ACIT, Jaipur V. JAIPUR STOCK EXCHANGE LTD., Jaipur

ITA 356/JPR/2013

• Counselvise Citation: 35623114 RSA 2013
• Duration Of Justice: 2 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 05-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset converted into stock in trade; Bad and doubtful debts

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH VH-VKJ-EHUK] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM VK;DJ VIHY LA-@ ITA NO. 356 & 357/JP/2013 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09 & 09-10 . ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-6, JAIPUR. CUKE VS. M/S. JAIPUR STOCK EXCHANGE LTD., STOCK EXCHANGE BUILDING, MALVIYA NAGAR, JLN MARG, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AABCJ 0362 L VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI KAILASH MANGAL (JCIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SMT. USHA SHARMA, GENERAL MANAGER OF ASSESSEE COMPANY. LQUOKBZ DH RKJH[K@ DATE OF HEARING : 21.07.2015. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 11/8/2015. VKNS'K@ ORDER PER SHRI T.R. MEENA, A.M. THESE ARE TWO APPEALS FILED BY THE REVENUE EMANATI NG FROM TWO SEPARATE ORDERS OF LD. CIT (A) DATED 09.01.2013 & 04.04.2013 FOR TH E ASSESSMENT YEARS 2008-09 & 2009-10. THE COMMON GROUND RAISED IN BOTH THE APPE ALS IS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT (APPEALS) HAS ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF ANNUAL LISTING FEES RECEIVED FROM ITS MEMBER ON ACCRUAL BASIS. 2 ITA NO. 356 & 357/JP/2013 A.Y.2008-09 & 09-10. ACIT VS. JAIPUR STOCK EXCHANGE LTD. 2. SIMILAR GROUND OF APPEAL WAS RAISED BY REVENUE I N THE CASE OF ASSESSEE FOR THE A.Y. 2006-07 AND 2007-08. PERUSAL OF THE ASSESSME NT ORDERS SHOW THAT AS PER THE AO, THE ASSESSEE COMPANY HAD NOT ACCOUNTED THE ANNUAL LISTING FEE OF RS. 79,48,500/- FOR A.Y. 2008-09 AND RS. 69,33,400/- FOR A.Y. 2009-10 A S INCOME AND HAD BEEN WRITTEN OFF. THE AO HELD THAT THIS SHOULD NOT HAVE BEEN DONE AND , THEREFORE, HE ADDED THE AMOUNT OF ANNUAL LIST FEES FOR THE ASSESSMENT YEARS UNDER CONSIDERATION. 3. ON APPEAL, THE LD. CIT (A) FOLLOWING THE ORDER O F THE JAIPUR BENCH OF THE ITAT IN THE CASE OF ASSESSEE IN ITA NO. 661/JP/2010 DATED 1 1.02.2011 FOR THE A.Y. 2007-08 DECIDED THE ISSUE IN FAVOUR OF THE APPELLANT, RELYI NG UPON ITAT JAIPUR BENCH B JAIPUR ORDER DATED 30.04.2010 IN THE CASE OF THE ASSESSEE IN A.Y. 2006-07. HOWEVER, THE TRIBUNAL HAS DECIDED THE APPEAL OF THE ASSESSEE VID E ORDER DATED 30.04.2010 IN FAVOUR OF THE ASSESSEE BY UPHOLDING THE FINDING OF LD. CIT (A). WE ARE REPRODUCING PARA 32 & 33 OF ORDER OF TRIBUNAL AS UNDER :- 32. AFTER HAVING GONE THROUGH THE ABOVE DECISIONS, WE FIND THAT THERE IS SUBSTANCE IN THE ABOVE CONTENTION OF THE LD.AR. THE HON'BLE SUPREME COURT OF INDIA IN THE CASE OF CIT VS. SHOORJI VALLABHDAS & C O, (SUPRA) HAS HELD THAT IF ANY ACCRUAL SYSTEM, THE PROBABILITY OR IMPROBABILITY OF REALIZATION HAS ALSO TO BE CONSIDERED IN A REALISTIC MANNER. IN THE CASE OF CH AINRUP SAMPATRAM VS. CIT, SUPRA , THE HON'BLE APEX COURT HELD THAT WHILE ANTI CIPATED LOSS IS TAKEN INTO ACCOUNT, ANTICIPATED PROFIT IS NOT BROUGHT IN ACCOU NT AS NO PRUDENT TRADE WOULD CARE TO SHOW INCREASED PROFIT BEFORE ITS ACTUAL REA LIZATION. THE SAME PRINCIPLE HAS BEEN FOLLOWED BY MUMABI BENCH TRIBUNAL IN ITS RECEN T DECISION IN THE CASE OF WESTERN MAHARASHTRA DEVELOPMENT CORP. LTD VS. DCIT, (SUPRA). CONSIDERING THESE MATERIAL ASPECT, WE ARE OF THE VIEW THAT THE LD. CIT(A) HAS RIGHTLY GIVEN THE 3 ITA NO. 356 & 357/JP/2013 A.Y.2008-09 & 09-10. ACIT VS. JAIPUR STOCK EXCHANGE LTD. FOLLOWING CONCLUSION VIDE PARA 1.3 OF HIS FIRST APP ELLATE ORDER WHICH IS BEING REPRODUCED HEREUNDER. 1.3 I HAVE CONSIDERED FACTS OF THE CASE AND ARGU MENTS TAKEN BY SHRI BHOLUSARIYA AND SHRI GOYAL QUITE CAREFULLY. IT IS S EEN THAT CONSISTENTLY IN THE SAME MANNER THE APPELLANT WAS ACCOUNTING ANNUAL LISTING FEE. AS PER THE SAID METHOD WHEREVER FOR 3 YEARS ANNUAL FEE IS NOT RECOVERED IT IS NOT RECOGNIZED AS REVENUE AND FOLLOWING THIS POLICY EVE N IF ANNUAL LISTING FEE IS RECOGNIZED AS REVENUE BUT NOT RECOVERED THEN REG ULARLY BY FOLLOWING PROPER METHOD OF TAKING APPROVAL OF FULL BOARD SUCH AMOUNT IS WRITTEN OFF BY DEBITING BAD DEBTS WRITTEN OFF AND CREDITING TO THE MEMBER CONCERNED ACCOUNT. THIS IS THE REASON WHY IN THE INCOME AND E XPENDITURE ACCOUNT THERE IS A DEBIT OF LISTING FEES WRITTEN OFF BY RS. 11,12,300/- WHICH HAS BEEN REFERE4D BY ASSESSING OFFICER. FURTHER AS-1 HA S BEEN NOTIFIED BY THE CENTRAL GOVERNMENT U/S 145(2) WHICH RECOGNIZED THE CONSIDERATION OF PRUDENCE IN THE ACCOUNTING SYSTEM. ON THIS ISSUE, H ON'BLE ITAT PUNE BENCH IN THE CASE OF WSTERN MAHARASHTRA DEV. CORPN. LTD VS. DCIT , 114 TTJ 54 HAS DELETED THE ADDITION MADE ON ACCOUNT OF ACCRUED INTEREST ON THE SEED MONEY LOAN SINCE, RECOVERY WAS UNCERTAIN. HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. GIRIRAJ UDYOG (P) LTD , 273 ITR 495 HAS HELD THAT THE MERCANTILE SYSTEM ONLY RECOGNIZES THE INCOME THAT HAS ACCRUED AND WHERE THERE IS NO CHANCE OF RECOVERY, T HE ASSESSING OFFICER IS NOT JUSTIFIED IN BRINGING INTO TAX SUCH AMOUNT AS A CCRUED INCOME BECAUSE WHERE THERE IS NO PROSPECT OF RECOVERY INCOME CANNO T BE CONSIDERED TO HAVE ACCRUED AT ALL. HON'BLE DELHI HIGH COURT IN T HE CASE OF CIT VS. CONSULTNG ENGG. SERVICES (INDIA) LTD, 250 ITR 849 H AS HELD THAT THE METHOD OF ACCOUNTING CONSISTENTLY FOLLOWED BY ASSES SEE WILL BE MOST RELEVANT IN THE ACCRUAL SYSTEM OF ACCOUNTING AND IT IS NOT OPEN TO AO TO DISTURB THE SAME. IN THIS BACKGROUND IT IS FURTHER NOTICED THAT CONSISTENTLY THE APPELLANT STOCK EXCHANGE IS FOLLOWING SAME METH OD OF ACCOUNTING REGARDING ACCOUNTING OF SUCH LISTING FEE INCOME AND UNDER SIMILAR CIRCUMSTANCES, THE SAID SYSTEM WAS ACCEPTED BY ASSESSING OFFICER 4 ITA NO. 356 & 357/JP/2013 A.Y.2008-09 & 09-10. ACIT VS. JAIPUR STOCK EXCHANGE LTD. WHILE PASSING ORDERS U/S 145(3) OF I.T. ACT AND N O ADDITION HAS BEEN MADE. IT IS FURTHER NOTICED THAT EVEN IN THE CASE O F DELHI STOCK EXCHANGE LTD, THE LISTING FEE IS RECOGNIZED ONLY FROM THOSE COMPANIES WHERE INCOME IS NOT OVER DUE FOR MORE THAN ONE YEAR AND I N THAT CASE ALSO AS PER COPY OF ASSESSMENT ORDER U/S 145(3) DATED 4-12- 2008 FOR ASSESSMENT YEAR 2006-07 ON THIS ACCOUNT NO ADDITION HAS BEEN M ADE AND CONTRARY TO THIS CASE IN THE PRESENT CASE THE APPELLANT STOCK E XCHANGE IS RECOGNIZING THE LISTING FEE AS INCOME WHERE INCOME IS NOT OVER DUE FOR MORE THAN 3 YEARS. WITH THIS DISCUSSION IN MY CONSIDERED VIEW T HE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING SAID ADDITION OF RS. 77 ,60,550/- WHICH IS HEREBY DELETED. 33. THE FIRST APPELLATE ORDER ON THE ISSUE IS COMPR EHENSIVE AND REASONED ONE. WE ARE THEREFORE, NOT INCLINED TO INT ERFERE WITH THE ORDER OF THE LD. CIT(A) WHICH IS UPHELD. THUS GROUND NO. 2 OF THE REVENUE IS REJECTED. 4. FOLLOWING THE ORDER OF TRIBUNAL IN THE CASE OF A SSESSEE FOR EARLIER YEARS, WE UPHOLD THE FINDING OF LD. CIT (A). 5. IN THE RESULT, APPEALS OF REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11.08.2015. SD/- SD/- VKJ-IH-RKSYKUH VH-VKJ-EHUK (R.P.TOLANI) (T.R. MEENA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 11/8/ 2015 DAS/ 5 ITA NO. 356 & 357/JP/2013 A.Y.2008-09 & 09-10. ACIT VS. JAIPUR STOCK EXCHANGE LTD. VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- ACIT CIRCLE-6, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- JAIPUR STOCK EXCHANGE LTD., JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 356 & 357/JP/2013) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR 6 ITA NO. 356 & 357/JP/2013 A.Y.2008-09 & 09-10. ACIT VS. JAIPUR STOCK EXCHANGE LTD.