ACIT, CORPORATE CIRCLE - 6 (2), CHENNAI V. SULEKHA.COM NEW MEDIA PVT. LTD., CHENNAI

ITA 299/CHNY/2020

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 7536 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-03-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 05-02-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Additional evidence; TDS
• Section: 145; 143(3)

Judgement Text

आयकर अपीलीय अिधकरण ‘सी’ ायपीठ चे ई म । IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH, CHENNAI माननीय +ी महावीर िसंह, उपा01 एवं माननीय +ी मनोज कु मार अ6वाल ,लेखा सद9 के सम1। BEFORE HON’BLE SHRI MAHAVIR SINGH, VICE PRESIDENT AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकर अपील सं./ ITA No.299/Chny/2020 (िनधाBरण वषB / Assessment Year: 2014-15) ACIT Corporate Circle-6(2) Chennai. बनाम/ V s. M/s. Sulekha.Com New Media Pvt. Ltd. 484 & 485, 4 th Floor, Pantheon Plaza, Egmore, Chennai – 600 008. थायी लेखा सं./जीआइ आर सं./P AN /GI R No . AAD C M -6 9 3 8 - R (अपीलाथ /Appellant) : ( थ / Respondent) अपीलाथ की ओरसे/ Appellant by : Shri P. Sajit Kumar (JCIT) –Ld. DR थ की ओरसे/Respondent by : Shri V. Ravichandran (CA)-Ld. A.R सुनवाई की तारीख/ Date of Hearing : 22-02-2022 घोषणा की तारीख / Date of Pronouncement : 04-03-2022 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by Revenue for Assessment Year (AY) 2014-15 arises out of the order of learned Commissioner of Income Tax (Appeals)-15, Chennai [CIT(A)] dated 28-11-2019 in the matter of assessment framed by Ld. Assessing Officer [AO] u/s.143(3) of the Act on 29-12-2016. The grounds raised by Revenue read as under: 1. The order of the Ld. CIT(A) is contrary to the law and facts of the case. ITA No.299/Chny/2020 - 2 - 2. The Ld. CIT(A) has failed to note that entire TDS relating to receipts is claimed, though only part (85%) of the receipts is recognized as income in P&L account. 2.1. The Ld. CIT(A) has failed to note that there is no mention of any disallowance of expenditure relating to the (15%) postpone income, or neither details of the relevant expenditure in the subsequent years have been furnished. 2.2. The Ld. CIT(A) ought to have appreciated that when there is no evidence or basis to support the fact that only 15% of the contract receipts is postponed to the subsequent years. 2.3. The Ld. CIT(A) erred in admitting additional evidence without giving opportunity to the AO under Rule 46A of the Income tax Rules. 3. The Ld. CIT(A) erred in deleting the disallowance of provision for expenditure to the tune of Rs.60.25 lakhs based on evidence submitted by the assessee at the time of appellate proceedings. 3.1. The Ld. CIT(A) erred in admitting additional evidence without giving opportunity to the AO under Rule 46A of the Income tax Rules. 4. The Ld. CIT(A) erred in deleting the disallowance of interest paid for the belated PF remittance of Rs.1.15 lakhs holding that payment of interest for default under PF Act cannot be equated to infraction of law. 4.1. The Ld. CIT(A) ought to have appreciated that the interest paid by the assessee for the belated PF remittance is penal in nature and which is not allowable as per Income Tax Act. As evident, three issues arise out of the appeal i.e. Recognition of Revenue, deduction of provision of expenditure and deduction of interest paid for belated PF remittance. 2. Having heard rival submissions and after considering the orders of lower authorities, our adjudication to the issues would be as given in succeeding paragraphs. 3. The assessee being resident corporate is stated to be engaged in online marketing. An Assessment was framed u/s 143(3) wherein the assessee was saddled with various additions / disallowances. The additions / disallowances which form subject-matter of appeal are adjudicated as under: - (i) Recognition of Revenue In the financial statements, the assessee reflected income received in advance for Rs.826.48 Lacs. The assessee explained that subscription ITA No.299/Chny/2020 - 3 - money is received from customer in advance for the agreed contract period. Considering Accounting Standard-9, the assessee recognized 85% of the revenue within 30 days from the date when the advertisement goes live considering the exposure given to the customers and balance 15% is recognized over the period of the advertisement campaign. However, noticing that the assessee had no refund clause for giving back such money to the customers, it was clear that once the money was received by the assessee and the assessee company displayed the relevant advertisement on its website, the assessee's part of contract is done and there exists no reason for postponing the receipt to future period. Accordingly, the said amount was