DCIT, CHENNAI V. Road Safety Club Pvt. Ltd., CHENNAI

ITA 537/CHNY/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4585 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 01-05-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 03-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS ILAVARASI
• Assessee Lawyers: R SIVARAMAN
• Keywords: Revised return
• Section: 5(2)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI . , . , BEFORE SHRI ABRAHAM P. GEORGE , ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./I.T.A. NO. 537/MDS/2017 / ASSESSMENT YEAR : 2012-2013 THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 5(2) CHENNAI 600 034. VS. M/S. ROAD SAFETY CLUB PVT. LTD, NO.1, 1 ST FLOOR, SAMBANDAM STREET, G.N. CHETTY ROAD, T. NAGAR, CHENNAI 600 017. [PAN AABCR 9430K] ( / APPELLANT) ( /RESPONDENT) ! / APPELLANT BY : MRS. ILAVARASI, ADDL. CIT. '# ! /RESPONDENT BY : SHRI. R. SIVARAMAN, ADVOCATE $ %& /DATE OF HEARING : 01-05-2017 '( %& /DATE OF PRONOUNCEMENT : 03-05-2017 / O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER: THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST AN ORDER DATED 30.11.2016 OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-3, CHENNAI. REVENUE HAS TAKEN ALTOGETHER FIVE GROU NDS OF WHICH ITA NO.537/MDS/2017. :- 2 -: GROUNDS NO.1 & 5 ARE GENERAL IN NATURE NEEDING NO S PECIFIC ADJUDICATION. 2. VIDE ITS GROUND 2, REVENUE IS AGGRIEVED ON DELETION OF A DISALLOWANCE OF PROVISION FOR SAFETY BONUS OF =6,3 7,28,715/-. LD. COUNSEL OF THE ASSESSEE AT THE OUTSET SUBMITTED THA T THE ISSUE REGARDING CLAIM OF SAFETY BONUS HAD COME UP BEFORE THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2001-02 TO 2004-05 IN ITA 382, 2429/MDS/2006, 775 & 2341/MDS/2007. AS PER LD . AUTHORISED REPRESENTATIVE, VIDE ITS ORDER DATED 11.07.2008, T HE TRIBUNAL HAD HELD THAT ESTIMATE OF SAFETY BONUS LIABILITY WAS FIXED BY THE ASSESSEE BASED ON CALCULATIONS WHICH WERE INTERNATIONALLY ACCEPTED . LD. AUTHORISED REPRESENTATIVE ALSO SUBMITTED THAT THE ISSUE HAD O NCE AGAIN COME BEFORE THIS TRIBUNAL IN REVENUE APPEAL FOR ASSESSME NT YEAR 2005-06 AND CO-ORDINATE BENCH IN ITS ORDER DATED 25.02.201 0 IN ITA 1637/MDS/2009 AND CO NO.201/MDS/2009, HAD AGAIN HEL D IN FAVOUR OF THE ASSESSEE. 3. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE FAIRLY ADMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE . 4. WE HAVE PERUSED THE ORDERS AND HEARD THE CONTENTION S. THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR S 2001-02 TO ITA NO.537/MDS/2017. :- 3 -: 2004-05 WITH REGARD TO THE CLAIM OF SAFETY BONUS LI ABILITY HELD AS UNDER AT PARAS 17 TO 19 OF ITS ORDER DATED 11.07.2008. 17. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND MATERIAL ON RECORD, WE FIND THAT INITIALLY THE ASSESSEE CLAIMED THE SAFETY BONUS LIABILITY IN RESPECT OF ITS MEMBERS ENROLLED IN THE YEAR WHICH WAS DISALLOWED BY THE ASSESSING OFFICER ON THE GROUND T HAT THE SAME IS A CONTINGENT LIABILITY AND NOT AN ACTUALLY EXISTING LIABILITY. ON APPEAL, THE CIT(APPEALS), THE CIT(APPEALS) HAS MODIFIED THE ORDER OF ASSESSING OFFICER AND ADOPTED THE METHOD OF PROBABI LITY. THE CIT(APPEALS) DIRECTED THE ASSESSEE TO FILE THE CALC ULATION ON THE BASIS OF LAW OF PROBABILITY AS ADOPTED AND ACCEPTED INTERNATIONALLY IN THE FIELD OF INSURANCE. ACCORDINGLY, THE ASSESSE E FILED THE ESTIMATES WHICH, WERE ACCEPTED BY THE CIT(APPEALS) AND THE ASSESSING OFFICER WAS ACCORDINGLY DIRECTED TO ALLOW THE SAME. WE FIND THAT THE . CIT(APPEALS) HAS ADOPTED A PRAGMATI C AND REALISTIC APPROACH IN COMPUTING THE SAFETY BONUS LIABILITY WH ICH ARE OTHERWISE THE ONLY BASIS FOR ASCERTAINING THESE LIA BILITIES TO ALLOCATE THE SAME DURING THE PERIOD OF SUSTAINING OF THE SAI D LIABILITY. 18. IN THE CASE OF CALCUTTA CO. LTD. (SUPRA), TH E HON'BLE SUPREME COURT HAS HELD THAT :- 'WE ARE DEFINITELY OF THE OPINION THAT THE SUM REPRESENTED THE ESTIMATED AMOUNT WHICH WOULD HAVE TO BE EXPENDED BY THE APPELLANT IN THE COURSE OF CARRYING ON ITS BUSINESS AND WAS INCIDENTAL TO THE SAME AND HAVING REGARD TO THE ACCEPTED COMMERCIAL PRACTICE AND TRADING PRINCIPLES WAS A DEDUCTION WHICH, IF THERE WAS NO SPECIFIC PROVISI ON FOR IT UNDER SEC 10(2) OF THE ACT, WAS CERTAINLY ALLOWABLE DEDUCTION' IN ARRIVING AT THE PROFITS, AND GAINS OF THE BUSINESS OF THE APPELLANT UNDER SECTION 10(1) OF TH E ACT, THERE BEING NO PROHIBITION AGAINST IT, EXPRESS OR I MPLIED, IN THE ACT. IN THE CASE OF TREASURE ISLAND RESORTS (P) LTD. (SU PRA), THE HYDERABAD BENCH OF THE TRIBUNAL/ AFTER FOLLOWING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CALCUTTA CO. LTD. (SUPRA) HAS HELD THAT ITA NO.537/MDS/2017. :- 4 -: EVEN WHEN THE METHOD OF ACCOUNTING ADOPTED IS MERCANTILE SYSTEM, TAXABILITY OF A RECEIPT MAY BE POSTPONED WHEN THE RECEIPT ENTAILS A LIABILITY TO B E MET IN FUTURE YEARS. IN THIS VIEW OF THE MATTER, IT HAS TO BE HELD THAT ALL THE AMOUNTS RECEIVED BY THE ASSESSEE AS THE MEMBERSHIP FEE DO NOT ACCRUE AS INCOME IN THE SAME YEAR. IN VIEW OF THE CONTINUING LIABILITY, ALLOCATION OF INCOME OVER DIFFERENT YEAR S IS PERMISSIBE. 19. THEREFORE, FROM THE ABOVE DECISIONS IT IS CLEA R THAT THE LIABILITY ASSOCIATED WITH THE RECEIPTS AND SPREAD OVER FOR A FUTURE PERIOD SHOULD BE ACCOUNTED ON THE BASIS OF ESTIMATES SO FAR AS IT RE PRESENTS REAL AND TRUE AND ACCEPTED PRINCIPLES OF ESTIMATION. MOREOVER, WH EN WE HAVE ALREADY HELD THAT THE PRINCIPLE OF MATCHING OF REVENUE AND EXPENDITURE IS A WELL ACCEPTED PRINCIPLE, WE FIND NO ERROR OR ILLEGALITY IN, THE ORDER OF THE CIT(APPEALS) IN DECIDING THE ISSUE OF LIABILITY OF SAFETY BONUS. ACCORDINGLY, THIS ISSUE IS DECIDED AGAINST THE REVENUE AND THE O RDER OF THE CLT(APPEALS) IS UPHELD QUA THIS ISSUE. THIS HAS BEEN FOLLOWED BY THIS TRIBUNAL IN SUBSEQU ENT YEARS ALSO VIDE ORDER DATED 25.02.2010 IN ITA 1637/MDS/2009 AND CO 201/MDS/2009 FOR ASSESSMENT YEAR 2005-06, IN ITA 457/MDS/2010, DATED 25.06.2010 FOR ASSESSMENT YEAR 2006-07, IN ITA 1651/MDS/2010, DATED 16.12.2010 FOR ASSESSMENT YEAR 2007-2008. ACCORDING LY, WE ARE OF THE OPINION THAT LD. COMMISSIONER OF INCOME TAX (APPEAL S) WAS JUSTIFIED IN ALLOWING THE CLAIM. GROUND NO. 2 STANDS DISMISSED. 