M/s Rites Ltd., Gurgaon V. ACIT, LTU, New Delhi

ITA 2149/DEL/2013

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 2925 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 03-12-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 12-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAMESH CHAND
• Keywords: Rule of consistency; Competent authority

Judgement Text

1 ITA NOS. 2 149 & 2660/DEL/2013 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH:F NEW DELHI BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER & SMT. BEENA PILLAI, JUDICIAL MEMBER I.T.A .NO. 2149/DE L/2013 (ASSESSMENT YEAR-2008- 09) RITES LTD., RITES BHAWAN, PLOT NO. 1, SECTOR 29, GURGAON. AAACR0830Q VS ACIT, LTU, NEW DELHI. & I.T.A .NO.-2660/DE L/2013 (ASSESSMENT YEAR-2008- 09) DCIT, CIRCLE 15(1), NEW DELHI. VS RITES LTD., RITES BHAWAN, PLOT NO. 1, SECTOR 29, GURGAON. AAACR0830Q APPELLANT BY SH. R.S. SINGHVI, CA RESPONDENT BY SH. RAMESH CHAND, CIT(DR) ORDER PER BEENA PILLAI, JUDICIAL MEMBER : THESE ARE CROSS APPEALS FILED BY THE ASSESSEE & REV ENUE AGAINST THE ORDER DATED 01/02/2013 PASSED BY THE LD . CIT(A)S- XVIII, NEW DELHI FOR A.Y. 2008-09 ON THE FOLLOWING GROUNDS: DATE OF HEARING 07.12.2015 DATE OF PRONOUNCEMENT 20.01.2016 2 ITA NOS. 2 149 & 2660/DEL/2013 GROUNDS OF ASSESSEES APPEAL ARE AS UNDER : 1. (I) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) IS NOT JUSTIFIED IN CONFIRMING DISALLOWANCE TO THE EXTENT OF RS. 67,99,614/- IN RESPECT OF CLAIM OF PR IOR PERIOD EXPENSES WITHOUT PROPER APPRECIATION OF FACT S AND OPPORTUNITY TO THE APPELLANT; (II) THAT ENTIRE CLAIM OF PRIOR PERIOD EXPENSES I S IN RESPECT OF LIABILITY CRYSTALLIZED DURING THE YEAR AND CLAIM IS IN CONFORMITY WITH PAST HISTORY OF THE CASE. (III) THAT OBSERVATION OF THE CIT(A) THAT PROPER EVIDENCES WERE NOT FILED IN SUPPORT OF CLAIM OF PRIOR PERIOD EXPENSES IS HIGHLY ARBITRARY, UNCALLED FOR ANY WITHOUT ANY F ACTUAL BASIS. 2. (I) THAT ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE CIT(A) IS NOT JUSTIFIED IN CONFIRMING ADDITION OF R S. 201.66 LACS BEING IN THE NATURE OF CONTINGENT CLAIM WITHOU T PROPER APPRECIATION OF FACTS OR LEGAL PRINCIPLES. (II) THAT THE IMPUGNED CLAIM IS OF CONTINGENT NATUR E AND THERE WAS COUNTER CLAIM BY OTHER PARTY AND BOTH THE SE ISSUES WERE IN DISPUTE UNDER ARBITRATION PROCEEDING S, THERE IS NO CASE OF ANY ACCRUAL OF INCOME. (III) THAT THE OBSERVATION OF THE CIT(A) THAT EVID ENCE IN RESPECT OF PENDING ARBITRATION PROCEEDINGS WAS NOT FILED IS NOT INCORRECT AS NECESSARY EVIDENCE IN SUPPORT OF ARBITRATION PROCEEDINGS WAS PLACED ON RECORD DURING THE APPELLATE PROCEEDINGS AND AS SUCH ORDER OF CIT(A) I S NOT SUSTAINABLE. 