Effluent Channel Project Ltd., Baroda V. The Dy.CIT.,Circle-1(2), Baroda

ITA 1945/AHD/2011

• Counselvise Citation: 194520514 RSA 2011
• Duration Of Justice: 3 year(s) 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 22-06-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 04-08-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Assessee Lawyers: M K PATEL
• Keywords: Revenue expenditure

Judgement Text

, D IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI G.D. AGRAWAL, VICE-PRESIDENT AND SHRI RAJPAL YADAV, JUDICIAL MEMBER ./ ITA NO.1945/AHD/2011 / ASSESSMENT YEAR: 2008-2009 EFFLUENT CHANNEL PROJECTS LTD. 4 TH FLOOR, COMMERCE CENTRE SAYAJI GUNJ, VADODARA. VS DCIT, CIR.1(2) VADODARA. ./ ITA NO.1948/AHD/2011 / ASSESSMENT YEAR: 2008-2009 THE DCIT, CIR.1(2) BARODA. VS EFFLUENT CHANNEL PROJECT LTD. 4 TH FLOOR, COMMERCE CENTRE SAYAJIGUN, VADODARA. PAN : AAACE 8486 B ! / (APPELLANT) '# ! / (RESPONDENT) ASSESSEE BY : SHRI M.K. PATEL REVENUE BY : SMT.SONIA KUMAR, SR.DR / DATE OF HEARING : 22/06/2015 / DATE OF PRONOUNCEMENT: 24/07/2015 $%/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE ASSESSEE AND REVENUE ARE IN CROSS-APPEALS AGAI NST THE ORDER OF THE LD.CIT(A) DATED 23.5.2011 PASSED FOR THE ASS TT. YEAR 2008-09. 2. THE GROUNDS OF THE APPEAL TAKEN BY THE ASSESSEE ARE NOT IN CONSONANCE WITH THE RULE 8 OF THE INCOME TAX (APPEL LATE TRIBUNAL) RULES. THEY ARE DESCRIPTIVE AND ARGUMENTATIVE IN N ATURE. IN BRIEF, ITS GRIEVANCE IS THAT THE LD.CIT(A) HAS ERRED IN CONFIR MING THE ADDITION OF RS.1,03,15,000/- RECEIVED AS CAPITAL CONTRIBUTION F ROM MEMBERS FOR ITA NO.1945 AND 1948/AHD/2011 2 DISCHARGE THROUGH EFFLUENT CHANNEL CONSTRUCTED BY T HE ASSESSEE. IT IS ALSO PLEADED THAT THE LD.CIT(A) HAS FURTHER ERRED I N MAKING ADDITION OF RS.23,95,082/- BY ENHANCING THE INCOME. ON THE OTHER HAND, THE GRIEVANCE OF THE REVENUE IS THAT THE ALLEGED CAPITAL CONTRIBUTION FROM THE MEMBERS RECEI VED BY THE ASSESSEE IS TO BE TREATED AS REVENUE RECEIPT IN THE HANDS OF THE ASSESSEE AND THE TOTAL AMOUNT RECEIVED BY THE ASSESSEE DURING THE YE AR IS TO BE TAXED IN THIS YEAR. THE LD.CIT(A) HAS ERRED IN ALLOWING THE ASSESSEE TO SPREAD THE ALLEGED CAPITAL CONTRIBUTION RECEIVED OVER A PE RIOD OF 5 YEARS BEGINNING FROM THE YEAR IN WHICH SUCH CONTRIBUTION WERE RECEIVED INITIALLY. IN THIS WAY, THE CIT(A) HAS IGNORED THE PROVISIONS OF SECTION 4(1), SECTION 5(1)(A), SECTION 5(1)(B) AND SECTION 9(1)(I) OF THE INCOME TAX ACT, 1961. 