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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI RAMIT KOCHAR
PER RAMIT KOCHAR, ACCOUNTANT MEMBER:
These are cross appeals filed by the assessee company and the Revenue directed against the Order by the learned Commissioner of Income Tax (Appeals)-II, Thane (‘CIT(A)’ for short) dated 13.03.2014, for the assessment year 2008-09.
2 ITA 2952/Mum/2014 & ITA 3966/Mum/2014 Assessment Year 2008-09 Edenred (India) Pvt. Ltd. Both these appeals are disposed of by this common order for the sake of brevity.
The Grounds of appeal raised by the assessee company in its appeal being Tribunal read as under:
“I ADDITION FOR UNCLAIMED VOUCHERS RS. 4,05,54,220/-
1.1 The learned Commissioner of Income Tax(Appeals)(CIT(Appeals)) erred in confirming the addition made by the learned Assessing Officer in respect of alleged unclaimed vouchers of Rs.4,05,54,220/- 1.2 The learned CIT(Appeals) failed to appreciate that the liability of Rs.4,05,54,220 was in respect of unclaimed vouchers for TC 2007 and the expiry date in respect thereof was 31.12.2008 i.e. relevant to subsequent year and not the year under appeal. Accordingly, the question of writing back the same does not arise. 1.3 The learned CIT(A) failed to appreciate the details furnished and the explanations offered by the appellant in support of its contentions.”
The ground raised by the Revenue in its appeal being filed with the Tribunal read as under:
“1 The CIT(A) has erred in deleting the addition of Rs.4,02,97,025 on the argument that it has been taxed in A.Y. 2009-10 and 2010-11 and that this system of accounting followed by the assessee has been accepted by the AO without appreciating the fact that an assessment order passed with undetected wrong policy /method of accountancy followed by the assessee does not justify deletion of the addition made in an earlier year.
3 ITA 2952/Mum/2014 & ITA 3966/Mum/2014 Assessment Year 2008-09 Edenred (India) Pvt. Ltd.
2. The CIT(A) has erred in deleting the addition of Rs.4,02,97,025 on the argument that the amount representing the unclaimed/expired vouchers have been taxed in A.Y.2009-10 and A.Y.2010-11 without appreciating the fact that the liability to pay the amount in respect of these vouchers had ceased prior to 31.03.2008 and hence is rightly taxable in an earlier assessment year and not in A.Y.2009-10 and A.Y.2010-11 ( which amounts to postponing of tax liability without any basis.)
3. The CIT(A) has erred in deleting the addition of Rs.4,02,97,025 instead of sustaining it by applying the principle of the year of taxing it on the same stand on which the CIT(A) sustained the addition of Rs.4,05,54,220 relating to unclaimed/unexpired vouchers TC 2006 with expiry date 31st Dec 2008 by taxing it in the same year and not postponing it to the next two years for taxation.
4. The CIT(A) has erred in deleting the addition of Rs.4,02,97,025 on the argument that it has been offered in A.Y.2009-10 and 2010-11(i.e. taxing it after 1 or 2 years of its due period) as per regular method of accounting followed by the assessee without appreciating the fact that the assessee is not consistently following such accounting method which can be seen from CIT(A)’s own decision of sustaining addition of Rs.4,05,54,220 relating to unexpired vouchers TC 2006 and also comparing the Accounting policy followed by the assessee in A.Y.2011-12 and A.Y.2012-13 where there is no postponement of two years.
