2015 (12) TMI 281 - AT - Income Tax

Tribunal Upholds Deletion of Additions on Annual Listing Fees

Assistant Commissioner of Income Tax, Circle-6, Jaipur Versus M/s. Jaipur Stock Exchange Ltd.

The Tribunal dismissed Revenue's appeals challenging the deletion of additions on account of annual listing fees received on an accrual basis for ... Addition made on account of annual listing fees received from its member on accrual basis - CIT(A) deleted the addition - Held that:- As decided in assesse's own case for A.Y. 2007-08 Hon'ble Delhi High Court in the case of CIT Vs. Consultng Engg. Services (India) Ltd, [2001 (1) TMI 48 - DELHI High Court ] has held that the method of accounting consistently followed by assessee will be most relevant in the accrual system of accounting and it is not open to AO to disturb the same. In this background it is further noticed that consistently the appellant stock exchange is following same method of accounting regarding accounting of such listing fee income and under similar circumstances, the said system was accepted by assessing Officer while passing orders u/s 145(3) of I.T. Act and no addition has been made. It is further noticed that even in the case of Delhi Stock Exchange Ltd, the listing fee is recognized only from those companies where income is not over due for more than one year and in that case also as per copy of assessment order u/s 145(3) dated 4-12-2008 for assessment year 2006-07 on this account no addition has been made and contrary to this case in the present case the appellant stock exchange is recognizing the listing fee as income where income is not over due for more than 3 years. With this discussion AO was not justified in making said addition which is hereby deleted - Decided in favour of assessee. Issues:Appeals by Revenue challenging deletion of addition made on account of annual listing fees received from members on accrual basis for assessment years 2008-09 and 2009-10.Analysis:1. The appeals by the Revenue were against the deletion of additions made on account of annual listing fees received from members on an accrual basis. The Revenue contended that the ld. CIT (A) had erred in deleting the said addition.2. The Assessing Officer (AO) had noted that the assessee company did not account for the annual listing fees as income for the relevant assessment years and had written them off. Consequently, the AO added the amount of annual listing fees to the income of the assessee for those years.3. On appeal, the ld. CIT (A) decided the issue in favor of the appellant, relying on previous orders of the ITAT Jaipur Bench. The Tribunal, in its order, referred to various legal precedents, including decisions by the Hon'ble Supreme Court and the Hon'ble High Courts, to support the conclusion that the assessing officer was not justified in making the addition of the annual listing fees.4. The Tribunal upheld the finding of the ld. CIT (A) based on the consistent method of accounting followed by the appellant regarding the annual listing fees. The Tribunal emphasized the importance of the accrual system of accounting and the relevance of the method consistently followed by the assessee in determining the recognition of income.5. The Tribunal highlighted that the assessing officer had previously accepted the method of accounting followed by the appellant in similar circumstances and that no addition had been made in those cases. The Tribunal, therefore, concluded that the assessing officer was not justified in making the addition of the annual listing fees and upheld the order of the ld. CIT (A).6. In light of the above analysis and following the precedent set in earlier years for the same assessee, the Tribunal dismissed the appeals of the Revenue and upheld the deletion of the addition made on account of annual listing fees for the assessment years 2008-09 and 2009-10.7. The Tribunal pronounced the order on 11.08.2015, rejecting the grounds of appeal raised by the Revenue and affirming the decision of the ld. CIT (A) in favor of the assessee regarding the treatment of annual listing fees received from members on an accrual basis.