DCIT Vs M/s Delhi Tourism Transportation Corporation Ltd. (ITAT Delhi)
The addition was made by the AO on the ground that although the assessee had claimed credit for Tax Deducted at Source (“TDS”, for short) on the interest income from the bank, corresponding interest income was not offered to tax by the assessee during the year. The Ld. CIT(A) confirmed this addition on the ground that the assessee had failed to file any evidence to reconcile the amount of Rs.61,81,344/-. At the time of hearing before us, the Ld. AR of the Assessee submitted that this amount refers to interest accruing to the assessee during the year on fixed deposits in the bank. He further stated that although this interest income has not been offered to tax during the year by the assessee, credit for TDS made by the bank was claimed by the assessee because the assessee was facing liquidity crunch. He further submitted that the assessee being a public sector undertaking, lenient view may be taken specially because of the liquidity crunch faced by the Assessee. He further also submitted that claim for TDS may be disallowed to the extent it pertains to corresponding income not offered to tax by the assessee during the year; but the addition to income may be deleted. Further, in this regard, he also submitted that the AO failed to appreciate that interest income due on the fixed deposits kept with the banks accrued to the customers on 31st March each year although the same had not become due for payment; but the TDS entries are booked on the closing date of the Financial Year i.e. on 31st March each year on provisional basis to comply with the provisions of the Accounting Standards. He also submitted that the interest income on Fixed Deposits was offered to tax in subsequent year(s), following cash system of accounting; in the year in which the was towards actually received by the Assessee. He relied on order of Co-ordinate Bench of ITAT, Delhi in the case of DCIT vs. Lloyd Insulation (India) Ltd. in ITA No. 2400/Del/2011 for the preposition that: “Income of a taxpayer is not required to be computed merely with reference to the TDS certificate, but assessment of an income is altogether an independent exercise.” However, the Ld. AR of the Assessee fairly conceded that the regular method of accounting being followed by the assessee is the mercantile system of accounting.
Income of a taxpayer is not required to be computed merely with reference to the TDS Certificate, but assessment of an income is an altogether independent exercise. We wish to add that income of an Assessee under the head “Profits and Gains of Business or Profession” and “Income from other sources” is to be determined regardless of whether tax was deducted at source in respect of amounts received or accrued to the assessee. What is relevant is the system of accounting regularly employed by the assessee – whether it is cash system or mercantile system. The assessee is not permitted to use mixed or hybrid system of accounting under which some items of income / expenditure are accounted for under cash system and the remaining items of income / expenditure are accounted for under mercantile.
It is obvious from the perusal of the aforesaid Provisions U/s 145(1) of I.T. Act that it is not open for the Assessee to follow cash system of accounting for some of the items and mercantile system of accounting for the remaining items. Mixed or hybrid system of accounting has lost statutory mandate w.e.f. 01.04.1997, pursuant to amendment of Section 145 of I.T. Act by the Finance Act, 1995. Income of an Assessee under the head of “Profits and Gains of Business or Profession” and under the head of “Income from Other Sources” is to be computed in accordance either with cash system of accounting regularly employed by the assessee or with mercantile system of accounting regularly employed by the assessee. Undisputedly, the regular system of accounting employed by the assessee is Mercantile System. Under Mercantile System of accounting items of income and expenditure are accounted for on accrual basis; and the actual dates of payments / receipts for various items of income and expenditure, are irrelevant. On the other hand, under cash system of accounting, various items of income and expenditure are accounted for on the basis of actual dates of receipts and payments; and whether the same actually accrued during the year is irrelevant. Once the assessee has opted to follow Mercantile System as its regular system of accounting, it is not open for the assessee to account for certain income (Interest Income from Fixed Deposits in the Bank, as in this case) under cash system of accounting. It is not the case of the assessee that interest income of the assessee from Fixed Deposits in Bank is exempt and thus, undisputedly the income