3. BRIEF FACTS OF THE CASE THAT THE ASSESSEE IS A C OMPANY. IT IS ENGAGED IN THE BUSINESS OF CONVEYANCE OF INDUSTRIAL EFFLUENT AND MAINTENANCE OF CHANNEL. IT HAS FILED ITS RETURN OF INCOME ELECTRONICALLY ON 27.9.2008 DECLARING AN INCOME OF RS.2,60,660/-. THE ASSESSEE HAS CONSTRUCTED CHANNEL WHICH IS 15 KILO-METERS IN LENG TH. IT ENDS UPTO THE GULF OF CAMBAY. THERE ARE ABOUT 300 INDUSTRIAL MEM BERS, TO WHOM THE ASSESSEE COMPANY PROVIDES CHANNEL FOR EFFLUENT DISP OSAL OF MEMBER INDUSTRIES. THE ASSESSEE HAS RECEIVED CONTRIBUTION FROM THE MEMBERS WHICH WERE SHOWN BY THE ASSESSEE AS REVENUE RECEIPT IN THE FIRST YEAR. BUT IT RECOGNIZES THE INCOME TO THE EXTENT OF 1/5 TH AND THE REST OF THE AMOUNT WAS DEFERRED FOR FIVE YEARS. DURING THE AS STT.YEAR 2008-09, THE ASSESSEE HAS RECEIVED CONTRIBUTION OF RS.1,70,7 6,612/- FROM NEW MEMBERS FOR LIFE-TIME MEMBERSHIP TO AVAIL EFFLUENT DISPOSAL FACILITY OFFERED BY THE ASSESSEE-COMPANY. 4. THE ISSUE BEFORE US IS WHETHER THE CONTRIBUTION RECEIVED FROM THE MEMBERS IS TO BE ASSESSED IN THE YEAR OF RECEIPT OR ASSESSEE IS TO BE PERMITTED TO SPREAD OVER, OVER A PERIOD OF FIVE YEA RS. ACCORDING TO THE ITA NO.1945 AND 1948/AHD/2011 3 AO, THE CONTRIBUTION IS TO BE ASSESSED AS INCOME OF THE ASSESSEE IN THE YEAR OF RECEIPT, WHEREAS, IN THIS YEAR, THE ASSESSE E ALLEGED THAT IT IS CAPITAL CONTRIBUTION AND NO LIABILITY CAN BE FASTEN ED UPON THE ASSESSEE. 5. ON APPEAL, THE LD.FIRST APPELLATE AUTHORITY HAS REJECTED THE CONTENTIONS OF THE ASSESSEE THAT IT IS CAPITAL CONT RIBUTION BY FOLLOWING THE ORDER OF THE TRIBUNAL IN THE ASSTT.YEAR 2001-02 . HOWEVER, THE LD.CIT(A) OBSERVED THAT THE ASSESSEE DID NOT FOLLOW THE METHOD AS FOLLOWED IN EARLIER YEARS. IT HAS NOT SPREAD OVER RECEIPTS OVER A PERIOD OF FIVE YEARS. ACCORDINGLY, THE LD.FIRST APPELLATE AUTHORITY HAS CONFIRMED THE ADDITION OF RS.1,03,15,000/-. 6. THE LD.FIRST APPEALLATE AUTHORITY FURTHER FOUND THAT AS FAR AS THE AMOUNT RECEIVED BY THE ASSESSEE IN EARLIER YEARS AN D SPREAD OVER, OVER A PERIOD FIVE YEARS, HAS NOT BEEN OFFERED FOR TAX I N THIS YEAR. IN OTHER WORDS, 1/5 TH OF THE AMOUNTS RECEIVED IN EARLIER YEARS, WHICH AR E TO BE OFFERED FOR TAXATION IN THIS YEAR, NOT OFFERED. TH EREFORE, THE LD.CIT(A) HAD ISSUED NOTICE FOR ENHANCEMENT OF THE INCOME. T HE LD.FIRST APPELLATE AUTHORITY AFTER HEARING THE ASSESSEE, AND FOLLOWING THE ORDER OF THE ITAT IN EARLIER YEARS AS WELL AS SPECIAL BEN CH ORDER IN THE CASE OF MAHINDRA HOLIDAYS AND RESORT (I) LTD., (2010) 131 T TJ (CHENNAI) (SB), MADE THE ADDITION OF RS.23,95,082/-. 