ITO, New Delhi V. M/s. Orient Craft Fashion Institute of Technology (P) Ltd., New Delhi

ITA 3698/DEL/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7385 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2012-2013
• Appeal Filed On: 07-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rule of consistency; TDS
• Section: 143(3); 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E, NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER ITA NO.3698/DEL/2017 ASSESSMENT YEAR: 2012-13 ITO, WARD-19(2), NEW DELHI VS. M/S. ORIENT CRAFT FASHION INSTITUTE OF TECHNOLOGY (P) LTD., F-8, OKHLA INDUSTRIAL AREA, PHASE-I, NEW DELHI PAN :AAACO9923H (APPLICANT) (RESPONDENT) ORDER PER O.P. KANT, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 24 TH MARCH, 2017 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-7, NEW DELHI [IN SHORT THE CI T(A)] FOR ASSESSMENT YEAR 2012-13, RAISING FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND UNDER THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY T HE ASSESSING OFFICER AMOUNTING OF RS. 1,91,00,000/- MADE ON ACCO UNT OF DEFERRED INCOME BY IGNORING THE FACT THAT THE GRANT IS OF REVENUE APPLICANT BY MS. RAKHI VIMAL, SR.DR RESPONDENT BY SHRI SALIL AGGARWAL, ADV. SHRI SHAILESH GUPTA, ADV. DATE OF HEARING 09.01.2020 DATE OF PRONOUNCEMENT 31.01.2020 2 ITA NO. 3698/DEL/2017 INCOME AND THE ENTIRE INCOME SHOULD BE CHARGED FOR TAX FOR THE YEAR UNDER CONSIDERATION. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE ASSESSIN G OFFICER AMOUNTING TO RS. 42,04,450/- MADE ON ACCOUNT OF DIF FERENCE AMOUNT PAID BY NIRD AS PER 26AS AND SHOWN BY THE AS SESSEE BY IGNORING THE FACTS THAT THE ASSESSEE HAS TAKEN COMP LETE TDS BENEFIT DURING THE YEAR BUT DIFFERENCE OF ABOVE INC OME HAS NOT SHOWN IN THE BOOKS OF THE ASSESSEE. 3. THE APPELLANT CRAVES TO BE ALLOWED TO ADD ANY FR ESH GROUND(S) OF APPEAL AND / OR DELETE, AMEND ANY OF THE GROUND(S) OF APPEAL. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSE SSEE FILED RETURN OF INCOME ON 30.09.2012, DECLARING NIL INCOM E. THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT AND STATUTORY NOTICE UNDER SECTION 143(2) OF THE INCOME-TAX ACT, 1961 (IN SHOR T THE ACT) WAS ISSUED AND COMPLIED WITH. IN THE ASSESSMENT COMPLET ED UNDER SECTION 143(3) OF THE ACT ON 20 TH MARCH, 2015 THE ASSESSING OFFICER MADE CERTAIN ADDITIONS/DISALLOWANCES. THE A SSESSEE FILED APPEAL AGAINST THE ORDER OF THE ASSESSING OFFICER W HICH WAS PARTLY ALLOWED BY THE LEARNED CIT(A). AGGRIEVED WITH THE R ELIEF ALLOWED TO THE ASSESSEE, THE REVENUE IS IN APPEAL BEFORE THE T RIBUNAL RAISING THE GROUNDS AS REPRODUCED ABOVE. 3. IN GROUND NO. 1, THE REVENUE HAS CHALLENGED THE DE LETION OF ADDITION MADE BY THE ASSESSING OFFICER, AMOUNTING T O RS.1,91,00,000/- ON ACCOUNT OF DEFERRED INCOME, OUT OF THE GRANT RECEIVED BY THE ASSESSEE. 