is taxable. Undisputedly again, the regular system of accounting followed by the assessee is mercantile system of accounting. Undisputedly also, Interest Income from Fixed Deposits in Bank has accrued to the assessee during the year but was not offered as income on accrual basis under mercantile system of accounting. As income from Fixed Deposits in Bank has accrued to the assessee in accordance with system of accounting regularly employed (mercantile system, in this case), the income has to be assessed during the year. It is irrelevant whether the assessee is a public sector undertaking. Unless specifically provided under law or intended by necessary implication under specific provisions of law, or held in binding judicial precedents; a public sector undertaking cannot legitimately claim a preferential treatment in determination of its tax liabilities. Therefore, we hold that the facts that assessee is a public sector undertaking is irrelevant. It is also immaterial whether the assessee was facing liquidity crunch. When the income has to be assessed during the year and when tax is to be paid in accordance with law on such income, the assessee cannot postpone the year in which the income will be offered to tax merely because the assessee has a liquidity crunch. Requirement of liquid funds by an assessee, howsoever genuine the requirement may be, cannot be accepted as a legitimate justification for postponement of the year in which income will be offered by the assessee. Therefore, in the facts of the case before us, the exercise of determining assessee’s income lead us to the conclusion that the aforesaid income amounting to Rs. 61,81,344/- by way of interest on Fixed Deposits in Bank is to be assessed during the year. Accordingly, we confirm the addition of aforesaid amount of Rs. 61,81,344/-; and dismiss Ground no. 7 in assessee’s appeal for A.Y. 2010-11.
FULL TEXT OF THE ITAT JUDGEMENT
These four appeals, are directed against different order dated 26.02.2015 and 13.11.2015 of Commissioner of Income Tax (Appeals)-3, Laxmi Nagar, Delhi-110092 pertaining to different Assessment Years i.e. 2010-11 and 2012-13. For the sake of convenience and brevity these four appeals, two each filed by Revenue and Assessee, are being disposed off by way of this consolidated order. The grounds of appeals are as under:
ITA No.- 716/Del/2016
“1. Ld. CIT(A) erred in law and on facts of the case in directing the AO to allow the assessee deduction of Rs. 5,20,17,982/- which was disallowed by the AO u/s 43B of the I.T. Act on account of advance excise duty.
2. CIT(A) erred in law and on facts of the case in directing the AO to allow the assessee deduction of Rs. 1,43,34,019/- which was disallowed by the AO on account of provision for leave encashment.
3. CIT(A) erred in law and on facts of the case in directing the AO to allow the assessee loss of Rs. 44,65,663/- pertaining to DITTM.
4. The appellant craves leave, modify, add or forego and ground(s) of appeal at any time before or during the hearing of this appeal.
ITA No.- 2489/Del/2015
“1. Ld. CIT(A) erred both in law and on facts of case by failing to treat the assessment order passed by Ld. AO to be infructuous and void being based on original return when revised return is duly filed.
2. CIT(A) erred both in law and on facts of case by:
2.1 directing the Ld. AO to consider the revised return
2.2. allowing another opportunity to the Ld. AO for adjudicating upon the revised return through remand report when time period allowed by section 153(1) for concluding the assessment u/s 143(3) had already lapsed.
2.3 failing to appreciate that the remand report issued by the Ld. AO on the directions of Ld. CIT(A) continues to suffer from the same legal infirmity as original order passed u/s 143(3) which was passed without considering the duly filed revised return.
3. CIT(A) erred both in law and on facts of case by:
3.1 observing that additional claims in the revised return are based on adhoc estimates.
3.2 failing to appreciate that the return is revised in pursuance to the order o f Hon’ble Delhi High Court in AY 1990-91, 1991-92, 1992-93, 1994-95 and 1996-97 holding that
3.2.1 the expenditure incurred on construction of flyovers, etc. was revenue expense, and
3.2.2 amount standing to credit of TIUF account was to be included in taxable income
3.3 failing to allow the claim of brought forward losses amounting to Rs. 5,61,25,314/- in the revised return.
4. CIT(A) erred in law and on facts of the case by confirming the rejection o f claim of
4.1 Provision for Doubtful Debts amounting to Rs. 6,11,675/-.
4.2 Provision for Doubtful Loans amounting to Rs. 1,14,901/-.
5. CIT(A) erred in confirming the action of the AO in
5.1 making a net addition of Rs. 1,01,03,121/- to the income on account of income from “Dilli Haat”.