7. WITH THE ASSISTANCE OF THE LEARNED REPRESENTATIV E, WE HAVE GONE THROUGH THE RECORD CAREFULLY. WE FIND THAT IN THE FIRST ASSESSMENT YEAR I.E. ASSTT.YEAR 2001-02, THE TRIBUNAL HAS CONSIDERE D THIS ISSUE IN DETAIL AND REJECTED THE CONTENTIONS OF THE ASSESSEE. THE ISSUE IN DISPUTE IS CLEARLY COVERED BY THE ORDER OF THE ITAT. THE DISC USSION MADE BY THE TRIBUNAL IN ITA NO.4280/AHD/2007 READS AS UNDER: 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE MATERIAL ON RECORD. SO FAR AS THE FACTS ARE CONCERN ED THERE IS NO DISPUTE. THE ASSESSEE COMPANY IS ENTIRELY SET UP FO R ENABLING MEMBER INDUSTRIES TO DISCHARGE THEIR EFFLUENTS IN T HE GULF OF ITA NO.1945 AND 1948/AHD/2011 4 CAMBAY. ON THE BASIS OF QUANTITY OF ANNUAL EFFLUENT EMISSION, A MEMBER PAYS CAPITAL CONTRIBUTION TO THE ASSESSEE CO MPANY WHICH IS TREATED BY THE ASSESSEE COMPANY AS REVENUE RECEI PT BUT IS DEFERRED FOR BEING TAXED OVER A PERIOD OF FIVE YEAR S AND THUS OFFERING FOR TAX ONLY 1/5TH THEREOF AND REST 4/5TH IN ENSUING FOUR YEARS. THE REVENUE INTENDS TO TAX THE ENTIRE RECEIP T IN THE YEAR OF RECEIPT ON THE GROUND THAT CONCEPT OF DEFERRING REV ENUE RECEIPT IS ALIEN TO INCOME-TAX ACT AND SECTIONS 4,5 & 9 DO NOT PROVIDE FOR SUCH DEFERMENT. HOWEVER, THE SPECIAL BENCH OF THE T RIBUNAL, CHENNAI IN ACIT VS. MAHINDRA HOLIDAYS & RESORTS (IN DIA) LTD. (SUPRA) HAS CONSIDERED THE ISSUE IN GREAT LENGTH. I N THAT CASE ADMISSION SHARE MEMBERSHIP FEES WAS RECEIVABLE FROM THE NEW MEMBERS AT THE TIME OF THEIR ENTRY OR ENROLMENT. TH E ASSESSEE COMPANY HAD OFFERED 40% OF SUCH RECEIPTS IN THREE I NITIAL YEARS AND 60% IN REMAINING YEARS OUT OF THE LIFE TIME OF MEMBERSHIP. GENERAL MEMBERSHIP WAS FOR 33 YEARS BUT IN THAT CAS E IT WAS REDUCED TO 25 YEARS AND THEREFORE, 60% OF MEMBERSHI P FEES WAS SOUGHT TO BE OFFERED FOR TAX IN LAST 22 YEARS WHERE AS 40% WAS OFFERED TO BE TAXED IN FIRST THREE YEARS. REVENUE S OUGHT TO TAX ENTIRE RECEIPT IN THE YEAR OF RECEIPT. HON. SPECIAL BENCH REFERRED TO THE DECISION OF HON. SUPREME COURT IN E.D. SASSO ON & CO. LTD. VS. CIT (1954) 26 ITR 27 (SC) AND REFERRED TO OBSER VATION OF THEIR LORDSHIPS ON PAGE 52 OF 26 ITR, WHEREIN THE HON. AP EX COURT OBSERVED THAT UNLESS AND UNTIL MANAGING AGENTS COMP LETE THEIR PERFORMANCE, VIZ., THE COMPLETION OF THE DEFINITE P ERIOD OF SERVICE OF A YEAR WHICH WAS A CONDITION PRECEDENT TO THEIR BEING ENTITLED TO RECEIVE THE REMUNERATION OR COMMISSION STIPULATE D THEREUNDER, NO DEBT PAYABLE BY THE COMPANIES WAS CREATED IN THE IR FAVOUR AND THEY HAD NO RIGHT TO RECEIVE ANY PAYMENT FROM THE C OMPANIES. THUS NO