ITAT HYDERABAD as Provided that where such subsidy or grant or reimbursement is of such nature that it cannot be directly relatable to the asset acquired so much of the amount which bears to the total subsidy or reimbursement or grant the same proportion as such asset bears to all the assets in respect of or with reference to which the subsidy or grant or reimbursement is so received shall not be included in the actual cost of the asset to the assessee. The appellant has gone on to state that the Assessing Officer has misunderstood the accounting policy and accounting entries passed in the books and erroneously treated the capital contributions received from consumers as income. Therefore the amount added to the total income under the normal provisions is not correct. - decided against revenue
Issues Involved:
Revenue's appeals for A.Ys 2013-14 & 2014-15 against CIT (A)'s orders - Deletion of net addition, Treatment of contributions from consumers, Pending appeal on identical issue, Accounting treatment of capital contributions and subsidies, Applicability of Accounting Standard-12 and Sec.43(1) of IT Act, Discrepancy in AO's interpretation, Correctness of CIT (A)'s decision, Consistency with earlier ITAT decision. Analysis: 1. Deletion of Net Addition: The Revenue challenged the CIT (A)'s deletion of a significant net addition of funds. The CIT (A) based the decision on the correct accounting treatment given by the assessee regarding capital contributions and subsidies. The ITAT, referring to an earlier decision, upheld the CIT (A)'s order, emphasizing the proper computation of income under the IT Act. The Revenue's appeal on this ground was rejected. 2. Treatment of Contributions from Consumers: The primary dispute revolved around whether contributions from consumers should be considered as revenue receipts. The assessee argued that these contributions were capital receipts towards fixed assets and should not be treated as income. The ITAT, in line with the assessee's contentions and the Accounting Standard-12, ruled that the contributions were correctly accounted for and should not be considered as income. The Revenue's appeal on this issue was dismissed. 3. Pending Appeal on Identical Issue: The Revenue contended that an identical issue was pending before the High Court in the assessee's case for A.Y 2009-10. However, the ITAT, following the earlier decision favoring the assessee, dismissed the Revenue's appeals for A.Ys 2013-14 & 2014-15. 4. Accounting Treatment of Capital Contributions and Subsidies: The ITAT analyzed the accounting entries and policies of the assessee regarding capital contributions and subsidies. It was established that the depreciation calculations and adjustments made by the assessee were in accordance with the IT Act and Accounting Standards. The ITAT upheld the correctness of the accounting method followed by the assessee, leading to the dismissal of the Revenue's appeals. 5. Consistency with Earlier ITAT Decision: The ITAT highlighted the consistency with an earlier decision in the assessee's case for an earlier A.Y, where the issue had been extensively deliberated and decided in favor of the assessee. Based on this precedent, the ITAT dismissed the Revenue's appeals for A.Ys 2013-14 & 2014-15, maintaining the same stance as the previous decision. In conclusion, the ITAT, after thorough analysis and consideration of the legal and accounting aspects, upheld the CIT (A)'s orders and dismissed the Revenue's appeals for the relevant assessment years. The judgment emphasized the importance of proper accounting treatment, adherence to Accounting Standards, and consistency with earlier decisions in similar matters.
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