DCIT, CHENNAI v. M/s. Trans India Resorts Ltd., CHENNAI

ITA 1069/CHNY/2001 | 1994-1995
Pronouncement Date: 16-07-2010 | Result: Dismissed

Appeal Details

RSA Number 106921714 RSA 2001
Bench Chennai
Appeal Number ITA 1069/CHNY/2001
Duration Of Justice 9 year(s) 5 day(s)
Appellant DCIT, CHENNAI
Respondent M/s. Trans India Resorts Ltd., CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 16-07-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 16-07-2010
Date Of Final Hearing 13-07-2010
Next Hearing Date 13-07-2010
Assessment Year 1994-1995
Appeal Filed On 11-07-2001
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL BENCH D CHENNAI BEFORE SHRI ABRAHAM P. GEORGE ACCOUNTANT MEMBER AN D SHRI GEORGE MATHAN JUDICIAL MEMBER .. I.T.A. NO. 966/MDS/2001 ASSESSMENT YEAR : 1994-95 M/S. TRANS INDIA RESORTS LTD. OLD NO. 37/10 NEW NO.12/10 SAROJINI STREET CHENNAI-600 017. VS. THE DY. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE-I(2) CHENNAI. (PAN: 1-T ) (APPELLANT) (RESPONDENT) I.T.A NO. 1069/MDS/2001 ASSESSMENT YEAR 1994-95 THE DY. COMMISSIONER OF INCOME-TAX V. M/S. TRANS INDIA RESORTS LTD. CENTRALCIRCLE-I(2) OLD NO. 37/10 NEW NO . CHENNAI. 12/10 SAROJINI STREET CHENNAI-17. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHI PHILIP GEORGE DEPARTMENT BY : SHRI OMKARESHWAR CHIDRA CIT- DR. O R D E R PER GEORGE MATHAN JUDICIAL MEMBER : I.T.A.NO.966/MDS/2001 IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER O F THE LEARNED CIT(A)-II CHENNAI IN APPEAL NO. 18/00-01 DATED 30-3-2001/09-0 4-2001 FOR THE ASSESSMENT I.T.A. NO.966 & 1069/MDS/2001 2 YEAR 1994-95 AND I.T.A.NO. 1069/MDS/2001 IS AN APPE AL FILED BY THE REVENUE AGAINST THE SAID ORDER OF THE LEARNED CIT(A). 2. SHRI PHILIP GEORGE ADVOCATE REPRESENTED ON BEHA LF OF THE ASSESSEE AND THE LEARNED CIT-DR SHRI OMKARESHWAR CHIDRA REPRESEN TED ON BEHALF OF THE REVENUE. 3. AT THE TIME OF HEARING IT WAS SUBMITTED BY THE L EARNED AUTHORISED REPRESENTATIVE THAT IN THE ASSESSEES APPEAL THE AS SESSEE HAS CHALLENGED THE ACTION OF THE LEARNED CIT(A) IN SETTING ASIDE THE I SSUE OF THE ADDITION REPRESENTING THE 45 PER CENT OF THE GROSS INCOME F ROM THE SALE OF TIME SHARES TO BE TAXED IN THE YEAR. IT WAS THE SUBMISSION THAT T HE ASSESSEE HAD OFFERED 55% OF THE GROSS INCOME FROM THE SALE OF THE TIME SHARE S DURING THE RELEVANT ASSESSMENT YEAR AND THE BALANCE 45% HAD BEEN TREATE D AS DEFERRED REVENUE. IT WAS THE SUBMISSION THAT THIS ISSUE WAS NOW SETTLED BY THE DECISION OF THE HONBLE SPECIAL BENCH OF THE INCOME-TAX APPELLATE TRIBUNAL IN THE CASE OF MAHINDRA HOLIDAYS & RESORTS (INDIA) LTD. VIDE ORDER IN ITA N OS. 2412 TO2416/MDS/2005 AND C.O. NOS. 7 TO 11/MDS/2006 DATED 26-5-2010 WHER EIN THE HONBLE SPECIAL BENCH HAD HELD THAT ONLY 40% OF THE GROSS REVENUE W AS LIABLE TO BE ASSESSED DURING THE RELEVANT ASSESSMENT YEAR. IT WAS THE SU BMISSION THAT IN VIEW OF THE DECISION OF THE