REMUNERATION OR COMMISSION COULD THEREFORE BE SAID TO HAVE ACCRUED TO THEM AT THE DATES OF THE RESPECTIVE TRANSFERS. THUS UNLESS AND UNTIL THE AGENTS EARN THEIR COMMISS ION IT WILL NOT ACCRUE TO THEM. BUT IN ORDER THAT THE INCOME CAN BE SAID TO HAVE ACCRUED TO OR EARNED BY THE ASSESSEE, IT IS NOT ONL Y NECESSARY THAT THE ASSESSEE MUST HAVE CONTRIBUTED TO ITS ACCRUING OR ARISING BY RENDERING SERVICES OR OTHERWISE BUT HE MUST HAVE CR EATED A DEBT IN HIS FAVOUR. A DEBT MUST HAVE COME INTO EXISTENCE AND HE MUST HAVE ACQUIRED A RIGHT TO RECEIVE THE PAYMENT. UNLES S AND UNTIL HIS CONTRIBUTION OR PARENTHOOD IS EFFECTIVE IN BRINGING INTO EXISTENCE A DEBT OR A RIGHT TO RECEIVE THE PAYMENT OR IN OTHER WORDS UNLESS THERE IS A DEBITUM IN PRAESENTI, SOLVENDUM IN FUTUR O, IT CANNOT BE SAID THAT ANY INCOME HAS ACCRUED TO THE AGENTS. FRO M THIS OBSERVATION OF HON. APEX COURT THE SPECIAL BENCH OF THE TRIBUNAL OBSERVED THAT TWO CONDITIONS ARE NECESSARY TO BE SA TISFIED TO SAY THAT INCOME HAS ACCRUED OR EARNED BY THE ASSESSEE. THEY ARE (I) IT IS NECESSARY THAT THE ASSESSEE MUST HAVE CONTRIB UTED TO ITS ACCRUING OR ARISING BY RENDERING SERVICES OR OTHERW ISE, AND (II) A ITA NO.1945 AND 1948/AHD/2011 5 DEBT MUST HAVE COME INTO EXISTENCE AND ASSESSEE MUS T HAVE ACQUIRED A RIGHT TO RECEIVE THE PAYMENT. ANOTHER PO INT WHICH WAS MADE OUT BY THE SPECIAL BENCH WAS THAT THE INCOME D OES NOT ACCRUE MERELY ON SIGNING OF THE AGREEMENT FOR ENROL LING AS A MEMBER. THERE IS A CONTINUING LIABILITY ON THE PART OF THE ASSESSEE NOT ONLY TO PROVIDE ACCOMMODATION BUT ALSO TO PROVI DE OTHER INCIDENTAL SERVICES ATTACHED WITH THE ACCOMMODATION . HON. SPECIAL BENCH THEN REFERRED TO THE DECISION OF HON. SUPREME COURT IN THE CASE OF ROTORK CONTROLS INDIA (P) LTD. VS. CIT 314 ITR 62 (SC) WHEREIN IT IS OBSERVED THAT LIABILITY IS DE FINED AS A PRESENT OBLIGATION ARISING FROM PAST EVENTS, THE SETTLEMENT OF WHICH IS EXPECTED TO RESULT IN AN OUTFLOW FROM THE ENTERPRIS E OF RESOURCES EMBODYING ECONOMIC BENEFITS. IT WAS FURTHER OBSERVE D THAT A PAST EVENT THAT LEADS TO A PRESENT OBLIGATION IS CALLED AS AN OBLIGATING EVENT. THE OBLIGATING EVENT IS AN EVENT THAT CREATE S AN OBLIGATION WHICH RESULTS IN AN OUTFLOW OF RESOURCES. IT ALSO O BSERVED THAT FOR A LIABILITY TO QUALIFY FOR RECOGNITION THERE MUST B E NOT ONLY PRESENT OBLIGATION BUT ALSO THE PROBABILITY OF AN OUTFLOW O F RESOURCES TO SETTLE THAT OBLIGATION. FROM THIS OBSERVATION OF AP EX COURT IT WAS OBSERVED THAT THERE IS A DEFINITE LIABILITY CAST ON THE ASSESSEE TO FULFILL