DCIT, CHENNAI V. Road Safety Club (P) Ltd., CHENNAI

ITA 2958/CHNY/2014

• Counselvise Citation: 295821714 RSA 2014
• Duration Of Justice: 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 08-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN
• Assessee Lawyers: R SIVARAMAN
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . , ! . . ' , # $ BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI S.S. GODARA, JUDICIAL MEMBER ./ ITA NOS.2957 & 2958/MDS/2014 # % !&% / ASSESSMENT YEARS : 2008-09 & 2009-10 THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE V(2), CHENNAI - 600 034. V. M/S ROAD SAFETY CLUB (P) LTD., NO.4, LADY DESIKA CHARI ROAD, MYLAPORE, CHENNAI - 600 004. PAN : AABCR 9430 K (()/ APPELLANT) (+,()/ RESPONDENT) () - . / APPELLANT BY : SHRI P. RADHAKRISHNAN, JCIT +,() - . / RESPONDENT BY : SHRI R. SIVARAMAN, ADVOCATE / ! - 0 / DATE OF HEARING : 25.02.2015 1& - 0 / DATE OF PRONOUNCEMENT : 11.03.2015 / O R D E R PER S.S. GODARA, JUDICIAL MEMBER: THESE REVENUES APPEALS FOR ASSESSMENT YEARS 2008 -09 AND 2009-10 ARISE FROM TWO SEPARATE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS)-V, CHENNAI, BO TH DATED 01.08.2014 PASSED IN ITA NO.616/2013-14(A)-V AND IN ITA - - I.T.A. NOS.2957 & 2958/MDS/2014 2 NO.707/13-14(A)-V RESPECTIVELY ALLOWING THE ASSESSE ES CLAIM OF TREATING 1/8 TH MEMBERSHIP RECEIPT AMOUNTS AS INCOME AND SAFETY BONUS CLAIM OF ` 1,24,76,016/-, IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE A CT'). 2. FOR THE SAKE OF CONVENIENCE AND BREVITY, WE PROC EED ASSESSMENT YEAR-WISE IN DEALING WITH THESE APPEALS. I.T.A. NO. 2957/MDS/2014 (ASSESSMENT YEAR 2008-09) 3. THE REVENUES PLEADINGS IN THIS CASE CHALLENGE T HE CIT(APPEALS)S ACTION IN ALLOWING THE ASSESSEES CL AIM OFFERING ONLY 1/8 TH OF MEMBERSHIP RECEIPTS RECEIVED DURING THE RELEVAN T PREVIOUS YEAR AS ITS INCOME AND ALSO IN DELETING DI SALLOWANCE OF SAFETY BONUS CLAIM OF ` 1,24,76,016/-. 4. THE ASSESSEE-COMPANY PROMOTES SAFETY AMONGST VEH ICLE OWNERS THROUGH INSURANCE. IT HAD FILED ITS RETURN ON 30.09.2008 ADMITTING AN INCOME OF ` 1,19,097/-. THE SAME WAS SUMMARILY PROCESSED. THEREAFTER, THE A.O. TOOK UP SCRUTINY . HE INTER ALIA NOTICED THE ASSESSEE TO HAVE RECEIVED MEMBERSHIP FE ES OF ` 10,95,32,513/- AS ON 31.03.2008. IT HAD ENROLLED M EMBERS AND RECEIVED ONE TIME MEMBERSHIP FEE; REFUNDABLE AND NO N- - - I.T.A. NOS.2957 & 2958/MDS/2014 3 REFUNDABLE. THE RELEVANT MEMBERSHIP TENURE WAS 3/5 /8 YEARS FROM THE DATE OF ENROLLMENT. THE ASSESSEE WOULD IN SURE ITS MEMBERS WITH INSURANCE COMPANIES AGAINST ACCIDENTS. IT RECOGNIZED ONLY 1/8 TH OF RECEIPT OF MEMBERSHIP FEES AS INCOME OF RELEVANT PREVIOUS YEAR. THERE IS NO DISPUTE THAT T HE CIT(APPEALS) AND THE TRIBUNAL HAVE ALREADY UPHELD THE VERY METHOD OF RECOGNITION OF INCOME IN EARLIER ASSESSME NT YEAR. THE ASSESSING OFFICER REJECTED THE ASSESSEES PRACTICE AND OBSERVED THAT THE REVENUE HAD NOT ACCEPTED THE AFORESAID APP ELLATE ORDERS. HE CONSIDERED THE ENTIRE MEMBERSHIP FEES A S ITS INCOME TO BE ASSESSED IN THE IMPUGNED ASSESSMENT YEAR INST EAD OF A TIME SPAN OF EIGHT YEARS. 5. THE ASSESSEE PREFERRED AN APPEAL. THE CIT(APPEA LS) HAS FOLLOWED THE TRIBUNALS DECISION FOR ALLOWING I TS GROUND AS UNDER:- 5.2 AFTE R CONSIDERING THE APPELLANT ' S SUBMISSIONS . THE APPELLANT HAS FILED COPY OF THE CIT (A) AND HONOURABLE ITAT ' S ORDERS RELATING TO THE ASSESSMENT YEARS 2001 - 02 TO 2007-08 AND I HAVE PERUSED THE SAME . SIMILAR ISSUE HAS BEEN CONSIDERED BY THE HONOURABLE ITAT , CHENNA I FOR THE ASSESSMENT YEARS 2001 - 02 TO 2007 - 08 AND THE ISSUE ' HAS BEEN DECIDED IN FAVOU R OF THE APPELLANT . - - I.T.A. NOS.2957 & 2958/MDS/2014 4 EXTRACT FROM THE ORDERS OF THE HONOURABLE ITAT BENC H ' B ' , CHENNAI IN ITA NO . 1651/MDS/2010 DATED 16 - 12-2010 FOR THE ASSESSMENT YEAR 2007 - 08 IS GIVEN BELOW : ' WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CONTENTIONS . IN SO FAR AS GROUND NOS . 2 AND 3 ARE CONCERNED , THESE ARE SIMILAR TO THE GROUNDS RAISED BY THE REVENUE FOR ASSESSMENT YEAR 2006-07 . IN ITS ORDER DATED 25 TH JUNE , 2010 AFTER CONSIDERING GROUND NOS . 2 AND 3 OF THE REVENUE , THIS TRIBUNAL IN I . T . A . NO. 457/MDS/2010 FOR ASSESSMENT YEAR 2006-07 DECIDED AS FOLLOWS : - 3 . AS CLEAR FROM THE GROUNDS ITSELF, THE FIRST ISSUE IS REGARDING MEMBERSHIP FEE RECEIPT . LD . CIT(A) RELIED ON THIS TRIBUNAL ' S ORDER IN ASSESSEE ' S OWN CASE FOR ASSESSMENT YEAR 2001-02 TO 2004-05 . THE SECOND ISSUE IS ON SAFETY BONUS LIABILITY CLAIMED BASED ON ACTUARIAL VALUATION . LD . CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE AGAIN RELYING ON THE ABOVE CITED DECISION OF THIS TRIBUNAL . THE FACTS FOR THE IMPUGNED ASSESSMENT YEAR ARE PARI MATERIA AND NOTHING HAS BEEN BROUGHT ON RECORD BY THE REVENUE TO SHOW ANY DECISION OF ANY HIGHER JUDICIAL AUTHORITY WHICH WOULD WARRANT A DIFFERENT VIE W . WE THUS FIND NO ERROR IN THE ORDER OF THE CIT(A) . ACCORDINGLY , GROUND NOS . 2 & 3 OF THE REVENUE STAND DISMISSED WE ALSO FIND FROM THE ORDER OF THE CIT(APPEALS) THAT HE HAD MADE A BIFURCATION OF REFUNDABLE FEES AND NON - REFUNDABLE FEES BEFORE ALLO W ING RELIEF TO THE ASSESSEE . WITH REGARD TO THE CONTENTION OF THE LEARNED O . R . THAT AMORTIZATION WAS NOT CONSIDERED IN THE ORDER OF THE TRIBUNAL OF THE EARLIER YEAR , WE ARE OF THE OPINION THAT THE REVENUE IF IT WAS AGITATED , SHOULD HAVE TAKEN REMEDIES AVAILABLE UNDER THE STATUTES , AGAINST THE ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2006-07 . NEVERTHELESS WE ALSO SEE THAT BY CONSIDERING 1/8 TH OF THE MEMBERSHIP FEES FOR EACH OTHER 8 YEARS , IN EFFECT THE CIT(APPEALS) HAD APPROVED A METHOD OF AMORTIZATION . WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(APPEALS) ON THE ABOVE TWO GROUNDS SINCE NO FACTS WHICH ARE DIFFERENT FROM THE EARLIER YEAR HAS BEEN BROUGHT - - I.T.A. NOS.2957 & 2958/MDS/2014 5 OUT BY THE REVENUE . ACCORDINGLY , GROUND NOS . 2 AND 3 STAND DISMISSED ' 6. WE HAVE HEARD BOTH SIDES AND GONE THROUGH THE RE LEVANT FINDINGS. THE REVENUE HAD SOUGHT TO TAX THE SIMILA R MEMBERSHIP ADVANCES IN THE RELEVANT YEAR OF RECEIPT IN EARLIER ASSESSMENT YEARS AS WELL. THE ASSESSEE PRODUCES CO PY OF THE CO-ORDINATE BENCH DECISION (SUPRA) REJECTING THIS C OURSE OF ACTION. THE REVENUE ONLY SUBMITS THAT THE ISSUE HA S NOT ATTAINED FINALITY AS ITS APPEALS ARE PENDING BEFORE THE HON'BLE JURISDICTIONAL HIGH COURT. WE OBSERVE THAT THIS PL EA DOES NOT FORM A VALID GROUND TO ADOPT A DIFFERENT ACTION IN THE P RESENT CASE. THE CIT(APPEALS)S FINDINGS ARE AFFIRMED. 7. THE REVENUES SECOND SUBSTANTIVE GROUND SEEKS RESTORATION OF SAFETY BONUS DISALLOWANCE OF ` 1,24,76,016/- DELETED IN LOWER APPELLATE ORDER. THE ASSESSEE HAD CREDITED THIS AMOUNT BEING EXCESS PROVISION OF SAFE BONUS WRITTEN BACK IN ITS PROFIT & LOSS ACCOUNT. IT CLAIMED EXCLUSION OF THE SAME AMOUNT FROM ITS TOTAL INCOME AS ALREADY SUBJECTED TO TAX I N THE EARLIER ASSESSMENT YEAR. IT ALSO CLARIFIED TO HAVE GIVEN B ACK THE MEMBERSHIP FEE AS SAFETY BONUS IN THE END OF THE ME MBERSHIP - - I.T.A. NOS.2957 & 2958/MDS/2014 6 PERIOD IN CASE THE MEMBER CONCERNED DID NOT RAISE A NY CLAIM. THE ASSESSING OFFICER DID NOT AGREE AND DISALLOWED / ADDED THE SAFETY BONUS CLAIM SUM OF ` 1,24,76,016/-. 8. THE LOWER APPELLATE AUTHORITY HAS ACCEPTED THE ASSESSEES GROUND RAISED, AS UNDER:- 7.2 AFTER CONSIDERING THE APPELLANTS SUBMISSIONS, AS PER THE MEMBERSHIP SCHEME, THE APPELLANT HAS TO GIVE BA CK THE MEMBERSHIP FEE COLLECTED AS SAFETY BONUS DURING THE END OF THE MEMBERSHIP PERIOD, IF THERE HAD BEEN NO CLAIM B Y THE MEMBER DURING HE MEMBERSHIP PERIOD. THIS LIABILITY FOR PAYMENT OF SAFETY BONUS EXTENDS TO THE ENTIRE PERIO D OF MEMBERSHIP I.E., 8 YEARS. THE BONUS LIABILITY HAS BEEN QUANTIFIED ON THE BASIS OF ACTUAL VALUATION BY ON E MR. A. VENKATARAMAN, ACTUARIAN, CHENNAI. THE APPELLANT HA S CLAIMED THE SAFETY BONUS LIABILITY AS A DEDUCTION. IN THE EARLIER ASSESSMENT YEARS 2001-02 TO 2007-08, THE AP PELLANT HAD PROVIDED FOR SUCH SAFETY BONUS LIABILITY AND CL AIMED THE SAME. THE SAME WAS DISALLOWED IN THOSE YEARS. ON A PPEALS THE CIT(A) DIRECTED THE APPELLANT TO FILE COMPUTATI ON OF SAFETY BONUS LIABILITY WHICH COULD BE CONSIDERED TO HAVE A CCRUED DURING THE RELEVANT PERIOD ON THE BASIS OF THE LAW OF PROBABILITY AS ADOPTED AND ACCEPTED INTERNATIONALLY IN THE FIELD OF INSURANCE. THE APPELLANT FILED THE ESTIMA TES WHICH WERE ACCEPTED BY THE CIT(A). THE CIT(A) DIRECTED T HE ASSESSING OFFICER TO ALLOW SAFETY BONUS LIABILITY A S PER ACTUARIAL VALUATION. AGAINST THE CIT(A)S ORDERS, THE DEPARTMENT FILED APPEAL BEFORE THE ITAT. THE ITAT, CHENNAI HAS DISMISSED THE DEPARTMENTAL APPEAL. THE DETAILS OF ITATS ORDERS FOR THE ASSESSMENT YEARS 2001-02 TO 2 007-08 HAVE ALREADY BEEN FURNISHED IN THE EARLIER PART OF THIS ORDER. THE FACTS OF THE CASE FOR THE YEAR UNDER CONSIDERAT ION ARE THE SAME AS THOSE FOR THE EARLIER YEARS. RESPECTFULLY FOLLOWING THE HONOURABLE ITATS DECISI ONS QUOTED ABOVE, WHEREIN IT WAS HELD THAT SAFETY BONUS LIABILITY IS ALLOWABLE. THEREFORE THE NET PRESENT VALUE OF T HE SAFETY - - I.T.A. NOS.2957 & 2958/MDS/2014 7 BONUS LIABILITY ON THE ACTUARIAL VALUATION BASIS IS TO BE ALLOWED. THE APPELLANT HAS FURNISHED THE DETAILED WORKINGS. THE NET PRESENT VALUE OF THE SAFETY BONUS LIABILITY WORKS O UT TO ` 3,95,87,354/- THE DETAILED WORKINGS GIVEN BY THE A PPELLANT IS ANNEXED AS ANNEXURE B TO THIS ORDER. THE ASSESS ING OFFICER IS DIRECTED TO ALLOW ` 3,95,87,354/- AS SAFETY BONUS LIABILITY FOR THE ASSESSMENT YEAR 2008-09. 9. HEARD BOTH SIDES. RECORD PERUSED. WE FIND THAT THE CIT(APPEALS) HAS FOLLOWED THE TRIBUNALS DECISION I N DELETING THE IMPUGNED DISALLOWANCE OF SAFETY BONUSES WRITTEN OFF . THE REVENUE NEITHER DRAWS ANY DISTINCTION ON FACTS NOR DOES IT QUOTE ANY CASE LAW TO THE CONTRARY DIRECTLY COVERING THE ISSUE. WE FOLLOW CONSISTENCY IN THESE CIRCUMSTANCES AND REJEC T THE REVENUES ARGUMENTS. I.T.A. NO. 2957/MDS/2014 IS DISMISSED. I.T.A. NO. 2958/MDS/2014 (ASSESSMENT YEAR 2009-10) 10. THE REVENUES PLEADINGS IN THIS APPEAL ARE IDEN TICAL TO THOSE DECIDED IN I.T.A. NO. 2957/MDS/2014. THE PAR TIES ARE FAIR ENOUGH NOT TO DISPUTE THIS TECHNICAL POSITION. THU S, WE REJECT THE REVENUES ARGUMENTS HEREIN AS WELL. I.T.A. NO. 2957/MDS/2014 IS ALSO DISMISSED. - - I.T.A. NOS.2957 & 2958/MDS/2014 8 11. TO SUM UP, THE REVENUES BOTH APPEALS ARE DISMI SSED. ORDER PRONOUNCED ON WEDNESDAY, THE 11 TH OF MARCH, 2015 AT CHENNAI. SD/- SD/- (A. MOHAN ALANKAMONY) (S.S. GODARA) ( . ) ( . . ') / ACCOUNTANT MEMBER # /JUDICIAL MEMBER /CHENNAI, 3 /DATED, THE 11 TH MARCH, 2015. KRI. 4 - +#056 76&0 /COPY TO: 1. () /APPELLANT 2. +,() /RESPONDENT 3. / 80 () /CIT(A)-V, CHENNAI 4. / 80 /CIT-V, CHENNAI-34 5. 6!9' +#0# /DR 6. ':% ; /GF.