Mayiladuthurai Consumer Co-op Wholesale Stores Ltd., CHENNAI V. JCIT, Kumbakonam

ITA 388/CHNY/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81131 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-08-2014
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 28-07-2014
• Assessment Year: 2010-2011
• Appeal Filed On: 17-02-2014
• Court: TRIBUNAL
• Department Lawyers: C V PAVANA KUMAR

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHE NNAI . , ! '! ! #, $ % BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER . / I.T.A. NO. 388/MDS/2014 / ASSESSMENT YEAR : 2010-11 M/S.MAYILADUTHURAI CONSUMER CO-OP. WHOLESALE STORES LTD., 58-B, NARAYANAPILLAI LANE, MAYILADUTHURAI-609 001 [PAN: AAAAT 0077 B] ( #& /APPELLANT) VS JOINT COMMISSIONER OF INCOME TAX, KUMBAKONAM RANGE, KUMBAKONAM ( '(#& /RESPONDENT) / APPELLANT BY : MR. PHILIP GEORGE, ADVOCATE / RESPONDENT BY : MR. C.V.PAVANA KUMAR, JCIT / DATE OF HEARING : 28-07-2014 ! / DATE OF PRONOUNCEMENT : 13-08-2014 ) / O R D E R PER VIKAS AWASTHY, J.M: THE APPEAL HAS BEEN FILED BY THE ASSESSEE IMPUGNIN G THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-TI RUCHIRAPALLI, DATED 18-11-2013 RELEVANT TO THE ASSESSMENT YEAR (A Y) 2010-11. ITA NO. 388/MDS/2014 2 2. THE FACTS IN THE CASE AS EMANATING FROM THE RECO RDS ARE: THE ASSESSEE IS A CO-OPERATIVE SOCIETY ENGAGED IN T HE STATE GOVERNMENT PUBLIC DISTRIBUTION SCHEME THROUGH RURAL RATION SHOPS. THE ASSESSEE IS DISTRIBUTING RATION THROUGH 100 SHOPS IN THE STATE OF TAMIL NADU. THE ASSESSEE FILED ITS RE TURN OF INCOME FOR THE AY.2010-11 ON 15-10-2010 DECLARING INCOME O F ` 52,97,600/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE U/S. 143(2) OF INCOME TAX ACT, 1961 (HER EIN AFTER REFERRED TO AS THE ACT) WAS ISSUED TO THE ASSESSE E ON 21-09- 2011. THE ASSESSING OFFICER DURING ASSESSMENT PROC EEDINGS OBSERVED THAT THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. DURING THE AY UNDER CONSIDERATION, THE ASSESSEE HAS CLAIMED GOVERNMENT SUBSIDY OF ` 38,30,956/- ON ACCOUNT OF INCREASE IN COST OF DISTRIBUTION. HOWEVER, THE ASS ESSEE HAS NOT REFLECTED THE SAME AS INCOME IN THE PERIOD UNDER CO NSIDERATION. AGGRIEVED BY THE ASSESSMENT ORDER DT.28-02-2013, T HE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(APPEALS ). THE CIT(APPEALS) UPHELD THE FINDINGS OF THE ASSESSING O FFICER AND DISMISSED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF ITA NO. 388/MDS/2014 3 FIRST APPELLATE AUTHORITY, THE ASSESSEE HAS COME IN SECOND APPEAL BEFORE THE TRIBUNAL. 3. SHRI PHILIP GEORGE, ADVOCATE APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS DISTRIBUTIN G RATION THROUGH HUNDRED SHOPS IN THE STATE OF TAMIL NADU. DUE TO I NCREASE IN THE COST OF DISTRIBUTION, THE ASSESSEE FILED ADDITIONAL CLAIM OF SUBSIDY BEFORE THE GOVERNMENT. THE SAID SUBSIDY IS NOT THE REGULAR INCOME OF THE ASSESSEE. IF THE GOVERNMENT DEEMS IT FIT, THE SUBSIDY AMOUNT IS GRANTED IN FULL OR IN PART, AS TH E CASE MAY BE AND THE REMAINING AMOUNT IS REJECTED. THE SAID SUB SIDY AMOUNT RECEIVED FROM GOVERNMENT IS ACCOUNTED ONLY IN THE Y EAR OF RECEIPT AND IS OFFERED TAX IN THE YEAR OF RECEIPT. 4. ON THE OTHER HAND, SHRI C.V.PAVANA KUMAR, APPEAR ING ON BEHALF OF THE REVENUE SUBMITTED THAT THE ASSESSEE I S FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, THE ASSESSEE SHOUL D HAVE OFFERED THE AMOUNT CLAIMED BY THE ASSESSEE AS SUBSI DY IN THE YEAR OF CLAIM ITSELF. THE ASSESSEE IS POSTPONING HIS TA X LIABILITY BY OFFERING THE SAID AMOUNT IN THE YEAR OF RECEIPT. T HE ASSESSEE IS NOT PERMITTED TO FOLLOW HYBRID SYSTEM OF ACCOUNTING . ITA NO. 388/MDS/2014 4 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF BOTH THE SIDES. WE HAVE ALSO PE RUSED THE ORDERS OF THE AUTHORITIES BELOW. THE ONLY ISSUE IN APPEAL IS; WHETHER THE AMOUNT OF SUBSIDY RECEIVED BY THE ASSES SEE FROM THE GOVERNMENT SHOULD BE ASSESSED TO TAX IN THE YEAR OF CLAIM OR IN THE YEAR OF RECEIPT? 6. IT IS AN UN-DISPUTED FACT THAT THE ASSESSEE IS F OLLOWING MERCANTILE SYSTEM OF ACCOUNTING. ACCORDINGLY, THE ASSESSEE IS LIABLE TO PAY TAX ON ACCRUED INCOME AS WELL. HOWEV ER, IN THE PRESENT CASE, WE FIND THAT THE ASSESSEE IS CLAIMING SUBSIDY FROM THE STATE GOVERNMENT. THE AMOUNT OF SUBSIDY TO BE PAID TO THE ASSESSEE IS CRYSTALISED ONLY AFTER SCRUTINY OF CLAI M OF THE ASSESSEE BY THE CONCERNED GOVERNMENT DEPARTMENT. THE ASSESS EE IS NOT SURE AS TO WHAT PART OF THE SUBSIDY CLAIM WOULD BE ALLOWED. ACCORDINGLY, THE ASSESSEE IS OFFERING THE AMOUNT OF SUBSIDY FOR TAX IN THE YEAR OF RECEIPT. WE FIND MERIT IN THE SUBM ISSIONS OF THE ASSESSEE. THE ASSESSEE IS DECLARING THE AMOUNT OF SUBSIDY AS ITS INCOME IN THE YEAR IT IS CRYSTALLIZED. THE ASSESSE E HAS BEEN CONSISTENTLY FOLLOWING THIS METHOD OF ACCOUNTING SU BSIDY. ITA NO. 388/MDS/2014 5 WE DO NOT FIND ANY ERROR IN THE ACCOUNTING METHOD A DOPTED BY THE ASSESSEE. THE IMPUGNED ORDER IS SET ASIDE A ND THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON WEDNESDAY, THE 13 TH AUGUST, 2014 AT CHENNAI. SD/- SD/- (. ) ('! ! #) (A. MOHAN ALANKAMONY) / ACCOUNTANT MEMBER (VIKAS AWASTHY) $ / JUDICIAL MEMBER '# /CHENNAI, $% /DATED:13 TH AUGUST, 2014 TNMM %& '()( /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. *+, /CIT(A) 4. * /CIT 5. (-. / /DR 6. .01 /GF