C I T JAIPUR vs. M/S JAIPUR STOCK EXCHANGE LTD

Both these Income Tax Appeals under Section 260A of the Income Tax Act, 1961 (for short, 'Act') are directed against the common order dt.11/08/2015 passed by the Income Tax Appellate Tribunal, Jaipur Bench, Jaipur (for short, 'Tribunal'). It relates to the assessment years 2008-09 and 2009-10. 2. Brief facts noticed for disposal of these appeals are that the respondent-assessee is a recognized stock exchange. The issue arises in the instant appeals is only for listing fees paid by the various listed companies. While claim of the appellant-Revenue was that the assessee is following mercantile system of accounting, therefore, listing fee accrued, ought to have been shown as receipt on accrual basis. The second claim put

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 3 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 Vallabhdas and co.: (1962) 46 ITR 144 (SC) has held that 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 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. [J.K. Ranka],J. [M.N. Bhandari],J. Raghu/p.5/ Certificate:All corrections made in the judgment/order have been incorporated in the judgment/order being e-mailed. Raghu, Sr. PA.