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Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH
Before: Shri Rajpal Yadav & Shri Amarjit Singh
आदेश/ORDER PER : AMARJIT SINGH, ACCOUNTANT MEMBER:-
This Revenue’s appeal for A.Y. 2011-12, arises from order of the CIT(A)-2, Ahmedabad dated 07-05-2015, in proceedings under section 143(3) of the Income Tax Act, 1961; in short “the Act”.
The revenue has raised following grounds of appeal:-
I.T.A No. 2424/Ahd/2015 A.Y. 2011-12 Page No 2 DCIT vs. M/s. Gujarat State Road Transport Corporation
“1. The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 50,94,97,173/- made on account of motor accident claims of earlier years, without properly appreciating the facts of the case and the material brought on record. 2. The Ld. CIT(A) has erred in law and on facts in treating the income from license fee of canteen amounting to Rs. 5,12,37,024/- as business income, without properly appreciating the facts of the case and the material brought on record. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) ought to have upheld the order of the assessing officer. 4. It is therefore, prayed that the order of the ld. CIT(A) may be set aside and tha.t.pf the Assessing Officer may be restored to the above extent.” 3. In this case, return of income declaring loss of Rs. 190,89,19,306/- was filed on 30th March, 2012. Subsequently, the case was selected under scrutiny by issuing of notice u/s. 143(2) of the act on 6th August, 2012. During the course of assessment proceedings, the assessing officer observed that assessee has claimed payment of Rs. 50,94,97,173/- towards motor accident claim as revenue expenditure. The assessee submitted that MCAT courts passes the awards after 6 to 7 years and the liability gets ascertained only when the claim is acknowledged accordingly provision or payment are made. The assessing officer has not accepted the submission of the assessee and observed that the award of motor accident claim pertains to the previous years. Consequently, he has added the aforesaid amount to the total income of the assessee. During the course of assessment proceedings , the assessing officer has also noticed that assessee has received licence fees from canteen of Rs. 5,12,37,024/- claimed as business income. The assessing officer observed that the aforesaid income is to be treated from house property instead of business income as claimed by the assessee. He was of the view that this income was
I.T.A No. 2424/Ahd/2015 A.Y. 2011-12 Page No 3 DCIT vs. M/s. Gujarat State Road Transport Corporation
generated by the assessee from letting out the property, therefore, the same is to be treated as income from house property. Accordingly, he assessed the same as income house property instead of business income.
Aggrieved assessee preferred appeal before the ld. CIT(A). The ld. CIT(A) has allowed the appeal on both the issues by observing as under. The relevant part of the decision of the ld. CIT(A) pertaining to addition on account of motor accident claim is as under:- “2.3. Decision: I have carefully considered the facts of the case, the assessment order and the written submission of the appellant. The AO has made a disallowance of the expenditure claimed by the appellant towards motor accident claim as the same did not pertain to the year under consideration. The appellant on the other hand has submitted that it had direct nexus of the transportation business and the liabilities related to the business of the appellant. The appellant was a government undertaking providing facilities at remote places at most economical fare also. The payment has been made after the award has been announced by Motor Accident Claims Tribunal (MACT) and as and when the liabilities were crystallised the same are provided in the books of accounts. The books of accounts were audited by Comptroller and Auditor General of India and the claims have been duly verified. It is noted that the similar issue has been decided by me in the case of the appellant for the A.Y. 2009-10 in appeal No. CIT(A)-VIII/ACIT Circle 4/251/11-12 dated 28/01/2014. For the sake of clarity the findings given by me in para-3.3 are reproduced here under: - . "3.3 I have carefully considered the facts of the case, the assessment order and the written submission of the appellant. The AO has disallowed payment made towards motor accident claims as it was held