DCIT CIR 7(1), MUMBAI V. PANCARD CLUBS LTD, MUMBAI

ITA 4567/MUM/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9968 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 05-06-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 06-08-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M DAYASAGAR
• Assessee Lawyers: DILIP V LAKHANI
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO. 4567/MUM/2015 (ASSESSMENT YEAR 2011-12) THE DCIT, CIR.7(1), ROOM NO.12, AAYKAR BHAVAN,M.K.ROAD, MUMBAI 400 020 ...... APPELLANT VS. M/S. PANCARD CLUB LTD. 110, KALYANDAS UDYOG BHAVAN, NEAR CENTURY BAZAR, PRABHADEVI, MUMBAI 400 025 .... RESPONDENT PAN: AAACP 9093R APPELLANT BY : SHRI M.DAYASAGAR RESPONDENT BY : SHRI DILIP V.LA KHANI DATE OF HEARING : 05/06/2017 DATE OF PRONOUNCEMENT : 01/09/2017 ORDER PER G.S.PANNU,A.M: THE CAPTIONED APPEAL FILED BY THE REVENUE PERTAI NING TO ASSESSMENT YEAR 2011-12 IS DIRECTED AGAINST AN ORD ER PASSED BY CIT(A)- 15 MUMBAI DATED 13/05/2015, WHICH IN TURN ARISES OU T OF AN ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143( 3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 31/03/2013 . 2 ITA NO. 4567/MUM/2015 (ASSESSMENT YEAR 2011-12) 2. IN THIS APPEAL, REVENUE HAS RAISED THE FOLLOWIN G GROUNDS OF APPEAL:- 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD.CIT(A} ERRED IN HOLDING THAT THE RECEIPT ON ACCO UNT OF ADVANCE SALE OF ROOM NIGHTS IS NOT A REVENUE RECEIPT, WITHOUT APPRE CIATING THE FACT THAT THE PRINCIPLE BUSINESS OF ASSESSEE IS TO PROVIDE ACCOMM ODATION AND OTHER FACILITIES TO TOURIST MEMBERS AND ASSESSEE IS CLAIM ING ALL THE EXPENSES RELATABLE TO THESE RECEIPTS IN ITS PROFIT & LOSS AC COUNT.' 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD.CIT(A) ERRED IN HOLDING THAT THE PROVISIONS MADE BY THE ASSESSEE ON THE SURRENDER VALUE OF HOLIDAY MEMBERSHIP AND CLAIMED A S DEDUCTION ON PAYABLE BASIS ARE DEPENDENT ON THE CONTINGENCY OF NON-UTILI ZATION OF ROOM SPACE.' 3. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE 'ADDITION MADE ON A CCOUNT OF COMMISSION PAID PERTAINING TO EARLIER A.YS. AND CLAIMED DURING THE CURRENT A.Y., I.E., A.Y.2011-12 WITHOUT APPRECIATING THE FACT THAT THE SAME IS RELATING TO THE GROUNDS ON WHICH THE DEPARTMENT HAS FILED SLP BEFOR E THE APEX COURT ON THE ISSUE.' 3. AT THE TIME OF HEARING, IT WAS A COMMON POINT BE TWEEN THE PARTIES THAT, IN PRINCIPLE, ALL THE DISPUTES MANIFE STED IN THE AFORESAID GROUNDS OF APPEAL ARE COVERED BY THE EARLIER PRECED ENTS IN THE CASE OF THE ASSESSEE ITSELF BY WAY OF THE DECISIONS OF THE TRIBUNAL, WHICH HAVE ALSO BEEN AFFIRMED THEREAFTER BY THE HON'BLE BOMBAY HIGH COURT. SO HOWEVER, IN ORDER TO IMPART COMPLETENESS TO THE ORD ER, THE FOLLOWING DISCUSSION IS RELEVANT. 4. THE RESPONDENT ASSESSEE IS ENGAGED IN THE BUSINE SS OF HOSPITALITY, RUNNING OF CLUBS AND HOLIDAY SCHEME. THE ASSESSEE COMPANY, INTER-ALIA, OFFERS HOLIDAY SCHEMES TO IT S CARD MEMBERS AT DISCOUNTED/SPECIAL PRICE BY RECEIVING AMOUNTS IN A DVANCE AGAINST SALE OF ROOM NIGHTS MARKETED THROUGH ITS AGENTS. IN THI S CONTEXT, THE ASSESSING OFFICER FOUND THAT ASSESSEE HAD CREDITED A SUM OF 3 ITA NO. 4567/MUM/2015 (ASSESSMENT YEAR 2011-12) RS.691,08,85,015/- IN THE BALANCE SHEET WHICH REPRE SENTED THE