Vasan Publications Pvt. Ltd., CHENNAI V. DCIT, CHENNAI

ITA 1534/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7797 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 01-11-2016
• Assessment Year: 2012-2013
• Appeal Filed On: 27-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AVIJIT RAKSHIT
• Assessee Lawyers: N VIJAY KUMAR
• Section: 143(3); 234B

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI . , ' # . $ , & ' BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICI AL MEMBER ./ I.T.A.NO.1534/MDS/2016 ( / ASSESSMENT YEAR: 2012-13) M/S. VASAN PUBLICATIONS PVT.LTD., 272, ANNA SALAI, CHENNAI-600 002. VS THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-3(2), CHENNAI. PAN: AAACV2180M ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. N.VIJAY KUMAR, C.A. /RESPONDENT BY : MR. AVIJIT RAKSHIT, JCIT /DATE OF HEARING : 1 ST NOVEMBER,2016 /DATE OF PRONOUNCEMENT : 21 ST DECEMBER, 2016 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THIS APPEAL IS FILED BY THE ASSESSEE AGGRIEVED BY T HE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS)- 11, CHENNAI DATED 29.01.2016 IN ITA NO.378/2014- 15/CIT(A)-11 PASSED UNDER SECTION 143(3) R.W.S. 250 (6) OF THE ACT. 2. THE ASSESSEE HAS RAISED SEVERAL ELABORATE GROUND S IN ITS APPEAL, HOWEVER, THE CRUXES OF THE ISSUES ARE A S FOLLOWS:- I) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE ORDER OF THE LEARNED ASSESSING OFFICER WHO HAD MADE ADDITION OF ` 1,10,29,714/- BEING INCOME RECEIVED IN ADVANCE UNDER FOUR HEADS VIZ. MAGAZINE SUBSCRIPTION, CIRCULATION ADVANCE, ADVERTISEMENT 2 ITA NO.1534/MDS/2016 ADVANCE, FOUR WHEELER RECOVERY ADVANCE, BY TREATING THE SAME AS REVENUE RECEIPT. II) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE LEVY OF INTEREST UNDER SECTION 234B & 234C OF THE ACT. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF PRINTI NG AND PUBLISHING OF TAMIL MAGAZINES AND BOOKS FILED ITS RETURN OF INCOME ON 28.09.2012 FOR THE ASSESSMENT YEAR 2012-1 3 ADMITTING TOTAL INCOME OF ` 7,80,37,770/-. THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143( 2) WAS ISSUED TO THE ASSESSEE ON 06.08.2013. SUBSEQUENTLY, THE LEARNED ASSESSING OFFICER COMPLETED THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT ON 06.02.2015 WHEREIN HE MADE CERTAIN ADDITIONS/DISALLOWANCES AMONGST WHICH ONE O F THE ADDITION WAS TOWARDS ADVANCE RECEIPT OF INCOME FOR ` 1,10,29,714/- AND LEVY OF INTEREST UNDER SECTION 23 4B & 234C OF THE ACT. GROUND NO.1: INCOME RECEIVED IN ADVANCE FOR ` `` ` 1,10,29,714/- :- 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS OBSERVED BY THE LEARNED ASSESSING OFFICER THAT THE ASSESSEE 3 ITA NO.1534/MDS/2016 HAD DISCLOSED THE FOLLOWING INCOME AS ADVANCE RECEI PT AND NOT CREDITED TO THE PROFIT AND LOSS ACCOUNT:- MAGAZINE SUBSCRIPTION (UNEXPIRED) RS. 76,60,690 CIRCULATION ADVANCE RS.21,29,174 ADVANCE ADVT. INCOME RS.11,77,610 FOUR WHEELER RECOVERY ADV. RS. 62,240 TOTAL : RS.1,10,29,714 5. ON QUERY, THE ASSESSEE HAD EXPLAINED THAT