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Income Tax Appellate Tribunal, MUMBAI BENCH “C”, MUMBAI
Before: SHRI G.S.PANNU & SHRI RAVISH SOOD
ORDER PER G.S.PANNU,A.M:
The captioned appeal filed by the Revenue pertaining to assessment year 2011-12 is directed against an order passed by CIT(A)- 15 Mumbai dated 13/05/2015, which in turn arises out of an order passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’) dated 31/03/2013.
(Assessment Year 2011-12) 2. In this appeal, Revenue has raised the following Grounds of appeal:-
1. "On the facts and in the circumstances of the case and in law, the Ld.CIT(A} erred in holding that the receipt on account of advance sale of room nights is not a revenue receipt, without appreciating the fact that the principle business of assessee is to provide accommodation and other facilities to tourist members and assessee is claiming all the expenses relatable to these receipts in its Profit & Loss account."
2. "On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in holding that the provisions made by the assessee on the surrender value of holiday membership and claimed as deduction on payable basis are dependent on the contingency of non-utilization of room space."
3. "On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the "addition made on account of commission paid pertaining to earlier A.Ys. and claimed during the current A.Y., i.e., A.Y.2011-12 without appreciating the fact that the same is relating to the grounds on which the department has filed SLP before the Apex Court on the issue."
At the time of hearing, it was a common point between the parties that, in principle, all the disputes manifested in the aforesaid Grounds of appeal are covered by the earlier precedents in the case of the assessee itself by way of the decisions of the Tribunal, which have also been affirmed thereafter by the Hon'ble Bombay High Court. So however, in order to impart completeness to the order, the following discussion is relevant.
The respondent assessee is engaged in the business of hospitality, running of clubs and holiday scheme. The assessee company, inter-alia, offers holiday schemes to its card members at discounted/special price by receiving amounts in advance against sale of room nights marketed through its agents. In this context, the Assessing Officer found that assessee had credited a sum of (Assessment Year 2011-12) Rs.691,08,85,015/- in the balance sheet which represented the amount received from members under different schemes under the head ‘advance against sale of room nights’. The assessee had explained that under the holiday scheme, an individual became a member after making advance payments for utilization of room nights in future. If a member exercises his rights, he is entitled to avail the room nights as per the scheme. The member is also entitled to refund at the end of the respective scheme, the surrender value of the room nights. The assessee treated the advance received against sale of room nights as a liability and the same was disclosed in the balance sheet. The assessee treated the difference between the amount paid by the member and the surrender value as an expense spread over the tenure of the scheme and pro-rata amount was claimed as deduction. At the stage of the assessment, the Assessing Officer referred to the stand of the assessing authorities in the past assessment years of 2004-05 to 2010- 11 and considered the advances received from the members as a revenue receipt chargeable to tax and also disallowed the claim for the pro-rata deduction of the difference between the holiday membership and surrender value. Both these aspects have since been negated by the CIT(A) by noticing that for assessment years 2004-05 to 2005-06, the Tribunal vide its orders in & 2418/Mum/2009 dated 16/03/2011; for assessment years 2006-07 and 2008-09 in ITA Nos.6724& 6725/Mum/2012 dated 21/02/2014; and, and assessment years 2004-05, 2005-06, 2007-08 and 2009-10 in ITA Nos.6701,6702,6703 &6650/Mum/2012 dated 21/02/2014 upheld the stand of the assessee. Furthermore, the CIT(A) noted that so far as assessment years 2004-05 and 2005-06 are concerned, the order of the (Assessment Year 2011-12) Tribunal dated 16/03/2011(supra) has since been approved by the Hon'ble Bombay High Court vide its order in Income Tax Appeal No.2255 & 2290 of 2011 dated 9th May 2014. In this view of the matter, the CIT(A) deleted the additions made by the Assessing Officer, against which Revenue is in appeal before the Tribunal by way of Grounds of appeal No.1 & 2 above.
5. We find that the dispute on the treatment of advances against sale of room nights and the claim of pro-rata deduction for the difference in the amount paid and the surrender value of the room nights, came up for the first time in assessment year 2004-05 by way of initiation of proceedings under section 263 of the Act by the Commissioner. The Tribunal vide its order dated 16/03/2011(supra) dealt with the merits of the stand of the Commissioner, which is in consonance with what the Assessing Officer done in the impugned order and the Tribunal disagreed with the stand of the Revenue. Thereafter, the Hon'ble Bombay High Court in its order dated 09/05/2014(supra) upheld the proposition that having regard to the terms and conditions of the holiday scheme, no income accrues to the assessee at the time of receipt of the advances. The Hon'ble Bombay High Court took note of the factual finding arrived by the Tribunal that the scheme obligated the assessee to refund not only the advance payment, but also the surrender value. Notably, for assessment years 2004-05,2005-06,2007-08 and 2009-10 also, the Hon'ble High Court in and 1678 of 2014 dated 17/02/2017 has approved the decision of the Tribunal. Be that as it may, it clearly implies that the stand taken by the Assessing Officer in the impugned
(Assessment Year 2011-12) assessment order is contrary to the judgments of the Hon'ble Bombay High Court dated 09/05/2015(supra) and 17/02/2017(supra) in the assessee’s own case and, therefore, we find no error on the part of the CIT(A) in deleting the addition. Thus, in so far as Grounds of appeal No.1 & 2 are concerned, the Revenue fails.
In so far as the issue in Ground of appeal No.3 is concerned, the same relates to deductibility of the commission expenditure allowable to the assessee. Notably, assessee pays commission to its agents for marketing its different holiday schemes. At the time of hearing, the Ld. Representative for the assessee pointed out that the assessee company was following the method of accounting under which the commission paid for each of the scheme was spread over the tenure of the scheme and pro-rata commission is debited to the respective years Profit and Loss Account. In this context, it is notable that for the year under consideration, assessee had debited an amount of Rs.96,06,89,340/- in the Profit and Loss Account as commission. So however, in the computation of income assessee claimed deduction for Rs.217,08,46,537/- on account of commission on payment basis. The Assessing Officer allowed the claim to the extent of Rs.121,01,57,197/- culling out the aforesaid amount being pro-rata commission attributable to the instant period. The assessee raised the issue before the CIT(A) and the CIT(A) in para-5 of her order has allowed the claim of the assessee to the extent of Rs.217,08,46,537/- on payment basis. Against such a decision of the CIT(A), Revenue is in further appeal before us.
(Assessment Year 2011-12) 7. In this context, the Ld. Representative for the assessee quite fairly conceded that having regard to the precedents and consistency in past as well as subsequent year assessment, the claim of the assessee on account of commission expenditure is to be allowed pro-rata to the relevant period and not on payment basis. The Ld. Representative for the assessee has furnished a statement, reconciling the commission debited in the Profit and Loss Account, the amount of commission actually paid during the year, as also the pro-rata commission attributable to the period under consideration. On this aspect, we deem it fit and proper to restore the matter back to the Assessing Officer, who shall verify the working of the amount of expenditure pro- rata attributable to the instant year and allow the deduction accordingly. Thus, on this aspect Revenue succeeds for statistical purposes.
In the result, appeal of the Revenue is partly allowed for statistical purposes.
Order pronounced in the open court on 01/09/2017.