ACIT CORPORATE CIRCLE 2, COIMBATORE vs. TNSTC COIMBATORE LTD., COIMBATORE

आदेश / O R D E R

PER S. JAYARAMAN, ACCOUNTANT MEMBER:

Therefore, the AO required the assessee to explain the transaction. The assessee explained that a sum of Rs.44.06 crore receivable from the State Government as per the G.O. Ms No.135 for the 100% and 50% concessional passes issued to the students during the year 2008- 09 was recognized in the P&L A/c for the year ended 31.03.2009, under the head – ‘Operational Income – Reimbursement of Students Concessional Ticket’. However, the Social cost to the tune of 11.01 crore to be borne by the assessee company and the operation income (face value of the bus passes issued during 2008-09 viz Rs.82.08 Crore) etc were not reflected in the P&L A/c. However, the AO did not agree with the assessee’s stand and held that as per the Accounting principles, as soon as the bus passes are issued to the students, the face value of the passes shall be taken as ‘Operating Income’ and a debit entry need to be booked against the Government A/c to the tune of face value of bus passes issued minus the amount collected from the college students. After adjusting the Government grant received / receivable, the balance unrealized debits to be treated as ‘revenue foregone’ and written off as per the commercial accounting principles. Therefore, the AO held that the revenue foregone by the assessee company without following the commercial accounting principles has resulted in under assessment of income to the tune of Rs.35.64 Crore and hence added the same to the returned income and completed the assessment. On similar issue for the assessment year 2014-15, he made an addition of Rs.81,07,13,482/- and completed the assessment. Aggrieved against those orders, the assessee filed appeals before the CIT(A). The ld.CIT(A) allowed the appeals. Aggrieved against those orders, the Revenue filed these appeals on similar grounds. Therefore, the grounds related to assessment year 2009-10 is extracted as under:- “1. The order of the learned Commissioner of Income tax (Appeals)-I, Coimbatore is against facts and circumstances of the case.

2. The learned Commissioner of Income tax (Appeals)-I, Coimbatore has erred in deleting the addition made by the A.O on account of revenue foregone by the assessee amounting to Rs. 35,63,79,855/- and held that the grant becomes payable only when the Govt. order is passed.

5. The Learned Commissioner of Income tax (Appeals) ought to have considered that as per the accounting Principles, after adjusting the Government grant received/receivable, balance unrealized debits are to be treated as revenue foregone & written off.

6.For these and other grounds that they may be adduced at the time of hearing, the order of the Commissioner of Income Tax (Appeals) may be cancelled and that of the Assessing Officer restored.”

3. The ld.DR presented the cases and argued on the lines of grounds of appeal. Per contra, the ld.AR relied on the portion of the order of the ld.CIT(A) and hence pleaded to allow the appeals.

4. We heard the rival submissions and gone through the relevant material. Since, the ld.AR relied on the order of the ld.CIT(A), the relevant portion of the order of the ld.CIT(A) for the assessment year 2009-10 is extracted as under:- “There is no dispute between AO and the appellant that the income has to be recognized in the year when they become receivable. Accounting Standard 12 also stipulates the same about govt. grants that are receivable. Hence, the issue to be decided is when the Govt. grants become receivable. In the instant case, the grant becomes payable only when the Govt. Order is passed. The grant becomes received / receivable only when the grant is sanctioned. It is unrealistic to compute the notional loss in such cases. No useful purpose will be served by treating the student’s subsidy as income and writing off as bad debts in the books when the expenditure incurred by the Corporation is treated as social cost as per Govt. Order. Hence, I find that the addition of Rs.35,6,79,855/- as revenue foregone is notional and unrealistic and hence deleted.”

From the above, it is clear that the assessee has foregone the entire amount falling under the head ‘Social Cost’ for the respective assessment year. Therefore, as held by the ld.CIT(A), no useful purpose will be served by treating the students subsidy as income and writing off as bad debts in the books when the assessee has already incurred the impugned expenditure konwing that it should not be collected from the students as per Government order. Therefore, we do not find any reason to interfere with the orders of the ld.CIT(A) and hence the Revenue’s appeals are dismissed.

Order pronounced in the court on 15th October, 2019 at Chennai.