THE AFORESAID AMOUNTS WERE RECEIVED IN ADVANCE FOR FUTU RE DELIVERY OF MAGAZINES, FUTURE ADVERTISEMENT TO BE P UBLISHED AND ADVANCE RECEIVED TOWARDS FOUR WHEELER RECOVERY. THE ASSESSEE HAD FURTHER JUSTIFIED ITS STAND STATING TH AT IT IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND ACCOR DINGLY THE ADVANCE RECEIPTS HAS TO BE TREATED AS INCOME DU RING SUBSEQUENT YEARS WHEN THE MAGAZINES ARE DISPATCHED. HOWEVER, THE LEARNED ASSESSING OFFICER REJECTED THE SUBMISSION OF THE ASSESSEE AND TREATED THE AFORESAI D AMOUNT AS INCOME OF THE ASSESSEE FOR THE RELEVANT ASSESSME NT YEAR BY HOLDING THAT THERE IS NO PROVISION IN THE ACT FO R TREATING THE ADVANCE RECEIPT AS DEFERRED INCOME AND OFFER THE SA ME FOR TAXATION AS PER ASSESSEES OWN SWEET WILL. THE LEAR NED ASSESSING OFFICER ALSO PLACED RELIANCE IN THE DECIS ION OF THE HONBLE MADRAS HIGH COURT IN THE CASE EID PARRY(I) LTD., 4 ITA NO.1534/MDS/2016 REPORTED IN 258 ITR 404, HONBLE KERALA HIGH COUR T IN THE CASE CIT VS. VARGEESE MANI REPORTED IN 252 ITR 735 AND THE HONBLE APEX COURT IN THE CASE E.D. SASSOON & CO.LT D., & ORS. VS. CIT REPORTED IN XXVI ITR 27, WHILE ARRIVIN G AT HIS CONCLUSION. 6. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) CONFIRMED THE ORDER OF THE LEARNED ASSESS ING OFFICER WITH REGARD TO UNEXPLAINED MAGAZINE SUBSCRI PTION ADVANCE, CIRCULATION ADVANCE, RECEIPT AGAINST ADVAN CE ADVERTISEMENT BY OBSERVING AS UNDER:- 6.3.3 NEITHER BEFORE THE ASSESSING OFFICER NOR BEF ORE THE CIT(A), THE APPELLANT HAS SUBMITTED THE WORKING OF INCOME RECOGNITION OUT OF THE ADVANCE RECEIVED. WIT HOUT THIS WORKING, IT IS NOT POSSIBLE FOR THE DEPARTMENT TO ASSESS THE CORRECT INCOME PERTAINING TO THE RELEVAN T ASSESSMENT YEAR. 7. WITH RESPECT TO FOUR WHEELER RECOVERY ADVANCE AL SO THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) CONFIR MED THE ORDER OF THE LEARNED ASSESSING OFFICER BY AGREE ING WITH HIS VIEW THAT THERE IS NO CONCEPT OF DEFERRED INCOM E IN TAXATION. 5 ITA NO.1534/MDS/2016 8. BEFORE US, THE LEARNED AUTHORIZED REPRESENTATIVE VEHEMENTLY ARGUED STATING THAT THE ASSESSEE HAD REC EIVED ADVANCE FOR FUTURE SERVICES TO BE RENDERED AND THER EFORE IT CANNOT BE TREATED AS INCOME OF THE ASSESSEE FOR THE RELEVANT ASSESSMENT YEAR BECAUSE THOSE RECEIPTS HAVE TO BE O NLY RECOGNIZED AS INCOME FOR THE YEAR IN WHICH SUCH SER VICES ARE TO BE RENDERED. FURTHER, THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAD RECE IVED FOUR WHEELER ADVANCES FROM ITS EMPLOYEES WHICH ARE TO BE REMITTED TO FINANCE COMPANIES FOR THE SUBSEQUENT YE AR AND THEREFORE IT CANNOT BE TERMED AS INCOME OF THE ASSE SSEE. HE THEREFORE PLEADED THAT THE ADDITION MADE BY THE LEA RNED ASSESSING OFFICER WHICH WAS FURTHER CONFIRMED BY TH E LEARNED COMMISSIONER OF INCOME TAX (APPEALS) MAY BE DELETED . 9. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE O THER HAND, VEHEMENTLY ARGUED IN SUPPORT OF THE ORDERS OF THE REVENUE AND REQUESTED FOR CONFIRMING THE SAME. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY PERUSED THE MATERIALS ON RECORD. THE ARGUMENT OF TH E LEARNED 6 ITA NO.1534/MDS/2016 AUTHORIZED REPRESENTATIVE DOES HAVE MERIT. IF THE AMOUNT RECEIVED BY THE ASSESSEE TOWARDS MAGAZINE SUBSCRIPTION, CIRCULATION, ADVERTISEMENT ETC., ARE FOR THE SUBSEQUENT YEAR OR YEARS, THEN THE SAME CANNOT BE TREATED AS INCOME OF THE ASSESSEE FOR THE RELEVANT ASSESSMENT YEAR BUT HAS TO BE TREATED AS INCOME FOR THE YEAR IN WHICH SUCH SERVICES ARE DUE AND PERFORMED, WHICH IS IN ACCORDANCE WITH THE PRINCIPLES OF MERCA NTILE SYSTEM OF ACCOUNTING, THE METHOD CONSISTENTLY FOLLO WED BY THE ASSESSEE. IT IS FURTHER PERTINENT TO MENTION THAT THE CASE LAWS RELIED BY THE REVENUE DO NOT SUPPORT THE ORDERS OF THE REVENUE AS THEY HAVE CLAIMED BECAUSE THEY ARE N OT APPLICABLE TO THE FACTS OF THE CASE. IN THE CASES EID PARRY (I) LTD., VARGHEESE MANI & E.D.SASSOON & COMPANY LTD., (SUPRA), THE ISSUE WAS WITH RESPECT TO DISCOUNTING OF INTEREST. THE HONBLE COURTS HAD TREATED THE DISCOUNTED INTER EST RECEIPT AS INCOME IN THE YEAR IN WHICH SUCH INTERES T IS DISCOUNTED BECAUSE THE INTEREST INCOME HAD CRYSTALL IZED IN THAT PREVIOUS YEAR. HOWEVER, SINCE THE LEARNED COMM ISSIONER OF INCOME TAX (APPEALS) HAS POINTED OUT THAT THE AS SESSEE HAD NOT SUBMITTED THE DETAILS OF THE ADVANCE RECEIV ED SUCH 7 ITA NO.1534/MDS/2016 AS FOR WHAT PERIOD THEY PERTAIN TO, IN THE INTEREST OF JUSTICE, WITH RESPECT TO THE ADDITION TOWARDS UNEXPLAINED MA GAZINE SUBSCRIPTION OF RS.76,60,690/-, CIRCULATION ADVANCE OF RS.21,29,174/- AND ADVANCE ADVERTISEMENT RECEIPT OF RS.11,77,610/-, WE REMIT BACK THE MATTER TO THE FILE OF THE LEARNED ASSESSING OFFICER, IN ORDER TO EXAMINE THE PERIOD FOR WHICH SUCH ADVANCES ARE RECEIVED AND THEREAFTER PASS APPROPRIATE ORDER AS PER MERIT AND LAW AND IN ACCORDANCE WITH OUR ABOVE OBSERVATIONS . 11. AS REGARDS FOUR WHEELER ADVANCE RECEIVED FROM T HE EMPLOYEES OF THE ASSESSEE TOWARDS COST OF FOUR WHEE LERS, WE ARE OF THE VIEW THAT THE SAME CANNOT BE TREATED AS THE INCOME OF THE ASSESSEE BECAUSE IT IS NOTHING BUT RE COVERY OF DUES FROM THE EMPLOYEES WHICH ARE TO BE REMITTED TO THE FINANCE COMPANIES FOR PURCHASE OF MOTOR CAR. THEREF ORE, THOSE RECEIPTS CANNOT BE TREATED AS THE INCOME OF T HE ASSESSEE BECAUSE THERE IS NO SURPLUS GENERATED OUT OF THE TRANSACTION. HENCE, WE HEREBY DIRECT THE LEARNED ASSESSING OFFICER TO DELETE THE ADDITION OF RS.62,2 40/- MADE BY HIM. 8 ITA NO.1534/MDS/2016 GROUND NO.2: LEVY OF INTEREST U/S.234B & 234C:- 12. SINCE LEVY OF INTEREST UNDER SECTION 234B & 234 C OF THE ACT IS CONSEQUENTIAL IN NATURE, THIS GROUND RAISED BY THE ASSESSEE IS DISMISSED. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES AS INDICATED HEREI N ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THE 21 ST DECEMBER, 2016 SD/- SD/- ( ' # . $ ) ( . ) ( DUVVURU RL REDDY ) ( A. MOHAN ALANKAMONY ) # % / JUDICIAL MEMBER % / ACCOUNTANT MEMBER # /CHENNAI, ( /DATED 21 ST DECEMBER, 2016 SOMU *+ ,+ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. + 1 /DR 6. /GF