Hyundai Capital India Pvt. Ltd., New Delhi V. ITO, Ward- 11(4), New Delhi

ITA 6700/DEL/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 7052 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 06-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Assessee Lawyers: SHIVANSH PANDYA S
• Keywords: Opportunity of being heard; Question of law; Tax effect; TDS
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : F : NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NO.6700/DEL/2017 ASSESSMENT YEAR: 2013-14 HYUNDAI CAPITAL INDIA PVT. LTD., 5 TH FLOOR, NON HIERARCHICAL COMMERCIAL CENTRE, CORPORATE ONE, PLOT NO.5, JASOLA, NEW DELHI. PAN: AADCH0493A VS ITO, WARD-11(4), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SALIL KAPOOR & SHRI SHIVANSH PANDYA, ADVOCATES REVENUE BY : SHRI SURENDER PAL, SR. DR DATE OF HEARING : 14.02.2019 DATE OF PRONOUNCEMENT : 30.04.2019 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 29 TH AUGUST, 2017 OF THE CIT(A)-4, NEW DELHI, RELATING TO ASSESS MENT YEAR 2013-14. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A COMPANY ENGAGED IN THE BUSINESS OF PROVIDING ANALYSIS AND CONSULTANCY SERV ICES TO CLIENTS TO ASSIST IN DECISION MAKING, PERFORMING AUTOMOTIVE MARKET ANALYSIS, PROV IDING SUPPORT SERVICES AND ITA NO.6700/DEL/2017 2 PROVIDING AN OVERVIEW ANALYSIS OF THE AUTOMOTIVE MA RKET. IT FILED ITS RETURN OF INCOME ON 01.10.2013 DECLARING TOTAL INCOME OF RS.6,61,520 /-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT AS AGAINST GROSS REVENUE AS PER TDS AT RS.3,10,81,172/-, AND SERVICE TAX FOR RS .38,41,632/-, THE ASSESSEE HAS ACCOUNTED FOR REVENUE FROM OPERATION AT RS.99,53,59 1/-. FURTHER, AS PER THE BALANCE SHEET, A SUM OF RS.3,14,30,524/- HAS BEEN SHOWN AS RECEIVABLE WHICH HAS BEEN COMPUTED BY ADDING INCOME AND SERVICE TAX AND DEDUC TING TDS THEREON. HE, THEREFORE, ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE INCOME/RECEIPT FOR THE YEAR UNDER CONSIDERATION MAY NOT BE TAKEN AT RS.3,10,81,172/-. HE ASKED THE ASSESSEE TO FURNISH ALL DOCUMENTARY EVIDENCE TO SUPPORT THE CLAIM AND F URNISH THE FINANCIAL STATEMENTS WITH SCHEDULES OF M/S HYUNDAI MOTOR INDIA LTD. FOR THE YEAR ENDING 31.03.2013 SHOWING THE AMOUNT BOOKED BY THE SAID CONCERN AND T HE AMOUNT SHOWN AS ADVANCE IN THEIR BOOKS. THE ASSESSEE, IN RESPONSE TO THE SAME , SUBMITTED THAT THE INCOME IS RECOGNIZED AT COST PLUS 8% WHICH HAS BEEN CORRECTLY FOLLOWED BY THE ASSESSEE. IT WAS SUBMITTED THAT THE TOTAL EXPENSES INCURRED BY IT IS RS.92,16,288/- AND PROFIT @ 8% ON THE ABOVE COMES TO RS.7,37,303/-. THEREFORE, THE T OTAL REVENUE HAS CORRECTLY BEEN ACCOUNTED BY THE ASSESSEE AT RS.99,53,591/-. IT WA S SUBMITTED THAT UNDER RULE 3(B) OF THE SERVICE TAX POINT OF TAXATION RULES, SERVICE TA X HAS TO BE PAID ON GENERATION OF INVOICE AND IT DOES NOT MATTER WHETHER IT RELATES T O INCOME OR ADVANCE. IT WAS SUBMITTED THAT THE MONEY RECEIVABLE IN INSTALLMENTS WAS MORE THAN THE INCOME IN TERMS OF THE AGREEMENT. HENCE, THE SERVICE TAX RET URNS SHOW A HIGHER FIGURE THAN THE INCOME AS PER THE AUDITED ACCOUNTS. THE INCOME HAS BEEN RECOGNIZED AT COST PLUS 8% ITA NO.6700/DEL/2017 3 AND THE ADVANCE HAS BEEN ADJUSTED IN FUTURE MONTHS AND INCOME RECOGNIZED ON A CONSISTENT BASIS. THEREFORE, THERE IS NO LOSS OF R EVENUE. THE ASSESSEE ALSO SUBMITTED THE COPY OF AGREEMENT WITH M/S HYUNDAI MOTORS INDIA LTD., CHENNAI. 3. THE ASSESSING OFFICER OBTAINED INFORMATION FROM HYUNDAI MOTORS INDIA LTD., WHO VIDE THEIR REPLY DATED 2 ND FEBRUARY, 2016, SUBMITTED THAT THEY HAVE PAID AN AMOUNT OF RS.3,10,81,172/- TO M/S HYUNDAI CAPITAL I NDIA PVT. LTD. AND THE ABOVE AMOUNT WAS TREATED AS EXPENDITURE IN THEIR BOOKS OF ACCOUNT. THEREFORE, THE QUESTION OF ADVANCE DOES NOT ARISE. SINCE THE PAYER COMPANY CONFIRMED THAT DURING THE YEAR THE PAYMENT WAS MADE AGAINST INVOICE NO.201303/01 DATED 31.03.2013 AND PAYMENTS WERE TREATED AS EXPENDITURE IN THEIR BOOKS OF ACCOU NT AND NOT AS ADVANCE, THEREFORE, THE ASSESSING OFFICER CONFRONTED THE SAME TO THE ASSESS EE TO EXPLAIN AS TO WHY THE TOTAL REVENUE DURING THE YEAR OF A SUM OF RS.3,10,81,172/ - SHOULD NOT BE RECOGNIZED. THE ASSESSEE REPLIED THAT THE CONTRACT BETWEEN HMI AND THE ASSESSEE CLEARLY STATES THAT THE INCOME IS TO BE RECOGNIZED BASED ON THE TOTAL COST INCURRED PLUS A MARGIN OF 8%. SUCH INCOME IS RESTRICTED IN TERMS OF THE AGREEMENT, THE BALANCE AD HOC INSTALLMENT AMOUNT REMAINS AS AN ADVANCE. THE ASSESSEE HAS ACCORDINGL Y CORRECTLY RECOGNIZED THE INCOME AT RS.99,53,591/-. IT WAS SUBMITTED THAT HMI RECOG NIZED THE EXPENSE BASED ON THE AD HOC INSTALLMENT AMOUNT WHICH IS INCORRECT. IT WAS ARG UED THAT THE ASSESSEE SHOULD NOT BE PENALIZED FOR INCORRECT COMPUTATION OF INCOME BY ITS CLIENT HMI. IT WAS FURTHER SUBMITTED THAT TAXING THE ADVANCE RECEIVABLE AMOUNT OF RS.2,11,27,581/- IN THE HANDS OF THE ASSESSEE IN THE YEAR ENDING 31 ST MARCH, 2013 WILL LEAD TO DOUBLE TAXATION OF THE ITA NO.6700/DEL/2017 4 SAME AMOUNT AS THE ASSESSEE HAS PAID TAX AS AND WHE N INCOME HAS BEEN RECOGNIZED IN FUTURE YEARS. IT WAS ACCORDINGLY PLEADED THAT THE ADVANCE RECEIVABLE OF RS.2,1127,581/- BE TREATED AS AN ADVANCE RECEIVABLE BY NOT TAXING IT AS INCOME IN THE YEAR UNDER SCRUTINY. WITHOUT PREJUDICE TO THE ABOV E, IT WAS PLEADED THAT IN CASE THE SUBMISSION OF THE ASSESSEE IS NOT ACCEPTED, A PROTE CTIVE ASSESSMENT ORDER MAY BE PASSED WHEREIN THE MATTER MAY REMAIN SUSPENDED TILL A SUBSTANTIVE ASSESSMENT OF HMI IS CARRIED OUT. 4. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE ARGUMENTS ADVANCED BY THE ASSESSEE. HE NOTED THAT THE REVENUE HAS TO BE RECOGNIZED ON THE BASIS OF THE INVOICE RAISED UPTO 31.03.2013 FOR THE FOLLOWING RE ASONS:- 1. THE IMPORTANT ASPECT TO BE NOTED HERE IS THAT I N ITS SERVICE TAX RETURN, ASSESSEE HAS ACCOUNTED THE GROSS REVENUE AS RS.3,10 ,81,172/- AND PAID SERVICE TAX ACCORDINGLY. 2. IN THE COPY OF INVOICE RAISED, WORD ADVANCE HAS NOT BEEN MENTIONED. 3. THE AMOUNT RECEIVED FROM M/S HYUNDAI MOTORS INDIA LTD HAS BEEN IMMEDIATELY REMITTED TO THE HOLDING COMPANY M/S HYU NDAI CAPITAL SERVICES INC, KOREA. 4. THE PAYER COMPANY, M/S HYUNDAI MOTORS INDIA LTD, H AS ACCOUNTED THE BILL AMOUNT AS EXPENSE AND THERE HAS TO BE MATCHING IN T HE ACCOUNTING STANDARD OF BOTH THE COMPANIES FOLLOWING MANDATORY MERCANTILE S YSTEM OF ACCOUNTING I.E., PAYEE AS WELL AS PAYEE . SO ACCOUNTING OF THE SAID INCOME HAS TO BE IN TUNE WITH THE SAME FOR OFFERING IT FOR RELEVANT YEAR UNDER CO NSIDERATION. 