DCIT, CHENNAI V. Lifecell International Pvt Ltd., CHENNAI

ITA 3427/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4401 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 12-06-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 21-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R JAYAKUMAR
• Assessee Lawyers: T BANUSEKAR
• Section: 260A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI , , % BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ I.T.A. NO. 3427/MDS/2016 / ASSESSMENT YEAR : 2012-13 DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE -4(1), CHENNAI. VS. M/S. LIFECELL INTERNATIONAL PVT. LTD., NO. 26, VANDALUR, KELAMBAKKAM MAIN ROAD, KEELAKOTTAYUR VILLAGE, CHENNAI 600 048. [PAN: AAECA 7997B] ( / APPELLANT) ( / RESPONDENT) & ' / APPELLANT BY : SHRI R. JAYAKUMAR, CIT *+& ' / RESPONDENT BY : SHRI T. BANUSEKAR, CA ' /DATE OF HEARING : 12.06.2017 ' /DATE OF PRONOUNCEMENT : 12.06.2017 /O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-8, COIMBATORE DATED 26.10.2016. ITA NO.3427/MDS/2016 :- 2 -: 2. M/S. LIFECELL INTERNATIONAL PVT. LTD., THE ASSES SEE, IS ENGAGED IN THE BUSINESS OF COLLECTION, PROCESSING, PRESERVING AND STORING OF BLOOD STEM CELLS VIZ., CELLS FROM UMBICAL CORD, EMBRYONIC STEM CELLS AND A UDIT STEM CELLS AT THE TIME OF DELIVERY OF A CHILD. THE SAMPLES COLLECTED ARE PRO CESSED UNDER MINUS 196C TEMPERATURE CONDITION. THE COMPANY AT THE TIME OF ENROLMENT OFFERS TWO OPTIONS TO ITS CLIENTS FOR ITS SERVICES VIZ., ANNUAL STORAG E PLAN OR THE 21 YEAR STORAGE PLAN. UNDER ANNUAL SUBSCRIPTION PLAN, THE FEE RECEIVABLE FROM CLIENT WILL BE RECOGNIZED AS INCOME IN THE YEAR OF RECEIPT ITSELF. UNDER THE 21 YEAR STORAGE PLAN, THE ASSESSEE COLLECTS THE STORAGE FEE IN ADVANCE FROM T HE CLIENTS. A PORTION OF THE SAID FEE WOULD BE OFFERED TO TAX IN THE YEAR OF REC EIPT AND THE BALANCE WILL BE DEFERRED TO BALANCE PERIOD OF 20 YEARS AND RECOGNIZ ED AS INCOME IN THE BALANCE 20 YEARS PROPORTIONATELY. FOR ALL CLIENTS, IRRESPE CTIVE OF THE PLAN THEY CHOOSES, THE ENROLMENT FEE, PROCESSING FEE AND FIRST YEAR ST ORAGE FEE ARE RECEIVED AT THE TIME OF ENROLMENT ITSELF. 3. WHILE MAKING THE ASSESSMENT FOR THE ASSESSMENT Y EAR 2012-13, INTER ALIA, THE AO FOUND THAT THE ASSESSEE HAS RECEIVED RS. 34, 51,24,579/- AS STORAGE FEES FOR 21 YEARS FOR NEW ENROLMENT. AFTER RECOGNISING RS. 1,63,25,096/- AS INCOME OF CURRENT YEAR, THE ASSESSEE DEFERRED RS. 32,87,99,48 3/-, BEING THE STORAGE FEES RECEIVED IN ADVANCE FROM CLIENTS. THE ASSESSING OF FICER REJECTED THIS WORKING AND HELD THAT THE ENTIRE SUM RECEIVED BY THE ASSESSEE S HOULD BE SUBJECTED TO TAX IN THIS YEAR ITSELF. HOWEVER, AFTER ADJUSTING RS. 1,6 3,25,096/- TOWARDS THE REVENUE RECOGNISED FOR CURRENT YEAR IN THE P&L ACCOUNT AND OFFERED AS INCOME AND RS. 6,38,94,353/- TOWARDS REVENUE RECOGNISED DURING THE YEAR OUT OF EARLIER ITA NO.3427/MDS/2016 :- 3 -: ENROLMENTS, WHICH IS ALREADY TAXED FROM ASSESSMENT YEAR 2005-06 TO 2011-12, THE AO DETERMINED THE ADDITIONAL INCOME OF RS. 26,4 9,05,130/-. THE AOS ABOVE TREATMENT IS PUT IN A TABULAR FORM, FOR EASY UNDERS TANDING AS UNDER: PARTICULARS AMOUNT (IN RS.) TOTAL ENROLMENT DURING THE YEAR 34,51,24,579 LESS: REVENUE RECOGNISED IN THE PROFIT & LOSS STATE MENT OF CURRENT YEAR 1,63,25,096 LESS: REVENUE RECOGNISED DURING THE YEAR OUT OF THE EARLIER ENROLMENT WHICH IS ALREADY TAXED FROM AY 20 05- 06 TO AY 2011-12 6,38,94,353 ADDITIONAL INCOME TO BE RECOGNISED 26,49,05,130 4. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A)-8, CHENNAI. THE CIT(A) FOUND THAT THIS ISSUE HAD BEEN DECIDED IN FA VOUR OF ASSESSEE FOR ASSESSMENT YEAR 2005-06 TO 2010-11 BY THE ORDERS OF JURISDICTIONAL BENCHES OF ITAT IN ORDER NOS. ITA NO. 2849/MDS/2014, 851/MDS/2 011, 2850/MDS/2014, 342/MDS/2012, 2851/MDS/2014 & 2142/MDS/2014 RESPECT IVELY. HENCE, FOLLOWING THE DECISIONS OF VARIOUS BENCHES OF THE JURISDICTIO NAL ITAT BENCHES IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2005-06 TO 2010-11, THE CIT(A) DELETED THE DISALLOWANCE MADE BY THE AO TOWARDS STO RAGE FEE. AGGRIEVED, THE REVENUE FILED THIS APPEAL WITH THE FOLLOWING GROUND S: 2.1 THE CIT(A) ERRED IN DELETING THE ADDITION ON DE FERRED INCOME OF STORAGE FEES OF RS. 26,49,05,130/- RECEIV ED IN ADVANCE FOR A PERIOD OF 21 YEARS. 2.2 THE CIT(A) ERRED IN HOLDING THAT OUT OF THE LUM P SUM PAYMENT RECEIVED BY THE ASSESSEE ONLY A PORTION OF FEE FOR PARTICULAR ITA NO.3427/MDS/2016 :- 4 -: YEAR IS TO BE TREATED AS INCOME AND THE BALANCE TO BE CARRIED FORWARD TILL THE COMPLETION OF 21 YEARS ON A PRO RATA COLLECTION OF YEARLY BASIS. 2.3 THE CIT(A) FAILED TO TAKE NOTE THAT AS PER SECT ION 5(1) OF THE INCOME TAX ACT. 1961 THE STORAGE FEE COLLECTED AND RECEIVED DURING THE YEAR SHOULD BE TAXED IN THE YEAR OF RECEIPT ITS ELF. 2.4 THE CIT(A) ERRED IN NOT APPRECIATING THE FINDIN GS OF THE AO THAT THE ASSESSEE HAS NOT PROVIDED ANY PROOF OR DOC UMENT IN SUPPORT OF ITS CLAIM THAT THE EXPENDITURE INCURRED FOR UPKEEP OF THE SAMPLES ARE MET ONLY OUT OF THE STORAGE FEE COLLECTED IN ADVANCE. 2.5 THE CIT(A)S FINDINGS IS NOT PROPER ESPECIALLY WHEN THE CLAUSES IN THE AGREEMENT CLEARLY SHOWS THAT ALL FEE PAID BY THE CLIENT ARE NOT REFUNDABLE AND THERE IS NOT CERTAINTY THAT THE SERVICES WOULD BE UTILISED BY THE PARENTS DURING THE ENTIRE CONTRACT PERIOD ESPECIALLY WHEN NO EXPENDITURE ON ACCOUNT OF REFUND OF STORAGE FEE WAS CLAIMED BY THE ASSESSEE. 2.6 IT IS SUBMITTED THAT THE CIT(A)S RELIED UPON O RDERS OF ITAT ON SIMILAR IDENTICAL ISSUE IN THE ASSESSEES OWN CA SE FOR ASSESSMENT YEARS 2005-06 TO 2010-11 HAVE NOT BECOME FINAL AND AGAINST WHICH DEPARTMENTS APPEAL U/S. 260A IS PENDING BEFORE THE HONBLE HIGH COURT OF MADRAS. 5. THE DR ARGUED ON THE LINES OF THE ASSESSMENT ORD ER AND ON THE LINES OF THE GROUNDS OF APPEAL. PER CONTRA, THE LD. COUNSEL SUB MITTED THAT THE IMPUGNED ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISIONS OF THIS TRIBUNAL, SUPRA. 6. WE HEARD BOTH THE PARTIES, PERUSED THE MATERIAL ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ISSUE INVOLVED IN THIS APPEAL IS, WHETHER THE ADVANCE STORAGE FEE RECEIVED BY THE ASS ESSEE FOR A PERIOD OF 21 YEARS IS TO BE OFFERED FOR TAXATION IN THE YEAR OF RECEIPT, AS DONE BY THE AO OR IS IT ITA NO.3427/MDS/2016 :- 5 -: HAS TO BE SPREAD OVER FOR A PERIOD OF 21 YEARS AS I S DONE BY THE ASSESSEE. THIS TRIBUNAL FOUND THAT ON SIMILAR ISSUE AND ON IDENTIC AL FACTS IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2006-07 AND 2008-09, THE APPEALS WERE ALLOWED IN ASSESSEES FAVOUR, SUPRA, AND FOLLOWING THEM ALLOWE D THE APPEAL IN FAVOUR OF THE ASSESSEE IN ITA NO. 2142/MDS/2014 DATED 11.03.2005 FOR ASSESSMENT YEAR 2010- 11. SINCE, THE FACTS OF THE CASE REMAIN IDENTICAL IN THIS ASSESSMENT YEAR ALSO, FOLLOWING THE ABOVE DECISIONS THE REVENUES APPEAL IS DISMISSED. 7. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED ORDER PRONOUNCED ON MONDAY, THE 12 TH DAY OF JUNE, 2017 AT CHENNAI. SD/- ( ) (GEORGE MATHAN) ' # /JUDICIAL MEMBER SD/- ( ) (S. JAYARAMAN) # /ACCOUNTANT MEMBER /CHENNAI, 1 /DATED: 12 TH JUNE, 2017 JPV ' *34 54 /COPY TO: 1. &/ APPELLANT 2. *+& /RESPONDENT 3. 6 ( )/CIT(A) 4. 6 /CIT 5. 4 * /DR 6. /GF