ITS PROMISE I.E. TO CONTINUE TO PROVIDE FAC ILITIES TO MEMBERS AND, THEREFORE, IT CANNOT BE SAID THAT ENTIRE FEE R ECEIVED FROM THE NEW ENROLLED MEMBERS HAD ACCRUED AS INCOME IN THE Y EAR OF RECEIPT. FINALLY THE SPECIAL BENCH OBSERVED AS UNDE R :- 31. WE HAVE HELD THAT THERE IS A DEFINITE LIABILIT Y CAST ON THE ASSESSEE TO FULFILL ITS PROMISE AND THEREFORE, IT C ANNOT BE SAID THAT THE ENTIRE FEE RECEIVED BY IT HAS ACCRUED AS INCOME . WE HAVE ALSO CONSIDERED THE PECULIAR NATURE OF THE ACTIVITY ALON G WITH THE COMPLEXITY ATTACHED TO IT AS RESULT OF WHICH NO REA SONABLE PROVISION FOR THE LIABILITY CAN BE MADE. THEREFORE, RECOGNIZING THE ENTIRE RECEIPT AS INCOME IN THE YEAR OF RECEIPT CAN LEAD TO DISTORTION. SOMEWHAT SIMILAR, THOUGH NOT EXACTLY ID ENTICAL SITUATION WAS FACED BY THE SUPREME COURT IN THE CAS E OF MADRAS INDUSTRIAL INVESTMENT CORPORATION LTD. VS. CIT (SUP RA). IN THAT CASE, THE ASSESSEE HAD ISSUED DEBENTURES OF RS.1.5 CRORES AT A DISCOUNT OF 2 PER CENT REDEEMABLE AFTER 12 YEARS. A T P. 813 OF THE REPORT, THE COURT OBSERVED THAT ORDINARILY REVENUE EXPENDITURE WHICH IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PU RPOSE OF BUSINESS MUST BE ALLOWED IN ITS ENTIRETY IN THE YEA R IN WHICH IT IS INCURRED. IT CANNOT BE SPREAD OVER A NUMBER OF YEAR S EVEN IF THE ASSESSEE HAS WRITTEN IT OFF IN HIS BOOKS OVER A PER IOD OF YEARS. HOWEVER, THE FACTS MAY JUSTIFY AN ASSESSEE WHO HAS INCURRED EXPENDITURE IN A PARTICULAR YEAR TO SPREAD AND CLAI M IT OVER A PERIOD OF ENSUING YEARS. IN FACT, ALLOWING THE ENTI RE EXPENDITURE IN ONE YEAR MIGHT GIVE A VERY DISTORTED PICTURE OF THE PROFITS OF A PARTICULAR YEAR. IT IS THIS DISTORTION WE HAVE TALK ED ABOUT IN THE ITA NO.1945 AND 1948/AHD/2011 6 EARLIER PART OF THIS PARA. THE ONLY DIFFERENCE IS T HAT IN THE CASE OF MADRAS INDUSTRIAL INVESTMENT CORPORATION (SUPRA), T HE DISTORTION WAS SUPPOSED TO BE ON ACCOUNT OF EXPENDITURE, IN TH E PRESENT CASE IN THE DISTORTION IS ON ACCOUNT OF THE ENTIRE INCOME BEING ACCOUNTED IN THE YEAR OF RECEIPT. EARLIER, WE HAVE ALSO DISCUSSED AS TO HOW DIFFICULT IT IS TO ESTIMATE THE LIABILITY WHICH IS LIKELY TO BE INCURRED IN FUTURE, MORE SO IN THE ABSENCE OF ANY S CIENTIFIC BASIS OR HISTORICAL DATA. THEREFORE, THE ONLY WAY TO MINI MIZE THE DISTORTION IS TO SPREAD OVER A PART OF THE INCOME O VER THE ENSUING YEARS. AT THIS JUNCTURE, WE MAY DEAL WITH ONE OF TH E ARGUMENTS MADE ON BEHALF OF THE ASSESSEE AND THE INTERVENER. IT WAS ARGUED THAT ACCOUNTING FOR THE WHOLE OF THE INCOME IN ONE YEAR WOULD GIVE A