ACIT, New Delhi V. M/s. Wimco Greens, New Delhi

ITA 2110/DEL/2010

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 4166 (ITAT-DELHI)
• Duration Of Justice: 13 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 16-10-2023
• Assessment Year: 1997-1998
• Appeal Filed On: 05-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: LEARNED
• Keywords: Business expenditure; Tax effect; Tax effect
• Section: 147; 143(3)

Judgement Text

1 ITA No. 2110/Del/2010 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “F”: NEW DELHI BEFORE SHRI G.S. PANNU, HON’BLE VICE PRESIDENT AND SHRI ANUBHAV SHARMA, JUDICIAL MEMBER ITA No. 2110 /DEL/2010 Asstt. Yr: 1997-98 Assistant Commissioner of Income-tax, circle-23(1), New Delhi Vs M/s Wimco Green, C-14, Lajpat Nagar, Phase-III, New Delhi. PAN: AAAAW0020F APPELLANT RESPONDENT Assessee represented by Sh. Rohit Jain, Adv. & Ms. Somya Jain, CA Department represented by Sh. Vivek Vardhan CIT( DR) Date of hearing 19.01.2024 Date of pronouncement 29.01.2024 O R D E R PER ANUBHAV SHARMA, JM: The Revenue has come in appeal against the order dated 22.02.2010 passed by the Commissioner of Income Tax (Appeals)-XVIII, New Delhi (hereinafter referred as “learned First Appellate Authority” or in short “FAA”) in Appeal no. 115/09-10, for the assessment year 1997-98, arising out of the order dated 28.03.2002 u/s 148/147 of the Income-tax Act, 1961 (hereinafter referred as the “Act”), passed by the Dy. Commissioner of Income-tax, Circle 23(1), New Delhi, (hereinafter referred in short as “Ld. AO”). 2 ITA No. 2110/Del/2010 2. Facts in brief are, assessee, an association of persons, was engaged in collective farming scheme of poplar plantation and in the year under consideration had filed income declaring loss of Rs. 2,33,38,800/-. Original assessment was completed u/s 143(3) of the Act vide order dated 31.03.2000, wherein loss returned was accepted. Subsequently, proceedings u/s 147 of the Act were initiated by the AO vide notice dated 31.03.2001. In the reassessment proceedings AO made various additions/ disallowances against which assessee preferred appeal, which was partly allowed in favour of assessee by the CIT(A) vide order dated 22.02.2010 and aggrieved with the same, both Assessee and Revenue have approached this Tribunal with respective appeals. 2.1 The appeal of assessee was settled under Vivad Se Vishwas Scheme being ITA no. 1428/Del/2010 2.2 Revenue’s appeal raises following grounds: “1. On the facts and circumstances of the case, the CIT(A) has erred in law and on facts in deleting the addition made in respect of management fees and licence fee on receipt basis by the AO to the income of the assessee. 2. On the facts and circumstances of the case, the CIT(A) has erred in law and on facts in directing the AO to recomputed the income of the assessee from management fees and licence fees on accrual basis of l/8 th of the total as claimed by the assessee. 3. On the facts and circumstances of the case, the CIT(A) has failed to appreciate that the assessee has claimed Business Promotion Expenditure on accruals and not on accrual basis while showing receipts on sale of 3 ITA No. 2110/Del/2010 ETP, Licence fees and Management charges of l/8 th on accrual basis. 4. On facts and circumstances of the case, the CIT(A) has erred in law and on facts in deleting the disallowance of business promotion expenses to the tune of Rs.2,43,31,921/-.” 5. The appellant craves leave to add, alter or amend any of the grounds of appeal before or during the course of hearing of the appeal 3. Heard and perused the record. 4. Ground no. 1 and 2; It was submitted on behalf of the assessee by learned AR that pro-rata taxation of the license fee and management charges stand accepted by Revenue and have attained finality in earlier and subsequent years. Attention was drawn of the Bench to the A.Y. 1996-97 order of ITAT, available at pages 115-117 of P.B. Vol. II; and 1989-90 order of the Tribunal dated 8.6.2016 in ITA no. 1306/Del/2007, available at pages 60-63 of P.B. Vol. II, wherein pro-rata offer of income was accepted by the CIT(A). However, as a matter of fact, Revenue’s appeals were dismissed on account of low tax effect. In subsequent assessment years 1999-2000 and 2000-01, pro-rata offer of income has been accepted by the CIT(A) and Revenue did not prefer any appeal, most likely for the reason that the same had also low tax effect. 