5.2 treating a part of income from “Dilli Haat” as rental income as against the claim of the assessee to treat the same as income from business.
5.3 restricting the claim of expenses to 30% of receipts from “Dilli Haat”.
6. Without prejudice to Ground No. 4, Ld. CIT(A) erred in confirming the arbitrary disallowance of expenditure by the Ld. AO, while determining the income from Dill i Haat, as;
6.1 proportionately attributable expenses w.r.t. rental income amounting to Rs. 65,88,427/-.
6.2 50% of other remaining expenses on account of NDMC share amounting to Rs. 1,00,39,192/-
7. CIT(A) erred in law and on facts of the case by confirming the addition of Rs. 61,81,344/- to income on account of under-statement of bank interest. ”
ITA No. – 570/Del/2016
1. On the facts and circumstances of the case and in law Ld. CIT(A) has erred in confirming the addition of Rs. 1,43,04,472/- made to the income of the assessee u/s 143(3) by Ld. AO.
2. CIT(A) erred in confirming the action of the AO in
2.1 making a net addition of Rs. 1,38,88,879/- to the income on account of income from “Dilli Haat”.
2.2 Treating a part of income from “Dilli Haat” as rental income as against the claim of the assessee to treat the same as income from business.
2.3 Restricting the claim of expenses to 30% of receipts from “Dilli Haat”.
3. Without prejudice to Ground No. 2, Ld. CIT(A) erred in confirming the arbitrary disallowance of expenditure by the Ld. AO, while determining the income from Dilli Haat, as:
3.1 proportionately attributable expenses w.r.t. rental income amounting to Rs. 1,15,41,687/-
3.2 50% of other remaining expenses on account of NDMC share amounting to Rs. 1,15,33,415/-
4. Ld. CIT(A) erred in law and on facts of the case by confirming the rejection of claim of
4.1 Provision for Doubtful Debts amounting to Rs. 4,15,593/-.
4.2 Deduction of Rs. 32,59,477/- being revenue booked under damage charges not representing real income of assessee. “
ITA No. 2792/Del/2015
“1. Whether on the facts and in the circumstances of the case and in law, Ld. CIT(A) has erred in deleting addition on account of deduction claimed u/s 43B of Rs. 7,50,48,000/- being advance excise duty payment / deposit?
2. Whether the CIT(A) was correct in allowing deduction of advance excise duty paid u/s 43B of the Act. Even though the liability to pay the sum had not crystallized during the year and the claim was also not debited to P & L account of this year?
3. Whether on the facts and in the circumstances of the case and in law, Ld. CIT(A) has erred in deleting disallowance of the provisions for the Leave Encashment of Rs. 1,80,75,136/-?
4. Whether on the facts and in the circumstances of the case and in law, Ld. CIT(A) has erred in deleting the disallowance of the payment to CRRI u/s 35(I)(iia) of Rs. 11,03,000/- as made by the AO.?
5. Whether on the facts and in the circumstances of the case and in law, Ld. CIT(A) has erred in deleting the disallowance of the net loss claim of the unit of Rs. 32,79,998/- related to the Delhi Institute of Tourism and Travel Management (DITTM) as made by the AO?
6. Whether on the facts and in the circumstances of the case and in law, Ld. CIT(A) has erred in deleting the disallowance of sum of Rs. 33,74,567/- being 50% of the expenses claimed towards “Tourism Promotion Expenses” and “Hiring of Tent & Purpose thereof” as made by the AO.?
7. The appellant craves to leave, to add, alter or amend any ground of appeal raised above at the time of hearing.”
(1.1) During the appellate proceedings in Income Tax Appellate Tribunal (“ITAT”, for short) the assessee filed separate Synopses for each of the aforesaid four appeals. The assessee also filed separate Paper Books for A.Y. 2010-11 and A.Y. 2012-13, containing the following particulars:
“1. Re. Ground no. 1: Revise Income tax return and its acknowledgment of filing for A.Y. 2010-11.
