Case Law Details
ACIT Vs Jojo Frozen Foods Private Limited (ITAT Cochin)
Conclusion: Amount paid as security deposit was taxable only on the year of termination of an agreement between the assessee and the dealer/distributor. Hence AO was not justified in treating the deposit as income each year irrespective of whether the dealership was terminated or not.
Held: Assessee-company was a manufacturer and dealer of ice cream and frozen foods, was giving freezers to its dealers/distributors for storing the ice cream. For giving the freezers, assessee was collecting deposits, which were refundable on termination of the dealership. As per the terms of the agreement between assessee and dealer/distributor, assessee could recover 25% of the deposit each year towards wear and tear, when agreements were terminated. According to assessee, such recoveries were offered as income in the year in which the dealership was terminated and such recovery was made. AO held that 25% of the deposit should be treated as income each year irrespective of whether the dealership was terminated or not. It was held that ITAT had dismissed the department appeal against the original assessment following its own orders for the earlier years on the ground that the said amount was taxable only in the year of termination and assessee had already offered such amount to tax in the return of income filed by it. The above order of the Tribunal had not been reversed by the Hon’ble High Court. Therefore, following the Tribunal order, in assessee’s own case, it was held that the freezer security deposit was taxable only on the year of termination of an agreement between the assessee and the dealer/distributor.
FULL TEXT OF THE ITAT JUDGEMENT
This appeal at the instance of the Revenue is directed against CIT(Appeals)’s order dated 24.06.2019. The relevant assessment year is 2009-2010.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
