C I T JAIPUR vs. JAIPUR STOCK EXCHANGE LTD

The Commissioner of Income Tax (Appeals) [for short, “CIT(A)”] on an appeal by the assessee, taking into consideration the nature of listing fee and the past history, allowed the claim of the assessee. It also held that the assessee was correct and justified in writing off the amount which was not recoverable/ not recovered and thus accepted contention of the assessee.

The appeal filed by the Revenue for both the assessment years before the Tribunal resulted into dismissal of appeals.

Learned counsel for the appellant strongly contended that the the assessee having followed mercantile system of accounting, whatever annual listing fee was due from the respective companies, was certainly required to be taken into consideration as in mercantile system of accounting whether the amount is received or not, it has to be shown. He contended that once bill has been raised, then whether the amount has been received or not, ought not to have been taken into consideration by the assessee. He thus contended that substantial question of law arise out of the order of the Tribunal.

We have heard learned counsel for the Revenue. Admittedly, the assessee is following the method of accounting consistently followed by it and is most relevant for the accrual system of accounting and it is not open for the authority to disturb the same. It has been a finding of fact recorded by the Tribunal that the other stock exchanges are also following the same system of accounting and consistency in this regard is required to be maintained. It is also a finding of fact recorded by the appellate authorities that consistently the respondent-assessee is following the same system of accounting regarding showing of such listing fee as income/receipt and under the similar circumstances in the earlier assessment years the said system was accepted.

The Apex Court in the case of CIT Vs.

Allahabad High Court in the case of CIT Vs. Girraj Udyog (P) Ltd. : (2005) 273 ITR 495 held that mercantile system only recognizes the income that has accrued and where there is no chance of recovery, the AO is not justified in bringing into tax such amount as accrued income because where there is no prospect of recovery of receipt/income, it cannot be considered to have accrued at all. The assessee cannot be compelled to account for the receipts and claim the same as bed debt in that regard when the said amount is not recoverable and good money cannot be wasted and spent for claiming of bad money i.e. by filing money suit in courts for recovery of the suit amount.

Delhi High Court in the case of CIT Vs. Consulting Engineering Services (India) Ltd.: (2001) 250 ITR 849 held that method of accounting consistently being followed by an assessee may be most relevant in the accrual system of accounting and it should normally not be disturbed unless occasion so arise.

Taking into consideration the above facts and circumstances, in our view, the Tribunal has come to a finding that only the listing fee which has actually been received was required to be taken into consideration and this is a finding of fact based on the evidence on records.

Accordingly, in our view, no question of law much less substantial question of law can be said to arise out of the order passed by the Tribunal and we find no apparent error, perversity or ambiguity in the order of the Tribunal so as to call for our interference.

Consequently, both the appeals, being devoid of merit, are accordingly dismissed.”