9911796707
TMI Blog2014 (2) TMI 240X X X X Extracts X X X X X X X X Extracts X X X X ..... ts only source of income is brokerage received from sellers of edible oil. In the return of income filed for the assessment year 2003-04 on 30.9.2003, assessee admitted an income of Rs.2,64,150, showing net profit of Rs.3,09,462 and claiming credit for TDS of Rs.2,11,060. The assessee claimed credit for TDS even though the corresponding income from which TDS was deducted was not included in the income/receipts, which were offered to tax on cash basis. Assessee thereupon filed revised return on 11.3.2004, declaring income of Rs.1,08,670 and excluded the TDS which corresponded to income not received and so not admitted. In the revised return, TDS credit was claimed at Rs.1,55,473. The assessment was initially completed on 29.3.2005 under S.143(3)of the Act, determining the total income of the assessee at Rs.2,29,993. The said assessment was set aside by the Commissioner of Income-tax vide his order dated 30.3.2007 passed under S.263 of the Act. 4. In the fresh assessment made in pursuance of the directions of the Commissioner of Income-tax, which gave rise to the present appellate proceedings, total income of the assessee was determined at Rs.38.05,116. In the said re-assessment pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... constrain the assessee from following the cash system of accounting. v) The assessee is not a mere consignment agent, but a del cre dere agent who assumes responsibility for the payments to sellers. Therefore, the sellers debit the account of the assessee with the amounts due from the buyers, as and when the payments from buyers are received. Therefore, although credited in the books of the sellers, it is not paid out till the buyers make the payment, and as such, the assessee follows the cash system of accounting for recognizing its income. vi) Receivables do not form part of balance sheet in the cash system of accounting. The memoranda in the form of registers produced before the Assessing Officer contain full details of brokerage receivables and the assessee has verifiable information at any point of time about the outstanding due to him from the sellers. vii) In the cash system of accounting, credit for the cheque received is taken on the day of its receipt, even though the collection in the bank account is reflected afterwards. viii) The interest income of Rs.61,856 on the fixed deposits was offered for tax on receipt basis in this year. ix) The Assessing Officer has ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he date of actual receipts of the amounts in the appellant's bank account, does not vitiate the cash system of accounting followed by the appellant. The Hon'ble AP High Court in the case of K.Venkata Reddy(250 ITR 147) held that the date of deposit of the cheque for collection is the date of receipt of its proceeds unless & until it is dishonoured. During the appeal proceedings, the learned. AR filed the details of each seller showing that the brokerage accrued but not received in this year was offered to tax in subsequent years on the receipt basis. The entire accrued brokerage was assessed and there was no concealment of income. It was further highlighted that in AY 06-07 to 08- 09, the brokerage receipts as per TDS certificates was less then the brokerage credited to the P&L account and offered for tax. I agree with the contention of the ld. AR that the appellant is subjected to the double taxation of the same income since its income is assessed on mercantile basis in some years while assessed on cash system in other years. AO is not justified in insisting that the brokerage should be brought to tax on the basis that the service of brokerage is completed anterior to the receip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. She also referred to the discrepancy relating to one of the principal, i.e. Good Health Agro Tech Pvt. Ltd., and submitted that as per whose TDS certificate total brokerage due to the assessee was Rs.3,44,750 for the assessment year 2003-904 and as per the accounts the outstanding payable to the assessee as on 31.3.2003 was Rs.528, but the assessee, in the Profit & Loss Account, had disclosed receipts of only Rs.1,50,000allegedly on cash basis. It is submitted that the assessee's claim in that behalf is uncorroborated by the version of the principal, viz. Good Health Agro Tech Pvt. Ltd. It is also submitted that provisions of Explanation (f) to Proviso to S.139(9) which obligates an assessee even in no accounts case to disclose amounts of total sundry debtors, whereas the assessee, allegedly following the cash system of account did neither possess nor furnish any such particulars. It is also submitted that in the original assessment for the assessment year 2003-04 as well as for the first year of assessment, viz. 2002- 03, the method of accounting of the assessee was shown to be 'mercantile', against which observation the assessee had not filed any appeal. She submitted that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceeding on the basis of business receipts as per TDS certificates, ignoring the book results disclosed by the assessee. The CIT(A) has given elaborate reasoning in the order impugned for assessment year 2004-05, vide para 2.3 of his order for that year dated 9.2.2009, relevant portion of which we have extracted in para 5 hereinabove, which has been followed for the other years under appeal before us, for deleting the additions made by the Assessing Officer, for the years under appeal. 11. It is evident from the impugned orders of the lower authorities and the material available on record that the assessee is a del cre dere agent dealing in oil business. No material to dispute this finding of the Commissioners (Appeals) has been brought on record by the Revenue, except for the plea that the assessee has not produced any agreements to substantiate that claim. Assessee's failure to furnish copies of the relevant agreements and consequent absence of agreements entered into by the assessee with the sellers, for whom he acts as a del cre dere agent, is not crucial, as the finding of the Commissioners (Appeal) in that behalf, is corroborated by other evidence on record including the met ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken by the Assessing Officer that the assessee cannot claim credit for the TDS unless and until the income in relation to which TDS, was made was offered to tax in the relevant year. Since the assessee is found to be a del cre dere agent, the role of the assessee, as observed by the CIT(A) in the impugned order, does not cease simply on booking the order for the seller or the delivery of goods to the purchaser, but extends till the time the sale proceeds are realized by the seller from the buyer. Considering the nature of the assessee's business, as a del cre dere agent, in which actual receipt of the brokerage would depend on the actual realization of the sale proceeds by the seller from the purchaser, as claimed by the assessee and accepted by the CIT(A), assessee is justified in following cash system of accounting, finding it to be appropriate for its business. When the assessee claims to be following that method of accounting consistently, and it has been recognized by the statute, there is no justification for the Assessing Officer to disturb the book results disclosed by the assessee. In this view of the matter, wo do not find any infirmity in the orders of the CIT(A) on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the assessment years 2002-03 and 2004-05, and not for the assessment year 2003- 04 for which a speaking order has been passed by the CIT(A). 16. The Learned Departmental Representative strongly relied on the orders of the assessing officer, submitted that insurance charges are not allowable under S.37(1) of the Act, as the assessee is merely an agent, and the insurance charges shall have to be borne either by th seller or by the buyer in terms of the agreement that may be there in between them. 17. Learned counsel for the assessee on the other hand, strongly supported the order of the CIT(A) and submitted that the assessee, being a del cre dere agent, continues to be responsible till the time the sale proceeds are realised by the seller from the purchaser, the insurance charges have to be incurred by the assessee to protect its own business interests, and as such it is allowable under S.37(1) of the Act.. 18. We heard both sides and perused the orders of the lower authorities on this issue. We find no merit in the grievance of the Revenue on this issue. Firstly, as noted above, while the detailed/speaking order deleting the addition made by the assessing officer by way of disa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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