ACIT vs. Noida Toll Bridge Co. Ltd. (Delhi ITAT)
Mercantile based accounting requires income and expenditure of a financial year has to be taken in account in the same, concerned financial year. In ACIT vs. Noida Toll Bridge Co. Ltd. & vice versa [ITA Nos. 5246, 5247, 5248, 5249 and 5286/Del/2012, decided on10.04.2017], the brief facts of the case (relating to above-mentioned topic) as emanating from the order of the Assessing Officer were as follows:
“12. On perusal of the balance sheet, it is seen that assessee has shown a sum of Rs.2,00,57,868/- as Advance Payment and unexpired discounts shown under the head current liability. Accordingly, assessee was asked to explain the nature of this unexpired discounts shown under the head liability. In response to the query, assessee has stated that this pertains to the toll receipts, which the customer has not used during the year under consideration. Assessee was further asked to explain as to why the receipts received from the customer have been kept aside in the balance sheet. In response assessee stated that customer purchases card of tolls which is consumed on to and fro basis, and when the customer utilized full to and fro the receipts is taken into consideration. The assessee has also submitted the copy of refund being made by the company to the customer. The submission of the assessee is not tenable and convincing because the assessee received the tolls through electronic cards as revenue receipt and thereafter treatment thereof as ITAs No.5246, 5247, 5248, 5249, 5286/Del/2012 15 liability is clear deferment of tax incidence on the ground of unutilization of to and from and other submission of refund to be made to customer in case the customer intends to take refund. The other submission is not acceptable because if a customer intends to take refund, which can be adjusted against the concerned year’s receipt and after adjusting refund, net revenue toll receipts will be taxable. Thus the entire submission of the assessee is not tenable, but is a clear cut avoidance of tax incidence. Accordingly, a sum of Rs.2,00,57,868/- is added to the income of assessee, for which penalty proceedings u/s.271(1)(c) are being initiated separately.”
The learned Members of the Delhi ITAT found as correct the deletion of addition by CIT(A) and found that the assessee had disclosed the advance payments received on account of toll and advertisement revenue as Advance Payment/Unexpired Discounts under the head Current Liabilities in its books of accounts. Out of total amount of Rs.2,00,57,868/-, Rs.63,03,382/- represented advance received on account of advertisement fees whereas the balance amounting to Rs 1,37,54,486 represented advance on account of toll fees. The Assessing Officer treated the entire amount as income of the appeal assessee, being a corporate entity, is required to maintain its books of accounts on accrual basis and in compliance with the Accounting Standards issued by the Institute of Chartered Accountants of India. In this regard Accounting Standard – AS·9 issued by the Institute of Chartered Accountants of India, is required to be mandatorily followed by all corporate entities. Reading of the aforesaid AS-9, makes it clear that the revenue should be recognized only when the services are rendered and in case where services are rendered partially, revenue should be recognised proportionate to the degree of completion of the services. In the instant case, the assessee recognised advertisement revenue proportionately on the basis of period falling under the particular financial year. So far as toll fee is concerned while issuing new cards (Silver and Gold cards) the assessee collects administration fees, security deposit and toll usage fees. While ITAs No.5246, 5247, 5248, 5249, 5286/Del/2012 16 administration fees was recognised as revenue immediately, amounts received on account of toll fees from issuance & recharge of Silver Gold Card was recognised as revenue on the basis of actual number of passages availed by the card users during a particular financial year. We have also noticed that the assessee has been following the same practice consistently since the commencement of its operations and the same had never been questioned by income tax department. Even in the subsequent financial years, the assessee has followed the same practice and was allowed by the department. The Assessing Officer ought not to have disturbed the method of accounting adopted by the assessee in one assessment year when the same is accepted in the earlier as well as the subsequent assessment years as any change to the treatment would have a corresponding ripple impact on the other assessment years. Accordingly, the grounds of the Revenue were dismissed.