Tax Management India. Com
Law and Practice  :  Digital eBook
Research is most exciting & rewarding
  TMI - Tax Management India. Com
Follow us:
  Facebook   Twitter   Linkedin   Telegram

TMI Blog

Home

2019 (9) TMI 89

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... an income is an altogether independent exercise. We wish to add that income of an Assessee under the head Profits and Gains of Business or Profession and Income from other sources is to be determined regardless of whether tax was deducted at source in respect of amounts received or accrued to the assessee. What is relevant is the system of accounting regularly employed by the assessee - whether it is cash system or mercantile system. The assessee is not permitted to use mixed or hybrid system of accounting under which some items of income / expenditure are accounted for under cash system and the remaining items of income / expenditure are accounted for under mercantile. Assessee is a public sector undertaking is irrelevant. It is also immaterial whether the assessee was facing liquidity crunch. When the income has to be assessed during the year and when tax is to be paid in accordance with law on such income, the assessee cannot postpone the year in which the income will be offered to tax merely because the assessee has a liquidity crunch. Requirement of liquid funds by an assessee, howsoever genuine the requirement may be, cannot be accepted as a legitimate justification for post .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... tted that for A.Y. 2010-11 and 2012-13 also this issue may be remanded back to the AO for fresh order after necessary verification of the claim. The Ld. AR of the assessee agreed that the issue may be remanded back to the AO for fresh order. Disallowance being 50% of the expenses claimed by assessee towards Tourism promotion expense and Hiring of tent purpose thereof - HELD THAT:- Assessee submitted that the issue may be remanded back to the file of the AO for verification and fresh order on this issue. In reply, the Ld. DR did not express any objection to remanding of the issue back to the file of the AO for verification and fresh order. In the fitness of things, and as both sides agree, we remand this issue to the file of the AO for necessary verification and fresh order. The AO is directed, before he passes fresh order, to provide opportunity to the assessee to produce / submit relevant details and documentary evidences.
SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER For The Revenue : Ms. Ashima Neb, Sr. DR For The Assessee : Shri H.P. Agrawal, FCA and Shri Pancham Sethi, FCA ORDER PER ANADEE NATH MISSHRA, AM These four appea .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... 2 amount standing to credit of TIUF account was to be included in taxable income 3.3 failing to allow the claim of brought forward losses amounting to ₹ 5,61,25,314/- in the revised return. 4. Ld. CIT(A) erred in law and on facts of the case by confirming the rejection of claim of 4.1 Provision for Doubtful Debts amounting to ₹ 6,11,675/-. 4.2 Provision for Doubtful Loans amounting to ₹ 1,14,901/-. 5. Ld. CIT(A) erred in confirming the action of the AO in 5.1 making a net addition of ₹ 1,01,03,121/- to the income on account of income from "Dilli Haat". 5.2 treating a part of income from "Dilli Haat" as rental income as against the claim of the assessee to treat the same as income from business. 5.3 restricting the claim of expenses to 30% of receipts from "Dilli Haat". 6. Without prejudice to Ground No. 4, Ld. CIT(A) erred in confirming the arbitrary disallowance of expenditure by the Ld. AO, while determining the income from Dilli Haat, as; 6.1 proportionately attributable expenses w.r.t. rental income amounting to ₹ 65,88,427/-. 6.2 50% of other remaining expenses on account of NDMC share amounting to ₹ 1,00,39, .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... stances of the case and in law, Ld. CIT(A) has erred in deleting the disallowance of the net loss claim of the unit of ₹ 32,79,998/- related to the Delhi Institute of Tourism and Travel Management (DITTM) as made by the AO? 6. Whether on the facts and in the circumstances of the case and in law, Ld. CIT(A) has erred in deleting the disallowance of sum of ₹ 33,74,567/- being 50% of the expenses claimed towards "Tourism Promotion Expenses" and "Hiring of Tent & Purpose thereof" as made by the AO.? 7. The appellant craves to leave, to add, alter or amend any ground of appeal raised above at the time of hearing." (1.1) During the appellate proceedings in Income Tax Appellate Tribunal ("ITAT", for short) the assessee filed separate Synopses for each of the aforesaid four appeals. The assessee also filed separate Paper Books for A.Y. 2010-11 and A.Y. 2012-13, containing the following particulars: "1. Re. Ground no. 1: Revise Income tax return and its acknowledgment of filing for A.Y. 2010-11. 