5. The order of the CIT(A) may be vacated and that of the assessing officer be restored.”
4 ITA 2952/Mum/2014 & ITA 3966/Mum/2014 Assessment Year 2008-09 Edenred (India) Pvt. Ltd.
The brief facts of the case are that the assessee company is engaged in the business of the prepaid vouchers/ coupons i.e. Food Coupons and Complimentary Coupons. The assessee company provides Meal and Gift Vouchers to its corporate customers. The Customers then provides these vouchers to their respective employees as part of their salary. The payment for the vouchers is received by the assessee company either in advance or within a short period from the date of supply. The invoice is raised by the assessee company for full face value of the vouchers/ coupon plus service charges as applicable. Thus, the assessee company gets full face value of the coupons/ vouchers at the initial stage of transaction itself. The customers distribute such coupons/ vouchers to their employees. These employees use the coupons as per their convenience, while buying goods and products from the affiliates of the assessee company and hand over the coupons to such affiliates. The affiliates in turn, send back such coupons collected to the assessee company for redemption and get payment from the assessee company. During the year, assessee company has shown gross turnover of Rs.8.58 Crores, and net loss has been arrived at (-) Rs.1.72 Crores.
During the course of assessment proceedings u/s 143(3) read with Section 143(2) of the Act, the assessee company was asked by the AO in view of the clause no. 12, 15 and 16 of “General terms and conditions applicable to the agreement between the assessee company and the customers” and why the face value of coupons which expired prior to 31.03.2008 should not be treated as income in the assessment year 2008-09.
“As per clause no.12 of the general terms “Customers may return the unused Vouchers and full booklet(s) whose validity expired to ASPL for revalidation, within one month of the expiry date of the unused vouchers. ASPL would revalidate the vouchers for a further validity dates on receipt of charges of 5% of the value of the vouchers to be revalidated or as agreed between ASPL and customers.”
5 ITA 2952/Mum/2014 & ITA 3966/Mum/2014 Assessment Year 2008-09 Edenred (India) Pvt. Ltd. As per clause no.15 of general terms “if the customers or the vouchers holder looses or damages any voucher ASPL shall not be liable to replace such vouchers or provide compensation in any form for the loss thereof.”
As per clause no. 16 of the general terms “The vouchers shall be valid until the 31st December of each calendar year and such validity shall be indicated on the face each vouchers. The vouchers shall be used strictly in accordance with the terms and conditions set out on the face and/ or reverse of the vouchers.”
After going through the clause no.12, 15 and 16, the AO held that it is evident that claim of redemption of the vouchers can be denied by the assessee company on three front namely i) On expiry of the vouchers, if not validated within stipulated period ii) On loss or damage of vouchers iii) Vouchers remained unused. Since, there is a time limit to revalidate the vouchers i.e. within 30 days of the expiry; in no way vouchers could be presented for redemption after the said period. The year wise details of the unclaimed vouchers provided by the assessee company are as follows: - Vouchers Year Amount i) Face value issued of TR 2005 Rs.1,27,31,758/- ii) Face value issued of TR 2006 Rs.2,16,66,986/- iii) Face value issued of TC 2005 Rs.41,75,112/- iv) Face value issued of TC 2006 Rs.4,05,54,220/- v) Face value issued of TC 2007 Rs.17,23,169/- Total Rs.8,08,51,245/-
Hence, the addition of Rs. 8,08,51,245/- was made to the income of the assessee company by the AO vide assessment orders dated 30.12.2010 passed u/s 143(3) of the Act.
