DCIT, CIRCLE-7(1), DELHI V. DELHI TOURISM & TRANSPORTATION DEVELOPMENT CORPORATION LTD., DELHI

ITA 5003/DEL/2024

AI Insights

The case involves the Delhi Tourism & Transportation Development Corporation Ltd., a wholly owned State Government Company, which appealed against the additions made by the Assessing Officer (AO) regarding Unspent Revenue Grant and prior period expenses for the assessment year 2022-23. The Ld. CIT(A) had deleted these additions, a decision which the Revenue challenged. The Income Tax Appellate Tribunal (ITAT) dismissed the Revenue's appeal, citing precedents from earlier years where similar issues were decided in favor of the assessee.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 312715 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2022-2023
• Other Referred Cases: CIT vs. Jagjit Industries Ltd. (2010) 194 Taxman 158, Sourastra Cement & Chemicals Industries Ltd. Vs. CIT (1995) 80
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR DHANESTA
• Assessee Lawyers: DELETING; DELETING; PANCHAM SETHI; SAURABH GUPTA
• Section: 143(3); 142(1)

Judgement Text

"1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: ‘B’, NEW DELHI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER, AND SHRI SUDHIR PAREEK, JUDICIAL MEMBER ITA NO. 5003/DEL/2024 A.YR. : 2022-23 DCIT, CIRCLE 7(1), NEW DELHI ROOM NO. 406, 4TH FLOOR, C.R. BUILDING, I.P. ESTATE, NEW DELHI – 2 (PAN: AAACD0169J) Vs. DELHI TOURISM & TRANSPORTATION DEVELOPMENT CORPORATION LTD., 18A, SCO COMPLEX, DEFENCE COLONY, NEW DELHI – 24 (Appellant) (Respondent) Date of hearing : 29.04.2025 Date of pronouncement : 29.04.2025 ORDER PER SHAMIM YAHYA: AM This appeal filed by the Revenue is directed against the order dated 06.09.2024 passed by the NFAC, Delhi in relation to assessment year 2022-23 on the following grounds:- i) On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in allowing the appeal of the assessee by deleting the addition made by the AO amounting to Rs. 6,63,46,000/- on account of Unspent Revenue Grant. ii) On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in allowing the appeal of the assessee by deleting Assessee by Shri Pancham Sethi, CA & Shri Saurabh Gupta, CA Department by Shri Rajesh Kumar Dhanesta, Sr. DR 2 the addition made by the AO amounting to Rs. 29,52,000/- on account of prior period expenses. 2. Brief facts of the case are that assessee is wholly owned State Government Company (PSU) under Government of NCT of Delhi. It filed the return of income for the year under consideration by declaring income of Rs. 1,06,97,270/-. Subsequently, the case was selected under CASS and notices u/s. 143(2), 142(1) and a show cause notice was issued and duly served upon the assessee. The Assessing Officer passed the order u/s. 143(3) of the Act on 26.02.2024 by making an addition of Rs. 7,02,43,000/- and determined total income at Rs. 8,09,40,270/-. Against the aforesaid action of the AO, assessee preferred an appeal before the Ld. CIT(A), who vide his impugned order dated 06.09.2024 has partly allowed the appeal of the assessee. Aggrieved with the ld. CIT(A)’s order, Revenue is in appeal before us. 3. We have heard both the parties and perused the records. Apropos ground no. 1 relating to issue of Unspent Revenue Grant is concerned, Ld. Counsel for the assessee submitted that this issue is squarely covered by the decision of the ITAT in assessee’s own case for the AYs 2014-15 (ITA No. 184/Del/2009), 2015-16 (ITA No. 4737/Del/2019) & 2016-17 (ITA No. 5922/Del/2019) dated 14.09.2023, which was followed by the Ld. CIT(A) in his order and decided the issue in dispute in favour of the assessee, hence, it was requested to respectfully follow the precedent in assessee’s own case, and accordingly, appeal of the revenue may be dismissed by upholding the order of the Ld. CIT(A). Ld. DR fairly agreed to this proposition. 