2014 (4) TMI 1227 - AT - Income Tax

Freezer Deposits Not Taxable: Tribunal Rules in Favor of Assessees

The Deputy Commissioner of Income-tax, Central Circle-1, Ernakulam. Versus Cream Packs P. Ltd., M/s. Combined Foods P. Ltd., M/s. South Shore Ice Cream P. Ltd., M/s. Kreem Drinks P. Ltd., M/s. Jojo Frozen Foods P. Ltd., M/s. High Range Foods P. Ltd.,

The Tribunal upheld the decision that deposits received by the assessees for freezers were not taxable income. The Tribunal considered the necessity of ... Accrual of income - Taxability of freezer deposits received by these assessee from their customers - The only objection of the DR is that the appeal was filed against the order of the Tribunal and the same is pending before the High Court. But on a query from the Bench, DR submitted that he does not have knowledge of any stay granted by the Hon’ble High Court on the operation of the earlier order of the Tribunal. Held that:- Since the CIT(A) has followed the order of the Tribunal, we are of the considered opinion that mere pending of the appeal before the High Court against the order of the Tribunal cannot be a reason to take a different view. Therefore this Tribunal is of the considered opinion that the deposits collected by the assessee for freezer cannot be considered as income of the assessee. Issues: Taxability of freezer deposits received by assessees.Analysis:The judgment by the Appellate Tribunal ITAT Cochin dealt with the taxability of freezer deposits received by various assessees from their customers. The appeals were filed by the Revenue against the orders passed by the Ld. CIT(A)-I, Kochi, and the issue in all appeals was identical. The key issue was whether the deposits in respect of the freezer should be considered as income of the assessees or not.The Ld. DR argued that the deposits collected by the assessees in respect of the freezer should be considered as income, as per the department's stand. On the other hand, the Ld. AR of the assessees contended that the Tribunal had previously found in favor of the assessees, stating that such deposits cannot be considered as income. The Tribunal referred to a previous order in the case of M/s. Kreem Foods (P) Ltd., where a similar issue was decided in favor of the assessee.The Tribunal analyzed the submissions and relevant material on record. It noted that the deposits for the supply of freezers were necessary for the business operations and were attached with a liability. The Tribunal observed that until the agreement was terminated, the deposits could not be considered as income accrued to the assessee. The Tribunal also cited various legal precedents supporting the assessee's position.The Ld. DR raised an objection regarding the pending appeal in the High Court against the Tribunal's order. However, since there was no information about any stay granted by the High Court, the Tribunal upheld the decision of the Ld. CIT(A) to follow the Tribunal's earlier order. The Tribunal concluded that the deposits collected for freezers could not be considered as income of the assessees, based on the previous Tribunal decision and the facts of the case.In light of the above analysis and the Tribunal's decision, it was held that there was no infirmity in the order of the Ld. CIT(A), and all the appeals filed by the Revenue were dismissed. The judgment confirmed that the deposits received by the assessees for freezers should not be treated as income.