5. HE NOTED THAT THE ASSESSEE HAS RAISED THE INVOIC E, THEREFORE, THIS PAYMENT WAS RECEIVED AND THE PAYER HAS ALSO CONFIRMED THAT IT I S NOT AN ADVANCE. THE ASSESSING OFFICER FURTHER NOTED THAT THE MONEY HAS BEEN CREDI TED IN THE BANK ACCOUNT BEFORE ITA NO.6700/DEL/2017 5 RAISING THE INVOICE AND THAT MONEY HAS BEEN FURTHER REMITTED TO THE HOLDING COMPANY OF THE ASSESSEE IN KOREA. FURTHER, THE HOLDING COM PANY IN KOREA AS WELL AS THE PAYER COMPANY AND PAYEE COMPANY ARE RELATED PARTIES. REJ ECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE, THE ASSESSING OFFICER HAS AD DITION OF RS.2,11,27,581/- TO THE TOTAL INCOME OF THE ASSESSEE. 6. IN APPEAL, THE LD.CIT(A) UPHELD THE ACTION OF THE A SSESSING OFFICER BY OBSERVING AS UNDER:- 8. I HAVE EXAMINED THE MATERIALS ON RECORD. IT IS NOTICED THAT INVOICE DATED 31.02.2013 HAS BEEN RAISED ON HYUNDAI MOTORS INDIA LTD FOR AN AMOUNT OF RS.3,10,81,172/- AFTER DEDUCTING SERVICES TAX OF RS .38,41,633/-. TDS AMOUNTING TO RS.34,92,281/- HAS BEEN CLAIMED BY THE APPELLANT IN ITS RETURN OF INCOME. THE ACCOUNT OF HYUNDAI MOTOR INDIA LTD. IN THE BOOKS OF APPELLANT COMPANY FOR THE PERIOD OF 01.04.2012 TO 31.03.2013 SHOWS FEE REVENU E OF RS.99,53,591/- AND ADVANCE INCOME OF RS.2,11,27,581/-. IT IS CLEAR THA T ONCE INVOICE IS RAISED, PAYMENT IS LEGALLY DUE, SERVICE TAX IS ACCOUNTED FO R, FULL CREDIT FOR TDS IS CLAIMED, ASSESSEE CANNOT CHOOSE WHEN & HOW MUCH IS TO BE TREATED AS INCOME AS PER ITS WHIMS AND WISHES. IT IS OBVIOUS THAT THERE IS NO UNCERTAINTY/ CONTINGENCY WITH RESPECT TO THE RECEIPT/ACCRUAL OF INCOME AND T HEREFORE, OFFERING OF ONLY A PART OF THE TOTAL ACCRUED INCOME FOR TAXATION CANNOT BE ACCEPTED. 9. THUS, IT IS SEEN THAT WHILE ONE PARTY I.E. HYUNDAI MOTOR INDIA LTD. MAKES FULL PAYMENT OF RS.3,10,81,172/- ON THE BASIS OF INVOICE RAISED BY THE APPELLANT AND DEBITS IT AS EXPENSES IN ITS BOOKS, T HE APPELLANT COMPANY RECOGNIZES ONLY RS.99,53,591/- AS FEE INCOME I.E. LESS THAN L/ 3 RD OF THE TOTAL PAYMENT. 10. IT IS CLEAR THAT GIVING UP OF PART OF ITS FEE RECE IPT BY THE ASSESSEE IS UNILATERAL AND ACCORDING TO ITS OWN WISHES. THE CON DUCT OF HYUNDAI MOTORS INDIA LTD. IN TREATING THE PAYMENT AMOUNTING TO RS.3,10,8 1,172/- BY CLAIMING IT AS EXPENSES IS MATERIAL EVIDENCE OF THE FACT THAT A SU M OF RS.3,10,81,172/- ACCRUED TO THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION AND IS TAXABLE. IT IS SETTLED LAW THAT INCOME ACCRUES WHEN IT FALLS DUE, THAT IS TO S AY WHEN IT BECOME LEGALLY RECOVERABLE AND ACCRUED INCOME IS THAT INCOME WHICH THE ASSESSEE HAS A LEGAL RIGHT TO RECEIVE. ITA NO.6700/DEL/2017 6 11. THE APPELLANT COMPANY ADMITTEDLY MAINTAINS ITS ACC OUNTS ACCORDING TO THE MERCANTILE SYSTEM. IN THIS SYSTEM AND AS PER AC COUNTING STANDARDS, CREDIT ENTRIES ARE MADE IN RESPECT OF AMOUNTS DUE IMMEDIAT ELY ONCE THEY BECOME LEGALLY DUE. IN THE PRESENT FACTS AND CIRCUMSTANCES OF THE CASE, THERE REMAINS NO DOUBT THAT THE APPELLANT HAS WRONGLY OFFERED INCOME