DISTORTED VIEW OF THE PROFITS OF THE COMPANY WHICH WILL BE AGAINST THE TRUE AND FAIR PRINCIPLE REQUIRED FOR TH E ANNUAL ACCOUNTS. WELL, THE DISTORTION THE LEARNED COUNSEL TALKED ABOUT WAS VIS--VIS THE PRESENTATION OF PUBLISHED ACCOUNT S WHEREAS THE DISTORTION THE SUPREME COURT TALKED ABOUT AND WHICH WE ARE INCLINED TO FOLLOW, IS VIS--VIS THE REAL TAXABLE I NCOME FOR A PARTICULAR YEAR. THEREFORE, IN VIEW OF THE FOREGOIN G DISCUSSION, WE ACCEPT THE PROPOSITION OF THE ASSESSEE THAT IT IS N OT JUSTIFIABLE TO TAX THE ENTIRE INCOME IN A SINGLE YEAR AS IS THE CA SE OF THE DEPARTMENT. THUS THE ABOVE JUDGMENT CLEARLY LAYS DOWN A PRINCIP LE THAT WHERE FEES IS RECEIVED BY AN ASSESSEE FOR RENDERING SERVI CES IN FUTURE THEN ENTIRE SUCH FEES CANNOT BE TAXED IN THE YEAR O F RECEIPT BECAUSE THE ASSESSEE HAD NOT PERFORMED ITS PART OF OBLIGATION IN THE YEAR OF RECEIPT. IT HAS TO BE PERFORMED IN ENSU ING YEAR AND INCUR EXPENDITURE FOR SUCH PERFORMANCE. THEREFORE, ENTIRE RECEIPT OF MEMBERSHIP FEES CANNOT BE TAXED IN ONE YEAR. 11. WHEN WE APPLY THE ABOVE PRINCIPLE TO THE FACTS OF THE PRESENT CASE, WE NOTICE THAT WHAT THE ASSESSEE HAS RECEIVED IS TERMED AS CAPITAL CONTRIBUTION BY THE MEMBERS BUT IT IS A REV ENUE RECEIPT IN THE HANDS OF ASSESSEE. QUID PRO QUO IS GIVING A RIG HT TO THE MEMBERS TO USE THE EFFLUENT DISCHARGE CHANNEL ACCOR DING TO THE CAPACITY PURCHASED BY THEM. THUS BY THIS ONE TIME P AYMENT THE MEMBERS ARE MADE ELIGIBLE TO UTILIZE THE PRESENT CA PITAL SET UP OF THE ASSESSEE COMPANY AS WELL AS FURTHER EXPANSION T HEREOF, IF ANY, OR MODIFICATION THEREOF, IF MADE BY THE ASSESS EE COMPANY IN FUTURE. 12. NOW WE REFER TO THE USER AGREEMENT WHICH THE NE W MEMBER SIGNED WITH THE ASSESSEE COMPANY. FOLLOWING CLAUSES ARE CONSIDERED AS IMPORTANT :- ITA NO.1945 AND 1948/AHD/2011 7 (8) CAPITAL CONTRIBUTIONS MEANS CONTRIBUTION TOWAR DS CAPITAL/ EXPENDITURE INCURRED/ LOBE INCURRED BY EFF LUENT CHANNEL PROJECT LIMITED FOR ITS ACTIVITIES. (9) M&R CONTRIBUTION MEANS PAYMENT OF FEES FOR THE MAINTENANCE AND REPAIRS OF THE EFFLUENT CHANNEL ANNUALLY. (10) TREATED EFFLUENT MEANS LIQUID EFFLUENT DISCHAR GED AFTER TREATMENT AS PER THE GPCB CONSENT CONDITIONS INTO THE EFFLUENT CHANNEL OF EFFLUENT CHANNEL PROJECT LIMITED. (11) COMPANY MEANS EFFLUENT CHANNEL PROJECT LIMT1ED (ECPL) PROVIDED FOR THE CONVEYANCE OF TREAT ED EFFLUENT AS PER THE GPCB CONDITIONS UP TO THE SAFE DISPOSAL, RECEIVED FROM THE PARTICIPANTS. (12) COMMITTED QUANTITY MEANS THE QUANTITY OF EFFLU ENT PER DAY, TO BE DISCHARGED BY EACH PARTICIPANT