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TMI Blog2023 (1) TMI 355X X X X Extracts X X X X X X X X Extracts X X X X ..... the right to receive i.e., accrual happens only in the quarter in which the services were rendered, namely, in the following quarter. While respectfully following the decision of Dinesh Kumar Goes [ 2010 (10) TMI 287 - DELHI HIGH COURT] we are of the considered opinion that the assessee was right in recognizing the revenue in the financial year in which the corresponding service was rendered, because it is only on consideration of the expenses relating to the rendering of services, the correct picture of income emerges, and it is only such income is taxable and not every receipt. With this view of the matter, we uphold the findings of the CIT (A) and find the grounds relating to this issue are devoid of merits. Disallowance of foreign remittances are subject make - Assessee makes payment to two foreign universities/institutions in UK and Switzerland in connection with the schools run by it; that according to the assessee, these payments made by them are, firstly, towards payment of examination fee collected from the students, which are not exactly the payment made by the assessee but merely collected from students and remitted, secondly, as fees for syllabus, setting up o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest paid by the assessee and if there is any waiver of such interest or a part thereof by the banker to bring the same to tax. All through the proceedings before the Ld. CIT(A), the assessee maintained that the mentioning of Rs.15.02 Crores in the notes to the audit report does not represent the interest, if any, waived by the bankers but it is only the estimate made by the assessee as to their probable liability contingent upon the default, if any, committed by the assessee in respect of the CDR guidelines or the bankers revoking the reduction of interest for any reason. As against this contention, AO did not demonstrate from the financial statements of the assessee that, as a matter of fact, an interest to the magnitude of Rs.15.02 Crores was in fact waived by the bankers. It goes undisputed that before making this addition,AO did not seek any clarification from the assessee before proceeding to assume anything in respect of the mentioning of Rs.15.02 Crores as contingent liability in the notes to audit report by the assessee. Had the learned Assessing Officer obtained any such clarification, it would have obviated the addition. In the absence of any proof as to the waiver o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis is concerned, facts are that the assessee collects tuition fee from the students every quarter for the entire academic year and recognises revenue only in respect of the tuition fee collected for the period relevant to the financial year as per the mercantile system of accounting followed by them. The tuition fee collected by the assessee for the period relating to the academic year that falls in the succeeding financial year is regarded as an advance received and shown as a liability in the financial statements. 4. It is submitted on behalf of the assessee that though this fact was submitted, the learned Assessing Officer discarded the same and observed that inasmuch as the assessee has been following the mercantile system of accounting, and particularly because there is no further liability on the assessee except regular running of the school, and also the assessee is not to return any part of the fee collected, the tuition fee received amounts to accrual. On this premise, learned Assessing Officer brought the fee collected in the fourth quarter of the year to tax. 5. In appeal, assessee pleaded that all the receipts during a financial year do not tantamount to income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He placed reliance on the decision reported in CIT Vs. Dinesh Kumar Goel (2011) (331 ITR 10) (Del). 8. Insofar as facts are concerned, there is no dispute. Though the receipt is there in the last quarter of a financial year that relates to the period of instructions to be imparted by the assessee in the next quarter, which falls in the next financial year. It, therefore, goes without saying that though the receipt is there in the last quarter of a financial year, the corresponding service is rendered by the assessee in the next quarter which falls in a different financial year. In the case of Dinesh Kumar Goel (supra), the Hon'ble Delhi High Court observed that : Under section 5(1)(b) of the Income-tax Act, 1961 when the income accrues or arises or is deemed to accrue or arise to the assessee in India during the previous year, it is to be taxed in that year. It is important, therefore, that receipt of a particular amount in the relevant year should be an 'income' under the provision. The relevant yardstick is the time of accrual or arisal for the purpose of taxation, viz., in order to be chargeable, the income should accrue or arise to the assessee during the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the assessee did not make any deduction of tax at source u/s. 195 of the Act, before making the aforesaid payments taking the view that there was no income that accrued or arose to the aforesaid foreign universities and educational institutions in India. 12. Submissions of assessee on this aspect are too fold. Firstly, they are not income in the hands of the assessee inasmuch as the assessee is only a passing through entity for the purpose of examination fee. Neither the income is recognised nor are the expenses claimed. According to them, such a fee was paid in connection with the educational activities conducted by the assessee in accordance with the instructions of the foreign universities. The other plea of the assessee is that this particular receipt cannot be treated as Fee for Technical Services (FTS) since the Double Taxation Agreements (DTAA) entered into by India with UK and Switzerland exclude the amounts received for teaching in or by educational institutions from the ambit of expression FTS. Further, Article 13 of the India-UK DTAA contains make available clause, in order to term a service as FTS, but in this case, no such technical services is made available to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee is only a passing through entity. He further submitted that the expression for teaching in or by educational institutions does not cover the high end technical services involving syllabus framing, paper setting, paper evaluation and modern teaching methods so on and so forth. He accordingly submits that the exemption clause referred to by the learned AR does not extend the specific activities for which the payment is made. 16. Per contra, learned AR submits that the word teaching cannot be confined to the activity of imparting instructions, but it has to be taken in a broader sense to include the activities relating to the education. He submits that the activities of setting syllabus and conduct of examinations are intrinsic to the activity of teaching. He further submitted that the treatment of the receipts and remittances in the books of the accounts of the assessee clearly reflect the role of the assessee in respect of these receipts. He submits that the entire receipts in rupees are transmitted to the foreign universities in foreign currency, and whatever the gain or loss resulted in the foreign exchange transaction it is routed through the profit and los ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out of technical/royalty services. The expression teaching in or by educational institution cannot be confined to the activity of imparting the instructions alone, in a broader sense, teaching includes not only the imparting the instructions but also the verification of the extent of perception of such instruction by the pupil and thereby includes the activity of examinations also. In this sense, this particular activity falls in the ambit of the exemption clause in the DTAAs which exempt the amounts paid for teaching in or by the educational institutions. 19. With this view of the matter, we are of the considered opinion that the findings of the Ld. CIT(A) on this aspect do not suffer any perversity, illegality or irregularity and they are in consonance with the spirit of the Act. We, therefore, do not find any merit in the contention of the Revenue and dismiss the grounds on this aspect. 20. Now coming to the addition on the ground of waiver of interest, the facts are that for the purpose of acquisition of the lands, construction of the school building etc., the assessee borrowed in the FY.2008-09, a sum of Rs.60.46 Crores, namely, Rs.25.46 Crores from Corporation Bank an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contingency of the banker reversing the benefit that is extended under CDR. 23. Ld. CIT(A) sought the remand report from the learned Assessing Officer and learned Assessing Officer reiterated his stand in the remand report. On an appraisal of the contentions on either side, Ld. CIT(A) found, as a matter of fact that the amount of Rs.15.02 Crores mentioned in the notes to audit report is not the loan/interest waived inasmuch as the interest charged of Rs.9.41 Crores upto 30/06/2013 was converted as FITL with charge of interest at 9.75% p.a. thereafter and on the representation of the assessee the bankers reduced the rate of interest from 13% to 10.5% through letter dt.22/01/2013, what all the assessee mentioned in the notes to the audit report is the projected liability that may arise in case of default of the assessee to follow the CDR guidelines and that too for the entire period of term loan but not for a particular assessment year. On this factual finding, Ld. CIT(A) further found that no benefit was derived during the FY.2014-15 by the assessee, and during that financial year, the bankers charged and the assessee paid interest at 10.5% as reduced by the bankers under CDR. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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