RECEIPT RS.99,53,591/- INSTEAD OF RS.3,10,81,172/-. ACCRUED INCOME REPRESE NTS THE INCOME WHICH HAS BEEN EARNED BUT YET NOT RECLAIMED AND UNDOUBTEDLY T HE INCOME MUST BE RECORDED IN THE ACCOUNTING PERIOD IN WHICH IT IS EARNED. THE ASSESSEE COMPANY HAS FAILED TO RECOGNIZE THE ENTIRE INCOME WHICH AROSE IN THE P REVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2013-14 AND RATHER SHIFTED IT TO SU BSEQUENT YEAR WHICH CANNOT BE ACCEPTED BEING CONTRARY TO ESTABLISHED LAWS. 12. APPELLANT'S INSISTENCE THAT INCOME HAS BEEN RECOGN IZED ON THE BASIS OF INSTALLMENT PLAN AGREED BETWEEN THE TWO PARTIES AS MENTIONED IN CONSULTING SERVICE AGREEMENT (CSA) DOES NOT CARRY ANY CREDENCE AS THE SAID AGREEMENT IS BETWEEN TWO PARTIES WORKING UNDER THE SAME UMBRELLA OF 'HYUNDAI GROUPS OF COMPANIES' AND SUCH AGREEMENT CANNOT OVERRIDE THE B ASIC ACCOUNTINGS PRINCIPLES. THIS IS PARTICULARLY SO WHEN I FIND THAT THE SAID A GREEMENT IS UNDATED AND MADE ON A STAMP PAPER DATED 26.03.2013 SUGGESTING THAT T HE AGREEMENT IS A PRODUCT OF AFTER THOUGHT AND MAKING IT CLEAR THAT THE INSISTED SANCTITY OF THE SAID CAS IS MISPLACED. ACCORDINGLY, APPELLANT'S ARGUMENT THAT R ETURNED INCOME OF APPELLANTS ARGUMENT THAT RETURNED INCOME OF THE AS SESSEE WAS AS PER INSTALLMENT PLAN BASED ON THE INCOME RECOGNITION TERMS OF THE C SA IS NOT ACCEPTABLE. EVEN IF THE SAID AGREEMENT IS TO BE BELIEVED, THE PAYMENT S TRUCTURE FOR THE YEAR UNDER EXAMINATION CLEARLY SHOWS THAT A SUM OF RS.3,10,81, 172/- IS THE SERVICE FEE FOR THE PERIOD FROM DECEMBER, 2012 TO MARCH, 2013, WHIC H IS CONFIRMED BY THE PAYMENT MADE AND CLAIMED AS EXPENSES BY HMI IN ITS RETURN OF INCOME TAX A.Y. 2013-14. THE CASE LAWS RELIED UPON BY THE APPE LLANT ARE NOT RELEVANT IN THE FACTS & CIRCUMSTANCES OF THE CASE. 13. AS REGARDS, APPELLANT'S CONTENTION THAT AS IT HAS AN ARRANGEMENT OF COST PLUS 8% WITH ITS CLIENT, ON BOOKING THE REVENUE OF RS.2,11,27,581/- THE A.O. SHOULD HAVE ALLOWED AN EXPENSE OF RS.1,95,62,575/-, THE SAME CANNOT BE ACCEPTED AS ALLOWABILITY OF EXPENSES CANNOT BE ON A DHOC BASIS BUT ON INCURRING OF THE SAME AND ON DEBITING TO P&L A/C. 14. AS REGARDS APPELLANT'S CLAIM THAT TAX ON RS.2,11,2 7,581/- HAS BEEN PAID IN THE SUBSEQUENT YEAR, IT WOULD BE WORTHWHILE TO M ENTION THAT IN TAX JURISPRUDENCE, IT IS A SETTLED LEGAL PRINCIPLE THAT LATER EVENTS CANNOT AFFECT THE EARLIER NATURE OF A RECEIPT AS ALSO ITS QUANTUM. 15. KEEPING IN VIEW OF THE ABOVE, THE ADDITION MADE BY THE AO AMOUNTING TO RS.2,11,27,581/- IS HEREBY CONFIRMED. 16. IN THE RESULT, THE APPEAL IS DISMISSED. ITA NO.6700/DEL/2017 7 7. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASSESS EE IS IN APPEAL BEFORE THE TRIBUNAL RAISING THE FOLLOWING GROUNDS:- 1. THAT THE ADDITIONS MADE BY THE ASSESSING OFFIC ER (AO) ASSESSING THE TOTAL INCOME OF THE APPELLANT AT RS. 2,17,89,101/- IS ILLEGAL AND BAD IN LAW. 2. THAT THE CIT(A) HAS ERRED IN UPHOLDING THE ADDITION MADE BY THE AO ON ACCOUNT OF ADVANCE RECEIVED BY THE APPELLANT FROM I TS CLIENT, AS PER THE AD HOC PAYMENT SCHEDULE, AGREED UPON IN THE CONSULTANCY SE RVICE AGREEMENT (HEREINAFTER REFERRED TO AS CSA). 