3. (I) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE CIT(A) WAS NOT JUSTIFIED IN CONFIRMING ADDITION OF RS. 71.26 CRORE EVEN THOUGH NO SUCH INCOME HAD ACCRUED OR RECEIVED DURING THE YEAR UNDER REFERENCE. (II) THAT IN RESPECT OF IRAQ DUES, ASSESSEE BECAME ENTITLED TO INTEREST OF RS. 48.87 CRORES ON THE BAS IS OF APPROVAL OF THE CLAIM IN AY 2009-10 AND SAME WAS DU LY DECLARED AND SUBJECTED TO TAX IN AY 2009-10. 3 ITA NOS. 2 149 & 2660/DEL/2013 (III) THAT THE WHOLE BASIS OF ADDITION IS ILLEGAL, ARBITRARY AND MERELY OF DUPLICATING NATURE BASED ON PRESUMPTI ON AND SURMISES. 4. THAT ORDER OF THE LOWER AUTHORITIES ARE NOT JUSTIFI ED ON FACTS AND SAME ARE BAD IN LAW. GROUNDS OF REVENUES APPEAL ARE AS UNDER : 1. THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DELETI NG THE MAJOR PART OF THE ADDITION MADE BY THE ASSESSING OF FICER ON ACCOUNT OF PRIOR PERIOD EXPENSES AND IN IGNORING THE FACT THAT AS PER MERCANTILE SYSTEM OF ACCOUNTING TH E ASSESSEE HAS TO MAKE PROVISIONS FOR THE EXPENSES. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ABOVE ADDITION RELYING ON THE DECISION OF THE I TAT ON THE ISSUE AND IN IGNORING THE FACT THAT THE MATTER IS SUB- JUDICE BEFORE THE HONBLE HIGH COURT AND HAS NOT CO ME TO ITS FINALITY. 3. THE APPELLANT CRAVES TO BE ALLOWED TO ADD ANY FRESH GROUNDS OF APPEAL AND/OR DELETE OR AMEND ANY OF THE GROUND OF APPEAL. 2. BRIEF FACTS OF THE CASE ARE AS UNDER: 2.1 THE ASSESSEE FILED ITS RETURN DECLARING A TOTAL INCOME OF RS. 225,75,07,850/- ON 26/09/2008. THE SAME WAS PR OCESSED U/S 143(1) OF THE ACT. THE CASE WAS SELECTED FOR SCRUT INY AND NOTICE U/S 143(2) OF THE ACT WAS ISSUED AND SERVED UPON THE AS SESSEE. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CONSULTANCY IN ALL THE TRANSPORT SECTORS IN ADDITION TO TECHNICAL INSPECTI ONS, EXPORTS AND LEASING AND FOREIGN CONSULTANCY SERVICES. ON EXAMI NATION OF RECORDS THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HA S DEBITED AN AMOUNT OF RS. 235.08 LACS TOWARDS PRIOR PERIOD EXPE NSES IN THE PROFIT AND LOSS ACCOUNT. THE ASSESSEE FOLLOWS MERC ANTILE SYSTEM OF ACCOUNTING AND, THEREFORE, THE LD. ASSESSING OFFICE R HELD THAT THE 4 ITA NOS. 2 149 & 2660/DEL/2013 PRIOR PERIOD EXPENSES TO BE NOT ALLOWABLE AND INCOM E IS TO BE TAXED ON ACCRUAL BASIS. 2.2 FURTHER, THE LD. ASSESSING OFFICER OBSERVED THA T ASSESSEE HAS SHOWN RECEIVABLES AMOUNTING TO RS. 201.66 LACS TOWARDS THE INTEREST ON MOBILIZATION ADVANCE WHICH HAD NOT BEEN RECEIVED BY THE ASSESSEE. THE ASSESSEE HAD SUBMITTED THAT THERE WA S UNCERTAINTY REGARDING REALIZATION OF THIS AMOUNT AS THERE WERE CLAIMS AND COUNTER CLAIMS IN RESPECT OF THE SAME. THE ASSESSI NG OFFICER DID NOT AGREE TO THE SUBMISSIONS OF THE ASSESSEE AND MADE A N ADDITION OF RS. 201.66 LACS AS THE ASSESSEE WAS FOLLOWING MERCA NTILE SYSTEMS OF ACCOUNTING. 2.3 THE LD. ASSESSING OFFICER FURTHER OBSERVED THA T THE ASSESSEE HAD SHOWN INTEREST TO AN EXTENT OF RS. 17. 75 CRORES AS RECEIVABLES FROM BAAR PROJECT. THE LD. ASSESSING O FFICER REJECTED THE ASSESSEES CONTENTIONS THAT THE INTEREST BEING SHOW N AS RECEIVABLE AMOUNTS TO A CONTINGENT LIABILITY AND, THEREFORE, C ANNOT BE TREATED AS INCOME FOR THE YEAR UNDER CONSIDERATION. THE LD . ASSESSING OFFICER ADDED AN AMOUNT OF RS. 17.75 CRORES TO THE INCOME OF THE ASSESSEE AS INTEREST IN RESPECT OF BAAR PROJECT. 3. AGGRIEVED BY THE ORDER OF THE LD. ASSESSING OFFI CER THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A). 3.1 THE LD. CIT(A) AFTER GOING THROUGH THE CONTENTI ONS AND SUBMISSIONS MADE BY THE ASSESSEE DELETED THE ADDITI ON MADE IN RESPECT OF PRIOR PERIOD EXPENSES TO AN EXTENT OF RS . 1,67,08,386/-, FOR WHICH THE ASSESSEE HAD PRODUCED DOCUMENTS FOR A DMISSIBILITY OF THE SAME. IN RESPECT OF THE BALANCE OF RS. 67,99,6 14/- THE LD. CIT(A) 5 ITA NOS. 2 149 & 2660/DEL/2013 CONFIRMED THE ADDITION AS THE ASSESSEE DID NOT PROD UCE ANY EXPLANATION. IN RESPECT OF THE INTEREST ON MOBILIZ ATION ADVANCE, AS INTEREST ON BAAR PROJECT, THE LD. CIT(A) CONFIRMED THE ADDITION MADE BY THE LD. ASSESSING OFFICER AS THE ASSESSEE WAS FO LLOWING MERCANTILE SYSTEM OF ACCOUNTING. 4. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE ASS ESSEE AS WELL AS THE REVENUE IS IN APPEAL BEFORE US. GROUND NO.1 5. THE LD. AR SUBMITTED THAT THE ASSESSEE IS A GOVE RNMENT UNDERTAKING PROVIDING ENGINEERING CONSULTANCY SERVI CES, EXPORT OF ROLLING STOCK, LEASING SERVICES ETC. THE LD. AR FU RTHER SUBMITTED THAT THE ASSESSEE IS ENGAGED IN EXECUTING VARIOUS PROJEC TS SPREAD OVER DIFFERENT LOCATIONS IN INDIA. THE ASSESSEE HAD DEB ITED RS.2,35,08,000/- TO THE PROFIT & LOSS ACCOUNT RELAT ING TO PRIOR PERIOD EXPENSES. THE LD. AR SUBMITTED THAT THE CLAIMS OF P RIOR PERIOD EXPENSES AND INCOME ARE REGULAR FEATURE, WHICH ARE PROCESSED, QUANTIFIED AFTER DUE PROCESS AND APPROVALS AND THER EAFTER THESE ARE RECOGNIZED IN THE BOOKS OF ACCOUNT. 5.1 THE LD. AR SUBMITTED THAT SUCH CLAIMS ARE BEING RECOGNIZED IN CONFORMITY WITH REGULAR SYSTEM, WHICH ARE BEING FOLLOWED CONSISTENTLY AND THE SAID CLAIMS OF THE AS SESSEE HAVE ALWAYS BEEN ACCEPTED BY THE REVENUE AND ALLOWED IN THE PAST ASSESSMENT YEARS, BEING A.Y. 2005-06, 2006-07 & 200 7-08. THE RELEVANT ORDERS OF THIS TRIBUNAL HAVE BEEN ANNEXED TO THE PAPER BOOK, AT PAGES 29 TO 38 AND 49 TO 51. 6 ITA NOS. 2 149 & 2660/DEL/2013 5.2. THE LD. AR SUBMITTED THAT IN THE RELEVANT YEAR UNDER CONSIDERATION THE ASSESSEE HAD DEBITED PRIOR PERIOD EXPENSES AMOUNTING TO RS. 235.08 LACS. THE LD. AR SUBMITTED THAT THERE WAS NO DOUBLE DEDUCTION, THAT THE CLAIM OF THE ASSESSEE HAD BEEN INCURRED AND CRYSTALLIZED DURING THE YEAR UNDER CON SIDERATION. THE LD. AR SUBMITTED THAT THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO PROVE THE SAME. THE LD. AR ALSO SUBMITTED THAT IN CASE THE EXPENSES HAD BEEN CRYSTALLIZED DUR ING THE YEAR THEY WOULD NOT HAVE BEEN TERMED AS PRIOR PERIOD EXPENSES . 5.3 THE LD. AR HAS PLACED BEFORE US THE DECISION O F THE HONBLE HIGH COURT IN ASSESSEES OWN CASE, IN ITA N O. 293/2013 AND 295/2013 FOR AY 2006-07 & 2007-08, WHEREIN ISSUE RE LATING TO PRIOR PERIOD EXPENSES HAVE BEEN DEALT WITH. THE HONBLE HIGH COURT HAD UPHELD THE VIEW OF THE TRIBUNAL OF THE ADDITION BEI NG DELETED UNDER THE HEAD PRIOR PERIOD EXPENSES. IN THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS FILED ITS REPLY WHICH HAS BEEN REPRODU CED AT PAGE 2 PARA 3.3 OF THE ASSESSMENT ORDER, WHICH IS AS UNDER : 3.3 IN RESPONSE THERETO THE ASSESSEE HAS FILED THE FOLLOWING SUBMISSION: THE PRIOR PERIOD EXPENSES HAVE ALREADY BEEN ALLOWED TO RITES IN THE EARLIER YEARS. RITES, IS A GOVT. OF INDIA UNDERTAKING AND IN SUCH ORGANIZATIONS, THERE ARE WELL LAID DOWN PROCEDURES FOR PROVIDING INCOME OR LIABILITY AFTER REQUISITE APPROVAL IS OBTAINED FROM THE DESIGNATED AUTHORITY. THIS HAS BEEN THE REGULAR PRACTICE FOR MANY YEARS AND THE SAME IS APPLIED UNIFORMLY IN RESPECT OF INCOME AND EXPENSES. THE EXPENSES/INCOME IS CONSIDERED TO BE CRYSTALLIZED ONLY IN THE YEAR IN WHICH THESE ARE 7 ITA NOS. 2 149 & 2660/DEL/2013 APPROVED BY DESIGNATED AUTHORITY. THE SAME VIEW HAS BEEN TAKEN IN EARLIER YEARS BY APPELLATE AUTHORITY AND COD WHICH ARE ON THE RECORD. THIS VIEW IS UPHELD BY CIT(A) AND ITAT IN THE CASE OF ITDC AND SIMILAR DECISIONS IN OTHER CASES LIKE THE DECISION OF GUJARAT HIGH COURT IN THE CASE OF SAURASHTRA CEMENT AND CHEMICALS INDUSTRIES V. CIT, 213 ITR 525. IN VIEW OF THE ABOVE, THE CLAIM FOR PRIOR PERIOD EXPENSES ARE JUSTIFIED AND, THEREFORE, BE ALLOWED. THE HONBLE HIGH COURT IN ASSESSEES OWN CASE FOR A Y 2006-07 AND 2007-08 HAS REPRODUCED SIMILAR FINDINGS OF THE LD. CIT(A), IN PARA 4 OF THE ORDER. TO AVOID REPETITION THE SAME IS NOT REPRODUCED HEREWITH. 6.ON THE CONTRARY, THE LD. DR SUPPORTED THE ORDERS OF THE LD. ASSESSING OFFICER AND SUBMITTED THAT, AS THE ASSESS EE WAS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING THE ASSESSING O FFICER WAS RIGHT IN CONSIDERING THE SAME AS INCOME IN THE HANDS OF T HE ASSESSEE. 7. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE M ATTER CAREFULLY. THE ASSESSEE IS A GOVERNMENT UNDERTAKING. THE ASSE SSEE HAS BEEN FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, AS PER W HICH ALL ITEMS OF INCOME AND EXPENDITURE ARE TREATED AS ACCRUED, ONLY AFTER THE APPROVAL IS GRANTED BY THE COMPETENT AUTHORITY. TH IS SYSTEM HAS BEEN FOLLOWED CONSISTENTLY IN RESPECT OF BOTH INCOM E AND EXPENDITURE ITEMS. THE SYSTEM FOLLOWED HAS BEEN AC CEPTED BY THE DEPARTMENT IN THE IMMEDIATE PRECEDING YEAR. THEREF ORE, IN OUR VIEW, IT WILL NOT BE APPROPRIATE TO DISTURB THE REGULAR S YSTEM BEING FOLLOWED BY THE ASSESSEE. MOREOVER, THE REVENUE HA S ALREADY 8 ITA NOS. 2 149 & 2660/DEL/2013 ACCEPTED THE SAME BASIS ADOPTED REGARDING THE ACCRU AL OF INCOME AND, THEREFORE, DIFFERENT STANDARDS CANNOT BE FOLLO WED IN RESPECT OF EXPENDITURE INCURRED IN RELATION TO THE SAME INCOME AS IT WOULD GIVE A DISTORTED PICTURE OF THE PROFIT OF THE YEAR. THE LD.CIT(A) HAS ALSO ALLOWED THE CLAIM IN PART IN HIS ORDER. 7.1. THE LD.AR HAS SUBMITTED THAT THE ISSUE MAY BE SENT BACK TO THE LD.AO FOR VERIFICATION TO AN EXTENT OF RS.67,99,614 /-. THE LD.DR DOES NOT OBJECT TO THIS PREPOSITION, D BY THE LD.AR. ACC ORDINGLY WE SET ASIDE THIS GROUND TO THE LD.AO FOR VERIFICATION AND TO ALLOW THE SAME FOLLOWING THE PRINCIPLE OF CONSISTENCY. 7.2. THIS GROUND RAISED BY THE ASSESSEE THEREFORE S TANDS STATISTICALLY ALLOWED. GROUND NO. 2: 8. THE LD. AR SUBMITTED THAT THE ASSESSEE HAD ENTER ED INTO A PRE- CLOSED CONTRACT IN THE YEAR 2005-06 WITH A COMPANY KNOWN AS M/S RPCL. THE ASSESSEE FURTHER BROUGHT TO THE NOTICE T HAT THE ASSESSEE HAD RAISED A CLAIM OF RS. 22,195.43 LACS AND M/S RP CL HAS RAISED COUNTER CLAIMS OF RS. 46,910 LACS. THE LD. AR FURT HER SUBMITTED THAT FOR THE YEAR UNDER CONSIDERATION THE ASSESEE HAS RA ISED A CLAIM OF RS. 18,441.31 LACS AGAINST THE COMPANY AND THE COMP ANY HAS RAISED COUNTER CLAIMS OF RS. 64,453.06 LACS IN A CO NTRACT WHICH HAS BEEN RENDERED VOIDABLE DUE TO COMMITMENT OF FRAUD A ND HENCE HAS BEEN TERMINATED. 8.1 THE LD. AR SUBMITTED THAT THE ARBITRATION PROCE EDINGS ARE UNDER PROCESS, AND THE RESPECTIVE AMOUNTS OF CLAIMS AND COUNTER 9 ITA NOS. 2 149 & 2660/DEL/2013 CLAIMS AGAINST THE COMPANY HAVE BEEN INCLUDED AS CO NTINGENT LIABILITIES. 8.2 THE LD. AR SUBMITTED THAT AN ARBITRAL TRIBUNA L HAS BEEN CONSTITUTED FOR RESOLVING THE ISSUES BETWEEN THE AS SESSEE AND M/S RML BY THE HONBLE JHARKHAND HIGH COURT VIDE ITS OR DER DATED 13/07/2006 WHICH HAS BEEN FURTHER MODIFIED VIDE ORD ER DATED 03/05/2013. THE LD. AR HAS ALSO PRODUCED ORDER SHE ET OF THE ARBITRAL PROCEEDING DATED 29/11/2015 WHICH SHOWS TH AT THE PROCEEDINGS HAVE NOT YET BEEN CONCLUDED AND THAT TH E MATTER HAS BEEN ADJOURNED FOR JANUARY, 2016. 8.3 THE LD. AR SUBMITTED THAT AS THE ARBITRATION PR OCEEDINGS ARE STILL UNDER PROCESS THE COUNTER CLAIMS ARE SHOWN AS CONTI NGENT LIABILITIES IN THE NOTES TO THE ACCOUNTS. AS THE ARBITRATION P ROCEEDINGS ARE STILL IN PROCESS, THE RIGHTS OF THE PARTIES ARE THEREFORE SUSPENDED TILL ARBITRATION AWARD IS PASSED. 9. ON THE CONTRARY, THE LD. DR SUPPORTED THE ORDER OF LD.AO AND SUBMITTED THAT AS THE ASSESSEE IS FOLLOWING MERCANT ILE BASIS OF ACCOUNTING THE ADDITION MADE BY THE LD. ASSESSING O FFICER NEEDS TO BE CONFIRMED. 10. WE HAVE PERUSED THE RELEVANT PAGES OF THE PAPER BOOK AND ARE CONVINCED THAT AS THE AMOUNT HAS NOT BEEN CRYSTALLI ZED THE SAME CANNOT BE TREATED AS INCOME IN THE HANDS OF THE ASS ESSEE. THE ASSESSEE BEING A GOVERNMENT UNDERTAKING HAS BEEN FO LLOWING A SYSTEM OF ACCOUNTING AS PER WHICH ALL ITEMS OF INCO ME AND EXPENDITURE ARE TREATED AS ACCRUED ONLY AFTER THE A PPROVAL IS GRANTED BY COMPETENT AUTHORITY. THIS SYSTEM HAS BEEN FOLLO WED CONSISTENTLY 10 ITA NOS. 2149 & 2660/DEL/2013 IN RESPECT OF BOTH INCOME AND EXPENDITURE ITEMS WHI CH HAS NOT BEEN DISPUTED BY THE REVENUE IN ANY OF THE PRECEDING YEA RS. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT THE ADDITION CONFIRMED BY THE LD. CIT(A) IS WITHOUT ANY BASIS AND NEEDS TO BE DEL ETED. 10.1ACCORDINGLY, THIS GROUND OF THE ASSESSEE IS ALL OWED. GROUND NO. 3 : 11. THIS GROUND IS DIRECTED AGAINST THE ADDITION OF 17.26 LACS AS ACCRUED INTEREST INCOME ON DUES FROM IRAQ. THE LD. AR SUBMITTED THAT THE DUES OF RS. 117.75 CRORES ARE A PART OF LO ANS AND ADVANCES AS DUE FROM GOVERNMENT OF INDIA. IT IS SUBMITTED T HAT WITH A VIEW OF RESOLVE THE LIQUIDITY RELATED PROBLEMS OF THE INDIA N PROJECT EXPORTERS DUE TO NON REALIZATION OF THEIR PROJECT RECEIVABLES FROM IRAQ AND CONSEQUENT TO NON SERVICING OF RUPEE AND FOREIGN CU RRENCY LOAN/FACILITIES AVAILED OF BY THEM FROM AXIM BANK A ND SBI, GOVERNMENT OF INDIA AGREED TO PAY THE BANKERS A SUM OF RS. 248.45 CRORES BEING THE RUPEE EQUIVALENT OF THE CERTIFIED RECEIVABLES OF THE ASSESSEE, CONFIRMED BY THE CENTRAL BANK OF IRAQ AS OF SEPTEMBER, 2001 TOWARDS THE PART SETTLEMENT IN RESPECT OF FUND BASED FACILITIES IN RUPEE AND US DOLLARS GRANTED BY THE BANKS TO ASS ESSEE AS ONE OF THE PROJECT EXPORTERS IN CONNECTIONS WITH THE CONTR ACT WHICH WAS ALSO AGREED TO BE PAID BY THE GOVERNMENT OF INDIA. 11.1 THE LD. AR FURTHER SUBMITTED THAT IN PURSUANC E OF THE GOVERNMENT AGREEING TO MAKE THE PAYMENTS TO THE BAN KERS UNDER THE ABOVE ARRANGEMENTS, THE ASSESSEE ASSIGNED THE P ROJECT RECEIVABLES STANDING TO ITS CREDIT IN THE ACCOUNTS OF AXIM BANK WITH CENTRAL BANK OF IRAQ TO THE EXTENT CERTIFIED BY THE CENTRAL BANK OF 11 ITA NOS. 2149 & 2660/DEL/2013 IRAQ AS OF SEPTEMBER 30, 2001. IT HAS BEEN SUBMITT ED THAT THE GOVERNMENT OF INDIA PAID A SUM OF RS. 130.70 CRORES DURING THE YEAR 2001-02 THAT WAS USED TO REPAY THE LOANS TO TH E BANKERS. THE BALANCE SUM OF RS. 117.75 CRORES ACCEPTED TO BE REL EASED IN THE FORM OF BONDS/CASH WERE NEVER ISSUED/PAID. THE LD. AR SUBMITTED THAT THE ASSESSEE PAID THE AMOUNT FROM ITS OWN FUND TO THE BANKERS AND THIS AMOUNT HAS BECOME RECEIVABLE FROM THE GOVE RNMENT OF INDIA TO THE ASSESSEE. THE LD. AR SUBMITS THAT AFT ER A CONTINUOUS FOLLOW UP WITH THE MINISTRIES THE GOVERNMENT AGREE TO PAY PROVIDED A SEPARATE CABINET NOTE BE PUT UP AGAINST A BALANCE AMOUNT OF RS. 117.75 CRORES. 11.2. THE LD. AR IN THE PAPER BOOK HAS RELIED UPON A LETTER DATED 28/03/2008, WHEREIN A PROPOSAL TO PROVIDE RELIEF TO THE PSUS OF THE MINISTRY OF RAILWAYS BEING THE ASSESSEE ON OUTSTAND ING DUES ON DEFERRED PAYMENT BASIS HAVE BEEN MADE. INITIALLY, THE PROPOSAL WAS TO PAY INTEREST AT 8.75% P.A. WHICH WAS SUBSEQUENTL Y MODIFIED VIDE OFFICE MEMORANDUM DT. 03/06/08 PLACED AT PAGE 53 TO 6% P.A. 11.3. THE LD. AR AT PAGE 54 OF THE PB HAS PLACED AN ORDER DT. 04/12/2008, WHEREIN AN AMOUNT OF RS. 166.62 CRORES HAS BEEN SANCTIONED PERTINENT TO THE ABOVE OFFICE MEMORANDUM . ACCORDINGLY, THE SAID AMOUNT HAS BEEN RELEASED AND THE RELEVANT DOCUMENTS AND A COPY OF THE ACCOUNT PAYEE CHEQUE ISSUED BY THE GO VERNMENT OF INDIA HAVE BEEN PLACED AT PAGE 52 TO 57 OF THE PB. THUS, IT IS SUFFICIENTLY CLEAR THAT THE ASSESSEE HAS BEEN AWARD ED AN INTEREST OF RS. 48.87 CRORES AS AGAINST RS. 71.26 CRORES WHICH HAS BEEN ADDED BY THE LD. ASSESSING OFFICER. 12 ITA NOS. 2149 & 2660/DEL/2013 12. WE HAVE PERUSED ALL THE ABOVE PAGES OF THE PAPE R BOOK AND ARE CONVINCED THAT THE ASSESSEE HAS ONLY REALEASED A TO TAL AMOUNT OF RS. 166.62 CRORES AT AN INTEREST OF RS. 6% P.A. WE ARE , THEREFORE, INCLINED TO DELETE THE ADDITION CONFIRMED BY THE LD . CIT(A) TO AN EXTENT OF RS. 71.26 CRORES AS INTEREST ON THE BASIS OF THE ABOVE DISCUSSIONS. GROUND NO. 3 OF THE ASSESSEES APPEAL , THEREFORE, STANDS ALLOWED. ITA NO. 2660/D/2013: NOW WE TAKE UP THE DEPARTMENTS APPEAL. 13. THE ONLY GROUND RAISED BY THE DEPARTMENT IN ITS APPEAL IS RELATING TO THE PRIOR PERIOD EXPENSES WHICH HAS BEE N ALLOWED TO AN EXTENT OF RS. 1,67,08,386/-. THE LD. CIT(A) HAS RE LIED UPON THE ORDERS OF THIS TRIBUNAL FOR A.Y. 1998-99, 2006-07 A ND 2007-08, WHEREIN THE TRIBUNAL HAS HELD AS UNDER: 3.3 WE HAVE PERUSED THE RECORDS AND CONSIDERED T HE MATTER CAREFULLY. THE ASSESSEE IS A GOVERNMENT UNDERTAKING. THE ASSESSEE HAS BEEN FOLLOWING SYSTE M OF ACCOUNTING AS PER WHICH ALL ITEMS OF INCOME AND EXPENDITURE ARE TREATED AS ACCRUED ONLY AFTER THE A PPROVAL IS GRANTED BY THE COMPETENT AUTHORITY. THIS SYSTEM HAS BEEN FOLLOWED CONSISTENTLY IN RESPECT OF BOTH INCOM E AND EXPENDITURE ITEMS. THE SYSTEM FOLLOWED HAS BEEN ACCEPTED BY THE DEPARTMENT IN THE IMMEDIATE PRECEDI NG YEAR. THEREFORE, IN OUR VIEW, IT WILL NOT BE APPRO PRIATE TO DISTURB THE REVENUE HAS ALREADY ACCEPTED THE SAME B ASIS ADOPTED REGARDING THE ACCRUAL OF INCOME AND, THEREF ORE, DIFFERENT STANDARDS CANNOT BE FOLLOWED IN RESPECT O F EXPENDITURE INCURRED IN RELATION TO THE SAME INCOME AS IT WOULD GIVE A DISTORTED PICTURE OF THE PROFIT OF THE YEAR. WE ARE, THEREFORE, UNABLE TO SUSTAIN THE ORDER OF CIT( A) AND THE SAME IS SET ASIDE AND THE CLAIM OF THE ASSESSEE IS ALLOWED. 13 ITA NOS. 2149 & 2660/DEL/2013 13.1. THIS TRIBUNAL IN A.Y. 2005-06 HAS FOLLOWED TH E FINDINGS OF THE TRIBUNAL FOR A.Y. 1998-99. RESPECTFULLY FOLLOWING THE DECISION OF THIS TRIBUNAL FOR THE PREVIOUS YEARS BEING 1998-99, 2005-06 WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF THE LD. C IT(A). 14. WE, THEREFORE, DISMISSED THIS GROUND OF APPEAL RAISED BY THE REVENUE. 15. IN THE RESULT, THE ASSESSES APPEAL STANDS ALLO WED ACCORDINGLY AND REVENUES APPEAL STANDS DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 20.01. 2016 SD/- SD/- (N.K. SAINI) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 20.01.2016 *KAVITA, P.S. COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 14 ITA NOS. 2149 & 2660/DEL/2013