AMOUNT RECEIVED FROM MEMBERS UNDER DIFFERENT SCHEMES UNDER THE HEAD ADVANCE AGAINST SALE OF ROOM NIGHTS. THE ASSESSE E HAD EXPLAINED THAT UNDER THE HOLIDAY SCHEME, AN INDIVIDUAL BECAME A ME MBER AFTER MAKING ADVANCE PAYMENTS FOR UTILIZATION OF ROOM N IGHTS IN FUTURE. IF A MEMBER EXERCISES HIS RIGHTS, HE IS ENTITLED TO AVAI L THE ROOM NIGHTS AS PER THE SCHEME. THE MEMBER IS ALSO ENTITLED TO REF UND AT THE END OF THE RESPECTIVE SCHEME, THE SURRENDER VALUE OF THE R OOM NIGHTS. THE ASSESSEE TREATED THE ADVANCE RECEIVED AGAINST SALE OF ROOM NIGHTS AS A LIABILITY AND THE SAME WAS DISCLOSED IN THE BALANCE SHEET. THE ASSESSEE TREATED THE DIFFERENCE BETWEEN THE AMOUNT PAID BY THE MEMBER AND THE SURRENDER VALUE AS AN EXPENSE SPREAD OVER THE T ENURE OF THE SCHEME AND PRO-RATA AMOUNT WAS CLAIMED AS DEDUCTION . AT THE STAGE OF THE ASSESSMENT, THE ASSESSING OFFICER REFERRED TO T HE STAND OF THE ASSESSING AUTHORITIES IN THE PAST ASSESSMENT YEARS OF 2004-05 TO 2010- 11 AND CONSIDERED THE ADVANCES RECEIVED FROM THE ME MBERS AS A REVENUE RECEIPT CHARGEABLE TO TAX AND ALSO DISALLOW ED THE CLAIM FOR THE PRO-RATA DEDUCTION OF THE DIFFERENCE BETWEEN THE H OLIDAY MEMBERSHIP AND SURRENDER VALUE. BOTH THESE ASPECTS HAVE SINC E BEEN NEGATED BY THE CIT(A) BY NOTICING THAT FOR ASSESSMENT YEARS 20 04-05 TO 2005-06, THE TRIBUNAL VIDE ITS ORDERS IN ITA NOS. 2389/MUM/2 009 & 2418/MUM/2009 DATED 16/03/2011; FOR ASSESSMENT YEAR S 2006-07 AND 2008-09 IN ITA NOS.6724& 6725/MUM/2012 DATED 21/02 /2014; AND, AND ASSESSMENT YEARS 2004-05, 2005-06, 2007-08 AND 2009-10 IN ITA NOS.6701,6702,6703 &6650/MUM/2012 DATED 21/02/2014 UPHELD THE STAND OF THE ASSESSEE. FURTHERMORE, THE CIT(A) NOT ED THAT SO FAR AS ASSESSMENT YEARS 2004-05 AND 2005-06 ARE CONCERNED, THE ORDER OF THE 4 ITA NO. 4567/MUM/2015 (ASSESSMENT YEAR 2011-12) TRIBUNAL DATED 16/03/2011(SUPRA) HAS SINCE BEEN APP ROVED BY THE HON'BLE BOMBAY HIGH COURT VIDE ITS ORDER IN INCOME TAX APPEAL NO.2255 & 2290 OF 2011 DATED 9 TH MAY 2014. IN THIS VIEW OF THE MATTER, THE CIT(A) DELETED THE ADDITIONS MADE BY THE ASSESS ING OFFICER, AGAINST WHICH REVENUE IS IN APPEAL BEFORE THE TRIBUNAL BY W AY OF GROUNDS OF APPEAL NO.1 & 2 ABOVE. 5. WE FIND THAT THE DISPUTE ON THE TREATMENT OF ADV ANCES AGAINST SALE OF ROOM NIGHTS AND THE CLAIM OF PRO-RATA DEDUC TION FOR THE DIFFERENCE IN THE AMOUNT PAID AND THE SURRENDER VAL UE OF THE ROOM NIGHTS, CAME UP FOR THE FIRST TIME IN ASSESSMENT YE AR 2004-05 BY WAY OF INITIATION OF PROCEEDINGS UNDER SECTION 263 OF THE ACT BY THE COMMISSIONER. THE TRIBUNAL VIDE ITS ORDER DATED 16 /03/2011(SUPRA) DEALT WITH THE MERITS OF THE STAND OF THE COMMISSIO NER, WHICH IS IN CONSONANCE WITH WHAT THE ASSESSING OFFICER DONE IN THE IMPUGNED ORDER AND THE TRIBUNAL DISAGREED WITH THE STAND OF THE REVENUE. THEREAFTER, THE HON'BLE BOMBAY HIGH COURT IN ITS OR DER DATED 09/05/2014(SUPRA) UPHELD THE PROPOSITION THAT HAVIN G REGARD TO THE TERMS AND CONDITIONS OF THE HOLIDAY SCHEME, NO INCO ME ACCRUES TO THE ASSESSEE AT THE TIME OF RECEIPT OF THE ADVANCES. T HE HON'BLE BOMBAY HIGH COURT TOOK NOTE OF THE FACTUAL FINDING ARRIVED BY THE TRIBUNAL THAT THE SCHEME OBLIGATED THE ASSESSEE TO REFUND NOT ONL Y THE ADVANCE PAYMENT, BUT ALSO THE SURRENDER