5. Thus, what becomes relevant for the present appeal is that when the major part of the pro-rata income stands accepted in the previous and subsequent years, 4 ITA No. 2110/Del/2010 the claim of Revenue for taxation of the whole amount in the year under consideration on the basis of accrual system of accounting will lead to double taxation. Even otherwise, the learned AO failed to appreciate that assessee, following mercantile system of accounting, receipt relevant to the year under consideration only could be taxed. The amount received in advance assumes the character of income when the assessee acquires the right to unconditionally appropriate the same, which was not the case here. Thus, we are inclined to not interfere in the finding of learned CIT(A). 6. Ground No. 3 and 4-: Ld. DR has relied the findings of LAO but what comes up is that during the year under consideration, the assessee had incurred expenditure on business promotion aggregating to Rs.2,43,31,921 for promoting its collective farming scheme. In the books of accounts, the aforesaid expenditure was treated as deferred revenue expenditure. In the reassessment order, the assessing officer did not allow the deduction of the said expenditure, by any discussion whatsoever, while computing the assessed income. Then in appeal, the CIT(A), after considering the nature of expense incurred, deleted the disallowance made by the assessing officer since similar expenses claimed in the immediately succeeding year 1998-99 were duly allowed by the assessing officer. The CIT(A) further noted that in the remand report the assessing officer had no objection to the amount being allowed as deduction (refer pg 64-66 of PB Vol 2). 5 ITA No. 2110/Del/2010 7. Ld. AR has submitted that the assessee had floated a collective farming scheme under which it received, inter-alia, license fee from the unit holders. To promote the collective farming scheme for poplar trees undertaken by the assessee, during the year under consideration, the assessee incurred expenditure aggregating to Rs.2,43,31,831 under the head business promotion, which comprised of the following: - Advertisement expenses; - Brokerage/ commission to broking firms for issuing units; - Printing and stationery expenses; - Professional charges for marketing; - Courier expenses; - Travelling and conference expenses; 7.1 It was submitted that the said expenses were incurred by the assessee for the purpose of promotion of the collective farming scheme launched by the assessee and were purely in the nature of regular business expenses undertaken to carry out the collective farming activity of the assessee. Ld. AR submitted that no disallowance for similar business promotion expenses as incurred by the assessee was made in the immediately succeeding year i.e., assessment year 1998-99. It is thus submitted that once the assessing officer has accepted the stand in subsequent year, the assessing officer cannot disallow the expenditure in the preceding year without there being any change in the facts of the case and nature of expenditure. 6 ITA No. 2110/Del/2010 8. We find the order of Ld. CIT(A) to be quite reasonable as AO in the remand report has not objected to the disallowance and the law require the tax authorities to follow the principle of consistency. There is no finding of AO as to if these expenses were not wholly and exclusively for purpose of assessee’s business. Rather, no disallowance for similar business promotion expenses as incurred by the assessee was made in the immediately succeeding year i.e., assessment year 1998- 99 and same establish that expenses had nexus with business revenue. 9 . Thus, the grounds raised by Revenue have no substance and accordingly the appeal of Revenue is dismissed. Order pronounced in open court on 29.01.2024. Sd/- Sd/- (G.S. PANNU) (ANUBHAV SHARMA) VICE PRESIDENT JUDICIAL MEMBER *MP* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI