The ITO, Ward-10(2), Ahmedabad V. Ambika R.Kushwaha, Ahmedabad

ITA 2314/AHD/2012

• Counselvise Citation: 231420514 RSA 2012
• Duration Of Justice: 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 15-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y P VERMA
• Assessee Lawyers: S N DIVETIA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD B BENCH BEFORE: SHRI MUKUL KR. SHRAWAT JUDICIAL MEMBER AND SHRI T.R. MEEN A, ACCOUNTANT MEMBER I.T.O., WARD-10(2) AHMEDABAD (APPELLANT) VS. SRI AMBIKA R. KUSHWAHA (RESPONDENT) PAN: AFQPK2920L REVENUE BY : SRI Y.P. VERMA, SR. D.R. ASSESSEE BY : SRI S.N. DIVETIA, A.R. DATE OF HEARING : 13-12-2012 DATE OF PRONOUNCEMENT : 28-12-2012 / ORDER PER : MUKUL KR. SHRAWAT, JUDICIAL MEMBER:- THIS IS AN APPEAL FILED BY THE REVENUE ARISING FROM THE ORDER OF LD. CIT(A)XVI AHMEDABAD DATED 11-07-2010 AND THE SUBST ANTIVE GROUNDS RAISED ARE REPRODUCED BELOW:- (1). THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 21,45,,646/- MADE ON ACCOUNT OF ADV ANCE COMMISSION SHOWN AS CURRENT LIABILITIES IN THE BALANCE SHEET. ITA NO. 2314/AHD/2012 A.Y.:-2009-10 ITA NO.2314 /AHD/2012 A.Y. 2009-10 PAGE NO ITO VS. SRI AMBIKA R. KUSHWAHA 2 (2). THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS I N DELETING THE ADDITION OF RS. 21,45,646/- REFERRED TO IN AT SR. N O. 1 ABOVE WITHOUT CONSIDERING THE LEGAL ASPECT, THAT WHETHER THE ADVA NCE COMMISSION FORM PART OF INCOME-IF THE ASSESSEE FOLLOWS CASH SY STEM OF ACCOUNTING. 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S 143(1) DATED 08-12-2011 THAT THE ASSESSE E IN INDIVIDUAL CAPACITY IS RUNNING A PROPRIETARY CONCERN NAMELY, M/S AVENUE OVERSEAS FOR PROVIDING EDUCATIONAL CONSULTANCY IN HIGHER STUDIES ABROAD TO STUDENTS. IT WAS NOTED BY THE AO THAT THE METHOD OF ACCOUNTING O F THE ASSESSEE WAS CASH BASIS. UNDER THE HEAD ADVANCE COMMISSION 2 008-09 THE ASSESSEE HAD A LIABILITY OF RS.21,45,646/-. THE ASSESSEES EXPLANATION WAS THAT ON IDENTICAL FACTS AND CIRCUMSTANCES IN ASSESSEES OWN CASE FOR A.Y. 07-08 AND 08-09 AND AMOUNT OF RS. 4,55,045/- WAS TREATED AS ADVANCE COMMISSION. FOR THAT PURPOSE ALSO, IT WAS SHOWN AS CURRENT LIAB ILITY IN THE BALANCE SHEET. THAT LIABILITY WAS REVERSED IN NEXT YEAR ON FULFILL MENT OF THE PERIOD AND IT WAS SHOWN AS COMMISSION INCOME IN A.Y. 08-09. FURT HER, IT WAS EXPLAINED THAT IN THE LIKE MANNER AN AMOUNT OF RS. 15,51,348/ - WAS TREATED AS ADVANCE COMMISSION AND SHOWN AS CURRENT LIABILITY IN THE B ALANCE-SHEET DRAWN AS ON 31-12-2008, HOWEVER, THE SAME WAS REVERSED IN THE N EXT YEAR ON FULFILLMENT OF THE PERIOD SHOWN AS INCOME IN A.Y. 2009-10. THE AO WAS NOT CONVINCED AND HELD THAT SINCE THE ASSESSEE HAD OPTED CASH BAS IS AS ACCOUNTING SYSTEM, THEREFORE, NOT ENTITLED TO SET APART THE INCOME. A S PER AO THE ASSESSEE HAD FOLLOWED HYBRID ACCOUNTING WHICH ACCORDING TO HIM W AS NOT PERMISSIBLE