2. Ground No. 2: Remand report for considering revised return
3. Ground No. 2: Assessee’s submission in respect to remand report of AO
4. Ground no. 3: Order of Hon’ble Delhi High Court in AY 1990-91, 1991-92, 1992-93, 1994-95 and AY 1996-97.
5. Ground No. 3: Order of Hon’ble ITAT in assessee’s case for AY 2004-05 to AY 2009-10
6. Ground No. 5: Profit & Loss A/c of Dilli Haat for FY 2009-10
7. Ground No. 5: Income from Dilli Haat as per alternate contention
8. Ground No. 7: Rectification application filed u/s 154 before Ld. AO
9. Ground Noj. 7: Screeshot on the income tax portal stating the effect of TDS calimed in application u/s 154
10. Ground no. 1 & 2 (Deptt): Order of Hon’ble ITAT in assessee’s case in AY 2008-09 and AY 2009-10.
11. Ground No. 1 & 2 (Deptt): order of Hon’ble Delhi High Court in assessee’s case in AY 2008-09 and AY 2009-10.
12. Ground No. 3(Deptt): Order of Ld. AO in assessee’s case for AY 2005-06.
13. Ground No. 4(Deptt). Notification no. 53/2011, dt. 30.09.2011 in relation to section 35(1)(ii) and names of institutes covered under CSIR.
14. Ground No. 4 (Deptt): Confirmation by CRRI for receipts of payment from DTTDC
15. Ground No. 4 (Deptt): order of DCIT (Exemption) New Delhi u/s 10(23C)(iv) regarding exemption to CSIR.
16. Ground No. 5 (Deptt): Order of Ld. CIT(S) dt. 30.01.2019 in assessee’s case in AY 2013-14.
17. Ground No. 5 (Deptt): MOU issued in 1993 by Ministry of Tourism, GOI and renewal letter dt. 08.09.2005.
18. Ground No. 5 (Deptt) : Abstract of DOD minutes held in Sept. 2007 related to taken over of DITTM by DTTDC.
19. Ground No. 6(Deptt): Invoices for tourism promotion expenses
20. General Ground: submission to Ld. CIT(A) Dt. 20.06.2014
21. Ground 1 & 2: Original and revised computation
22. Ground NO. 2 & 3 : Copy of memorandum of association and licence deed.
23. Ground No. 2 & 3 : Balance sheet and profit & loss a/c of Dilli Haat for FY 2011-12
24. Ground NO. 2 & 3: Incoem from Dilli Haat as per alternate contention
25. Ground No. 4: Copy of ledgers relating to provision for bad & doubtful debt
26. Ground No. 4: Ledger of ITE India Pvt. Ltd. along with note on reversal of recovery relating to damage charges.
27. General ground: Submission to Ld. CIT(A)”
(1.2) We have considered all materials on record, including the aforesaid Synopses and Paper Books, and order of the lower authorities, namely the Ld. Commissioner of Income Tax (Appeals) and the Assessee. At the time of hearing before us, we have heard both sides patiently and have taken the oral submissions made by the two sides into consideration.
(2) We first take up Assessee’s appeals in ITA No.2489/Del/2015 for Assessment Year 2010-11 (“A.Y.”, for short) and ITA No.570/Del/2016 for A. Y. 2012-13. The Grounds 1, 2, 3, and 4 in assessee’s appeal for A. Y. 2010-11 were not pressed. Hence, these grounds are dismissed, being not pressed. Ground No.1 in Assessee’s appeal for A. Y. 2012-13 is general in nature and does not required specific adjudication.