VALUE. NOTABLY, FOR ASSESSMENT YEARS 2004-05,2005-06,2007-08 AND 2009-10 ALSO, THE HON'B LE HIGH COURT IN ITA NO.1515,1516,1594 AND 1678 OF 2014 DATED 17/02/ 2017 HAS APPROVED THE DECISION OF THE TRIBUNAL. BE THAT AS IT MAY, IT CLEARLY IMPLIES THAT THE STAND TAKEN BY THE ASSESSING OFFIC ER IN THE IMPUGNED 5 ITA NO. 4567/MUM/2015 (ASSESSMENT YEAR 2011-12) ASSESSMENT ORDER IS CONTRARY TO THE JUDGMENTS OF TH E HON'BLE BOMBAY HIGH COURT DATED 09/05/2015(SUPRA) AND 17/02/2017(S UPRA) IN THE ASSESSEES OWN CASE AND, THEREFORE, WE FIND NO ERRO R ON THE PART OF THE CIT(A) IN DELETING THE ADDITION. THUS, IN SO FAR A S GROUNDS OF APPEAL NO.1 & 2 ARE CONCERNED, THE REVENUE FAILS. 6. IN SO FAR AS THE ISSUE IN GROUND OF APPEAL NO.3 IS CONCERNED, THE SAME RELATES TO DEDUCTIBILITY OF THE COMMISSION EXP ENDITURE ALLOWABLE TO THE ASSESSEE. NOTABLY, ASSESSEE PAYS COMMISSION TO ITS AGENTS FOR MARKETING ITS DIFFERENT HOLIDAY SCHEMES. AT THE TI ME OF HEARING, THE LD. REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT TH E ASSESSEE COMPANY WAS FOLLOWING THE METHOD OF ACCOUNTING UNDER WHICH THE COMMISSION PAID FOR EACH OF THE SCHEME WAS SPREAD OVER THE T ENURE OF THE SCHEME AND PRO-RATA COMMISSION IS DEBITED TO THE RESPECTIV E YEARS PROFIT AND LOSS ACCOUNT. IN THIS CONTEXT, IT IS NOTABLE THAT FOR THE YEAR UNDER CONSIDERATION, ASSESSEE HAD DEBITED AN AMOUNT OF RS .96,06,89,340/- IN THE PROFIT AND LOSS ACCOUNT AS COMMISSION. SO HOWE VER, IN THE COMPUTATION OF INCOME ASSESSEE CLAIMED DEDUCTION FO R RS.217,08,46,537/- ON ACCOUNT OF COMMISSION ON PAYM ENT BASIS. THE ASSESSING OFFICER ALLOWED THE CLAIM TO THE EXTENT O F RS.121,01,57,197/- CULLING OUT THE AFORESAID AMOUNT BEING PRO-RATA COM MISSION ATTRIBUTABLE TO THE INSTANT PERIOD. THE ASSESSEE R AISED THE ISSUE BEFORE THE CIT(A) AND THE CIT(A) IN PARA-5 OF HER ORDER HA S ALLOWED THE CLAIM OF THE ASSESSEE TO THE EXTENT OF RS.217,08,46,537/- ON PAYMENT BASIS. AGAINST SUCH A DECISION OF THE CIT(A), REVENUE IS I N FURTHER APPEAL BEFORE US. 6 ITA NO. 4567/MUM/2015 (ASSESSMENT YEAR 2011-12) 7. IN THIS CONTEXT, THE LD. REPRESENTATIVE FOR THE ASSESSEE QUITE FAIRLY CONCEDED THAT HAVING REGARD TO THE PRECEDENT S AND CONSISTENCY IN PAST AS WELL AS SUBSEQUENT YEAR ASSESSMENT, THE CLA IM OF THE ASSESSEE ON ACCOUNT OF COMMISSION EXPENDITURE IS TO BE ALLOW ED PRO-RATA TO THE RELEVANT PERIOD AND NOT ON PAYMENT BASIS. THE LD. REPRESENTATIVE FOR THE ASSESSEE HAS FURNISHED A STATEMENT, RECONCILI NG THE COMMISSION DEBITED IN THE PROFIT AND LOSS ACCOUNT, THE AMOUN T OF COMMISSION ACTUALLY PAID DURING THE YEAR, AS ALSO THE PRO-RATA COMMISSION ATTRIBUTABLE TO THE PERIOD UNDER CONSIDERATION. ON THIS ASPECT, WE DEEM IT FIT AND PROPER TO RESTORE THE MATTER BACK T O THE ASSESSING OFFICER, WHO SHALL VERIFY THE WORKING OF THE AMOUNT OF EXPENDITURE PRO- RATA ATTRIBUTABLE TO THE INSTANT YEAR AND ALLOW THE DEDUCTION ACCORDINGLY. THUS, ON THIS ASPECT REVENUE SUCCEEDS FOR STATISTICAL PURPOSES. 8. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 01/09/2017. SD/- SD/- (RAVISH SOOD) (G.S. PANNU) JUDICIAL MEMBER ACCOCUNTANT MEMBER MUMBAI, DATED 01/09/2017 VM , SR. PS 7 ITA NO. 4567/MUM/2015 (ASSESSMENT YEAR 2011-12) COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI