ACIT, Hyderabad v. M/s Monster.Com(India)(P)Limited, Hyderabad

ITA 1080/HYD/2009 | 2005-2006
Pronouncement Date: 29-01-2010 | Result: Partly Allowed

Appeal Details

RSA Number 108022514 RSA 2009
Assessee PAN AACCM3695G
Bench Hyderabad
Appeal Number ITA 1080/HYD/2009
Duration Of Justice 2 month(s) 24 day(s)
Appellant ACIT, Hyderabad
Respondent M/s Monster.Com(India)(P)Limited, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 29-01-2010
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 29-01-2010
Date Of Final Hearing 07-01-2010
Next Hearing Date 07-01-2010
Assessment Year 2005-2006
Appeal Filed On 05-11-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B HYDERABAD BEFORE SHRI N.R.S. GANESAN JUDICIAL MEMBER AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER ITA NO.1080/H/2009 ASST. YEARS: 2005-06 ACIT CIRCLE 16(2) HYDERABAD VS M/S MONSTER COM.(INDIA) (P) LTD. HYDERABAD (PAN AACCM 3695 G) (APPLICANT) (RESPONDENT) APPLICANT BY : SMT. VASUNDHARA SINHA DR RESPONDENT BY : SHRI B. SATYANARAYANA MURTHY O R D E R PER: CHANDRA POOJARI ACCOUNTANT MEMBER THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED A GAINST THE ORDER PASSED BY THE CIT(A)V HYDERABAD DATED 17.8.200 9 AND PERTAINS TO THE ASSESSMENT YEARS 2005-06. 2. THE FIRST GROUND IN THE REVENUE APPEAL IS THAT T HE CIT(A) ERRED BOTH IN LAW AND ON FACTS IN DELETING THE ADDITI ON OF INCOME ACCRUED OF RS.13 63 37 183 BUT SHOW BY ASSESSEE AS UN-MATURED INCOM E AND NOT OFFERED TO TAX. 3. WE HAVE HEARD FROM BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. FOR THE ASSESSMENT YEARS 2001-02 IN THE ASSESSEES OWN CASE IN ITA NO.1081/HYD/2004 VIDE ORDER DAT ED 10.8.2007 THE TRIBUNAL CONSIDERED SIMILAR ISSUE AND HEL D AS FOLLOWS: IN THE SECOND GROUND THE REVENUE IS AGGRIEVED AG AINST THE DELETION OF THE ADDITION MADE ON ACCOUNT OF DIFFERENCE IN PR OFESSIONAL RECEIPTS. IT WAS NOTICED BY THE ASSESSING OFFICER THAT AS PER TWO TD S CERTIFICATES THE ASSESSEE HAD RECEIVED PROFESSIONAL FEES AGGREGATING TO RS.1 39 125 (RS.1 18 125 + 21 000). HOWEVER THE ASSESSEE HAD SHOWN TOTAL REC EIPTS OF RS.60 558 ONLY. 2 THE EXPLANATION OF THE ASSESSEE WAS THAT IT FOLLOW S MERCANTILE SYSTEM OF ACCOUNTING AND UNDER THE SAID SYSTEM IT RECOGNIZES THE REVENUE ON THE BASIS OF PROPORTIONATE COMPLETION METHOD WHICH IS RECOGNI ZED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA (ICAI) IN ITS ACCOUN TING STANDARD OF REVENUE RECOGNITION. UNDER THIS METHOD REVENUE IS RECOGNI ZED PROPORTIONATELY BY REFERENCE TO THE PERFORMANCE OF EACH ACT. THE REVE NUE RECOGNIZED UNDER THIS METHOD WOULD BE DETERMINED ON THE BASIS OF CONTRACT VALUE ASSOCIATE COST NUMBER OF ACTS OR OTHER SUITABLE BASIS. WHEN SERVI CES ARE PROVIDED BY AN INDETERMINATE NUMBER OF ACTS OVER A PERIOD OF TIME REVENUE IS RECOGNIZED