(2.1) Grounds 5 and 6 in Assessee’s appeal for A. Y. 2010-11 and Grounds 2 and 3 in assessee’s appeal for A. Y. 2012-13 pertain to additions made by the Assessing Officer (“AO”, for short) on account of income from “Dilli Haat”, treating part of income from “Dilli Haat” as rental income and restricting the claim of expenses to 30% of the receipts. The additions made by the AO on this account are Rs.1,01,03,121/- for A. Y. 2010-11 and Rs.1,38,88,879/- for A. Y. 2012-13. At the time of hearing before us, the Ld. Authorized Representative (“AR”, for short) of the Assessee submitted that the issue is covered by order of Co-ordinate Bench of ITAT (“Income Tax Appellate Tribunal”, for short) Delhi in assessee’s own case for A. Y. 2004-05 to A.Y. 2009-10 vide order dated 28.03.2018 in ITA Nos. 3457/Del/21007, 1505/Del/2009, 4877/Del/2009, 1903/Del/2011, 1634/Del/2011, 2687/Del/2012 and 4910/Del/2012. Directions of ITAT in aforesaid order dated 28.03.2018 are contained in paragraphs 19 and 22 of the order which are reproduced below for ready reference:-
“19 Further, the nature of the business activity of the assessee unmistakably deciphers that it cannot be carried out without letting out stalls on regular frequency to different craftsmen. In the above hue, we have absolutely no doubt in our mind that income of Rs. 1.82 crore earned by the assessee from use of craft stalls on 15 days basis is ‘Business income’ and has been considered by the authorities below as ‘Income from house property’.
The impugned order is pro tanto vacated.
22. Turning to the remaining amount of Rs.54.00 lac, we find that the same consists of Rs.41.00 lac, being, income from space rented on regular basis and Rs.12.99 lac, being, licence fee for allowing activities of food court, souvenir shops, bank and PCO. This amount of Rs.54 lac has been earned by the assessee from the letting out of its permanent structures. The same cannot be equated with income of Rs.1.82 crore discussed above, being, licence fee for use of craft stalls on 15 day basis. The Id. AR was fair enough not to contest the taxability o f Rs.54.00 lac as income held by the lower authorities to be falling under the head ‘Income from house property.”
The AR of the Assessee submitted that same view may be taken for A.Y. 2010-11 and A.Y. 2012-13 also.
(2.2) The Ld. Departmental Representative (“DR”, for short) fairly conceded that the issues in dispute are covered by the aforesaid order dated 28.03.2018 of Co-ordinate Bench of ITAT, Delhi in Assessee’s own case for A. Y. 2004-05 to 2009-10 on identical facts and circumstances. However, she relied on the orders of the AO. Thus, both sides agree that the issue in dispute are covered by aforesaid order dated 28.03.2018 of Co-ordinate Bench of ITAT, Delhi in assessee’s own case.
(2.3) The Assessee Company was incorporated by the Government of Delhi with the main object to develop tourism. Main objects of the assessee, as contained in Memorandum of Association states:
“1. To DEVELOP TOURISM AND TO :
….
(d) Provide entertainment to tourists by way of cultural shows, tourist complexes, entertainment and amusement parks, dances, music concerts, ballets , films, shows, sports and games, son-et-luminiere spectacles and others.
(f) provide shopping facilities to tourist, establish and manage shops including duty free shops, bazaars, emporia and other places for selling travel requisites and other articles of tourist interest “
With the object to promote tourism, the idea of ‘DILLI HAAT was conceptualized in 1994 by the Ministry of Tourism, Government of India and land measuring about 6 acres was leased to the assessee from New Delhi Municipal Council (NDMC) initially for 10 years and renewed from time to time.
On the leased land, the assessee constructed shops, stalls, space for banks, food courts, green plaza, etc. and walkways, amphitheater and open theater for entertainment, fashion shows, and cultural programmes.
The stalls were allotted to craftsmen, hawkers, etc. at a nominal payment for a period of 15 Days by the Ministry of Textiles, Government of India. These craftsmen, hawkers and artisans come from all corners of India and are allotted open spaces having temporary construction on rotational basis at Rs.200 per day for 15 Days.
Dilli Haat was conceptualized on the land leased by NDMC and as a consideration for lease of land, assessee was required to pay a sum of Rs. 1,50,000/- per annum as license fee plus 50% of the sales of the entry tickets of Dilli Haat per annum.”
(2.3.1) During the A.Y. 2010-11 Assessee earned total gross receipts amounting to Rs.5,98,17,388/- from “Dilli Haat”, break up of which is as follows :-