5. VIDE ITS GROUNDS 3 & 4, GRIEVANCE RAISED BY THE REV ENUE IS WITH REGARD TO DELETION OF A DISALLOWANCE OF INSURA NCE PREMIUM OF =32,86,975/-. 6. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISS UE IS COVERED IN FAVOUR OF THE ASSESSEE IN ASSESSEES OW N CASE FOR ITA NO.537/MDS/2017. :- 5 -: ASSESSMENT YEAR 2006-2007 VIDE TRIBUNAL ORDER DATED 25.06.2010 IN ITA 457/MDS/2010. 7. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE SUBM ITTED THAT TRIBUNAL HAD NOT GIVEN A BLANKET ALLOWANCE, BUT ONL Y TO THE EXTENT OF ACTUAL PAYMENTS. 8. WE HAVE PERUSED THE ORDERS AND HEARD THE CONTENTION S. ISSUE RELATING TO INSURANCE PREMIUM FOR THE SAFETY CARD HOLDERS OF THE ASSESSEE, HAD COME UP BEFORE THIS TRIBUNAL IN ASSE SSMENT YEAR 2006- 07 IN REVENUES APPEAL. IT WAS HELD AS UNDER AT PAR AS 6 TO 10 OF ITS ORDER DATED 25.06.2010 IN ITA NO.457/MDS/2010 IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR ASSESS EE HAD CHANGED ITS METHOD OF ACCOUNTING OF INSURANCE PREMIUM. EVERY SAFETY CARD HOLDER WAS CONTRACTUALLY ENTITLED FOR INSURANCE PREMIUM DURING THE TENURE OF MEMBERSHIP AND DURING THAT YEAR, ASSESSEE DECIDED T O QUANTIFY SUCH LIABILITY TAKING INTO ACCOUNT THE POS SIBLE FUTURE INSURANCE PREMIUM PAYMENT THAT WERE TO BE EFFECTED DURING THE TENURE OF THE MEMBERSHIPS. AS A RESULT, ASSESSEE FOR THAT YEAR IN ADDITION TO THE P REMIUM PAID ON EXISTING CARD HOLDERS AND NEW CARD HOLDERS RS.6,96,66,815/-, ALSO CLAIMED INSURANCE PREMIUM PAYABLE IN FUTURE FOR ALL SUCH CARD HOLDERS, QUANTI FYING THE LIABILITY AT RS.19,80,97,951/-, ALTOGETHER TOTALING TO RS.26,77,64,766/-.. ASSESSING OFFICER NOTED THAT F OR THE IMPUGNED ASSESSMENT YEAR ALSO ASSESSEE HAD FOLLOWED THE CHANGED METHOD FOR CHARGING THE PREMIUM. ACCORDINGLY, THE AMOUNT WORKED OUT FOR THE CLAIM OF INSURANCE PREMIUM OF RS.3,31,85,098.70 BY THE ASSESSEE WAS AS UNDER: 1 INSURANCE PREMIUM PROVISION A.Y 2005-06 P. 19,80,97,951.00 2 LESS: PAYMENTS MADE TO VARIOUS ITA NO.537/MDS/2017. :- 6 -: INSURANCE COMPANIES BEING INSURANCE PREMIUM PERTAINING TO THE A.Y. 2006-07 BALAN CE (A) 6,91,15,178.70 12,89,82,772.30 3 INSURANCE PREMIUM PROVISION A.Y 2006-07(B) 15, 90,41,807.00 4 INSURANCE PREMIUM PAID (B) (A) 3,00,59,034.70 5 ADD: BAJAJ ALLIANZ GENERAL INSURANCE CO. LTD TATA AIG GENERAL INSURANCE CO. LTD IFFCO TOKYO GENERAL INSURANCE CO. LTD AMP SANMAR INSURANCE CO. LTD 5.332.00 31,06,512.00 2,008.00 12,212.00 TOTAL 3,31,85,097.70 OUT OF THE ABOVE ACTUAL PREMIUM PAYMENT ARE AS UNDE R:- NAME OF THE COMPANY TO WHICH PAID AMOUNT (IN ) RELIANCE GENERAL INSURANCE CO.LTD 1,22,5 7,457.00 BAJAJ ALLIANZ GENERAL