4. Upon careful consideration, we not that pursuant to the disallowance made by the AO, Ld. CIT(A) has decided the issue in favour of the assessee by holding as under:- 3 “5.2 Ground No. 2 raised in this appeal pertains to the addition made against the unspent revenue grant of Rs. 6,63,46,000/-. During the appellate proceedings, the appellant in support of its claim, has quoted judgement of the jurisdictional Hon’ble ITAT, New Delhi in its own case for the AYs 2014-15 (ITA No. 184/Del/2009), 2015-16 (ITA No. 4737/Del/2019) & 2016-17 (ITA No. 5922/Del/2019) dated 14.09.2023 which squarely covers the facts of the present case. Hence, respectfully following the decision of the Hon’ble ITAT discussed above, the AO is directed delete the addition made in the assessment order amounting to Rs. 6,63,46,000/- and the appellant succeeds in this ground of appeal.” 4.1 We further note that ITAT in assessee’s own case for the AYs 2014-15 (ITA No. 184/Del/2009), 2015-16 (ITA No. 4737/Del/2019) & 2016-17 (ITA No. 5922/Del/2019) dated 14.09.2023, has decided the issue in favour of the assessee by holding as under:- “57. We have heard the parties and perused the material on record. It is found that the assessee had received grants from Government Agencies for carrying out day to day operations of the assessee which is in revenue field. In the course of carrying out of the business activities of the assessee, the amount received through grant from the Government Agencies, a certain portion was unspent and the same cannot lead to taxing the unspent balance, the assessee being an ongoing concern and following mercantile system of accounting and the activities for which the grant has been received has not been over and there was an obligation on the part of the assessee to spent the amount in whole for the purpose of which it has been received. Taxing of the said unspent revenue grant amounts to penalizing the assessee which cannot be permitted. Accordingly, we find no error or infirmity in the order of the CIT(A) in deleting the addition and find no merit in grounds of Appeal of the Revenue. Accordingly, Ground No. 3 of ITA No. 184/Del/2019 (A.Y 2014-15), Ground No. 2 in ITA No. 4737/Del/2019 (A.Y. 2015-16) and Ground No. 2 in ITA No. 5922/Del/2019 (A.Y 2016- 17) of the Revenue are dismissed.” 5. In the background of the aforesaid discussions and respectfully following the above precedent, we decide the issue in dispute against the Revenue by affirming the order of the Ld. CIT(A). Accordingly, the Ground No. 1 raised by the Revenue is rejected. 4 6. Apropos ground no. 2 relating to issue of prior period expenses is concerned, Ld. Counsel for the assessee submitted that this issue is also squarely covered by the decision of the ITAT in assessee’s own case for the AYs 2011-12 to AY 2016-17 vide order dated 14.09.2023 whereby this issue was decided in favor of the appellant, which was followed by the Ld. CIT(A) in his order and decided the issue in dispute in favour of the assessee, hence, it was requested to respectfully follow the precedent in assessee’s own case, and accordingly, appeal of the revenue may be dismissed by upholding the order of the Ld. CIT(A). Ld. DR fairly agreed to this proposition. 7. Upon careful consideration, we not that pursuant to the disallowance made by the AO, Ld. CIT(A) has decided the issue in favour of the assessee by holding as under:- “5.3 Ground No. 3 raised vide this appeal pertains to the addition made against the issue of prior period expenses. The appellant in support of its claim, has quoted judgment of the Jurisdictional Hon’ble ITAT, New Delhi in its own case for the AYs 2011-12 to AY 2016-17 vide order dated 14.09.2023 whereby this issue was decided in favor of the appellant. The Hon’ble ITAT relied upon the decision of the jurisdictional Hon’ble Delhi High Court in the case of CIT vs. Jagjit Industries Ltd. (2010) 194 Taxman 158. Hence, respectfully following the decision of the Hon’ble ITAT discussed above, the AO is directed delete the addition made against the issue of prior period expenses amounting to RS. 29,52,000/- and the appellant succeeds in this ground of appeal.” 8. We further note that ITAT in assessee’s own case for the AYs 2011-12 to AY 2016-17 vide order dated 14.09.2023, has decided the issue in favour of the assessee by holding as under:- “13. We have heard the parties and perused the material. The issue of allowability of prior period expenses involved in the above ground of appeals of the Revenue is no more Res-integra, the jurisdictional 5 High Court in the case of CIT vs. Jagjit Industries Ltd. (2010) 194, Taxmann 158 held as under: “The assessee had been debiting the expenditure spill over to the subsequent years and the Assessing Officer had been allowing the same. The said accounting practice had been consistently followed by the assessee and accepted by the department. If a particular accounting system has been followed and accepted and there is no acceptable reason to differ with the same, the doctrine of consistency would come into play. In the instant case, the said accounting system had been followed for a number of years and there was no proof that there had been any material change in the activities of the assessee as compared to earlier years. Nothing has been brought on record to show that there had been distortion of profit or the books of accounts did not reflect the correct picture. In the absence of any reason whatsoever, there was no warrant or justification to depart from the previous accounting system which was accepted by the department in respect of the previous years.” 14. Further, the Hon’ble Gujarat High Court in the case of Sourastra Cement & Chemicals Industries Ltd. Vs. CIT (1995) 80 has held as under: \"Merely because an expense relates to a transaction of an earlier year it does not become a liability payable in the earlier ear unless it can be said that the liability was determined and crystallized in the year in question on the basis of maintaining accounts on the mercantile basis. 6 In each case where the accounts are maintained on mercantile basis, it has to be found in respect of any claim whether such liability was crystallized and quantified during the previous year as required to be adjusted in the books of account of that previous year. If any liability, though relating to the earlier year, depends upon making a demand and its acceptance by the assessee and such liability has been actually claimed and paid in the later previous years, it cannot be disallowed as deduction merely on the basis that accounts are maintained on mercantile basis and that it relates to a transaction of the previous year. The true profit and gain of a previous year are required to be computed for the purpose of determining tax liability. The basis of taxing income is accrual of income as well as actual receipt. If for want of necessary material crystallizing the expenditure is not in existence in respect of which such income or expenses relates, the mercantile system does not call for an adjustment in the books of account on estimate basis. It is actually known income or expenses, right to receive or liability to pay which has come to be crystallized is to be taken into account under mercantile system of maintaining books of account. An estimated income or liability, which is yet to be crystallized, can only be adjusted as contingency item but not as an accrued income or liability of that year.” Thus, the Tribunal was not justified in holding that the impugned expenditure was not allowable in the relevant previous 7 year on the ground that the liability had arisen in the earlier years.\" 15. Considering the facts of the present case and finding the parity, we find no error or infirmity in the order of the learned CIT (Appeals) in deleting the disallowance of prior period expenses, accordingly, we dismiss Ground No.2, 4, 6, 5 and 3 of Departmental Appeals in ITA Nos. 5920/Del/2019, 4100/Del/2019, 184/Del/2019, 4737/Del/2019 and 3922/Del/2019 respectively.” 9. In the background of the aforesaid discussions and respectfully following the above precedent, we decide the issue in dispute against the Revenue by affirming the order of the Ld. CIT(A). Accordingly, the Ground No. 2 raised by the Revenue is rejected. 10. In the result, the appeal filed by the Revenue stand dismissed. Order pronounced on 29/04/2025 upon conclusion of hearing. Sd/- (SUDHIR PAREEK) Sd/- (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER “SRBHATNAGAR” Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asstt. Registrar, ITAT, New Delhi "