3.1 FACTS QUA THE ISSUE IN DISPUTE ARE THAT THE ASSESS EE WAS ENGAGED IN THE BUSINESS OF SETTING UP, ADMINISTERIN G, MAINTAINING AND RUNNING OF EDUCATIONAL INSTITUTES AND FOR THAT PURPOSE IT HAD ENTERED INTO A MEMORANDUM OF UNDERSTANDING (MOU) WI TH THE 3 ITA NO. 3698/DEL/2017 NATIONAL INSTITUTE OF RURAL DEVELOPMENT (NIRD), MIN ISTRY OF RURAL DEVELOPMENT, FOR TRAINING OF 8000 RURAL BPL YOUTH I N APPAREL INDUSTRY UNDER SPECIAL PROJECT, I.E., SWARANJAYANTI GRAM SWAROJGAR YOJANA (SGSY) BY WAY OF GRANT IN AID FROM THE CENTRAL GOVERNMENT. THE TOTAL COST OF THE PROJECT WAS RS.14 91.28 LAKHS OUT OF WHICH RS.1118.46 LAKHS WERE TO BE FUNDED BY THE CENTRAL GOVERNMENT AND THE ASSESSEES CONTRIBUTION OF RS.37 2.82 LAKHS. THE PROJECT WAS TO BE COMPLETED WITHIN TWO YEARS I. E. FROM 17.05.2020 TO 16.05.2012 FROM THE DATE OF REALIZATI ON OF THE FIRST INSTALLMENT OF THE PAYMENT BY THE CENTRAL GOVERNMEN T. THE ASSESSEE WAS RELEASED A GRANT OF RS.2,75,42,077/- D URING THE FINANCIAL YEAR 2010-11 AND RS.5,50,84,155/- DURING THE FINANCIAL YEAR 2011-12 TOWARDS FIRST AND SECOND INSTALLMENTS OF GRANT. ACCORDING TO THE ASSESSEE, THE GRANT WAS FOR SPECIF IC PROJECT WHICH WAS TO BE COMPLETED WITHIN TWO YEARS. THE ASSESSEE RECOGNIZED THE REVENUE FROM THE GRANTS IN THE PROFIT AND LOSS ACCOUNT, RELYING ON AS 12 ISSUED BY THE INSTITUTE OF CHARTERED ACCOU NTANTS OF INDIA. THE ASSESSEE REALIZED THE REVENUE FROM THE G RANTS IN MATCHING CONCEPT OF INCOME IN RATIO OF EXPENDITURE INCURRED TOWARDS THE PROJECT AND DEFERRED A PORTION OF GRANT , I.E., RS.1,91,00,000 TO SUBSEQUENT YEAR. HOWEVER, ACCORDI NG TO THE ASSESSING OFFICER, THE ASSESSEE WAS FOLLOWING MERCA NTILE SYSTEM OF ACCOUNTING AND, THEREFORE, THE ENTIRE GRANT BEING R EVENUE IN NATURE, THE DEFERRED PORTION OF THE GRANT IS TAXABL E IN THE HANDS OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. THE LEARNED CIT(A) AFTER CONSIDERING THE FACTS OF THE CASE, ASSESSMENT ORDER AND SUBMISSIONS OF THE ASSESSEE MADE BEFORE HIM, DELETE D THE ADDITIONS BY OBSERVING THAT THE INCOME WAS OFFERED BY THE 4 ITA NO. 3698/DEL/2017 ASSESSEE CONSISTENTLY RECOGNIZING THE EXPENDITURE I NCURRED FOR THE PROJECT AGAINST GRANT RECEIVED DURING THE YEAR AND OFFERED THE INCOME FOLLOWING THE MATCHING PRINCIPLE OF INCOME. THE RELEVANT FINDING OF THE LEARNED CIT(A) IS REPRODUCED AS UNDE R: 4.5. THE APPELLANT HAS BEEN FOLLOWING THIS ACCOUNT ING METHOD FOR THE GRANT RECEIVED FROM THE GOVERNMENT. THE UNUTILI ZED GRANT AT THE END OF THE YEAR IS CARRIED FORWARD TO THE NEXT YEAR AND ONLY EXPENSES RELATABLE TO THE SAID GRANT IS CHARGED FOR THE YEAR AND REVENUE TO THAT EXTENT IS RECOGNIZED FOR THE YEAR A ND THE BALANCE GRANT IS TRANSFERRED TO THE NEXT YEAR. THE APPELLAN T HAD AN OPENING BALANCE OF RS.1.28 CRORES AND RECEIVED