9911796707
TMI Blog2021 (7) TMI 1072X X X X Extracts X X X X X X X X Extracts X X X X ..... system of accounting policy, the bench mark as applicable to other credit rating agencies are fallowed. When the query was raised to the Ld. AR to explain the basis of offering of fee in 60% and 40% ratio or industry yardstick or standard. AR reply/explanations are not supported by evidences. DR also accepted the fact of offering of income in the A.Y 2013-14 based on the supporting evidences including assessment order u/sec143(3) of the Act filed by the Ld.AR. We find that the CIT(A) relied on the submissions and the accounting policies and has deleted the addition. Whereas, in respect of 100% TDS claim made by the assessee on the 60% income/fee offered for taxation needs to be modified. When the income is recognized, the TDS claim should be restricted to the extent of income offered. In the income tax return filed electronically by the assessee, there is a Schedule of TDS, were there are columns earmarked for set apart/carry forward of income and TDS claim for the Subsequent assessment year, which needs to be opted. CIT(A) has passed a reasoned order and we up hold the same to the extent of deletion of addition of surveillance fee made by the Assessing officer. TD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee has debited expenses of ₹ 14lakhs related to increase of authorized capital. The A.O found that the claim is in the nature of capital expenditure, therefore the same was disallowed.(iii)IPO expenses ₹ 11.25 lakhs was disallowed u/s 37(1) of the Act, as the expenses are not wholly and exclusively incurred in the purpose of business. (iv) And on the disputed issue with respect of surveillance fee in the year of receipt, the A.O found that there is a mismatch of receipts as per Form no 26AS and actual income offered it was found that the assessee has changed the method of accounting regularly followed in the earlier years. The surveillance fee is a nature of income of the assessee and this A.Y i.e 2012-13 the assessee has offered only 60% of the surveillance fee in the year of receipt and balance amount in the subsequent year. The contentions of the assessee are that the change is reliable and more relevant information on the operations of the company are reflected in the financial statement. But the A.O was not satisfied with the explanations and observed that the assessee has been following the mercantile system of accounting from many years and offering 100% receip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted issue of surveillance fee. Accordingly, the CIT(A) has observed that the change in method of revenue recognition accounting with respect of surveillance fee is bonafide and directed the A.O. to delete the addition and also allow the credit of TDS certificate in the year when such income is taxed as per Rule 37BA(3)(i) of IT Rules and granted relief in other grounds of appeal and partly allowed the assessee appeal. Aggrieved by the CIT(A) order, the revenue has filed an appeal before the Honble Tribunal. 4. At the time of hearing the Ld.DR Submitted that the CIT(A) has erred in directing the A.O to delete the addition on account of surveillance fee irrespective of the fact that the assessee has not offered the income in this assessment year as reflected in Form no 26AS and TDS was deducted. The assessee is following the mercantile accounting system and up to the Assessment Year 2011- 12 the surveillance fee is offered on receipt basis but for this assessment year due to change in method of accounting system of surveillance fee and the revenue recognition was only 60% of the receipts and remaining was offered in subsequent year. The Ld. DR submitted that the concept of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is read as under: 7.2 I have carefully perused the assessment order and the submission of the appellant. It is seen that the AO has not given any finding that the change in revenue recognizing policies which respect to surveillance fees is not giving the appropriate or correct picture of the financial statement of the appellant. It is true that change in method once regularly employed cannot be change frequently but AO has not mentioned that the appellant is changing the method of revenue re-cognisation frequently and the change in method now adopted is not giving the true or correct financial statement of the appellant. It is seen that the AO has not demonstrated as to how the change in revenue re-cognisation would result is underestimation of prof it and not giving the correct financial result of the prof it. Instead, the appellant stated that the change in revenue reorganization policies would result in more appropriate presentation of the financial statement. The fees named surveillance is an activity whereby the appellant monitors the instruments rated by the appellant for each year to check whether any upgrade or downgrade is required, based on the changed financial pos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rders were passed u/sec143(3) of the Act. Where the similar accounting policy was fallowed for income recognition referred at page 52 to 92 of the paper book. The Ld. AR trust upon the fact that the assessment orders have been passed considering the assessee s submissions and there is no addition of any income on account of surveillance fee. 8 Further the Ld.AR referred to page 93 of the paper book in respect of CRISIL Ltd, the revenue recognition policy implementation and income from operations were mentioned. The Ld.AR also dealt at page 94 at Para 3.2 on the notes to the financial accounts and the basis of recognition of surveillance fee at Para 3.2 of revenue recognition. It was brought to the knowledge of the bench that in the earlier date of hearing, the bench wanted the assessee company to file the details of revenue offered. The Ld. AR has filed the documents for the A.Y 2013-14, where the portion of surveillance of ₹ 19.78 crores was recognized and offered. We have considered the facts that the method of accounting employed by the assessee is acceptable and is followed by the similar credit rating agencies and the change is bonafide and has been recognized as s ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
