DCIT, CIRCLE- 23(2), NEW DELHI vs. SISTEMA SHYAM TELESERVICES LTD, NEW DELHI

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ITA 4825/DEL/2017Status: DisposedITAT Delhi22 February 2021AY 2013-143 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the assessee's accounting policy of recognizing talk time revenue upon actual usage, consistent with past practice and affirmed by the High Court and Supreme Court, was acceptable. Therefore, the addition made by the AO was deleted.

What were the facts?

The revenue department appealed against the deletion of an addition made on account of unaccrued income from prepaid card talk time. The assessee recognized revenue from talk time charges based on actual usage, treating unutilized balances as advance.

What were the issues?

Whether unutilized talk time on prepaid cards constitutes accrued income in the year of sale, or if its recognition can be postponed to the period of actual usage.

Which sections of the Income-tax Act were involved?

Section 24(2)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH ‘G’, NEW DELHI

Before: Sh. Bhavnesh SainiDr. B. R. R. Kumar

Hearing: 11.02.2021Pronounced: 22.02.2021

Per Dr. B. R. R. Kumar, Accountant Member:

1.

The present appeal has been filed by the revenue against the order of the ld. CIT(A)-28, New Delhi dated 22.05.2017.

2. Following grounds have been raised by the revenue:

"1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 20,26,04,801/- made by the A.O on account of un accrued income in respect of service revenue earned on prepaid cards on which the talk time unused at the end of the financial year despite the facts that the company has not reported any change in the accounting policy regarding the treatment of un accrued revenue from sale of prepaid cards.

2.

Whether the revenue recognition in respect of unutilized talk time of pre-paid cards, realized and 2 Sistema Shyam Teleservices Ltd. available without in cumbrance, can be postponed to the period when same would be rendered?

3. "Whether the income did not accrue to the respondent u/s 24(2) of the Act, qua the prepaid cards during relevant year when it received the advance charges from subscribers through the appointed dealers?"

3.

Heard the arguments of both the parties and perused the material available on record.

4.

The issue deals with taxation of un-accrued income.

5.

According to the integrated software for billing & accounting, the revenue in respect of services that have been provided in the form of talk time to the subscribers automatically recognizes in the accounts of prepaid & postpaid cards.

6.

The prepaid cards had two parts, namely activation charge and talk time charge. While the activation charges are immediately recognize as revenues, the talk time charges are recognized on the basis of actual use which is a normal practice followed as per the terms with DOT. The unutilized balance on the prepaid card is treated as advance in the balance sheet and recognized in the subsequent year whenever the talk time was actually used.

7.

The issue has been adjudicated by the Co-ordinate Bench of Tribunal accepting the accounting policy consistently followed by the assessee for the assessment years 2003-04, 2004-05 & 2009-10. The matter has reached the Hon’ble Jurisdictional High Court wherein the decision of the High Court has been 3 Sistema Shyam Teleservices Ltd. reaffirmed. (101 taxman 218) Further, the Hon’ble Supreme Court vide order dated 12.07.2019 (108 taxman 333) dismissed the SLP filed by the revenue.

8.

Hence, the appeal of the revenue for the instant year involving the similar issue is liable to be dismissed.

9.

In the result, the appeal of the revenue is dismissed. Order Pronounced in the Open Court on 22/02/2021.

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