GRANT OF RS. 5.89 CRORES DURING THE YEAR. IT UTILIZED GRANT OF RS.5.26 CRORE S AND CARRIED FORWARD THE BALANCE GRANT OF RS.1.91 CRORES TO THE NEXT YEAR. IN TERMS OF THE MOU WITH THE NATIONAL INSTITUTE OF RUR AL DEVELOPMENT (NIRD), THE PROJECT WAS TO BE COMPLETED WITHIN TWO YEARS I.E. FROM 17.05.2010 TO 16.05.2012 FROM THE DATE OF REALIZATI ON OF THE FIRST INSTALLMENT OF THE PAYMENT OF THE CENTRAL GOVERNMEN T. THE APPELLANT WAS RELEASED GRANT OF RS.2.75 CRORES DURING THE F.Y . 2010-11 AND RS.5.50 CRORES DURING THE YEAR UNDER CONSIDERATION WHICH WAS ACCOUNTED FOR AS PER AS -12 AS ABOVE. THE AO HOWEVE R, WAS OF THE VIEW THAT THE DEFERRED PORTION OF THE GRANT IS ALSO TAXABLE DURING THE YEAR AS THE APPELLANT IS FOLLOWING MERCANTILE SYSTE M OF ACCOUNTING. THE LD. AR HAS CONTENDED THAT TERMS OF THE MOU WITH THE MINISTRY OF RURAL DEVELOPMENT PUTS AN OBLIGATION ON THE APPE LLANT FOR ACCOUNTING OF THE GRANT RECEIVED AS UNDER: 'H. MAINTAIN RECORDS IN ACCORDANCE WITH APPROPRIATE AND ACCEPTED ACCOUNTING PRACTICES REFLECTING ITS OPERATION AND UTILIZATION OF GRANT. I. OPEN AND MAINTAIN A SEPARATE BANK ACCOUNT OF THE PROJECT FOR IMPLEMENTING THE PROGRAMME. J. 'OCFIT' WILL MAINTAIN SEPARATE BOOKS OF ACCOUNTS FOR THIS PROJECT FOR THE PURPOSE OF AUDITING. K. GET THE EXPENDITURE WITH THE APPROPRIATE AND CONSISTENTLY APPLIED AUDITING PRINCIPLES IN INDIA. SUCH AUDITORS WILL FURNISH TO NIRD AT THE END OF EACH FI NANCIAL YEAR A CERTIFICATE TO THE EFFECT THAT THE ACCOUNTS HAVE BEEN AUDITED AND THE GRANT HAS BEEN SPENT ON THE OBJECTS FOR WHI CH IT WAS MEANT, SAVE AS OTHERWISE PROVIDED IN THIS AGREEMENT . ANY 5 ITA NO. 3698/DEL/2017 UNSPENT BALANCE AND ACCRUED INTEREST THERE FROM SHO ULD BE CARRIED FORWARD TOWARDS THE NEXT YEAR'S PROJECTED B UDGET.' 9. ON GOING THROUGH THE ABOVE CLAUSES, IT IS TO BE NOTED THAT THERE IS AN OBLIGATION ON THE ASSESSEE TO MAIN TAIN SEPARATE BANK ACCOUNT. FURTHER COMPLETE RECORD FINA NCIAL YEAR-WISE IS TO BE MAINTAINED AND CERTIFIED BY THE AUDITORS. 10. CLAUSE (K) PUTS SPECIFIC OBLIGATION ON CARRYING FORWARD THE UNSPENT BALANCE WITH ACCRUED INTEREST TO THE NEXT Y EAR PROJECTED BUDGET. 4.6. THE LD. AR HAS ALSO STATED THAT THIS METHOD OF ACCOUNTING HAS BEEN ACCEPTED BY THE AO IN THE ASSESSMENT FOR THE A .Y. 2013-14. I HAVE PERUSED THE ACCOUNTING OF GOVERNMENT GRANT BY THE APPELLANT COMPANY, WHEREBY IT IS CONSISTENTLY RECOGNIZING THE EXPENDITURE INCURRED FOR THE PROJECT AGAINST THE GRANT RECEIVED DURING THE YEAR AND OFFERING MATCHING INCOME. THE UNUTILIZED GRANT IS CARRIED FORWARD TO THE NEXT YEAR AND IS REPORTED AS DEFERRE D REVENUE GRANT IN THE BALANCE SHEET. THIS ACCOUNTING TREATMENT IS AS PER THE MOU WITH THE GOVERNMENT AND ALSO CLAUSE 15 OF THE ACCOU NTING STANDARD AS - 12 PRESCRIBED BY THE ICAI. THE APPELLANT IS CO NSISTENTLY FOLLOWING THIS ACCOUNTING METHOD. ON THE ISSUE OF C ONSISTENCY, THE HON'BLE SUPREME COURT IN THE CASE OF RADHASOAMI SAT SANG VS. CIT 1992 AIR 377 HAS RULED AS UNDER: .. WE ARE AWARE OF THE FACT THAT STRICTLY SPEAKING RES JUDI-CATA DOES NOT APPLY TO INCOME-TAX PROCEEDINGS. AGAIN, EA CH ASSESSMENT YEAR BEING A UNIT, WHAT IS DECIDED IN ON E YEAR MAY NOT APPLY IN THE FOLLOWING YEAR BUT WHERE A FUN DAMENTAL ASPECT PERMEATING THROUGH THE DIFFERENT ASSESSMENT YEARS HAS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND P ARTIES HAVE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT C HALLENGING THE ORDER, IT WOULD NOT BE AT ALL APPROPRIATE TO AL LOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YEAR' 4.7 IN VIEW OF THE FACTS OF THE CASE AND THE SUBMIS SION OF THE LD. AR AND THE PRINCIPLE OF CONSISTENCY LAID DOWN BY TH E APEX COURT, THE AOS ACTION IN TREATING THE DEFERRED GRANT OF RS.1. 91 CRORES AS INCOME OF THE APPELLANT FOR THE YEAR IS NOT SUSTAIN ABLE AND IS DIRECTED TO BE DELETED. THIS GROUND OF APPEAL IS RU LED IN FAVOUR OF THE APPELLANT. 3.2 WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES ON THE ISSUE-IN-DISPUTE. WE FIND THAT THE ASSESSEE HAS FOL LOWED 6 ITA NO. 3698/DEL/2017 PERCENTILE COMPLETION METHOD OF REVENUE RECOGNITION WHICH IS FOLLOWED IN THE CASE OF CONTRACT WORK ON BROAD PRIN CIPLE THAT INCOME IS ACCRUED CORRESPONDING TO THE EXPENDITURE INCURRED TOWARDS EXECUTION OF THE CONTRACT PROJECT. SINCE IN COME HAS BEEN OFFERED BY THE ASSESSEE AS AND WHEN ACCRUED TO IT, WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LEARNED CIT(A) ON THE ISSUE IN DISPUTE. WE ALSO NOTE THAT THE ASSESSEE IS CONSISTE NTLY FOLLOWING THIS ACCOUNTING METHOD AND THUS, THE LEARNED CIT(A) HAS DELETED THE ADDITION IN VIEW OF THE RULE OF CONSISTENCY. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE ABOVE, WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LEARNED CIT(A) ON THE ISSUE IN DIS PUTE. ACCORDINGLY, WE UPHOLD THE SAME. THE GROUND NO. 1 O F THE APPEAL OF THE REVENUE IS DISMISSED. 4. THE GROUND NO. 2 OF THE APPEAL RELATES TO DELETION OF ADDITION OF RS. 42,04,450/- MADE ON ACCOUNT OF DIFFERENCE AM OUNT PAID BY NIRD AS 26AS. 4.1 THE FACTS QUA THE ISSUE IN DISPUTE IS THAT NATIONAL INSTITUTE OF RURAL DEVELOPMENT (NIRD) DEDUCTED TDS OF RS.11,5 6,767/- ON THE ENTIRE GRANT OF RS.5.50 CRORES ISSUED TO THE AS SESSING DURING THE YEAR UNDER CONSIDERATION. HOWEVER, THE ASSESSEE OFFERED INCOME OF RS.5.08 CRORES DURING THE YEAR UNDER CONS IDERATION AND CLAIMED THE ENTIRE CREDIT OF RS.11.56 CRORES DURING THE YEAR. THE ASSESSING OFFICER ADDED IN INCOME OF RS.42,02,450/- CORRESPONDING THE TDS CLAIM OF THE ASSESSEE. THE L EARNED CIT(A) THOUGH DELETED THE ADDITION OF RS.42,02,450/-, HOWE VER, DIRECTED THE ASSESSING OFFICER TO RESTRICT THE CREDIT OF TDS