HONBLE SPECIAL BENCH IN THE CASE O F MAHINDRA HOLIDAYS & RESORTS (INDIA) LTD. WHEREIN IT HAS BEEN HELD THAT ONLY 40% NEED TO BE ASSESSED DURING I.T.A. NO.966 & 1069/MDS/2001 3 THE RELEVANT ASSESSMENT YEAR AND AS THE ASSESSEE HA S ITSELF DISCLOSED 55% DURING THE RELEVANT ASSESSMENT YEAR NO FURTHER ADD ITION WAS CALLED FOR. 4. IN REPLY THE LEARNED DR SUBMITTED THAT IN VIEW OF THE DECISION OF THE HONBLE SPECIAL BENCH IN THE CASE OF MAHINDRA HOLID AYS & RESORTS (INDIA) LTD. THE ISSUE MAY BE RESTORED TO THE FILE OF THE AO FOR RE- ADJUDICATION. IT WAS THE FURTHER SUBMISSION THAT THE LEARNED CIT(A) HAD NOT IN FACT CONFIRMED THE ADDITION OF 45% MADE BY THE AO WHICH HAD BEEN TREATED BY THE AS SESSEE AS DEFERRED REVENUE AND THAT WHAT THE LEARNED CIT(A) HAD DONE W AS THAT HE RESTORED THE ISSUE TO THE FILE OF THE AO FOR RE-ADJUDICATION AFT ER APPLYING THE PRESCRIBED STANDARDS FOR SUCH CASES OF TIME SHARE. HE HAD NO OBJECTION IF THE ORDER OF THE LEARNED CIT(A) WAS MODIFIED INSOFAR AS THE AO WAS T O CONSIDER THE DECISION OF THE SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF M AHINDRA HOLIDAYS & RESORTS (INDIA) LTD. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF THE ORDER OF THE LEARNED CIT(A) CLEARLY SHOWS THAT THE LEARNED CIT(A ) HAS RESTORED THE ISSUE OF COMPUTATION OF THE REVENUE FROM THE SALE OF THE TIM E SHARES TO THE FILE OF THE AO FOR RE-CONSIDERATION AFRESH AFTER TAKING INTO ACCOU NT THE ACCOUNTING STANDARD PRESCRIBED FOR SUCH CASES. IT WAS NOTICE THAT THE LEARNED CIT(A) HAS CATEGORICALLY HELD THAT SINCE THE ASSESSEE HAD OFFE RED 55% OF ITS GROSS INCOME FROM THE SALE OF TIME SHARES AS ITS INCOME FOR THE YEAR THAT WOULD BE THE MINIMUM RECOGNISABLE INCOME FOR THE ASSESSMENT. A PERUSAL OF THE DECISION OF I.T.A. NO.966 & 1069/MDS/2001 4 THE HONBLE SPECIAL BENCH OF THIS TRIBUNAL IN THE C ASE OF MAHINDRA HOLIDAYS & RESORTS (INDIA) LTD. SHOWS THAT THE TRIBUNAL HAS TA KEN INTO CONSIDERATION THE INTERNATIONAL ACCOUNTING STANDARD 18 PERTAINING TO THE REVENUE RECOGNITION WHEN TRANSACTIONS INVOLVE RENDERING OF SERVICES. IN THE CIRCUMSTANCES WE ARE OF THE VIEW THAT THERE WAS NO ERROR IN THE ORDER OF THE LE ARNED CIT(A) IN SETTING ASIDE THE ISSUE FOR RE-ADJUDICATION TO THE FILE OF THE AO ESPECIALLY WHEN NO SPECIFIC PROVISION IN RESPECT OF THE METHOD OF COMPUTING THE INCOME IN SUCH CASES IS PROVIDED UNDER THE ACT AND IT IS THE ACCOUNTING STA NDARDS WHICH HAVE TO BE CONSIDERED. IN THE CIRCUMSTANCES THE FINDING OF THE LEARNED CIT(A) ON THIS ISSUE STANDS CONFIRMED. HOWEVER THE SAME STANDS M ODIFIED TO THE EXTENT THAT WHEN RE-ADJUDICATING THE ISSUE THE AO SHALL ALSO CO NSIDER THE DECISION OF THE SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF M/S. MAHINDRA HOLIDAYS & RESORTS (INDIA) LTD. REFERRED TO SUPRA. THE AO SHALL KEEP IN MIND THAT THE ASSESSEE HAS OFFERED 55% OF ITS GROSS INCOME FROM THE SALE OF TI ME SHARES AS ITS INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION AND THIS WO ULD BE THE MINIMUM RECOGNISABLE AS INCOME FOR THE RELEVANT ASSESSMENT YEAR. IN THE CIRCUMSTANCES THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTIC AL PURPOSES. 