brought to tax by Ld. AO. During appellate proceedings, the assessee reiterated that the said accounting method to recognize the revenue was being followed consistently. Under mercantile system, income accrues when services are delivered. The assessee has to keep serving its customers during the campaign (advertisement) period. This consistent method of accounting as followed by the assessee has been endorsed by the CBDT through a notification dated 29-09-2016. Further, there is no revenue loss over a period of time since the entire advance is fully declared as income during the period of advertisement. The provisions of Section 145 allow the assessee to follow mercantile system of accounting. The Ld. CIT(A) examined the claim of the assessee and rendered a finding that entire advances so received by the assessee were offered to tax over the campaign period. The accounting method was being consistently followed by the assessee. Ultimately, the method was ITA No.299/Chny/2020 - 4 - revenue neutral and therefore, additions were to be deleted. Aggrieved, the revenue is in further appeal before us. Upon due consideration of material facts, we find that the assessee being corporate assessee was mandated to follow mercantile system of accounting. The business of the assessee was such that it would receive entire amount from its customers in advance for the campaign period. As per consistent method of accounting, the assessee offered 85% of receipts within 30 days from the date when the advertisement goes live and balance 15% is recognized over the period of the advertisement campaign. The said method has consistently been followed by the assessee. The Ld. CIT(A) has already examined the fact that the advances so received by the assessee has fully been offered to tax over the campaign period and the accounting treatment is revenue neutral. These findings remain undisturbed before us also. So far as the argument that entire TDS has been claimed in this year, we find that there would be no TDS claim in subsequent years when the balance 15% income is offered to tax by the assessee. It is also not the findings of Ld. AO that the assessee is claiming TDS credit twice. It is only due to its nature of business, the assessee has adopted particular method of accounting to recognize the revenue over the life of the campaign period. Therefore, this argument would not jeopardize the claim of the assessee. Finally, on the given facts and circumstances, finding no infirmity in the impugned order on this issue, we dismiss the grounds raised by the revenue. (ii) Provision for Expenditure The assessee made provision of Rs.60.25 Lacs for various expenditure as tabulated in para 5.1 of the assessment order. The expenditure was ITA No.299/Chny/2020 - 5 - in the nature of business development expenses, data validation cost, commission, outsourcing expenses, product development cost, marketing cost etc. Treating the same as mere provisions, Ld. AO disallowed the same. The Ld. CIT(A) noted that the assessee linked every provision with subsequent payment along with invoices and the amount was actually paid. Therefore, the liability had actually arisen and the provisions so made would be allowable keeping in view the fact that the assessee was following mercantile system of accounting. Upon due consideration, we find that the assessee has linked every provision with subsequent payment and furnished invoices before lower authorities. Therefore, the provisions could not be held to be unascertained liability. The same has rightly been deleted by Ld. CIT(A). The ground thus raised stand dismissed. (iii) Interest on late remittance of PF The assessee paid penal damages of Rs.1.15 Lacs for PF default. The same being penal in nature was disallowed by Ld. AO. The Ld. CIT(A) deleted the same since the same was mere interest for belated payment of PF. The same could not held to be payment for infraction of law. Aggrieved, the revenue is in further appeal before us. Keeping in view the fact that the amount merely represent interest for late payment of PF, the same would be an allowable expenditure. We do not find any infirmity in the impugned order. The grounds raised by the revenue stand deleted. ITA No.299/Chny/2020 - 6 - 4. The appeal stand dismissed in terms of our above order. Order pronounced on 04 th March, 2022 in Chennai. Sd/- (MAHAVIR SINGH) उपा01 /VICE PRESIDENT Sd/- (MANOJ KUMAR AGGARWAL) लेखा सद9 / ACCOUNTANT MEMBER चे*ई / Chennai; िदनांक / Dated : 04-03-2022 EDN/- आदेश की Vितिलिप अ 6ेिषत/Copy of the Order forwarded to : 1. अपीलाथ /Appellant 2. यथ /Respondent 3. आयकर आयु (अपील)/CIT(A) 4. आयकर आयु /CIT 5. िवभागीय ितिनिध/DR 6. गाड फाईल/GF