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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 ..... rnational School, offering International Baccalaureate (IB) and another pre-school known as Gachibowli School. Academic year followed in the main school commences in the month of August and ends in the month of May of the succeeding calendar year, whereas the academic year of Gachibowli School commences in the month of June and ends in the month of March of the succeeding calendar year. It is evident, therefore, that the academic year followed by the schools is different and partly overlaps, and also falls into different financial years followed by assessee for the purpose of accounting and filing income tax returns. While passing the assessment order, learned Assessing Officer made certain additions including additions relating to the (i) fee received on accrual basis, (ii) disallowance of foreign remittances and (iii) interest waiver not admitted u/s.41(1) of the Income Tax Act, 1961 ("the Act"). In the appeals for the other assessment years, additions relating to (i) fee received on accrual basis and (ii) disallowance of foreign remittances are subject maker. We deal with these additions one after the other hereunder. 3. Insofar as the addition of fee received on accrual basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me. While placiang reliance on the decision reported in ACIT Vs. M/s.Mahindra Holidays & Resorts (I) Limited (131 TTJ (Chennai)(SB) 1), and also the decision of the Hon'ble Apex Court in the case of Madras Industrial Investment Corporation Ltd Vs. CIT (1997) 225 ITR 802 (SC) Ld. CIT(A) held that if the receipts pertaining to a period beyond the financial year are included in the income of the year, the same would lead to distortion of income. He, accordingly, directed the deletion of the addition on this score. 7. Learned DR placed reliance on the assessment order and submitted that inasmuch as the assessee has been following the mercantile system of accounting, is not open for the assessee to contend that following the matching principle would alone give correct picture of income, whereas it is submitted on behalf of the assessee that it is only when the receipt and expenditure are considered, the correct picture of income emerges. According to him, it is only in the subsequent quarter of the year, the relevant expenditure like salaries of the teachers and other related expenses are met and, therefore, the income accrues only after the expenditure is considered. He placed rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inesh Kumar Goes (supra), 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 Ld. CIT (A) and find the grounds relating to this issue are devoid of merits. 11. Now coming to the second issue relating to the foreign remittances, the facts are that the assessee makes payment to two foreign universities/institutions viz., University of Cambridge (UK) and International Baccalaureate (IB) (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 of question papers, training of teachers, etc; and that in respect of these payments made, the assessee did not m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee was remitted in toto to the International Baccalaureate (IB) (Switzerland) on behalf of the students, in connection with the educational activities conducted by the assessee in accordance with the syllabus set by the universities and, therefore, cannot be termed as the payments for managerial/technical/ consultancy services availed by the assessee. Further according to the Ld. CIT(A), Section 40(a)(i) of the Act could be invoked only when any expenditure is claimed by the assessee, but in this case, no expenditure is booked by the assessee. Lastly, Ld. CIT(A) making reference to the DTAA held that the amounts paid by the assessee to both the universities are not answerable to the description of technical services/royalty services as defined in those DTAAs. 15. Learned DR contended that the invoices for the payment of examination fee are not raised by the foreign universities and there is nothing indicating that the amounts are paid by the students to such foreign universities through the assessee. He submits that since the assessee is raising the invoices on their name and receiving the amounts on their own behalf, it cannot be said that the assessee is only a passi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly, foreign universities are conducting the examinations before issuing the degrees. In these circumstances, the finding of the Ld. CIT(A) that the assessee is only a pass through entity in the sense that they are collecting the exam fee on behalf of the foreign universities does not appear to be unreasonable or perverse. 18. Further, Article 13 (5)(c) of the DTA between India and the UK, and Article 12 (5)(a) of the DTAA between India and Switzerland clearly read that the definition of fee for technical services does not include any amount paid for teaching in or by educational institutions. Ld. CIT(A) took the view that in view of this provision contained in DTAAs, the amount paid to the above two universities do not come under the clutches of the technical services or the royalty services. Ld. CIT(A) made reference to the decisions reported in ACIT Vs. Mahindra Holidays and Resorts (I) Ltd. (supra) and also the decision of the Hon'ble Karnataka High Court in the case of CIT Vs. DE Beers India Minerals P. Ltd., (2012) (346 ITR 467) (Kar) to reach the conclusion that the activities conducted by the foreign universities in this case are out of technical/royalty services. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nancial statements, the learned Assessing Officer, without seeking any clarification from the assessee as to the nature of this amount, assumed that this is the amount that reflects the difference between the interest payable and paid, and, therefore, to that extent, the assessee had the benefit of waiver of interest. On this premise, learned Assessing Officer proceeded to add this amount to the income of the assessee. 22. Before the Ld. CIT(A), the assessee submitted that as per the Corporate Debt Restructuring, the rate of interest was reduced from 13% to 10.5% by the bankers, bankers charged interest accordingly, but not at 13%, and since the assessee paid the interest that was charged by the bankers, the question of waiver does not arise. Assessee further submitted that the learned Assessing Officer wrongly assumed that the figure Rs.15.02 Crores represent the interest that was waived by the banker in case of assessee, whereas the fact of the matter is that the figure Rs.15.02 Crores represents the estimate of the assessee as to the amount that may likely to be incurred by them in case of any default with CDR guidelines and on the contingency of the banker reversing the benefi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rores 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 of interest by the bankers, addition on that score basing on assumptions cannot be maintained. Ld. CIT(A) is perfectly right in deleting the same and we hold such finding. AYs.2012-13, 2013-14, 2014-15 & 2016-17: 25. As far as the appeals for the AYs.2012-13, 2013-14, 2014-15 & 2016- 17 are concerned, learned Assessing Officer made additions relating to the fee received on accrual basis, and disallowance of foreign remittances and the Ld. CIT (A) has taken a view in favour of assessee in respect of these two issues. In the preceding paragraphs we uphold the findings of Ld. CIT(A) in respect of the AY.2015-16. Since the facts involved for these years are identical to the facts involved for the AY.2015-16, while following the said view, we uphold the findings of the Ld. CIT(A) for these assessment years also, and dismiss the grounds raised by the Revenue. 26. In the result, all the appeals of Revenue are dismissed. Order pronounced in the open court on this ..... X X X X Extracts X X X X X X X X Extracts X X X X
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