ON A STRAIGHT LINE BASIS OVER THE SPECIFIC PERIOD. HO WEVER THE ASSESSING OFFICER WAS OF THE VIEW THAT SINCE THE SAID ACCOUNTING STAN DARD HAS NOT BEEN NOTIFIED RECOGNIZED BY THE CBDT UNDER S.145(2) OF THE IT ACT 1961 (THE ACT) THE RECEIPTS HAVE TO BE ACCOUNTED FOR ON THE BASIS OF T DS CERTIFICATES. ACCORDINGLY THE AMOUNT OF RS.78 567 WAS ADDED AS D IFFERENCE IN PROFESSIONAL RECEIPTS. THE CIT(A) CONSIDERED THE EXPLANATION OF THE ASSESSEE AND FOLLOWING THE ORDER OF THE HYDERABAD BENCH OF THE T RIBUNAL IN THE CASE OF BHARAT TELEVISION LTD. IN ITA NO.1797/HYD/89 AND OF THE MADRAS BENCH IN THE CASE OF SAKURA ELECTRONICS (P) LTD. ALLOWED THE CLA IM OF THE ASSESSEE. THE CONTENTION OF THE LEARNED DEPARTMENTAL REPRESE NTATIVE WAS THAT SINCE THE ASSESSEE HAS ACCOUNTED FOR ONLY PROPORTIO NAL RECEIPT CREDIT FOR THE ENTIRE TDS CANNOT BE ALLOWED. ON THE OTHER HAND T HE LEARNED COUNSEL SUPPORTED THE ORDER OF THE CIT(A). ON DUE CONSIDERATION OF THE MATTER WE UPHOLD THE ORDER OF THE CIT(A). WHETHER A PARTICULAR ACCOUNTING STANDARD HAS BEEN N OTIFIED OR NOT IS NOT MATERIAL. WHAT IS TO BE SEEN IS WHETHER THE ASSESS EE HAS FOLLOWED A RECOGNIZED METHOD OF ACCOUNTING OR NOT. IF METHOD FOLLOWED BY THE ASSESSEE IS SUCH WHEREBY CORRECT INCOME CANNOT BE DEDUCED T HEN ONLY THE ASSESSING OFFICER HAS THE AUTHORITY TO ADOPT A REASONABLE BAS IS TO DETERMINE THE TOTAL INCOME. IN THE INSTANT CASE . IT CANNOT BE DISPUTE D THAT THE ASSESSEE HAS FOLLOWED A RECOGNIZED METHOD OF ACCOUNTING AND HENC E THERE IS NO QUESTION OF ADDING ANY FURTHER AMOUNT TO THE TOTAL INCOME. THERE BEING NO INFIRMITY IN THE ORDER OF THE CIT(A) WE UPHOLD THE SAME. 4. IN OUR OPINION FOR THE ASSESSMENT YEAR UNDER CON SIDERATION THE SAME RATIO IS APPLICABLE SUBJECT TO THE CONDITION THA T THE DIRECT AND INDIRECT EXPENSES INCURRED RELATING TO EARN IMPUGNED RE CEIPTS ALSO TO BE EXCLUDED AS PER MERCANTILE SYSTEM OF ACCOUNTING SYSTEM AND IN TERMS OF ACCOUNTING STANDARD-9 AND SAME TO BE CONSIDERED AT THE TIME OF RECOGNITION OF SAID IMPUGNED INCOME. 4. THE SECOND GROUND IN THE REVENUE APPEAL IS THAT THE LEARNED CIT(A) ERRED IN FACTS AND IN LAW IN DELETING THE ADDI TION OF RS.11 45 000 REPRESENTING PROVISION FOR BAD AND DOUBTFUL DEBTS WH ICH CLAIM IS INADMISSIBLE WITHIN THE MEANING OF SECTION 36(1) (VII) . 3 4.1. THE BRIEF FACT OF THE ISSUE ARE THAT THE ASSESSEE HAD DEBITED PROVISIONS OF BAD AND DOUBTFUL DEBTS OF RS.55 32 906/- IN THE INCOME COMPUTATION IT WAS ALSO FOUND THAT THE PROVISION FOR BAD AND DOUBTFUL DEBT WAS EXCLUDED ONLY TO THE EXTENT OF RS.43 87 006. ACCORDINGLY THE ASSESSING OFFICER ADDED THE DIFFERENCE OF RS.11 45 900 AS I NCOME IN THE ASSESSMENT ORDER. THE ASSESSING OFFICER HAS ALSO NOTED THAT THE ASSESSEE COMPANY HAD ALREADY DEBITED AN AMOUNT OF RS.7 63 617 SEPARATELY UNDER THE HEAD BAD DEBTS AND IT HAD WRI TTEN OFF IN THE PROFIT AND LOSS ACCOUNT. ON APPEAL CIT(A) OBSERVED THAT ASSESSIN G OFFICER DID NOT CONSIDERED CARRIED FORWARD PROVISION FOR BAD AND DO UBTFUL DEBTS AND ASSESSING OFFICER MERELY STATED THAT AN AMOUNT OF RS.7 63 617 HAD ALREADY BEEN DEBITED TO THE PROFIT AND LOSS ACCOUNT HEN CE NO OTHER DEBIT WOULD BE ALLOWED. ACCORDING TO THE CIT(A) THERE IS NO ACCOUNTING INFIRMITY IN THE PROCEDURE FOLLOWED BY THE ASSESSEE AND THE CLAIM OF THE ASSESSEE WAS ALLOWED BY HIM. AGAINST THIS REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD FROM BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. SECTION 36(1)(VII) OF THE IT ACT READS AS FOLLOWS: SECTION 36(1) (VII) : SUBJECT TO THE PROVISIONS OF SUB SECTION (2) THE AMOUNT OF ANY BAD DEBT OR PART THEREOF WHICH IS WRITTEN OF F AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE FOR THE PREVIOUS YEAR. PROVIDED THAT IN THE CASE OF AN ASSESSEE TO WHICH C LAUSE (VIIA) APPLIES THE AMOUNT OF DEDUCTION RELATING TO ANY SUCH DEBT OR PA RT THEREOF SHALL BE LIMITED TO THE AMOUNT BY WHICH SUCH DEBT OR PART THEREOF EX CEEDS THE CREDIT BALANCE IN THE PROVISION FOR BAD AND DOUBTFUL DEBTS ACCOUNT MADE UNDER THAT CLAUSE. TO THIS PROVISION AN EXPLANATION WAS INSERTED BY TH E FINANCE ACT 2001 W.E.F. 1.4.1999 WHICH READS AS FOLLOWS.: EXPLANATION: FOR THE PURPOSE OF THIS CLAUSE ANY B AD DEBT OR PART THERE OF WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE SHALL NOT INCLUDE ANY PROVISIONS FOR BAD AND DOUBTFUL DEBT MA DE IN THE ACCOUNTS OF THE ASSESSEE. 4 5.1. IN OUR OPINION SINCE THE EXPLANATION TO SECTION 36(1) (VII) WAS ADDED W.E.F. 1.4.1989 IT OBLIVIOUSLY APPLIES TO THE PRESENT CASE SINCE THE ASSESSMENT YEAR THAT INVOLVED IS 2005-06. TO C LAIM A BAD DEBT THE ASSESSEE IS REQUIRED TO WRITE OFF OF THE SAME BY DEBITING TO PROFIT AND LOSS ACCOUNT CREDITING TO THE CONCERNED DEBTOR ACCOUNT. IN THE PRESENT CASE THE ASSESSEE IS NOT ABLE TO SHOW BEFORE US THAT DEBTOR ACCOUNT WAS CORRESPONDINGLY WRITTEN OFF AND ALSO FAILED T O ESTABLISH THE COMPLIANCE OF THE REQUIREMENT OF THE SECTION 36(1)(VII ). ACCORDINGLY IN THE INTEREST OF JUSTICE WE SET ASIDE THIS ISSUE TO THE FIL E OF ASSESSING OFFICER TO EXAMINE THE ISSUE AFRESH AND GIVE SPECIFIC FIND INGS REGARDING THE COMPLIANCE OF SECTION 36(1) (VII). 6. IN THE RESULT THE APPEAL OF THE REVENUE IS PART LY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON : 29.1.2010 SD/- SD/- (N.R.S. GANESAN) CHANDRA POOJARI JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 29 TH JANUARY 2010 COPY FORWARDED TO: 1. M/S MONSTER.COM (INDIA) (P) LTD. 8-2-293/82/A/10 24/1 ROAD NO.45 JUBILEE HILLS HYDERABAD 2. ACIT CIRCLE 16(2) 6 TH FLOOR AAYAKAR BHAVAN HYDERABAD 3. CIT(A)-V HYDERABAD. 4. CIT HYDERABAD 5. THE D.R. ITAT HYDERABAD. NP