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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Per CHANDRA POOJARI, ACCOUNTANT MEMBER: This appeal filed by the Revenue is directed against the order of the CIT(A)-I, Kochi dated 25/10/2017 and pertains to the assessment year 2012-13.
The Revenue has raised the following grounds: 1. The order of the Commissioner of Income-tax(Appeals)-I, Kochi opposed to the facts and circumstances of the case. 2. The learned Commissioner of Income-tax(Appeals)-I, Kochi erred in the facts and circumstances of the case in directing to delete the addition of Rs.85,32,436/- being the dealer deposit received by the assessee from its vendors and claimed as lapsed liability in the balance sheet.
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In the facts and circumstances of the case, it is prayed that the orders of the learned Commissioner of Income-tax(Appeals) on the above issues be reversed and that of the Assessing Officer restored. 4. For these and other grounds that may be urged at the time of hearing, it is requested that the order of the Commissioner of Income-tax(Appeals) may be set aside and that of the Assessing Officer restored.
After hearing the parties, we are of the opinion that a similar issue was considered by the Tribunal in assessee’s own case in ITA No. 219/Coch/2016 & Others dated 16th November, 2016 wherein it was held as under: “3.4 We have heard the rival parties and perused the material on record. In assessee’s own case, the division bench of the Tribunal have decided the matter in favour of the assessee, by following the earlier orders of the Tribunal. The relevant findings of the Tribunal in assessee’s own case read as follows:
“4. We have considered the rival submissions on either side and relevant material on record. The issue arises is whether the deposits in respect of the freezer has to be considered as income of the assessee or not. As rightly submitted by the Ld. AR of the assessee that this issue was considered by the Tribunal in one of the assessees for the earlier assessment year and found that such deposits cannot be considered as income of the assessee. For the sake of convenience, we extract below the order dated 08.08.2012 passed by the Tribunal in the case of M/s. Kreem Foods (P) Ltd. In ITA No. 597/Coch/2010 relating to assessment year 2007-08:- “3. At the time of hearing, the Ld. Counsel for the assessee submitted a copy of the order dated 25-05-2012 passed by this Bench in the case of Jojo Frozen Food (P) Ltd. and Cream Packs (P) Ltd. in I.T.A. Nos. 655 & 654/Coch/2010 wherein the Tribunal has considered an identical issue and decided the same in favour of the assessee. For the sake of convenience, we extract below the operative portion of the said order in respect of the above said issue. “6. We have considered the rival submissions and carefully perused the record. We have also gone through the copy of
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the order passed by the co-ordinate bench of the Tribunal in the case of High Range Foods (P) Ltd, referred supra. In respect of the first issue, i.e., Whether the deposits received from the dealers can be considered as income of the assessee, the Tribunal has observed as under. “The assessee received Deposit for the supply of freezer from the concerned vendors. The freezers are required to safe keep the edible ice-creams. They are required for the purpose of business. The small vendors may not be inclined to purchase the freezers as they are not affordable to them considering their status. This made the assessee company to supply freezer on the receipt of fixed deposit and the compensation of the spread-over period. They are attached with a liability. The accrual comes only on termination of agreement. The business necessity requires cordial relationship with vendors. The assessee cannot treat these two amounts as receipts in the nature of income unless the so-called agreement terminated. In other words it is not a debt owned by the assessee. Hence, under the above facts and circumstances of the case, this issue to be decided in favour of the assessee by setting aside the orders of the authorities. Besides the assessee never treated this as income in the books. The assessee consistently holding it so as the amount attached with a liability to refund. The assessee never admitted this amount as income in the books. Only accrued income arose to the assessee during the relevant previous year also can be brought to tax under the Income-tax provisions which is a settled law. In other words, there must be a debt owned to the assessee and until this is created in favour of the assessee as a debt due to the assessee, it cannot be said as income accrued. Hence, the decision relied by the Jr. D.R. in the case of CIT vs. T.V. Sundaram Iyengar and Sons cited supra, is clearly distinguishable on facts. In that case, assessee itself admitted this as income as per the book entries. Hence, it is distinguishable. The decision relied by the ld. Counsel for the assessee in the case of CIT vs. Realest Builders and Services Ltd. – 307 ITR 202 (SC) in addition to the following cases –
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(a) Siddheswar Sahakari Sakhar Karkhana Ltd. vs. CIT & Others – 270 ITR 1 (SC); (b) Bharat Petroleum Corporation Ltd. vs. CIT – 202 ITR 492 (Cal). (c) Sugauli Sugar Works (Impugned) Ltd. – 236 ITR 518 (SC); 5 I.T.A. Nos. 73-79/Coch/2014 (d) Star India P. Ltd. vs. Addl. CIT – 311 ITR (ST) 235 (Mumbai). (e) Govind Prasad Prabhu Nath – 171 ITR 417 (All.); (f) Hindustan Housing and Land Development Trust Ltd. – 161 ITR 524 (SC); (g) Ace Builders Pvt. Ltd. vs. CIT – 225 ITR 746 (SC); (h) Mantra Tanta Yantra Vigyan vs. CIT – 300 ITR 140 (Raj.); and (i) Guardian Industries Corpn. vs. Assistant Director of Income-tax – 7 DTR 594 (Del.). are also supports the plea of the assessee. The accrual has been dealt with in the relied judgments. Hence, under the given set of facts and circumstances, we by relying on the above decisions set aside the orders of the authorities and allow this ground of the assessee as it cannot be treated as income for the year relevant under appeal.” 7. Since the co-ordinate bench has already taken a view on identical issue, by following the said decision, we hold that the deposits collected from vendors cannot be considered as the income of the assessee so long as the agency agreement continues. Accordingly, we set aside the order of Ld CIT(A) on this issue in the hands of both the assessees and direct the AO to delete the addition made on this issue in the hands of both the assessees herein”. 5. The only objection of the Ld. DR is that the appeal was filed against the order of the Tribunal and the same is pending before the High Court. But on a query from the Bench, the Ld. DR submitted that he does not have knowledge of any stay granted by the Hon’ble High Court on the operation of the earlier order of the Tribunal. Since the Ld. CIT(A) has followed the order of the Tribunal, we are of the considered opinion that mere pending of the appeal before the High Court against the order of the Tribunal cannot be a reason to take a different view. Therefore, by following the order of the Tribunal for the earlier assessment year, this Tribunal is of the considered opinion that the deposits collected by the assessee for freezer cannot be considered as income of the assessee.
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In view of the above facts and circumstances of the case and in view of the order of the Tribunal, we do not find any infirmity in the order of the Ld. CIT(A) and accordingly, the same is confirmed. 7. In the result, all the appeals filed by the revenue stand dismissed.” 3.5 Admittedly, the issue in question is covered in favour of the assessee by the order of the division bench of the Tribunal, cited supra. Both the parties have submitted that the issue is pending for adjudication before the Hon’ble jurisdictional High Court. No contrary High Court judgment has been cited. Hence, respectfully following the order of the division bench of the Tribunal, in assessee’s own case ( supra), we uphold the order of the first appellate authority as correct and in accordance with law and no interference is called for. It is ordered accordingly.
4 In the result, the appeal filed by the revenue is dismissed.”
In view of the above finding of the Tribunal in assessee’s own case , we are inclined to decide the issue in favour of the assessee and against the Department.
5.. In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the open Court on this 28th August, 2018.
sd/- sd/- (GEORGE GEORGE K.) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER Place: Dated: 28th August, 2018 GJ Copy to: 1. M/s. Cream Packs Private Ltd., 28/3030, Cheruparambath Road, Elamkulam, Kadavanthara, Kochi-682 020.
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The Deputy Commissioner of Income-tax, Circle-1(1), Kochi. 3. The Commissioner of Income-tax(Appeals)-I, Kochi. 4. The Pr. Commissioner of Income-tax, Kochi. 5. D.R., I.T.A.T., Cochin Bench, Cochin. 6. Guard File. By Order
(ASSISTANT REGISTRAR) I.T.A.T., Cochin