AS AG REED AND SPECIFIED IN HIS APPLICATION. PERIOD OF AGREEMENT : (13) THIS AGREEMENT SHALL COME INTO FORCE FROM THE DATE IT IS SIGNED AND SHALL REMAIN OPERATIONAL FOR A PERIOD OF 99 YEARS. DELIVERY OF EFFLUENT : (14) THAT THE PARTICIPANT IS A PRIVATE LIMITED; PUB LIC LIMITED/ PARTNERSHIP/ PROPRIETORSHIP COMPANY. (15) PARTICIPANT SHOULD BE MADE LIABLE ONLY FOR NOT MEETING THE EFFLUENT DISCHARGED TO THE ECPL AND NOT FOR ANY VIOLATION AROSE AT ECPL IN CONVEYANCE TO GULF OF CA MBAY. (16) THE PATICIPANT SHALL GET THE CONSENT FROM THE GUJARAT POLLUTION CONTROL BOARD DIRECTING THE PARTICIPANT T O SEND ITS TREATED EFFLUENT TO THE EFFLUENT CHANNEL OF EFFLUENT CHANNEL PROJECT LIMITED FOR SAFE DISPOSAL. (17) THE PATICIPANT SHALL NOT SEND IN ANY CASE ANY EFFLUENT CONTAINING ANY POLLUTANT BEYOND PERMISSIBL E LIMITS FROM HIS COMPANY OR HIS SISTER COMPANY OR AN Y OTHER COMPANY FOR SHORT OR LONG DURATION. THE TREATED EFF LUENT OF PARTICIPANT SHALL CONFORM TO THE GPCB CONSENT CONDITIONS. THE PARTICIPANT SHALL NOT DISCHARGE EFF LUENT EXCEEDING HIS ITA NO.1945 AND 1948/AHD/2011 8 (18) THE DISCHARGE OF TREATED EFFLUENT INTO EFFLUEN T CHANNEL OF THE EFFLUENT CHANNEL PROJECT LIMITED SHALL BE AS PER COMMITTED QUANTITY AS IN 'APPLICATI ON' BY THE PARTICIPANT TO COMPANY. (19) THE PARTICIPANT SHALL BE BOUND TO PAY M&R CHAR GES CALCULATED ON ITS COMMITTED QUANTITY AND IN THE EVE NT OF DISCHARGE BEING LESS THAN [HE COMMITTED QUANTITY, T HE PARTICIPANT WILL HAVE TO PAY M&R/ CAPITAL/ OTHER CH ARGES AS PER COMMITTED EFFLUENT QUANTITY, WITHIN STIPULAT ED TIME LIMIT. (20) THE PARTICIPANT SHALL BE BOUND TO PAY M&R/ OTH ER CHARGES CALCULATED ON ITS COMMITTED EFFLUENT QUANTI TY AND IN THE EVENT OF HIGH (MORE THAN COMMITTED) DISCHARGE, PARTICIPANT WILL HAVE TO PAY M&R/ OTHER CHARGES AS PER ACTUAL DISCHARGE WITHIN STIPULATED TIME LIMIT, AND THE RATES AS APPLICABLE. THUS A CLEAR RIGHT IS GIVEN BY THE ASSESSEE COMPANY TO THE MEMBERS TO UTILIZE ITS CAPITAL FACILITIES FOR A PER IOD OF 99 YEARS FOR DISCHARGE OF AGREED QUANTITIES OF EFFLUENT. IN OTHE R WORDS, ASSESSEE COMPANY HAS TO PERFORM ITS PART OF OBLIGAT ION FOR NEXT 99 YEARS AND TO KEEP THE CAPITAL SET UP INTACT AND ALLOW THE USE THEREOF BY THE MEMBERS. THIS IS AKIN TO HIRING THE CAPITAL STRUCTURE OF THE ASSESSEE COMPANY FOR THE NEXT 99 Y EARS BY MAKING ONE TIME HIRING CHARGES. SINCE THE ASSESSEE COMPANY HAS TO ENSURE USE OF CAPITAL STRUCTURE BY THE MEMBERS D URING THE TERM OF AGREEMENT, IT IS BOUND TO DISCHARGE ITS OBLIGATI ON IN FUTURE. THUS ONE TIME MEMBERSHIP FEE IS NOT IN FACT IN RETU RN FOR ANY OBLIGATION OR SERVICES RENDERED BY THE ASSESSEE IN ONE YEAR. IT IS A RECEIPT IN ADVANCE FOR AN OBLIGATION TO BE RENDERED IN FUTURE. THUS IT CANNOT BE SAID THAT INCOME HAS ACTUALLY ACCRUED TO THE ASSESSEE IN ONE YEAR EVEN THOUGH IT MIGHT HAVE RECEIVED IT I N ONE YEAR. MERELY RECEIPT DOES NOT ENSURE ACCRUAL UNLESS EQUIV ALENT PART OF AGREED SERVICES BY THE RECEIVER IS RENDERED. IN FAC T BY PAYING ONE TIME FEES A PART OF DEBT IS CREATED AGAINST THE ASS ESSEE WHICH HAS TO BE DISCHARGED BY MEETING EQUIVALENT OBLIGATION I N THE FORM OF CONTINUING TO PROVIDE USE OF THE CAPITAL STRUCTURE FOR EFFICIENT DISCHARGE OF EFFLUENT EMITTED BY MEMBER-INDUSTRIES. EVEN ACCOUNTING STANDARD -9 PROVIDES SUCH DEFERRING OF R EVENUE FOR TAXATION. ACCOUNTING STANDARD 9 HAS BEEN REFERRED A BOVE AND PARA 6 THEREOF IS RELEVANT. 13. FOLLOWING THE ABOVE DECISION OF SPECIAL BENCH I N THE CASE OF ACIT VS. MAHINDRA HOLIDAYS & RESORTS (INDIA) LTD. ( SUPRA) WE HOLD ITA NO.1945 AND 1948/AHD/2011 9 THAT THEASSESSEE WAS JUSTIFIED IN DEFERRING THE REV ENUE FOR TAXATION FOR FOUR YEARS. ACCORDINGLY THIS GROUND OF ASSESSEE IS ALLOWED. 8. RESPECTFULLY FOLLOWING THE ABOVE ORDER OF THE IT AT, WE SET ASIDE THE ISSUE AS FAR AS DETERMINATION OF TAXABILITY OF THE RECEIPTS RECEIVED IN THIS YEAR TO THE FILE OF THE AO. THE LD. AO SHALL RE-WORK THE AMOUNT OUT OF THE CONTRIBUTION RECEIVED IN THIS YEAR ON THE BA SIS OF THE TRIBUNALS FINDINGS IN THE ASST.YEAR 2001-02. IN OTHER WORDS, THE RECEIPT RECEIVED BY THE ASSESSEE DURING THE ACCOUNTING PERIOD RELEVA NT FOR THIS ASSESSMENT YEAR IS ALSO TO BE SPREAD OVER, OVER A P ERIOD OF FIVE YEARS. THE TOTAL RECEIPT CANNOT BE ASSESSED IN THIS YEAR. AS FAR AS THE ENHANCEMENT MADE BY THE LD.CIT(A) IS CONCERNED, WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LD.CIT(A), BECAUSE, THE A SSESSEE OUGHT TO HAVE SHOWN THAT THE AMOUNT AS INCOME ON THE BASIS OF CLA IM MADE IN EARLIER YEARS, I.E. WHATEVER AMOUNT REPRESENTING THE ALLEGE D 1/5 TH OUGHT TO BE OFFERED FOR TAXATION IN THIS YEAR. THE LD.FIRST AP PELLATE AUTHORITY HAS RIGHTLY MADE THE ENHANCEMENT. 9. IN VIEW OF THE ABOVE DISCUSSION, THE APPEAL OF T HE ASSESSEE IS TREATED AS PARTLY ALLOWED, WHEREAS, THE APPEAL OF T HE REVENUE IS DISMISSED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED, AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 24 TH JULY, 2015 AT AHMEDABAD. SD/- SD/- (G.D. AGRAWAL) VICE-PRESIDENT (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 24/07/2015