Aggrieved by the orders dated 30.12.2010 passed by the AO u/s 143(3) of the Act, the assessee company filed first appeal before the CIT(A) and 6 ITA 2952/Mum/2014 & ITA 3966/Mum/2014 Assessment Year 2008-09 Edenred (India) Pvt. Ltd. submitted that In respect of addition of unclaimed vouchers of Rs.8,08,51,245/-, the assessee company gives grace period of 6-12 months after the expiry of date to its affiliated agencies to submit the expired vouchers. Further, the assessee company has the policy of taking the expired vouchers as income after a period of two years from the date of expiry in case of meal vouchers and one year from the date of expiry in case of compliment vouchers. This accounting policy has been consistently followed by the assessee company right from first year of its business. It has been further submitted by the assessee comapny that this accounting policy has been accepted by the Revenue in all these years. The assessee company also submitted before the CIT(A) that the unexpired vouchers have been shown as income in the subsequent years on the basis of this consistent policy. The assessee company has also submitted that the income on account of expired vouchers/ unclaimed vouchers added by the A.O. had been shown in subsequent years as detailed below: Sr. Name of Addition Credit Transfer to Redemption Remark No. Voucher made notes income 1 TR 2005 1,27,31,758 125,493 60,110 1,25,46,155 A.Y. 2009-10 19,97,680 17,45,581 2 TR 2006 2,16,66,986 1,750 61,017 1,78,60,958 A.Y. 2010-11 3 TC 2005 41,75,112 99,310 80,938 39,94,864 A.Y. 2009-10 15,08,322 4 TC 2007 17,23,169 22,92,423 20,987 918,081 A.Y. 2010-11
However, the unclaimed vouchers of Rs.4,05,54,220/- (TC-2006) have not been transferred to the income since the date of expiry was 30th December 2008 falling in assessment year 2009-10 and admittedly income has also been shown in the assessment year 2009-10. The assessee company submitted that method of accounting consistently followed by the assessee company cannot be disturbed by the Revenue unless there are reasons for the same that the system does not reflect true and correct profits , relying on decision of Hon’ble Supreme Court in the case of CIT v. Woodward Governor India Private Limited (2009) 21 DTR 106(SC) and CIT v. Gopal Purohit (2011)
7 ITA 2952/Mum/2014 & ITA 3966/Mum/2014 Assessment Year 2008-09 Edenred (India) Pvt. Ltd. 336 ITR 287(Bom.) . The assessee company submitted copies of assessment orders passed u/s 143(3) of the Act for assessment year 2005-06 to 2007-08 and assessment year 2009-10 and 2010-11 wherein system of accounting followed by the assessee company has been accepted by the AO and pleaded that system of accounting followed by the assessee company consistently in respect of expired/unclaimed coupons should be accepted and the additions made by the AO may be deleted.
The copy of written submissions was forwarded by the CIT(A) to the AO for remand report. The AO submitted a report simply reiterated the conclusion of the AO recorded in the assessment order and hence, disallowance made by the AO was justified. The copy of remand report was provided to the Ld. A.R.s and they have argued the case with reference to the earlier submission already made.
The CIT(A) found that the assessee company has shown income in subsequent year particularly in the Assessment year 2009-10 and 2010-11 as detailed in the written submissions . The AO vide order u/s.143(3) of the Act dated 29.12.2011 and 22.03.2013 respectively for assessment year 2009-10 & 2010-11 has accepted the same without any variation and it is an established legal position that the income cannot be taxed twice and the income which has already been taxed in subsequent years cannot be taxed in the year under consideration . The claim of the assessee company was forwarded to the AO who has not pointed any discrepancy in the same and that no addition on account of unclaimed/ expired vouchers namely TR 2005, TR 2006, TC 2005, TC 2007 can be made in year under consideration and the AO was directed to delete the same. In respect of unclaimed/ expired vouchers TC 2006 worth Rs.4,05,54,220/- the expiry date as per assessee company was in December, 2008 considering the extended period of two years & the income should have been shown in the assessment year 2009-10.
8 ITA 2952/Mum/2014 & ITA 3966/Mum/2014 Assessment Year 2008-09 Edenred (India) Pvt. Ltd. The income of Rs.4,05,54,220/- was not disclosed even in the assessment year 2009-10 and the assessee company has not consistently followed the accounting policy in this regard and income thereof has to be taxed in the year under consideration and accordingly addition of Rs.4,05,54,220 as made by the AO was upheld by the CIT(A).