6. IN THE REVENUES APPEAL IT WAS SUBMITTED BY THE L EARNED DR THAT THE AO HAD DISALLOWED THE ADVERTISEMENT EXPENSES TO THE EX TENT OF RS. 30 03 887/- HOLDING THAT THE ASSESSEE HAD NOT PAID THE AMOUNT T O M/S. AKSHARA ADVERTISING. IT WAS THE SUBMISSION THAT THE LEARNED CIT(A) HAD H ELD THAT THE AO HAD NOT I.T.A. NO.966 & 1069/MDS/2001 5 SHOWN THAT THE ADVERTISEMENT EXPENDITURE CLAIMED WA S FALSE. IT WAS THE SUBMISSION THAT THE AO DID NOT QUESTION THE FALSITY OF THE CLAIM OF ADVERTISEMENT EXPENDITURE. IT WAS THE AOS CLAIM THAT THE BILLS AND PAYMENTS WERE NOT CORRELATED. HE VEHEMENTLY SUPPORTED THE ORDER OF T HE AO. 7. IN REPLY THE LEARNED AUTHORISED REPRESENTATIVE S UBMITTED THAT THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. THE LEARNED AUTHORISED REPRESENTATIVE FURTHER DREW OUR ATTENTION TO PAGE 3 5 PARA 19.3 OF THE ASSESSMENT ORDER TO SUBMIT THAT THE AO HAD INVOKED HIS POWERS U/S. 133(6) AND HAD CALLED FOR THE DETAILS FROM M/S. AKSHARA ADVERT ISING AND M/S. AKSHARA ADVERTISING HAD CONFIRMED THAT THE BILLS HAD BEEN A CTUALLY RAISED BY THEM ON THE ASSESSEE. IT WAS THE SUBMISSION THAT IN VIEW OF TH E FACT THAT THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND IN VI EW OF THE FACT THAT M/S. AKSHARA ADVERTISING HAD CONFIRMED THAT THEY HAD RAI SED THE BILLS THE EXPENDITURE WAS AN ALLOWABLE EXPENDITURE. HE VEHEMENTLY SUPPOR TED THE ORDER OF THE LEARNED CIT(A). 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A P ERUSAL OF THE ORDER OF THE LEARNED CIT(A) IN PAGE 7 OF HIS ORDER CLEARLY SHOWS THAT THE LEARNED CIT(A) HAS ACCEPTED THE FACT THAT THE LIABILITY IS THERE ON TH E ASSESEE TO PAY M/S. AKSHARA ADVERTISING AND M/S. AKSHARA ADVERTISING HAS CONFIR MED THAT THE BILLS RAISED ARE THEIR OWN. IT IS ALSO NOTICED THAT THE LEARNED CIT (A) HAS RECOGNISED THAT THE ASSESSEE ONLY HAS TO ESTABLISH A LIABILITY TO PAY I N ORDER TO CLAIM THE DEDUCTION I.T.A. NO.966 & 1069/MDS/2001 6 UNDER THE MERCANTILE SYSTEM OF ACCOUNTING. IN VIEW OF THIS FACT AS THE ASSESSEE HAS ESTABLISHED THE LIABILITY TO PAY THE AVERTISEME NT CHARGES TO M/S. AKSHARA ADVERTISING WE ARE OF THE VIEW THAT THE FINDING OF THE LEARNED CIT(A) IN DELETING THE ADDITION IS RIGHT. IN THE CIRCUMSTANCES THE APPEAL OF THE REVENUE IS DISMISSED. 9. IN THE RESULT THE APPEAL OF THE ASSESSEE IN ITA NO.966/MDS/2001 IS ALLOWED FOR STATISTICAL PURPOSES AND THE APPEAL OF THE REVENUE IN ITA NO.1069/MDS/2001 IS DISMISSED. 10. THE ORDER WAS PRONOUNCED IN THE COURT ON 16-07- 2010. SD/- SD/- (ABRAHAM P. GEORGE) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI DATED THE 16 TH JULY 2010. H. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE