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

ITA 527/CHNY/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8726 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 07-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P B SEKARAN
• Assessee Lawyers: N VIJAY KUMAR
• Keywords: Reasonable cause
• Section: 143(3); 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . , ! ' . # , % & BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICI AL MEMBER ./ I.T.A.NO.527/MDS/2016 & C.O. NO.66/MDS/2016 ( / ASSESSMENT YEAR: 2007-08) THE ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-4(1), CHENNAI. VS M/S. LIFECELL INTERNATIONAL PVT. LTD., 26, VANDALUR KELAMBAKKAM, MAIN ROAD, KEELAKOTTAIYUR VILLAGE, CHENNAI-600 048. PAN: AAECA7997B ( /APPELLANT) (RESPONDENT/CROSS OBJECTOR) / APPELLANT BY : MR. P.B.SEKARAN, CIT /RESPONDENT BY : MR. N.VIJAY KUMAR, C.A. /DATE OF HEARING : 18 TH JULY,2016 /DATE OF PRONOUNCEMENT : 22 ND JULY, 2016 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THE APPEAL AND THE CROSS OBJECTION ARE FILED BY THE REVENUE AND THE ASSESSEE RESPECTIVELY AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APP EALS)- 8, CHENNAI DATED 21.12.2015 PASSED UNDER SECTION 143(3) R.W.S. 250(6) OF THE ACT. 2. THE REVENUE HAS RAISED SEVERAL GROUNDS IN ITS AP PEAL, HOWEVER THE CRUX OF THE ISSUE IS AS FOLLOWS:- THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DELETING THE ADDITION OF ` 17,03,25,621/- MADE BY THE LEARNED ASSESSING OFFICER TREATING THE RECEIPT OF STORAGE FEES IN 2 ITA NO.527/MDS/2016 & C.O.NO.66/MDS/2016 ADVANCE FOR A PERIOD OF 21 YEARS AS INCOME OF THE ASSESSEE UNDER SECTION 5(1) OF THE ACT. 3. THE CROSS OBJECTION FILED BY THE ASSESSEE IS BAR RED BY LIMITATION OF FOUR DAYS. THE ASSESSEE FILED AN AFFI DAVIT EXPLAINING THE REASON FOR THE DELAY IN FILING THE C ROSS OBJECTION STATING THAT THE RECORDS SENT BY POST WAS RECEIVED LATE AND THEREFORE PRAYED FOR CONDONATION OF DELAY. CONSIDER ING THE SUBMISSIONS OF THE ASSESSEE, WE ARE SATISFIED THAT THERE WAS REASONABLE CAUSE FOR THE DELAY IN FILING THE CROSS OBJECTION. HENCE IN THE INTEREST OF JUSTICE, WE HEREBY CONDONE THE DELAY IN FILING THE CROSS OBJECTION AND ADMIT THE SAME FO R ADJUDICATION. 4. AT THE OUTSET, THE LEARNED AUTHORIZED REPRESENTA TIVE SUBMITTED THAT THE IDENTICAL ISSUE HAS BEEN DECIDE D BY THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE EARLIER ASSESSMENT YEAR 2008-09 IN ITA NO.342/MDS/2012 & C.O.NO.72/MDS/2012 VIDE ORDER DATED 03.05.2012 IN F AVOUR OF THE ASSESSEE. 3 ITA NO.527/MDS/2016 & C.O.NO.66/MDS/2016 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE COULD NO T CONTROVERT TO THE SUBMISSIONS OF THE LEARNED AUTHOR IZED REPRESENTATIVE, HOWEVER HE ARGUED IN SUPPORT OF THE ORDER OF THE LEARNED ASSESSING OFFICER. 6. ON HEARING BOTH SIDES AND ON PERUSING THE ORDER OF THE CHENNAI BENCH OF THIS TRIBUNAL DATED 03.05.2012 IN ASSESSEES OWN CASE IN ITA NO.342/MDS/2012 & C.O.NO.72/MDS/2012 FOR THE EARLIER ASSESSMENT YEAR 2008- 09, WE FIND THAT THIS TRIBUNAL HAS DECIDED THE SIMI LAR ISSUE AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE.T HE RELEVANT PORTION OF THE ORDER OF THE TRIBUNAL IS RE PRODUCED HEREIN BELOW:- 8. AFTER HEARING BOTH SIDES IN DETAIL, WE FIND THAT THE COMMISSIONER OF INCOME-TAX IS NOT JUSTIFIED IN EXERCISING HIS POWERS OF REVISION UNDER SECTION 263 ON THIS MATTER OF ADVANCE COLLECTION OF STORAGE FEE FROM PARENTS OF BABIES. AS FAR AS ENROLMENT FEE IS CONCERNED, THERE IS NO DISPUTE. IN THE CASE OF PROCESSING FEE THERE IS NO DISPUTE. IN THE CASE OF STORAGE FEE PAID ON YEARLY BASIS, AGAIN, THERE IS NO DISPUTE. ALL THESE THREE COLLECTIONS ARE TREATED AS. REVENUE RECEIPTS OF THE CONCERNED PREVIOUS YEAR. THE DISPUTE IS ONLY IN RESPECT OF THE STORAGE FEE COLLECTED BY THE ASSESSEE IN ADVANCE. 