Aggrieved both the Revenue and the assessee company are in appeal before the Tribunal and cross appeals are filed before the Tribunal. The learned counsel of the assessee company submitted that assessee company is in business of prepaid vouchers/ coupons i.e. Food Coupons and Complimentary Gift Coupons . The assessee company gets face value of the coupons/ vouchers at the initial stage of transaction received from the companies who give these coupons to their employees . The employees of the client get these coupons redeemed from establishments/restaurants/hotels etc who surrender these vouchers to the assessee company to get the payment from assessee company. The assessee company submitted that the assessee company recognizes revenue for unutilized coupons after two year after expiry of meal coupons and one year in case of compliment vouchers when it is reasonably certain that payment of liability will not arise in future and whereby in the interim period, it wait for the claims ,if any arising from these coupons which may arise due to several factors. This policy is consistently followed by the assessee company which is accepted by the Revenue. The ld. Counsel drew our attention to the accounting policy of the assessee company consistently followed by the assessee company which is placed at page 20-21 and 50 of paper book filed by the assessee company with the Tribunal. The assessee company also drew our attention to the page 55-57 to submit that income arising from these expired coupons as has been added by the AO have been duly accounted for in the books of accounts and offered for taxation in the return of income filed with the Revenue for 9 ITA 2952/Mum/2014 & ITA 3966/Mum/2014 Assessment Year 2008-09 Edenred (India) Pvt. Ltd. assessment year 2009-10 to 2010-11 . The Ld. Counsel submitted the details of offering for tax vide page 55 -57 of the paper book as under: Sr. Name of Addition Credit Transfer to Redemption Remark No. Voucher made notes income 1 TR 2005 1,27,31,758 125,493 60,110 1,25,46,155 A.Y. 2009-10 19,97,680 17,45,581 2 TR 2006 2,16,66,986 1,750 61,017 1,78,60,958 A.Y. 2010-11 3 TC 2005 41,75,112 99,310 80,938 39,94,864 A.Y. 2009-10 15,08,322 4 TC 2007 17,23,169 22,92,423 20,987 918,081 A.Y. 2010-11 4,05,54,220 3,32,26,240 1,46,534 5. TC 2007 1,98,300 293470 66,89,676 A.Y.2010-11 The ld. AR submitted that this policy is regularly followed by the assessee company which has been accepted by the Revenue and orders of the assessment year 2006-,2009-10 , 2010-11 and 2011-12 passed u/s 143(3) of the Act were placed in the file and no additions have been made by the Revenue on these counts and hence in nutshell it was submitted by the assessee company that entire income embedded in the expired coupons/vouchers as at 31-03-2008 have been offered and subjected to tax by the Revenue albeit in the assessment years 2009-10 and 2010-11 as per chart above and audited profit and loss account. The Ld. Counsel also drew our attention to audited profit and loss account for the financial year ended 31-03-2009 and 31-03-2010 to show that entire income on account of the meal coupons and complimentary gift coupons which expired prior to 31-03- 2008 has been offered for taxation and due taxes paid to Revenue albeit in the assessment year 2009-10 and 2010-11. Thus, it was submitted by the assessee company that entire income of these vouchers both meal coupons and complimentary gift coupons has been subjected to taxation albeit in the subsequent assessment year’s 2009-10 and 2010-11 and this method of accounting is consistently followed by the assessee company which has been accepted by the Revenue in past and based on the principles of consistency the same is to be accepted by the Revenue. The Ld counsel for the assessee
10 ITA 2952/Mum/2014 & ITA 3966/Mum/2014 Assessment Year 2008-09 Edenred (India) Pvt. Ltd. company submitted that same income cannot be subjected to tax twice as is done by the Revenue in the impugned assessment year which is not permissible under the Act , while in all other years no such addition has been made.
The learned DR on the other hand submitted that as per agreement entered into by the assessee company vide clause 12,15 and 16 , the time limit of submission of unutilsed vouchers is 30 days from the date of expiry and after vouchers/coupons expires , receipt is to be recognized as income and income has to be assessed to tax and there is no requirement of waiting of 2 years for offering the income to taxation as was followed by the assessee company.Further, it was submitted by the DR that claim of the assessee company that entire income has been subjected to taxation albeit in the assessment year 2009-10 and 2010-11 needs verification by the authorities.
The ld. AR submitted in rejoinder that the assessee company has huge carried forward un-absorbed losses and the assessee company will not get any advantage by postponing the income to subsequent assessment years rather by postponing the income , the assessee company will be at loss. There is no avoidance of tax by postponing income as per policy adopted by the assessee company rather it is based on sound and scientific principles as the company wait for the claims to be made against these expired vouchers before offering the same for taxation when it is reasonably certain that no further claim will be received by the assessee company.
We have considered the rival contentions and perused the material on record. We have observed that the assessee company is dealing in prepaid meal and complimentary coupons which are issued to corporate clients. These coupons/vouchers are issued on calendar year basis and the assessee company gets upfront payment of these vouchers/coupons from its corporate
11 ITA 2952/Mum/2014 & ITA 3966/Mum/2014 Assessment Year 2008-09 Edenred (India) Pvt. Ltd. clients including its service charges. The clients give these coupons/vouchers to its employee who utilize the same at establishments/restaurant/hotels . The said establishment claim payment from the assessee company against the utilized coupons/vouchers. After the expiry of coupons/vouchers, the unutilized coupons are surrendered by the clients to the assessee company to claim back the amount or for revalidation for which period of thirty days are allowed by the assessee company. The assessee company waits for the claims against both utilized /unutilized vouchers/coupons till when it is certain that payment of liability will not arise in future before offering the same for taxation in respect of unclaimed amount with respect to these vouchers/coupons which in case of meal coupons is a period of 2 years from the date of expiry of meal coupons while it is 1 year from the date of expiry of gift/complimentary coupons/vouchers which policy is consistently followed by the assessee company over the years and the same is accepted by the Revenue in all these years except the impugned assessment year. The Revenue has also accepted the said method of accounting even in the assessment’s framed u/s 143(3) of the Act and hence now , the Revenue cannot be allowed to disturb the method of accounting consistently followed by the assessee company and accepted by the Revenue even in the assessment framed u/s 143(3) of the Act unless Revenue bring on record cogent evidences that method of accounting consistently followed by the assessee company is defective leading to distortion of income and correct income as per the Act cannot be computed by following the method of accounting consistently followed by the assessee company or the same policy is not regularly followed by the assessee company keeping also in view the well established principles of taxation that the same income cannot be subjected to tax twice . However , keeping in view the peculiar facts and circumstances of the case, the interest of justice will be best served if the matter is restored back to the AO with a direction to make limited verification to protect the interest of Revenue that all the income embedded in the expired
12 ITA 2952/Mum/2014 & ITA 3966/Mum/2014 Assessment Year 2008-09 Edenred (India) Pvt. Ltd. coupons/vouchers as per the additions made by the AO in the impugned assessment year have been offered for taxation by the assessee company with respect to all these expired vouchers/coupons both meal and complimentary gift vouchers, albeit in the subsequent assessment year’s i.e. 2009-10 and 2010-11 as per accounting policy consistently followed by the assessee company. The said assessments for the assessment year 2009-10 and 2010- 11 were also framed by the Revenue under scrutiny u/s 143(3) of the Act . The assessee company is directed to appear before the AO and to submit evidences in support of its contention before the AO for verification that with respect to all the expired vouchers/coupons as at 31-03-2008 as per the assessment order dated 30.12.2010 against which the additions have been made by the AO had been offered for taxation to Revenue albeit in the subsequent assessment year 2009-10 and 2010-11 as per accounting policy and method of accounting consistently followed by the assessee company. The AO shall provide proper and adequate opportunity to the assessee company in accordance with principles of natural justice and in accordance with law before completing verification as directed in this order. We order accordingly.
In the result both the appeals filed by the assessee company and Revenue are allowed for statistical purpose.
Order pronounced in the open court on 24th February 2016. आदेश क� घोषणा खुले �यायालय म� �दनांकः 24- 02-2016 को क� गई ।