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Income Tax Appellate Tribunal, MUMBAI BENCHES “A”, MUMBAI
Before: Shri Joginder Singh, & Shri Ramit Kochar
आदेश / O R D E R Per Joginder Singh (Judicial Member) The Revenue is aggrieved by the impugned order dated 28/10/2016 of the Ld. First Appellate Authority, Mumbai, deleting he disallowance of Rs.4,35,56,762/-, being deferred maintenance charges, relying upon the decision of the Tribunal in the case of the assessee itself for Assessment Years 2007-08 and 2008-09, without appreciating the fact that no direct relief was given by the Tribunal but the issue was subject to verification by the Ld. Assessing Officer to identify the cost which escalate with times and further it is nothing but provision for unascertained liability, which is not allowable as per the provisions of the Act.
During hearing, none was present for the assessee in spite of issuance of registered notice issued on 19/06/2018 at the address of the assessee provided in form no.36(form of appeal). The assessee neither presented itself nor moved any adjournment petition. On the other hand, the ld. DR, Shri Nishant Samaiya, invited our attention to page- 18(para 5.2.3) of the impugned order and the order of the Tribunal for Assessment Year 2008-09 and 2009-10 (ITA No.2179 & 601/Mum/2013 and respectively).
2.1. We have considered the submissions of Ld. DR and perused the material available on record. We observe that in para 5.2.3 of the impugned order, the Ld. Commissioner of Income Tax (Appeal) has mentioned some observation made in the order of the Tribunal dated 25/07/2016. The relevant portion of the Tribunal’s order is reproduced hereunder:-
“ We, accordingly, approve the accounting treatment - which forms the basis for returning income qua the said service, in principle. True, the ‘excess’ amount received in the initial years cannot be called or said to be an advance proper - which could only be so in terms of the contract, and neither the amount appropriated (to the reserve a/c) a ‘provision’. Yet, the amount so appropriated can be said as not liable to be recognized as revenue for the year of receipt, considering that the corresponding costs, which form the basis of the charge, is yet to be incurred (to that extent). In-as-much as uneven repairs and, therefore, corresponding services, are liable to be rendered over the lease term – as indicated by the corresponding expenditure, the accounting treatment is in consonance with AS-9. The assessee’s reliance on the decisions in Calcutta Co. Ltd. vs. CIT [1959] 37 ITR 1 (SC) and Madras Industrial Investment Corporation Ltd. vs. CIT [1997] 225 ITR 802 (SC), both advocating the matching principle, is apposite. The AO shall cause necessary verification as indicated above, subject to whose findings of fact we allow the assessee’s claim. We may further add that the assessee’s plea is acceptable only qua such expenditure which is subject to, in the normal course of events, an increase with time, i.e., is age
(of the vehicle) related. We say so as we observe several expenses forming part of the fleet management services, viz. providing relief vehicles, drivers, emergency breakdown services, door to door services, etc., and which are essentially period costs, so that all such costs which do not exhibit a pronounced increase with time, i.e., in relation to the age of the corresponding vehicle, would not be subject to such appropriation. The AO’s finding shall further include that in respect of reversal of the credit (on the basis of the rule being purportedly followed) as well. Reference to the said rule, we may add, is only toward the assessee following a scientific basis in allocating the revenue over the term of the lease and, accordingly would stand to be examined by the A.O., and the allowance of the assessee’s claim by us is subject to his returning positive findings. We decide accordingly.
In the result, the assessee’s appeals are allowed for statistical purposes, while the Revenue’s appeals are dismissed.” In the aforesaid order, the Tribunal has relied upon the decisions from Hon'ble Supreme Court in Calcutta Company Ltd. vs CIT (37 ITR 1)(Supreme Court) and Madras Industrial Investment Corporation Ltd. vs CIT 225 ITR 802(Supreme Court). In the aforesaid order, the Ld. Commissioner of Income Tax (Appeal) has directed the Ld. Assessing Officer to allow the claim of the assessee after due verification as per the direction of the Tribunal, therefore, for the impugned year also, we remand this appeal to the file of the Assessing Officer with similar direction as contained in para 5 & 6 of the order of the Tribunal dated 25/07/2016, thus, this appeal of the Revenue is allowed for statistical purposes only.
Finally, appeal of the Revenue is allowed for statistical purposes.
This order was pronounced in the open court in the presence of ld. DR at the conclusion of the hearing on 09/08/2018.