2016 (6) TMI 796

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....mments of the auditor in the audit report that "no income had been booked for Rs. 1619.80 lacs for the year and for Rs. 3630.07 lacs for earlier years on account of lease rent payable/claimed by the Railways for the use of STM 4 Bandwidth." The Assessing Officer refused to accept the assessee's contention that the approval of the Railways for the payment was received only on 19.12.2008 and therefore the revenue was to be recognized only in financial year 2008-09. The Assessing Officer was also of the opinion that since the assessee company maintained its books of account on mercantile basis, the amount was includible on accrual basis. The Assessing Officer also referred to the fact that the agreement between the assessee company and the Railways was dated 21.09.2006 and, therefore, the effective date for accounting on accrual basis commenced on 21.09.2006 and the contention of the assessee that the Financial Advisor of the Railways had not vetted the payment during the year under consideration was only a pretext to shift the year of chargeability. 3. On appeal before the First Appellate Authority, the addition was confirmed. The issue has been discussed by the Ld. CIT (A) in paras....

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.... Approx RKM handed over during 2004-055409 39047571 Approx RKM handed over during 2005-0622438 161979922 Approx RKM handed over during 2006-0722438 161979922   363007415 Income for A.Y. 2008-09 reported by Auditor 1619 lacs"   4.4 Thus the RKM handed over during the relevant assessment year is 22438 and the same has been valued at Rs. 1619.80 lacs. The appellant company in its submission has mainly relied upon letter dated 30.06.2008 as per which the lease charges are payable from the date on which the actual route handing over of the STM 4 capacity takes place. The auditor of the appellant company for computation of income and for purpose of comments in notes of accounts on income not shown has relied upon letter dated 23.05.2008. This letter dated 23.05.2008 has been written by the Director/NPM of the appellant company specifying the date on which actual handing over has taken place. As per the annexures to this letter, written to the Secretary, Ministry of Railways, on the subject of payment of STM 4 lease charges by the railways, for the purpose of verification of STM 4 bandwidth which has already been provided to the railways, the approximate date of handi....

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....that the assessee had not acquired the right to receive the income because the right was subject to the satisfaction of the Zonal Railway authorities which did not happen till the conclusion of the year under appeal. The Ld. AR also referred to and drew the attention of the Bench to the following evidences/documents in the paper book:- PB 73-114 is agreement between the appellant and railways in which at PB 81, as per Clause 3.1.11, it has been mentioned that lease charges as mutually decided shall be payable on creation of STM 4 network. PB 82 contains clause 3.2.8 which mentions that till such time that STM 4 network is setup , no charges shall be payable by railways to the appellant PB 37-38 is AS-9 which, provides that recognition of income may be deferred in case of uncertainty. PB- 39 is letter dated 30.01.2008 from Indian Railways intimating to the assessee that lease charges will be Rs. 7219 per K.M. to be paid by Zonal Railways based on actual route KMs of STM 4 capacity handed over to them and the date from which handover has taken place. PB 40-41 is letter from the assessee to railways dated 23.05.2008 intimating the list of sections along with the date of handi....

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....u Industrial Gases (ITR No. 229/1988) and CIT vs Dinesh Kumar Goel 331 ITR 10 (Del) for the proposition that the question as to the year in which an income is chargeable may be material when the rate of tax chargeable on the assessee in two different years is different but in the case of income of company, tax is attracted at a uniform rate, and, therefore, the year of chargeability of income should be of no consequence to the Department. The Ld. AR also placed reliance on the judgment of the Hon'ble Punjab & Haryana High Court in the case of CIT vs Vee Gee Industrial Enterprises (I.T.A. No. 187 of 2014) for the same proposition and submitted that in light of these judgements, the addition ought to be deleted. 7. The Ld. DR submitted that when the basis of accounting is mercantile, the receipts should be taxable on accrual basis only and, therefore, the action of the Assessing Officer was justified. He strongly supported the orders of the authorities below and submitted that the same should be upheld. 8. We have heard the rival contentions and perused the material on record. For the purpose of this appeal, we will not be adjudicating on the issue of the year of accrual of inc....