9. IT IS TO BE SEEN THAT THE ASSESSEE IS STORING THE BLOOD STEM CELLS FOR A PERIOD OF 21 YEARS. WHEN THE ASSESSEE IS COLLECTING STORAGE FEE IN ADVANCE 4 ITA NO.527/MDS/2016 & C.O.NO.66/MDS/2016 FROM THE PARENTS IN LUMP SUM, THE ASSESSEE IS UNDERTAKING THE LIABILITY OF PROVIDING THE SERVICES OF STORING THE BLOOD STEM CELLS NOT FOR THE YEAR OF RECEIPT ALONE, BUT ALSO FOR THE ENTIRE PERIOD F 21 YEARS. THEREFORE, IT IS VERY CLEAR THAT THE LUMP SUM COLLECTION MADE BY THE ASSESSEE FROM THE PARENTS IS ONLY IN THE NATURE OF ADVANCE AND NOT IN THE NATURE OF INCOME AGAINST SERVICES RENDERED. IF THE ASSESSEE HAS COLLECTED ` 21,000/- FROM A PARENT FOR STORING THE BLOOD STEM CELLS FOR 21 YEARS, THE PORTION OF INCOME FOR ONE YEAR WILL BE ` 1,000/- ONLY. THE REMAINING SUM OF ` 20,000/- IS TO BE TREATED AS STORAGE FEE COLLECTED IN ADVANCE AGAINST THE LIABILITY OF RENDERING SERVICE OF STORING THE BLOOD STEM CELLS FOR THE REMAINING 20 YEARS. IF THE ENTIRE AMOUNT OF ` 21,0001- IS TREATED AS REVENUE RECEIPT OF THE FIRST YEAR, THERE IS NO PROVISION AVAILABLE IN THE HANDS OF THE ASSESSEE TO MEET THE LIABILITY FOR THE REMAINING 20 YEARS. THE ASSESSEE HAS TO ACCOUNT FOR INCOME AND EXPENDITURE FOLLOWING THE MATCHING PRINCIPLES. SERVICE CHARGES RECEIVED IN ADVANCE CANNOT BE TREATED AS THE INCOME OF THE YEAR IN WHICH THE ADVANCE AMOUNT WAS RECEIVED. THAT IS AGAINST THE CANONS OF ACCOUNTANCY. 10. THE ASSESSEE HAS GIVEN A PROPER TREATMENT TO THE ACCOUNTING OF STORAGE FEE COLLECTED IN ADVANCE. THE LUMP SUM PAYMENT IS SPREAD OVER THE PERIOD OF SERVICE FOR WHICH THE ASSESSEE IS LIABLE. THIS IS THE CORRECT METHOD OF ACCOUNTING. THIS HAS BEEN ACCEPTED BY THE ASSESSING AUTHORITY. THE ORDER OF THE ASSESSING AUTHORITY ON THIS POINT IS JUST AND PROPER IN LAW. 11. THEREFORE ON THE MERITS OF THE CASE, THE REVISION ORDER PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) IS UNSUSTAINABLE IN LAW. 7. FURTHER, IN THE ASSESSEES OWN CASE THIS BENCH O F THE TRIBUNAL IN ITA NOS.2849 TO 2851/MDS/2014 VIDE ORDE R DATED 08.04.2015 ON THE IDENTICAL ISSUE HAS HELD AS FOLLO WS:- 5 ITA NO.527/MDS/2016 & C.O.NO.66/MDS/2016 5. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIAL S ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIE S BELOW. THE ISSUE INVOLVED IN THIS APPEAL IS WHETHER THE ADVANCE STORAGE FEE RECEIVED BY THE ASSESSEE FOR A PERIOD OF 21 YEARS HAS TO BE OFFERED FOR TAXATION I N THE YEAR OF RECEIPT OR IT HAS TO BE SPREAD OVER. IN I.T .A. NO. 2142/MDS/2014 DATED 11.03.2015 FOR THE ASSESSMENT YEAR 2010-11 IN ASSESSEE'S OWN CASE, THE TRIBUNAL H AS CONSIDERED SIMILAR ISSUE ON IDENTICAL FACTS AND, BY FOLLOWING ASSESSEE'S OWN CASE FOR THE ASSESSMENT YE AR 2006-07 AND 2008-09 IN I.T.A. NO. 851/MDS/2011 AND I.T.A. NO. 342/MDS/2012 DECIDED ON 13.07.2011 AND 03.05.2012, HELD THAT THE ISSUE INVOLVED IN THIS AP PEAL IS COVERED IN FAVOUR OF THE ASSESSEE BY THE AFORESAID DECISION OF THE TRIBUNAL AND DISMISSED THE APPEAL F ILED BY THE REVENUE. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE TRIBUNAL, WE DISMISS THE GROUND RAI SED BY THE REVENUE FOR ALL THE ASSESSMENT YEARS BY HOLDING THAT THE RECEIPTS RECEIVED BY THE ASSESSEE HAS TO BE SPR EAD OVER FOR THE PERIOD OF 21 YEARS. 8. SINCE THE ISSUE IS ALREADY DECIDED BY THE TRIBUN AL, BY FOLLOWING THE EARLIER ORDERS IN THE ASSESSEES OWN CASE ON THE IDENTICAL ISSUE, WE DO NOT HAVE ANY HESITATIO N TO CONFIRM THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WHO HAS ONLY FOLLOWED THE DECISION OF TH E TRIBUNAL. 9. SINCE WE HAVE DISMISSED THE APPEAL OF THE REVENU E, THE CROSS OBJECTION FILED BY THE ASSESSEE BECOMES INFRUCTUOUS AND THE SAME IS DISMISSED AS SUCH. 6 ITA NO.527/MDS/2016 & C.O.NO.66/MDS/2016 10. IN THE RESULT, THE APPEAL OF THE REVENUE AND TH E CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 22 ND JULY, 2016 SD/- SD/- ( ! ' . # ) ( . ) ( DUVVURU RL REDDY ) ( A. MOHAN ALANKAMONY ) # % / JUDICIAL MEMBER % / ACCOUNTANT MEMBER # /CHENNAI, ( /DATED 22 ND JULY, 2016 SOMU *+ ,+ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. + 1 /DR 6. /GF