by him that the expenditure did not pertain to the year under consideration. The appellant has submitted that as per the consistent accounting policy the claims are being paid after the award by Motor Accident Claims Tribunal. The awards are passed by MACT after 6-7 years and after the receipt of order through advocates the liability is discharged subject to the availability of the fund with the corporation. Therefore,, it has been submitted by the appellant that the liability takes time to get crystallised and all these claims became due only in this assessment year and were accordingly honoured. The accounts of the appellant were audited by C&AG of India and there has certified the amount of Rs. 4J4480439/- which has been claimed during the assessment year under consideration. It has been further submitted by the appellant that no provision is being made as the same cannot be done merely on the basis of claims made by the parties or routes five by the court by dead or injured parties/related is due to accidents. The liabilities are therefore, crystallised; made known and debited in the books only when awards/orders of the court are received from the advocates. Accordingly, it has been submitted by the appellant that this is not in the
I.T.A No. 2424/Ahd/2015 A.Y. 2011-12 Page No 4 DCIT vs. M/s. Gujarat State Road Transport Corporation
nature of previous year's expenditure. It is also further been pointed out by the appellant that the claim has been allowed consistently on the same basis for all earlier years. In support of its claim of consistency the appellant has produced copies of assessment order of assessment year 2004 - 05 onwards wherein no disallowance or addition on this account has apparently been made. After considering all the facts of the issue I'm inclined to accept the submission given by the appellant. The claim of the appellant that the liability crystallises only after the award by the MACT and the payment is made thereafter is correct. The appellant cannot make a provision merely on the basis of claims made by the disputed party. The provision made on that basis would be totally erroneous and without any basis. The disputed liability can only be crystallised after the award of the court which decides the matter. Accordingly the claim of the appellant is acceptable. It is further observed that the accounts of the appellant are audited by the C&AG and these figures have been duly certified by them. The AO is however directed to verify the claim of the appellant that the liabilities have been crystallised during the year after the award of MACT. Subject to the verification by the AO the disallowance made is directed to be deleted. The ground of appeal is accordingly, partly allowed."
The relevant part of the decision of the Ld. CIT(A) regarding assessment of income from license of canteen is as under:- “4.3. Decision: I have carefully considered the facts of the case, the assessment order and the written submission of the appellant. The AO had treated the rent and license fee received from the canteens as income from house property. It was held by him that it cannot be considered as income from business but the same is to be treated as income from house property as it has been received from letting out of the property of the appellant. The appellant on the other hand has submitted that the properties have been let out for running the canteens for the employees of the appellant. The same are to be kept for the benefit of the staff and the income received as rent and license fee recovered from Canteen contractors was grouped as miscellaneous receipts. The appellant had shown this income in the books of accounts in the return and no separate addition should have been made under a different head. It has therefore, been requested that the addition should be deleted.”
During the course of appellate proceedings before us, ld. counsel has contended that Co-ordinate Benches of the ITAT vide ITA No. 2598/Ahd/2009 order dated 24th January, 2013 and vide ITA No.1192/Ahd/14 in the case of the assessee itself have decided the above two issues in favour of the assessee. Therefore, he submitted that the appeal of the assessee should be allowed. On the other
I.T.A No. 2424/Ahd/2015 A.Y. 2011-12 Page No 5 DCIT vs. M/s. Gujarat State Road Transport Corporation
hand, ld. departmental representative relied on the order of the assessing officer.
We have heard both the parties and perused the material on record. We have gone through the aforementioned decision of the co-ordinate benches of ITAT in the case of the assessee on identical issue. The decision of the Co-ordinate Bench vide ITA No. 1192/Ahd/2014 in the case of assessee regarding motor accident claim is reproduced as under:- “6. So far as this grievance of the Assessing Officer is concerned, the relevant material facts are like this. The assesse is engaged in rendering transportation services, and other allied services, to the public. During the course of scrutiny assessment proceedings, the Assessing Officer noticed that the assessee had claimed a deduction in respect of payments, aggregating to Rs 41,44,80,439, towards motor accident claims, but all these payments donot pertain to the current year alone. When matter was probed further, it was discovered that in many cases the compensation award by Motor Accidents Claim Tribunal (MACT) was given much earlier, but assessee did not create any provision or liability at that point of time. On these facts, therefore, the Assessing Officer declined the deduction. In appeal, however, learned CIT(A) did not approve this approach of the Assessing Officer, and held as follows: “I have carefully considered the facts of the case, the assessment order and the written submission of the appellant. The AO has disallowed payment made towards motor accident claims as it was held by him that the expenditure did not pertain to the year under consideration. The appellant has submitted that as per the consistent accounting policy the claims are being paid after the award by Motor Accident Claims Tribunal. The awards are passed by MACT after 6-7 years and after the receipt of order through advocates the liability is discharged, subject to the availability of the fund with the corporation. Therefore, it has been submitted by the appellant that the liability takes time to get crystallized and all these claims became due only in this assessment year and were accordingly honoured. The accounts of the appellant were audited by C&AG of India and there has certified the amount of Rs.414480439/- which has been claimed during the assessment year under consideration. It has been further submitted by the appellant that no provision is being made as the same cannot be done merely on the basis of claims made by the parties or routes five by the court by dead or injured parties/related is due to accidents. The liabilities are therefore, crystallized; made known and debited in the books only when awards/orders of the court are received from the advocates. Accordingly, it has been submitted by the appellant that this is not in the nature of previous year's expenditure. It is also
I.T.A No. 2424/Ahd/2015 A.Y. 2011-12 Page No 6 DCIT vs. M/s. Gujarat State Road Transport Corporation
further been pointed out by the appellant that the claim has been allowed consistently on the same basis for all earlier years. In support of its claim of consistency the appellant has produced copies of assessment order of assessment year 2004 - 05 onwards wherein no disallowance or addition on this account has apparently been made. After considering all the facts of the issue I'm inclined to accept the submission given by the appellant. The claim of the appellant that the liability crystallizes only after the award by the MACT and the payment is made thereafter is correct. The appellant cannot make a provision merely on the basis of claims made by the disputed party. The provision made on that basis would be totally erroneous and without any basis. The disputed liability can only be crystallized after the award of the court which decides the matter. Accordingly the claim of the appellant is acceptable. It is further observed that the accounts of the appellant are audited by the C&AG and these figures have been duly certified by them. The AO is however directed to verify the claim of the appellant that the liabilities have been crystallized during the year after the award of MACT. Subject to the verification by the AO the disallowance made is directed to be deleted. The ground of appeal is accordingly, partly allowed.”
Regarding second issue, we have noticed that Co-ordinate Bench of the ITAT vide its decision ITA No. 2598/Ahd/2009 in the case of the assessee has held that that receipt of licence fees from canteen has to be assessed as business income of the assessee instead of income from house property as assessed by the assessing officer. The decision of relevant part of the Co-ordinate Bench is reproduced as under:-
“8. We have considered rival submission and have perused the orders of the authorities below and the judgment cited by the learned counsel of the assessee. First, we discuss regarding the applicability of judgment of Hon'ble Punjab and Haryanna High Court) relied on by the learned counsel of the assessee. In that case, a finding is given that the rental of the premises was fixed and it did not change with the change of occupants and it was deducted from the wages of the employee or employees occupying the premises. It cannot be shown by the learned counsel of the assessee in the present case that these facts are identical in the present case also, even in the respect of income from rent towards staff quarter. Admittedly, the major part of the income for the licece fee of canteen is not from staff, but from outsiders and hence this judgment is not applicable to this receipt at all, and even for the receipt of rent on account of staff quarter, the judgment is not applicable because it could not be shown by the learned AR of
I.T.A No. 2424/Ahd/2015 A.Y. 2011-12 Page No 7 DCIT vs. M/s. Gujarat State Road Transport Corporation
the assessee that the facts are identical. Regarding the argument that this income was taxed under the head income from business in earlier years, we find that on the plea of consistency, it cannot be held that if a mistake is committed by the AO in earlier years, the same should be perpetuated. This is not case of the assessee that the rental income is not in respect of house property owned by the assessee, and hence in our considered opinion, this rental income is taxable under the head income from house property, as has been held by the authorities below, and hence, we do not find any reason to interfere with order of the learned CIT(A) on this issue, and this ground of the appeal of the assessee is dismissed.” In view of the above mentioned facts and legal findings and following the decision of the Co-ordinate Bench of ITAT in the case of the assessee itself, we dismiss the appeal on both the issues.
In the result, the appeal of the revenue is dismissed.
Order pronounced in the open court on 27-11-2017
Sd/- Sd/- (RAJPAL YADAV) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad : Dated 27/11/2017 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद