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TMI Blog2016 (6) TMI 1007X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-Tax (2015 (3) TMI 853 - SUPREME COURT ) also observed that as per the ordinary rule revenue expenditure incurred in a particular year is to be allowed in that year. Thus, if the assessee claims that expenditure in that year, the Department cannot deny it. However, in a case where the assessee himself wants to spread the expenditure over a period of ensuing years, it can be allowed only if the principle of “matching concept” is satisfied, which upto now has been restricted to cases of debentures. Therefore, it is rightly observed by the CIT (A) that the expense is required to be allowed in the same year. - Decided in favour of assessee - TAX APPEAL NO. 414 of 2007 - - - Dated:- 14-6-2016 - MR. KS JHAVERI AND MR. G.R.UDHWANI, JJ. FOR THE APPELLANT : MR BD KARIA with MR DARSHAN PATEL for MR RK PATEL, ADVOCATE FOR THE OPPONENT : MR BHATT for MRS MAUNA M BHATT, ADVOCATE ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. By way of this appeal, the appellant-assessee has challenged the judgment and order dated 8.9.2006 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench 'C', Ahmedabad (for short, the Tribunal ) in Income Tax App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Consequently, in the circumstances of the case, the expenditure was revenue expenditure within section 10 (2) (xv). 5. He has also relied upon the decision of the Apex Court in the case of Taparia Tools Ltd. v. Joint Commissioner of Income-Tax reported in [2015] 372 ITR 605, wherein it is observed that as per the ordinary rule revenue expenditure incurred in a particular year is to be allowed in that year. Thus, if the assessee claims that expenditure in that year, the Department cannot deny it. However, in a case where the assessee himself wants to spread the expenditure over a period of ensuing years, it can be allowed only if the principle of matching concept is satisfied, which upto now has been restricted to cases of debentures. 6. Mr.Bhatt, learned counsel for the respondent has supported the impugned order and contended that the Tribunal has not committed any error. He has relied upon the observations of the Assessing Officer and the Tribunal made in the impugned order and contended that the Tribunal has rightly relied upon the decision of the Apex Court in the case of Madras Industrial Investment Corporation v. Commissioner of Income Tax reported in 225 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the audited accounts. If the contention of the Revenue is accepted and the entire membership fee collected is taxed in the year of receipt then in the subsequent year when the assessee will incur the expenditure there will be loss. That would give distorted picture of the working result of the assessee. In view of the above, we respectfully following the above decision of ITAT, Hyderabad Bench in the case of Treasure Island (P) Ltd (supra) hold that the method of accounting followed by the assessee was proper and correct method and the Assessing Officer has wrongly rejected the same. 6. In this regard we are supported by the decisions of the Apex Court as well as this Court, Bombay and Delhi High Courts. The Bombay High Court in the case of Taparia Tools Ltd. vs. Jt. CIT, [2003] 260 ITR 102 has observed that in order to determine the net income of an accounting year, the revenue and other incomes are matched with the cost of resources consumed. Under the Mercantile System of Accounting, this Matching is required to be done on accrual basis. Under this Matching concept, revenue and income earned during an Accounting Period, irrespective of actual cash in-flow, is required to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng for services and where the right to receive is interior to rendering of service, the income, therefore, would accrue on rendering of services. 6.3 This Court has also taken the same view in a recent decision in the case of Snesh Resort Pvt. Ltd vs. Dy. CIT rendered in Tax Appeal No. 113 of 2004 on 18.11.2014 . This Court has observed as under: 6.2 Similarly in the case of Bilahari Investment P. Ltd (supra) the Apex Court has held that since from the various statements produced, the entire exercise arising out of the change of method from the completed contract method to deferred revenue expenditure was revenue neutral, the completed contract method was not required to be substituted by the percentage of completion method. 7. Considering the aforesaid observations of the Tribunal as well as the decisions relied upon by learned advocate for the assessee, we are of the opinion that the Tribunal has committed an error in passing the impugned order so far as considering the membership fees as income when the assessee had not resumed giving the services of the water park to its members. Under such circumstances, the amount received by way of membership fees was required to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome Tax (supra), such expense is required to be allowed in the same year. The Apex Court in the case of Taparia Tools Ltd. v. Joint Commissioner of Income-Tax (supra) also observed that as per the ordinary rule revenue expenditure incurred in a particular year is to be allowed in that year. Thus, if the assessee claims that expenditure in that year, the Department cannot deny it. However, in a case where the assessee himself wants to spread the expenditure over a period of ensuing years, it can be allowed only if the principle of matching concept is satisfied, which upto now has been restricted to cases of debentures. Therefore, it is rightly observed by the CIT (A) that the expense is required to be allowed in the same year. 9. The decision on which learned advocate for the respondent has placed reliance in the case of Madras Industrial Investment Corporation v. Commissioner of Income Tax (supra) is not applicable in the facts of the present case, as it was a case of further payment as per contract between two parties. So far as decision of this Court in Tax Appeal No.1471 of 2005 is concerned, it was a case of capital fee collected from the members. Therefore, we do n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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