INSURANCE CO. LTD 1,64,91,675 .00 IFFCO TOKYO GENERAL INSURANCE CO. LTD 36,75,085.00 NATIONAL INSURANCE 2,16,11,683.70 TATA AIG GENERAL INSURANCE CO. LTD 1,50,79,278.00 TOTAL 6,91,15,178.70 ASSESSING OFFICER NOTED THAT THERE WERE SOME OTHER PREMIUM PAYMENTS WHICH ALSO HAD TO BE CONSIDERED. THUS, HE WORKED OUT THE ACTUAL PREMIUM PAYMENT FOR THE IMPUGNED ASSESSMENT YEAR AS UNDER:- INSURANCE PREMIUM PERTIANING TO A.,Y. 2006-07 6,91, 15,178.70 ADD : BAJAJ ALLIANZ GENERAL INSURANCE CO. LTD 5,332.00 TATA AIG GENERAL INSURANCE CO. LTD 31,06,512.00 ITA NO.537/MDS/2017. :- 7 -: IFFCO TOKYO GENERAL INSURANCE CO. LTD 2,008.00 AMP SANMAR INSURANCE CO. LTD 12,212.00 ALLOWABLE PREMIUM 7,22,41,242.70 HOWEVER, SINCE ASSESSEE ITSELF HAD CLAIMED ONLY RS.3,32,59,309/-, ASSESSING OFFICER REFUSED TO CONSIDER THE ENHANCED CLAIM MADE BY THE ASSESSEE, DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS. ACCORDING TO ASSESSING OFFICER, THE ISSUE REGARDING CHANGE OF METHOD OF ACCOUNTING OF INSURANCE PREMIUM WHICH WAS FOR TH E FIRST TIME MADE IN ASSESSMENT YEAR 2005-06, WAS PENDING BEFORE ID. CIT(A). AGGRIEVED BY THE ABOVE TREATMENT, ASSESSEE IS IN APPEAL BEFORE ID. CIT(A). 7. BEFORE THE L.D. CIT(A), IT WAS SUBMITTED THAT ITS APPEAL FOR ASSESSMENT YEAR 2005-06 WAS DISPOSED OF BY CIT(A)-V CHENNAI VIDE ORDER DATED 18.2.2009 IN ITA NO.74/2007-08. IN THAT ORDER, ID. CIT(A) HELD THAT ENTIRE INSURANCE PREMIUM LIABILITY CLAIMED BY ASSESSEE COU LD NOT BE ALLOWED AND ONLY THAT LIABILITY RELATABLE TO THE PREVIOUS YEAR COULD BE CONSIDERED. REASONING GIVEN WAS THAT ONLY 1/8TH OF THE MEMBERSHIP FEE RECEIPT W AS CONSIDERED AS THE INCOME OF A YEAR AND HENCE EXPENDITURE ALSO COULD BE CONSIDERED ONLY LIKE WISE . FOR THE IMPUGNED ASSESSMENT YEAR ALSO TAKING THE SAME VIEW AS TAKEN BY HIS PREDECESSOR FOR THE PRECEDING YEAR, CIT(A) WAS OF THE OPINION THAT THE PREMIUM OF RS.7,22,41,243/- AS QUANTIFIED BY ASSESSING OFFICER HIMSELF HAD TO BE ALLOWED. ACCORDING TO HIM, SUCH CLAIM COULD NOT BE RESTRICTED TO RS.3,32,59,309/- AS ORIGINALLY CLAIMED BY THE ASSES SEE IN IT'S PROFIT AND LOSS ACCOUNT. HE THEREFORE, DIRE CTED ASSESSING OFFICER TO ALLOW THE ENHANCED CLAIM 8. BEFORE US, ID. D.R. ASSAILING ON THE ORDER OF ID . CIT(A), SUBMITTED THAT ASSESSEE COULD NOT ENHANCE I TS CLAIM OTHER THAN THROUGH FILING A REVISED RETURN. ACCORDING TO HIM, ASSESSEE HAD CLAIMED AT RS.3,32,59,309/- ORIGINALLY IN ITS RETURN BUT ENHANCED SUCH AMOUNT TO RS.7,22,41,243/- BY REVISING ITS STATEMENT OF COMPUTATION BUT WITHOUT FILING A REVIS ED RETURN. RELIANCE WAS PLACED ON HON'BLE APEX COURT IN THE CASE OF GOETZE (INDIA) LTD VS. CIT (284 ITR 323). 9. PER CONTRA, THE ID. AR. STRONGLY SUPPORTED THE ORDER OF ID. CIT(A). 10. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. FOR THE PRECEDING ASSESSMENT YEAR, THE ITA NO.537/MDS/2017. :- 8 -: CHANGED METHOD OF ACCOUNTING ADOPTED BY ASSESSEE, CLAIMING FUTURE INSURANCE PREMIUM ALSO, WAS NOT ALL OWED BY ASSESSING OFFICER AND THIS WAS UPHELD BY ID. CIT (A). THIS HAS NOT BEEN CHALLENGED BY ASSESSEE IN ITS CRO SS OBJECTION FOR ASSESSMENT YEAR. SO, ACCEPTED POSITIO N IS THAT ONLY THE INSURANCE CLAIM FOR THE RELEVANT YEAR WAS ALLOWED TO THE ASSESSEE. IF THAT BE SO, FOR THE IMP UGNED ASSESSMENT YEAR ALSO ASSESSEE WOULD BE ELIGIBLE FOR THE CLAIM OF INSURANCE PREMIUM DEBITED DURING THE RELE VANT PREVIOUS YEAR. NO DOUBT, ASSESSEE IN ITS RETURN OF INCOME, FOLLOWING THE CHANGE OF METHOD OF ACCOUNTING ADOPTE D FOR THE PRECEDING ASSESSMENT YEAR, MADE A LESSER CLAIM, BUT IF TAKEN ON ACTUAL PAYMENT BASIS, THE SUM ALLOWABLE WO ULD BE RS. 7,22,41,243/- AS ADMITTED BY ASSESSING OFFIC ER ITSELF AT PARAGRAPH 7 OF THE ASSESSMENT ORDER. SO, WE ARE OF THE OPINION THAT THE ENHANCEMENT WAS CORRECTLY A LLOWED BY THE CIT(A) EVEN IF THE ASSESSEE HAD NOT FILED A REVISED RETURN. IF WE TAKE THE DECISION OF HON'BLE APEX COURT IN THE CASE OF GOETZE (INDIA) LTD. (SUPRA), IT HAS BEEN MA DE CLEAR THEREIN THAT THE LAW LAID DOWN WAS LIMITED TO THE P OWERS OF THE ASSESSING AUTHORITY. HERE, ON THE OTHER HAND, T HE DIRECTIONS WERE GIVEN BY THE ID. CIT(A). IT IS TRIT E LAW THAT POWERS OF THE CIT(A) ARE COTERMINOUS WITH THE POWERS OF THE ASSESSING OFFICER AND FURTHER HE CAN CONSIDER A NY MATTER WHILE DEALING WITH AN APPEAL ARISING OUT OF AN ASSESSMENT. THUS, THE CIT(A) WAS WELL WITHIN HIS POWERS TO GIVE THE DIRECTIONS. WE FIND NO REASON T O INTERFERE WITH THE ORDER OF THE CIT(A). GROUND NO.4, THEREFORE, STANDS DISMISSED. FOR THE IMPUGNED ASSESSMENT YEAR SUBMISSION OF THE LD. DEPARTMENTAL REPRESENTATIVE IS THAT WHAT WAS CLAIMED BY THE AS SESSEE, EXCEPT FOR A SUM OF =32,86,975/- WAS ONLY A PROVISION. HOWEV ER, THERE IS NO FINDING BY THE LD. ASSESSING OFFICER THAT THE CLAIM WAS NOT AN ACTUAL LIABILITY BUT ONLY AS ESTIMATE. TRIBUNAL HAD CLEAR LY HELD THAT INSURANCE PREMIUM RELATABLE TO THE PREVIOUS YEAR HAS TO BE AL LOWED. THE LD. ASSESSING OFFICER HAD SIMPLY HELD THAT SUCH PROVISI ON WAS NOT ALLOWED IN ASSESSMENT YEAR 2005-06 AND HENCE COULD NOT BE ALLOWED FOR IMPUGNED ASSESSMENT YEAR ALSO. LD. ASSESSING OFFIC ER HAD NOT DISALLOWED THE CLAIM AS AN UNASCERTAINED LIABILITY. IN THE ITA NO.537/MDS/2017. :- 9 -: CIRCUMSTANCES, FOLLOWING THE ORDER OF THE CO-ORDINA TE BENCH (SUPRA), WE ARE OF THE OPINION THAT THE CLAIM WAS ALLOWABLE. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. COMMI SSIONER OF INCOME TAX (APPEALS). GROUNDS 3 & 4 OF THE REVENUE STAND D ISMISSED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMIS SED ORDER PRONOUNCED ON WEDNESDAY, THE 3RD DAY OF MAY,2 017, AT CHENNAI. SD/- ( . ) (G. PAVAN KUMAR) $ %& / JUDICIAL MEMBER SD/ - ( . ) (ABRAHAM P. GEORGE) ' %& / ACCOUNTANT MEMBER +$ / CHENNAI , / DATED: 3RD MAY, 2017. KV - '%./ 0/% / COPY TO: 1 . / APPELLANT 3. 1% () / CIT(A) 5. / 45 '%6 / DR 2. '# / RESPONDENT 4. 1% / CIT 6. 57 8$ / GF