AS PER THE PROVISIONS OF THE I.T. ACT. THE AO HAS THU S CONCLUDED THAT THE COMMISSION RECEIVED DURING THE YEAR WAS TO BE TAXED , THEREFORE, THE SAID SUM OF RS. 21,45,646/- BEING REDUCED FROM THE COMMISSIO N RECEIVED AND WHICH ITA NO.2314 /AHD/2012 A.Y. 2009-10 PAGE NO ITO VS. SRI AMBIKA R. KUSHWAHA 3 WAS CONSIDERED BY THE ASSESSEE AS LIABILITY WAS TO ADDED IN THE TOTAL INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION AN D TO TREATED AS THE INCOME EARNED ON CASH BASIS FOR THE YEAR. BEING AGGRIEVED , THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY WHO HAS FOLLOW ED THE ORDER OF THE TRIBUNAL AND HELD THAT THE MAIN ADDITION COULD NOT BE SUSTAINED. RELEVANT PARA IS REPRODUCED AS UNDER:- 2.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE IN THE LIGHT OF ARGUMENTS MADE BY THE APPELLANT AND THOSE TAKEN BY THE ASSESSING OFFICER. THE FIRST GROUND OF APPEAL IS REGARDING T HE ADDITION OF RS. 21,45,646, SHOWN BY THE ASSESSEE IN THE CURRENT LIA BILITIES AS ADVANCE COMMISSION. IT IS THE CASE OF THE AO THAT THE APPE LLANT THOUGH ADMITTEDLY FOLLOWS CASH METHOD OF ACCOUNTING, ACTUA LLY IS FOLLOWING A HYBRID SYSTEM OF ACCOUNTING WHICH IS PERMISSIBLE AS PER INCOME TAX ACT. THE AO HAS ARGUED THAT AS THE APPELLANT FOLLO WS CASH METHOD OF ACCOUNTING, ENTIRE COMMISSION RECEIVED DURING THE Y EAR UNDER CONSIDERATION IS TO BE TAXED. WHILE MAKING THE ADD ITION THE ASSESSING OFFICER HAS ALSO RELIED ON THE FACT THAT IN ADDITIO N ON SIMILAR GROUNDS WAS MADE IN ASSESSMENT YEAR 2007-08 WHICH HAS BEEN SUSTAINED IN APPELLATE PROCEEDINGS. DETAILS FILED BY THE APPELL ANT INDICATE THAT THE APPELLANT HAS BEEN CONSISTENTLY FOLLOWING THE PRACT ICE OF SHOWING AS COMMISSION INCOME IN THE SUCCEEDING YEAR, THE AMOUN T OF COMMISSION CLAIMED AS ADVANCE COMMISSION IN PRECEDING YEAR. T HUS COMMISSION INCOME AMOUNTING TO RS. 4,55,054/- SHOWN AS ADVANCE IN ASSESSMENT YEAR 2007-08 WAS OFFERED AS INCOME IN ASSESSMENT YE AR 2008-09. AGAIN ADVANCE COMMISSION OF RS. 15,81,348/- WAS SHO WN AS INCOME IN ASSESSMENT RS. 21,45,646/- HAS BEEN SHOWN AS INCOME IN FY 2009-10 RELEVANT TO ASSESSMENT YEAR 2010-11. IT IS THE CAS E OF THE APPELLATE THAT IT IS COMPELLED TO SHOW THE FIGURES OF ADVANCE COMMISSION SINCE THE OVERSEAS UNIVERSITIES MAKE PAYMENTS ONLY AFTER CONFIRMED ADMISSION OF THE STUDENT. IN SUPPORT OF ITS CONTEN TIONS THE APPELLANT HAS RELIED UPON THE DECISION OF HONORABLE JURISDICT IONAL TRIBUNAL IN APPELLANTS OWN CASE FOR A.Y. 2007-08 DELIVERED VIDE I T A NO. 973/AHD/2011 DT 30/03/2012. EXAMINING IDENTICAL FA CTS, HONOURABLE TRIBUNAL OBSERVED IN OUR OPINION, A RECEIPT WOULD BE CHARGEABLE IN THE YEAR OF RECEIPT ONLY WHEN IT IS IN THE NATURE O F INCOME. IN OTHER WORDS, UNLESS A RECEIPT IS IN THE NATURE OF INCOME, MERELY BY RECEIVING IT IT WOULD NOT BE CHARGEABLE IN THE YEAR OF RECEIP T. IN THE CASE OF ITA NO.2314 /AHD/2012 A.Y. 2009-10 PAGE NO ITO VS. SRI AMBIKA R. KUSHWAHA 4 ACIT VERSUS UPPER GANGES SUGAR AND INDUSTRIES LTD I T HAS BEEN HELD THAT EVEN ON CASH BASIS OF ACCOUNTING, IT IS WELL S ETTLED THAT THE RECEIPT, IN ORDER THAT IT IS TAXABLE, SHOULD PAR TA KE THE CHARACTER OF INCOME AND IT IS NOT AS IF EVERY RECEIPT IS TAXABLE IN THE HANDS OF THE ASSESSEE. RECEIPT IN ORDER THAT IT MAY BE TAXABLE, SHOULD HAVE BEEN RECEIVED BY THE ASSESSEE BY VIRTUE OF THE RIGHT TO RECEIVE THE SAME AND NOT MERELY AS AN ADVANCE IN ANTICIPATION OF FUTURE CONTINGENCY. ACCORDINGLY, IN THE CONCLUDING REMARKS HONOURABLE T RIBUNAL HELD THAT WE ARE OF THE VIEW THAT HE ADVANCE RECEIPT OF RS. 4,55,044/- DOES NOT BEAR THE CHARACTERISTIC OF INCOME FOR THE YEAR UNDE R CONSIDERATION PARTICULARLY WHEN THE SAME WAS SUBJECTED TO TAX AND OFFERED IN SUBSEQUENT YEARS. WE ACCORDINGLY HOLD THAT THE ASS ESSING OFFICER HAD WRONGLY CONSIDERED THE ADVANCE AS INCOME IN THIS YE AR. WE THEREFORE DIRECT TO DELETE THE SAME, RESPECTFULLY FOLLOWING THE ABOVE JUDGMENT OF HONOURABLE JURISDICTIONAL TRIBUNAL IT IS HELD TH AT THE ADDITION OF RS. 2145646 MADE BY THE ASSESSING OFFICER CANNOT BE SUS TAINED. THE GROUND OF APPEAL IS ACCORDINGLY ALLOWED. 3. NOW, BEFORE US AN ORDER OF THE TRIBUNAL PASSED B Y ITAT B BENCH AHMEDABAD IN ASSESSEES OWN CASE TITLED AS OF BEAR ING ITA NO. 973/AHD/2011 A.Y. 07-08 ORDER DATED 30 TH MARCH, 2012 HAS BEEN PLACED ON RECORD WHEREIN THIS ISSUE WAS DEALT WITH AS UNDER:- 9.3. ASSESSEE HAS ENTERED INTO ''APPROVED AGENT AGREEMENT FOR OF OVERSEAS STUDENTS FOR HO LMESGLEN INSTITUTE OF TAFE MELBORUNE, VICTORIA, AUSTR ALIA' ON 8-3- 2007. THE RELEVANT CLAUSES IN AGREEMENT WITH REFERENCE TO FEES ARE AS UNDER:- SCHEDULE 1 - NOTE 2 ''COMMISSION IS ONLY PROCESSED ONCE HOLMESGLEN HAS RECEIVED APPROPRIATE TUITION FEE AND STUDENT HAS COMPLETED O NE YEAR AT HOLMESGLEN, IN THE INTERIM COMMISSION IS PAID AS AD VANCE.' 9.4 ASSESSEE HAS ALSO FURNISHED COPIES OF A FEW REV ERSE CHARGE NOTE, WHICH HAVE BEEN ISSUED FOR THE REASON STUDENT NOT ENROLLED, STUDENT CANCELLED THEIR COURSE ETC. WITH REGARD TO THE PAYMENT OF INTEREST AND VISA EXPENSES, THE ASSESSEE HAD STATED THAT THE INTEREST HAS ACTUALLY BEEN PAID BY HER AND VISA EXP ENSES IS ROUTED ITA NO.2314 /AHD/2012 A.Y. 2009-10 PAGE NO ITO VS. SRI AMBIKA R. KUSHWAHA 5 THROUGH ESCROW ACCOUNT ON THIS MATTER, CIT (A) HAS OPINED THAT THE A.O. HAS MADE ONLY HALF HEARTED EFFORT AND HAS NOT BROUGHT ANY EVIDENCE ON RECORD TO PROVE THAT THE ASSESSEE H AS ACCOUNTED FOR EXPENSES ON ACCRUAL BASIS. 9.5 THE READING OF THE VARIOUS CLAUSES OF THE AGREE MENT ENTERED INTO BY ASSESSEE WITH VARIOUS UNIVERSITIES REVEALS THAT THE RECEIPT OF COMMISSION BY THE ASSESSEE IS CONDIT IONAL. SHE IS ENTITLED TO COMMISSION ONLY ON FULFILLMENT OF CERTA IN CONDITIONS INCLUDING THE STUDENT CONTINUING THE COURSE. IN CAS E THE ADMISSION OF THE STUDENT IS CANCELLED, OR FEES IS REFUNDED TO THE STUDENT, THE COMMISSION PAYABLE TO ASSESSEE IS ALSO REDUCED. IN CASE THE COMMISSION HAS ALREADY BEEN PAID TO THE ASSESSEE, ADMISSION OF THE STUDENT IS CANCELLED OR THE FEES ARE REFUNDED, THEN IS LIABLE TO REFUND THE COMMISSION. IN SUCH A SITUATION THOUGH M IGHT HAVE RECEIVED THE COMMISSION IT CANNOT BE TERMED AS FINA LLY ACCRUED OR EARNED BY THE ASSESSEE IN THE YEAR UNDER CONSIDERAT ION. IN OUR OPINION, A RECEIPT WOULD BE CHARGEABLE IN THE YEAR OF RECEIPT ONLY WHEN IT IS IN THE NATURE OF INCOME. IN OTHER WORDS, UNLESS A RECEIPT IS IN THE NATURE OF INCOME, MERELY BY RECEIVING IT WOULD NOT BE CHARGEABLE IN THE YEAR OF RECEIPT. IN THE CASE OF A CIT V/S. UPPER GANGES SUGAR AND INDUSTRIES LTD (40 ITD 614), IT HAS BEEN HELD THAT 'EVEN ON CASH BASIS OF ACCOUNTING, IT IS WELL SETTLED THAT THE RECEIPT, IN ORDER THAT IT IS TAXABLE, SHOULD PARTAK E THE CHARACTER OF INCOME AND IT IS NOT AS IF EVERY RECEIPT IS TAXABLE IN THE HANDS OF THE ASSESSEE. RECEIPT IN ORDER THAT IT MAY BE TAXAB LE, SHOULD HAVE BEEN RECEIVED BY THE ASSESSEE BY VIRTUE OF A RIGHT TO RECEIVE THE SAME AND NOT MERELY AS AN ADVANCE IN ANTICIPATION O F FUTURE CONTINGENCY.' 10. IN VIEW OF THE FACTUAL POSITION STATED ABOVE, W E ARE OF THE VIEW THAT THE ADVANCE RECEIPT OF RA-4,55,044/- DOES NOT BEAR THE CHARACTERISTIC OF INCOME FOR THE YEAR UNDER CONSIDE RATION PARTICULARLY WHEN THE SAME WAS SUBJECTED TO TAX AND OFFERED IN THE SUBSEQUENT YEARS. WE ACCORDINGLY HOLD THAT THE A O. HAD WRONGLY CONSIDERED THE ADVANCE AS INCOME IN THIS YEAR. WE T HEREFORE, DIRECT TO DELETE THE SAME. THUS, THE APPEAL OF THE ASSESSEE IS ALLOWED. 4. ON HEARING THE SUBMISSIONS OF BOTH SIDES WE ARE OF THE CONSIDERED VIEW THAT ON IDENTICAL FACTS IN THE PAST THE RESPEC TED CO-ORDINATE BENCH HAS ITA NO.2314 /AHD/2012 A.Y. 2009-10 PAGE NO ITO VS. SRI AMBIKA R. KUSHWAHA 6 TAKEN A VIEW THAT EVERY RECEIPT IS NOT AN INCOME UN LESS AND UNTIL IT HAS TAKEN THE CHARACTER OF INCOME IN THE YEAR UNDER CONSIDERA TION, THEREFORE, NOT TO BE TAXED MERELY ON THE BASIS OF THE RECEIPT OF AN AMOU NT BUT SUBJECT TO TAX WHEN IT HAS TAKEN THE CHARACTERISTICS OF INCOME. SUCH A RECEIPT WAS FOUND TO BE SUBJECTED TO TAX IN SUBSEQUENT YEARS AS DULY OFFERE D BY THE ASSESSEE. ONCE A CONSCIENTIOUS VIEW HAS BEEN TAKEN BY THE RESPECTED BENCH, THEREFORE, FOLLOWING THE SAME WE HEREBY HOLD THAT THE LD. CIT( A) HAS RIGHTLY ALLOWED THE CLAIM. 5. IN THE RESULT, THE REVENUES GROUNDS IN THIS RE GARD ARE HEREBY DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE SD/- SD/- (T.R. MEENA) (MUKUL KR. SHRAWAT) ACCOUNTANT MEMBER JUDICIAL M EMBER AHMEDABAD : DATED 28/12/2012 AK / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. / CONCERNED CIT 4. - / CIT (A) 5. , ! , '# / DR, ITAT, AHMEDABAD 6. $% &' / GUARD FILE. BY ORDER/ , //TRUE COPY// ( / ' ) ! , '#