2. Re. Ground No. 2: Remand report for considering revised return 3. Re. Ground No. 2: Assessee's submission in respect to remand report of AO 4. Re. Ground no. 3: Or .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ssioner of Income Tax (Appeals) and the Assessee. At the time of hearing before us, we have heard both sides patiently and have taken the oral submissions made by the two sides into consideration. (2) We first take up Assessee's appeals in ITA No.2489/Del/2015 for Assessment Year 2010-11 ("A.Y.", for short) and ITA No.570/Del/2016 for A. Y. 2012-13. The Grounds 1, 2, 3, and 4 in assessee's appeal for A. Y. 2010-11 were not pressed. Hence, these grounds are dismissed, being not pressed. Ground No.1 in Assessee's appeal for A. Y. 2012-13 is general in nature and does not required specific adjudication. (2.1) Grounds 5 and 6 in Assessee's appeal for A. Y. 2010-11 and Grounds 2 and 3 in assessee's appeal for A. Y. 2012-13 pertain to additions made by the Assessing Officer ("AO", for short) on account of income from "Dilli Haat", treating part of income from "Dilli Haat" as rental income and restricting the claim of expenses to 30% of the receipts. The additions made by the AO on this account are ₹ 1,01,03,121/- for A. Y. 2010-11 and ₹ 1,38,88,879/- for A. Y. 2012-13. At the time of hearing before us, the Ld. Authorized Representative ("AR", for short) of the Assessee su .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... elop tourism. Main objects of the assessee, as contained in Memorandum of Association states: "1. To DEVELOP TOURISM AND TO : …. (d) Provide entertainment to tourists by way of cultural shows, tourist complexes, entertainment and amusement parks, dances, music concerts, ballets , films, shows, sports and games, son-etluminiere spectacles and others. ………. (f) provide shopping facilities to tourist, establish and manage shops including duty free shops, bazaars, emporia and other places for selling travel requisites and other articles of tourist interest" With the object to promote tourism, the idea of 'DILLI HAAT was conceptualized in 1994 by the Ministry of Tourism, Government of India and land measuring about 6 acres was leased to the assessee from New Delhi Municipal Council (NDMC) initially for 10 years and renewed from time to time. On the leased land, the assessee constructed shops, stalls, space for banks, food courts, green plaza, etc. and walkways, amphitheater and open theater for entertainment, fashion shows, and cultural programmes. The stalls were allotted to craftsmen, hawkers, etc. at a nominal payment for a .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... 08 4 Rent/Store charges 4,11,39,371 5 Other receipts 3,70,800 6 Misc. Income (sale of tendor form, etc.) 91,391 7 Interest on FDR 13,38,944 Total Gross Receipts ( C) 7,94,29,047 The total receipt at "Dilli Haat" was ₹ 7,94,29,047/- and the total expense incurred by the assessee at "Dilli Haat" is ₹ 4,25,52,448 thereby the net income of ₹ 3,68,76,599/- has been shown by the assessee as business income from "Dilli Haat". The AO at Page No. 6 of his order held that out of the total receipts of ₹ 7,94,29,047/- from "Dilli Haat", ₹ 4,76,56,682/- has been earned on account of rental income being the aggregate of following: Income from space rented on regular basis 1,98,51,494/- Craft stall 2,78,05,188/- Total 4,76,56,682/- While computing Income under the head House Property, the AO allowed expenses @ 30 % of the rental income, i.e. he allowed only ₹ 1,42,97,005/- as expenses against rental income of ₹ 4,76,56,682/, disallowed the balance expenses of ₹ 1,38,88,879 (i.e. ₹ 5,07,65,477 - 3,68,76,599) claimed against the aforesaid receipts totaling ₹ 4,76,56,682/-. (2.4) In paragraph no. 6.2 of the order .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ugh this interest income has not been offered to tax during the year by the assessee, credit for TDS made by the bank was claimed by the assessee because the assessee was facing liquidity crunch. He further submitted that the assessee being a public sector undertaking, lenient view may be taken specially because of the liquidity crunch faced by the Assessee. He further also submitted that claim for TDS may be disallowed to the extent it pertains to corresponding income not offered to tax by the assessee during the year; but the addition to income may be deleted. Further, in this regard, he also submitted that the AO failed to appreciate that interest income due on the fixed deposits kept with the banks accrued to the customers on 31st March each year although the same had not become due for payment; but the TDS entries are booked on the closing date of the Financial Year i.e. on 31st March each year on provisional basis to comply with the provisions of the Accounting Standards. He also submitted that the interest income on Fixed Deposits was offered to tax in subsequent year(s), following cash system of accounting; in the year in which the was towards actually received by the Asses .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... nd mercantile system of accounting for the remaining items. Mixed or hybrid system of accounting has lost statutory mandate w.e.f. 01.04.1997, pursuant to amendment of Section 145 of I.T. Act by the Finance Act, 1995. Income of an Assessee under the head of "Profits and Gains of Business or Profession" and under the head of "Income from Other Sources" is to be computed in accordance either with cash system of accounting regularly employed by the assessee or with mercantile system of accounting regularly employed by the assessee. Undisputedly, the regular system of accounting employed by the assessee is Mercantile System. Under Mercantile System of accounting items of income and expenditure are accounted for on accrual basis; and the actual dates of payments / receipts for various items of income and expenditure, are irrelevant. On the other hand, under cash system of accounting, various items of income and expenditure are accounted for on the basis of actual dates of receipts and payments; and whether the same actually accrued during the year is irrelevant. Once the assessee has opted to follow Mercantile System as its regular system of accounting, it is not open for the assessee t .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... 015 for A.Y. 2010-11 and ITA No. 716/Del/2016 for A.Y. 2012-13. Grounds 1 and 2 in Revenue's appeal for A.Y. 2010-11 and Ground 1 in Revenue's appeal for A.Y. 2012-13 pertain to disallowance made by the Assessing Officer U/s 43B of I.T. Act in respect of payments made by the Assessee on account of advance excise duty. The disallowances were made by the AO on the ground that payment of advance excise duty pertains to the next year's expenses and are not allowable in the year(s) in which it has been claimed. According to the assessee, as per the excise rules & regulations specifically regulating the liquor industry, the assessee is bound to pay the excise duty in advance in order to secure the release of transport permit for supply of liquor at various liquor shops for immediate ensuing period. It was submitted, that as the assessee is engaged in the retail business of Indian Made Foreign Liquor, the assessee is required to pay / deposit the excise duty in advance to the State Excise Department. At the time of hearing before us, the Ld. AR of the assessee submitted at the outset, that the issue is covered in favour of the assessee by order dated 30.09.2013 of Coordinate Bench of ITAT .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... nd that the documentary evidence did not contain the name of the assessee. The Ld. CIT(A) allowed the claim of the assessee observing as under: "Having gone through the submission and the order of assessment, it emerges that the Central Road Research institute is a unit of Council for scientific and industrial Research and the income of which is exempt u/s 10(23C) (vi) if the Act. The Assessing Officer is directed to allow the deduction of ₹ 8,82,40/- with the weighted deduction rebate u/s 35(1)(iia) of the Act. The disallowance of ₹ 11,03,000/- made by the assessing officer is therefore, deleted." (7.1) At the time of hearing before us, the Ld. DR relied on the order of the AO. The Ld. AR of the assessee relied on the order of the Ld. CIT(A). The Ld. AR further submitted that CSIR has been approved, through Notification No. 53/2011 [F.No. 203/73/2010/ITA-II], Dated 30.09.2011, for the purpose of Section 35(1)(ii), read with rules 5C and 5E of the Income-tax Rules, 1962, in the category of 'Other Institution'. He also submitted that the payment of ₹ 8,82,400/- to CRRI was made vide Cheque No. 651127 dated 12.06.2009. He furthermore submitted that the Director .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... nnexed as per practice consistently followed since its setup on 1993. On the basis of above loss claimed in respect to Delhi Institute of Tourism and Travel Management stands added back to the income of the assessee." In A.Y. 2012-13, the disallowance was made by AO, holding as under: "6.10 It has also been noticed that in the AY 2007-08 where net profit of the same institute was added by AO, the assessee has claimed that the ownership of institute belongs to IITM- Gwalior and not to DTTDC. Whereas in the previous year under assessment, the net loss has been claimed in returned income as net business loss. This results to the contrary stand of the assessee without any reasonable cause & explanation for these two situations on record. On the basis of above facts, net loss claimed in respect of unit titled as Delhi Institute of Tourism & Travel Management Stands added back to the income of assessee corporation." For both the years, the Ld. CIT(A) allowed assessee's claim, holding that the assessee has been exclusively managing, administrating this institute without any interference of the concerned Ministry; and that the AO had not disputed that the institute was run by .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

 

 

 

 

Quick Updates:Latest Updates