2018 (5) TMI 1692 - AT - Income Tax

Appeal dismissed: Trade deposit not revenue receipt. Double taxation avoided. Assessee's accounting method upheld.

The Revenue's appeal against the deletion of an addition of a trade deposit treated as a revenue receipt was dismissed. The CIT(A) found that the trade ... Addition of trade receipts - nature of receipts - revenue receipts admissibility - business of automobile dealer and service centre - Held that:- Assessee's vehicles are kept with ARDs and SSPs for display, test drive, etc. trade deposits are received from them by the assessee by way of security deposits - when sales takes place through the ARDs and SSPs, assessee account for the sales proceeds in the books of accounts and refunds the corresponding deposits to the ARDs and SSPs - this method has been consistently followed over the years - assessee's own case [2016 (8) TMI 1354 - ITAT AHMEDABAD] to be followed. - Decided in favor of assessee. Issues:Revenue's appeal against deletion of addition of trade deposit as revenue receipt.Analysis:The Revenue appealed against the deletion of an addition of Rs. 80,00,000 made on account of a trade deposit treated as a revenue receipt by the assessee. The sole issue raised was whether the CIT(A) erred in deleting the addition. The assessee, engaged in the automobile business, had shown trade deposits of Rs. 80,00,000 received from parties in the balance sheet. The AO added this amount to the total income, considering it as the value/sale proceeds of vehicles. However, the CIT(A) deleted the addition after considering the appellant's submissions and the consistent method followed by the assessee in previous years.The CIT(A) noted that the trade deposits were received as security from Authorized Representative Dealers (ARDs) and Sales Service Providers (SSPs) for displaying vehicles. The sales proceeds were accounted for when actual sales occurred, and the deposits were returned. The CIT(A) observed that the AO's action was against basic accounting principles and led to double taxation. The Tribunal, in a similar case involving the assessee, had decided in favor of the assessee, emphasizing the consistent accounting method followed. The Tribunal found no reason to interfere with the CIT(A)'s order, and the Revenue's appeal was dismissed. The judgment was pronounced on 24/05/2018.