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE AO HAS ERRED IN TAXING THE ADVANCE RECEIVED AMOUNTING TO RS. 2,11,2 7,581/- WHICH REPRESENTS THE AMOUNTS INVOICED TO CUSTOMER AS AND WHEN THE BILLIN G MILESTONE AS PER THE CSA ARE TRIGGERED BUT IN RESPECT TO WHICH NO SERVICES H AVE BEEN RENDERED NEITHER ANY COST HAS BEEN INCURRED BY THE APPELLANT DURING THE SUBJECT YEAR. 4. THAT THE CIT(A) AND AO HAVE FAILED TO APPRECIATE T HAT THE AFORESAID ADVANCE RECEIVED HAVE BEEN OFFERED TO TAX IN SUBSEQ UENT ASSESSMENT YEAR WHEN THE WORK IS PERFORMED AND COST IS INCURRED, THE ADD ITION OF THE SAME TO THE TOTAL INCOME OF SUBJECT ASSESSMENT YEAR SHALL AMOUNT TO D OUBLE TAXATION. 5. THAT THE ASSESSEE HAS BEEN RECOGNISING THE INCOME AS PER THE APPLICABLE ACCOUNTING STANDARDS AND PRINCIPLES. FURTHER THE AP PELLANT HAS BEEN CONSISTENTLY FOLLOWING THIS APPROACH. BOTH THE LOWER AUTHORITIES HAVE ERRED IN DISTURBING THE REGULAR METHOD OF ACCOUNTING FOLLOWED BY THE APPELL ANT AND DISREGARDING THE JUDICIAL PRECEDENT LAID DOWN IN THIS REGARD BY THE HONBLE SUPREME COURT. 6. THAT WITHOUT PREJUDICE TO THE ABOVE THE METHOD OF RECOGNITION OF INCOME HAS BEEN ACCEPTED BY THE DEPARTMENT IN SUBSE QUENT YEARS I.E AY 2014-15, AS FOR THE SUCCEEDING YEAR RETURNED INCOME HAS BEEN ACCEPTED IN ORDER UNDER SECTION 143(3) OF THE ACT, THOUGH THE SAME METHOD O F RECOGNITION WAS CONSISTENTLY FOLLOWED. 7. THAT WITHOUT PREJUDICE, THE WHOLE EXERCISE OF THE R EVENUE IS TAX NEUTRAL AS TOTAL AMOUNT OF THE CONTRACT HAS BEEN CREDITED A S INCOME IN THE SUBSEQUENT YEAR. 8. THAT THE EVIDENCE FILED AND MATERIALS AVAILABLE ON RECORD HAVE NOT BEEN PROPERLY CONSTRUED AND JUDICIOUSLY INTERPRETED, HEN CE THE ADDITION MADE IS UNCALLED FOR. ITA NO.6700/DEL/2017 8 9. THAT THE OBSERVATION AND THE ADDITIONS MADE ARE UNJ UST, ILLEGAL, ARBITRARY, BAD IN LAW, HIGHLY EXCESSIVE AND BASED ON SURMISE C ONJECTURE. 10. THAT INTEREST U/S 234B, 234C AND 234D OF THE INCOME TAX ACT, 1961 HAS BEEN WRONGLY AND ILLEGALLY CHARGED AND HAS BEEN WRO NGLY WORKED OUT. 11. THAT THE APPLICANT CRAVES LEAVE TO ADD, AMEND, ALTE R AND/OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL AT OR BEFORE THE TIME O F HEARING. 8. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY CHALLENGE D THE ORDER OF THE CIT(A) UPHOLDING THE ACTION OF THE ASSESSING OFFICER. REF ERRING TO PAGE 1 TO 9 OF THE PAPER BOOK, THE LD. COUNSEL DREW THE ATTENTION OF THE CON SULTANCY SERVICE AGREEMENT ENTERED INTO WITH HMI. REFERRING TO PAGE 8 OF THE A GREEMENT, HE DREW THE ATTENTION OF THE BENCH TO THE CLAUSE RELATING TO SERVICE FEE ACC ORDING TO WHICH: THE SERVICE FEE FOR BOTH BASIC SERVICES AND FINANCIAL PROJECT SERVICES SHALL BE BASED ON COST IN RELATION TO PROVIDING SERVICES TO THE COMPANY PLUS 8% (A MARGIN OF EIGHT PERCENT) MARGIN. REFERRING TO PROFIT & LOSS ACCOUNT FOR THE PERIOD N OVEMBER 12, 2012 TO MARCH 31, 2013, THE LD. COUNSEL DREW THE ATTENTION OF THE BEN CH TO THE REVENUE FROM OPERATION FEE FOR SERVICES AT RS.99,53,591/-. REFERRING TO P AGE 47 OF THE PAPER BOOK, HE DREW THE ATTENTION OF THE BENCH TO THE ORDER PASSED U/S 143(3) FOR ASSESSMENT YEAR 2014-15 WHEREIN THE ASSESSEE HAS DECLARED TOTAL INCOME AT R S.40,86,810/-. SO FAR AS THE ALLEGATION OF THE ASSESSING OFFICER THAT THE ASSESS EE HAS RECEIVED THE AMOUNT AND SENT THE MONEY TO KOREA IS CONCERNED, THE LD. COUNSEL FO R THE ASSESSEE, REFERRING TO THE BALANCE SHEET OF THE ASSESSEE COMPANY AS ON 31 ST MARCH, 2013 STATED THAT AN AMOUNT OF RS.3,14,30,524/- IS SHOWN AS RECEIVABLE AS PER NOTE NO.9 WHICH INCLUDES THE AMOUNT OF RS.2,11,27,581/-. SO FAR AS THE ALLEGATION OF T HE ASSESSING OFFICER THAT THE SERVICE ITA NO.6700/DEL/2017 9 TAX HAS BEEN PAID IS CONCERNED, HE SUBMITTED THAT I T IS PAYABLE ON ADVANCE RECEIVED AS PER THE SERVICE TAX RULES. SO FAR AS THE ALLEGATIO N OF THE ASSESSING OFFICER THAT HONDA MOTORS INDIA LTD., HAS CLAIMED THE SAME AS EXPENDIT URE IN THEIR ACCOUNTS FOR THE IMPUGNED YEAR IS CONCERNED, HE SUBMITTED THAT THE A SSESSEE CANNOT BE PENALIZED FOR THE WRONG INTERPRETATION BY THE OTHER COMPANY. MERELY BECAUSE THEY HAVE DECLARED THE SAME AS EXPENDITURE, IT DOES NOT AUTOMATICALLY BECO ME THE INCOME OF THE ASSESSEE. FURTHER, IN SUBSEQUENT YEAR, THE ASSESSEE HAS DECLA RED THE INCOME, WHICH HAS BEEN ACCEPTED BY THE REVENUE IN THE ORDER PASSED U/S 143 (3), THEREFORE, IT WILL AMOUNT TO TAXATION OF THE SAME AMOUNT TWICE IF THE VERSION OF THE ASSESSING OFFICER IS ACCEPTED. HE SUBMITTED THAT WHEN THE ASSESSING OFFICER IS CON FIRMING THE RECEIPT FROM HYUNDAI MOTORS INDIA LTD., THEY COULD HAVE ALSO VERIFIED TH E DATE OF AGREEMENT. THEREFORE, THE WHOLE BASIS ON WHICH ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE CIT(A) IS NOT JUSTIFIED. 9. IN HIS ALTERNATE CONTENTION, HE SUBMITTED THAT THE MATTER MAY BE RESTORED TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO V ERIFY AS TO WHAT STATEMENT HAS BEEN GIVEN BY HYUNDAI MOTORS. REFERRING TO THE INVOICE RAISED BY THE ASSESSEE TO HYUNDAI MOTORS LTD., HE SUBMITTED THAT THE INVOICE SHOWS IN STALLMENTS AS PER AGREEMENT FOR THE MONTH OF DECEMBER, 2012 TO MARCH, 2013 AT RS.3,10,8 1,172/-. REFERRING TO THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F CIT VS. EXCEL INDUSTRIES LTD., REPORTED IN 358 ITR 295 (SC), THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO PARA 32 OF THE ORDER WHICH READS AS UN DER:- ITA NO.6700/DEL/2017 10 32. THIRDLY, THE REAL QUESTION CONCERNING US IS TH E YEAR IN WHICH THE ASSESSEE IS REQUIRED TO PAY TAX. THERE IS NO DISPUTE THAT IN TH E SUBSEQUENT ACCOUNTING YEAR, THE ASSESSEE DID MAKE IMPORTS AND DID DERIVE BENEFI TS UNDER THE ADVANCE LICENCE AND THE DUTY ENTITLEMENT PASS BOOK AND PAID TAX THE REON. THEREFORE, IT IS NOT AS IF THE REVENUE HAS BEEN DEPRIVED OF ANY TAX. WE ARE TOLD THAT THE RATE OF TAX REMAINED THE SAME IN THE PRESENT ASSESSMENT YEAR AS WELL AS IN THE SUBSEQUENT ASSESSMENT YEAR. THEREFORE, THE DISPUTE RAISED BY T HE REVENUE IS ENTIRELY ACADEMIC OR AT BEST MAY HAVE A MINOR TAX EFFECT. TH ERE WAS, THEREFORE, NO NEED FOR THE REVENUE TO CONTINUE WITH THIS LITIGATION WH EN IT WAS QUITE CLEAR THAT NOT ONLY WAS IT FRUITLESS (ON MERITS) BUT ALSO THAT IT MAY NOT HAVE ADDED ANYTHING MUCH TO THE PUBLIC COFFERS. 10. REFERRING TO THE CONFIRMATION OF CONSULTANCY SERVIC E AGREEMENT ISSUED BY THE ASSESSEE AS WELL AS THE HYUNDAI MOTORS INDIA LTD., HE SUBMITTED THAT THE CONSULTANCY AGREEMENT WAS SIGNED ON 26 TH MARCH, 2013 AND IS BINDING ON BOTH THE PARTIES. H E ACCORDINGLY SUBMITTED THAT THE ADDITION MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE CIT(A) IS NOT JUSTIFIED. 11. THE LD. DR, ON THE OTHER HAND, HEAVILY RELIED ON TH E ORDER OF THE ASSESSING OFFICER AND CIT(A). REFERRING TO COPY OF THE AGREE MENT, HE SUBMITTED THAT THERE IS NO DATE MENTIONED IN THE CONSULTANCY SERVICE AGREEMENT AND IT IS BLANK. THE STAMP PAPER WAS PURCHASED ON 26 TH MARCH, 2013 WHICH IS VERIFIABLE. THEREFORE, THIS DOCUMENT IS NOTHING, BUT, A SELF SERVING DOCUMENT. REFERRING T O THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. VS. C IT, REPORTED IN 227 ITR 172, THE LD. DR DREW THE ATTENTION OF THE BENCH TO PARA 32 OF THE ORDER WHICH READS AS UNDER:- 32. BUT THIS IS AN ENTIRELY DIFFERENT CASE. WHETHE R A PARTICULAR RECEIPT IS OF THE NATURE OF INCOME AND FALLS WITHIN THE CHARGE OF SECTION 4 IS A QUESTION OF LAW WHICH HAS TO BE DECIDED BY THE COURT ON THE BASIS O F THE PROVISIONS OF THE ACT AND THE INTERPRETATION OF THE TERM 'INCOME' GIVEN I N A LARGE NUMBER OF DECISIONS OF THE HIGH COURTS, THE PRIVY COUNCIL AND ALSO THIS CO URT. IT IS WELL-SETTLED THAT ITA NO.6700/DEL/2017 11 INCOME ATTRACTS TAX AS SOON AS IT ACCRUES. THE APPL ICATION OR DESTINATION OF THE INCOME HAS NOTHING TO DO WITH ITS ACCRUAL OR TAXABI LITY. IT IS ALSO WELL-SETTLED THAT INTEREST INCOME IS ALWAYS OF A REVENUE NATURE UNLES S IT IS RECEIVED BY WAY OF DAMAGES OR COMPENSATION. 12. HE ALSO RELIED ON THE DECISIONS OF THE HON'BLE SUPR EME COURT IN THE CASE OF CIT VS. DURGA PRASAD MORE (1971) 82 ITR 540 (SC) AND IN THE CASE OF KEDARNATH JUTE MFG. CO. LTD. VS. CIT 1971 AIR 2145 . 13. IT WAS ALSO THE SUBMISSION OF THE LD. DR THAT THE S TAMP PAPER WAS PURCHASED ON 26 TH MARCH, 2013 AND THERE IS NO DATE MENTIONED IN THE CONSULTING SERVICE AGREEMENT AND THE INVOICES FROM THE MONTH OF DECEMBER, 2012, THEREFORE, THE DOCUMENTS PRODUCED BY THE ASSESSEE ARE SELF SERVING DOCUMENTS . 14. THE LD. COUNSEL FOR THE ASSESSEE, IN HIS REJOINDER, SUBMITTED THAT THE ASSESSING OFFICER HAS MADE THE ADDITION ON THE BASIS OF THE A GREEMENT. NOW, THAT IT HAS BEEN CLARIFIED BY BOTH THE SIDES THAT THE AGREEMENT WHIC H WAS SIGNED ON 26 TH MARCH, 2013 IS BINDING ON BOTH THE PARTIES AND, THEREFORE, THE ADD ITION MADE BY THE ASSESSING OFFICER AND UPHELD BY THE CIT(A) IS NOT SUSTAINABLE. 15. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. WE HAVE ALS O CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND, THE ASSESSEE, IN THE INST ANT CASE, HAS SHOWN AN AMOUNT OF RS.99,53,591/- AS REVENUE FROM OPERATIONS AS AGAINS T RS.3,10,81,172/- AS PER THE TDS CERTIFICATE AND CLAIMED CREDIT OF TDS AT RS.34,92,2 81/-. THE ASSESSING OFFICER MADE ADDITION OF RS.2,11,27,581/- BEING THE DIFFERENCE B ETWEEN RS.3,10,81,172/- AND ITA NO.6700/DEL/2017 12 RS.99,53,591/-. WHILE DOING SO, HE NOTED THAT THE PAYER COMPANY M/S HYUNDAI MOTOR INDIA LTD. HAS ACCOUNTED THE BILL AMOUNT AS EXPENDI TURE. THE AMOUNT RECEIVED FROM HYUNDAI MOTOR INDIA LTD., HAS BEEN IMMEDIATELY REMI TTED TO THE HOLDING COMPANY M/S HYUNDAI CAPITAL SERVICES INC., KOREA AND IN THE COP Y OF INVOICE RAISED, THE WORD ADVANCE HAS NOT BEEN MENTIONED. FURTHER, THE ASS ESSEE IN ITS SERVICE TAX RETURN HAS ACCOUNTED THE GROSS REVENUE AS RS.3,10,81,172/-. W E FIND, THE LD.CIT(A) UPHELD THE ACTION OF THE ASSESSING OFFICER THE REASONS FOR WHI CH HAS BEEN REPRODUCED IN THE PRECEDING PARAGRAPHS. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE IN THE SUBSEQUENT YEAR HAS OFFERED THE BAL ANCE AMOUNT TO TAX WHICH HAS BEEN ACCEPTED IN THE ORDER PASSED U/S 143(3) AND, THEREF ORE, TAXING THE SAME IN THE IMPUGNED ASSESSMENT YEAR WILL AMOUNT TO DOUBLE TAXA TION. IT IS ALSO HIS SUBMISSION THAT MERELY BECAUSE THE OTHER PARTY HAS DECLARED TH E SAME AS EXPENDITURE, IT DOES NOT AUTOMATICALLY BECOME THE INCOME OF THE ASSESSEE AND THE CERTIFICATE ISSUED BY THE PAYER COMPANY WHICH HAS BEEN COUNTERSIGNED BY THE A SSESSEE COMPANY IS BINDING ON BOTH THE SIDES. IT IS ALSO HIS SUBMISSION THAT TOT AL RECEIPTS AND EXPENDITURE ARE FULLY MATCHING AS PER THE MATCHING CONCEPT. 16. IT IS THE ALTERNATE SUBMISSION OF THE LD. COUNSEL F OR THE ASSESSEE THAT THE MATTER MAY BE RESTORED TO THE FILE OF THE ASSESSING OFFICE R WITH A DIRECTION TO VERIFY AS TO WHAT STATEMENT HAS BEEN GIVEN BY HINDUSTAN MOTORS I N THEIR ACCOUNTS. WE FIND SOME FORCE IN THE ARGUMENT OF THE LD. COUNSEL FOR THE AS SESSEE REGARDING THE ALTERNATE CONTENTION. A PERUSAL OF THE CONSULTING SERVICE AG REEMENT SHOWS THAT THE STAMP ITA NO.6700/DEL/2017 13 PAPER WAS PURCHASED ON 26 TH MARCH, 2013 AND THE DATE IN THE CONSULTING SERVICE AGREEMENT IS BLANK. A CERTIFICATE WAS FURNISHED BY THE LD. COUNSEL FOR THE ASSESSEE WHICH READS AS UNDER:- THIS IS TO STATE AND CONFIRM THAT THE ENCLOSED CO NSULTING SERVICE AGREEMENT WAS EXECUTED AND SIGNED BETWEEN HYUNDAI MOTOR INDIA LIMITED AND HYUNDAI CAPITAL INDIA PRIVATE LIMITED ON MARCH 26, 2013 AND IS BINDING ON BOTH PARTIES. THE COPY OF SAID AGREEMENT IS ANNEXED HEREWITH. INADVERTENTLY, THE DATE OF EXECUTION WAS OMITTED TO BE MENTIONED ON THE SAID AGREEMENT. 17. SINCE THIS CERTIFICATE WAS FURNISHED AT THE TIME OF HEARING AND WAS NOT AVAILABLE BEFORE THE ASSESSING OFFICER OR THE CIT(A), THEREFO RE, WE DEEM IT PROPER TO RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A D IRECTION TO OBTAIN FURTHER INFORMATION FROM HYUNDAI MOTOR INDIA LTD. REGARDING THE NATURE OF THE AGREEMENT. HE SHOULD ALSO KEEP IN MIND THE ORDER PASSED U/S 143(3) IN THE SUB SEQUENT ASSESSMENT YEAR WHERE THE ASSESSEE HAS SHOWN THE INCOME WHICH WAS SHOWN AS RE CEIVABLE IN THE IMPUGNED ASSESSMENT YEAR. THE ASSESSING OFFICER SHALL DECID E THE ISSUE AS PER FACT AND LAW, AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. THE GROUNDS RAISED BY THE ASSESSEE AR E ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 18. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON 3 0.04.2019. SD/- SD/ (SUCHITRA KAMBLE) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMFBER DATED: 30 TH APRIL, 2019 ITA NO.6700/DEL/2017 14 DK COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASSTT. REGISTRAR, ITAT, NEW DELHI