CORRESPONDING TO THE INCOME OFFERED BY THE ASSESSEE. THE RELEVANT FI NDING OF THE LEARNED CIT(A) IS REPRODUCED AS UNDER: 7 ITA NO. 3698/DEL/2017 5.2. I HAVE CAREFULLY CONSIDERED THE ASSESSMENT OR DER AND WRITTEN SUBMISSION FILED BY THE LD. AR. THE AO ADDED RS.42, 04,450/- AS THE APPELLANT HAD ACCOUNTED FOR RECEIPTS OF RS.5.08 CRORES AGAINST RS.5.50 CRORES AS APPEARING IN THE 26AS STATEMENT A ND HAD ALSO CLAIMED CREDIT OF TDS OF RS.11.56 LACS ON THE RECEI PTS. IN VIEW OF MY DECISION REGARDING THE METHOD OF ACCOUNTING FOLLOWE D BY THE APPELLANT CONSISTENTLY IN PARA 4.6 OF THIS ORDER AN D SINCE PART OF THE GRANT RECEIVED DURING THE YEAR ON WHICH TDS IS CLAI MED IS DEFERRED TO THE NEXT YEAR, CLAIM OF TDS ON THE ENTIRE GRANT RECEIVED DURING THE YEAR IS NOT ADMISSIBLE OF THE APPELLANT. SECTION 19 9 OF THE ACT READ WITH RULE 37(BA)(3) OF THE I. T. RULES, 1962 CLEARL Y LAYS DOWN THE PROCEDURE FOR CREDIT OF TAX DEDUCTION AT SOURCE AS UNDER: '37(BA)(3): (I) CREDIT FOR TAX DEDUCTED AT SOURCE A ND PAID TO THE CENTRAL GOVERNMENT, SHALL BE GIVEN FOR THE ASSESSME NT YEAR FOR WHICH SUCH INCOME IS ASSESSABLE. (II) WHERE TAX HAS BEEN DEDUCTED AT SOURCE AND PAID TO THE CENTRAL GOVERNMENT AND THE INCOME IS ASSESSABLE OVE R A NUMBER OF YEARS, CREDIT FOR TAX DEDUCTED AT SOURCE SHALL BE ALLOWED ACROSS THOSE YEARS IN THE SAME PROPORTION I N WHICH THE INCOME IS ASSESSABLE TO TAX.' 5.3. SINCE THE APPELLANT AS PER THE METHOD OF ACCOU NTING HAS NOT BOOKED THE ENTIRE REVENUE OF RS.5.50 CRORES ON WHIC H TDS IS CLAIMED BUT HAS ONLY OFFERED RECEIPTS OF RS.5.08 CRORES DUR ING THE YEAR, THE AO IS DIRECTED TO WITHDRAW THE TDS CREDIT ALLOWED T O THE APPELLANT ON THE AMOUNT OF RS.42,04,450/-. FURTHER, AS THE SA ID AMOUNT IS DEFERRED TO THE NEXT YEAR AS PER THE ACCOUNTING MET HOD OF GOVERNMENT GRANT, THE ADDITION OF RS.42,02,450/- SH ALL ALSO STAND DELETED. THIS GROUND OF APPEAL IS PARTLY RULED IN F AVOUR OF THE APPELLANT. 4.2 WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES ON THE ISSUE IN DISPUTE. IN OUR OPINION, THE LEARNED CIT(A ) HAS FOLLOWED RELEVANT PROVISIONS OF SECTION 199 OF THE ACT READ WITH RULE 37(BA)(3) OF THE IT RULES, 1962 WHICH SPECIFY THAT CREDIT OF THE TAX DEDUCTED AT SOURCE AND PAID TO THE CENTRAL GOVERNME NT, SHALL BE GIVEN FOR THE ASSESSMENT YEAR FOR WHICH SUCH INCOME IS ASSESSABLE. IN VIEW OF THE ABOVE, WE DO NOT FIND AN Y ERROR IN THE ORDER OF THE LEARNED CIT(A) ON THE ISSUE IN DISPUTE AND 8 ITA NO. 3698/DEL/2017 ACCORDINGLY, WE UPHOLD THE SAME. THE GROUND NO. 2 O F THE APPEAL OF THE REVENUE IS DISMISSED. 5. IN RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 31 ST JANUARY, 2020. SD/- SD/- (AMIT SHUKLA) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 31 ST JANUARY, 2020. RK/-(D.T.D.) COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI