TaxTMI 
TaxTMI 
TaxTMI 
2018 (5) TMI 334
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....y Commissioner of Income-tax, Central Circle 2(2), Bangalore (hereinafter referred to as AO) in making the disallowance of collection charges of Rs. 5,22,04,677/- retained by the airlines under section 40(a)(ia) on completion of assessment U/s. 153A. 2. The CIT(A) failed to appreciate and ought to have held that the provisions of section 194H of the Income Tax Act,1961 are not applicable in as much as there is no principal and agent relationship between the appellant and the airlines. Further the appellant has made detailed submission in support of claim that the airlines has discharged its incometax liability on collection charges of Rs. 5,22,04,677/- retained by the airlines wherever applicable 3. The Appellant therefore prays that the Assessing officer be directed to allow the claim of collection charges of Rs. 5,22,04,677/-. Ground II: Addition of Rs. 13,21,44,035/- by treating the duty credit entitlement under SFIS accrued as grant related to revenue.: 1. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in upholding the action of AO in adding an amount of Rs. 13,21,44,035/- by treating the duty credit entitlement under SFIS accr....
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.... the orders of the authorities below are that the assessee has entered into Operation Management and Development Agreement (OMDA) vide agreement dated 04.04.2006 with the Airport Authority of India (AAI) pursuant to which assessee is required to undertake the function relating to operation, maintenance& development, design, construction, organization, finance and management of the Indira Gandhi International Airport, New Delhi (IGA) and to perform certain aeronautical and non-aeronautical services at the IGI Airport. The major source of revenue of the assessee/appellant is from providing aeronautical services at the IGI Airport which includes landing fees, parking and housing fees, passenger service fees (PSF), Common User Terminal Equipment counter charges (CUTE) and Common Infrastructure Charges (CIC) etc. All these aeronautical service charges are regulated by the Airports Economic Regulatory Authority of India (AERA) in terms of Concession Agreement. The income derived from providing non-aeronautical services, which is primarily from allowing the concessionaires to undertake operation and management of retail outlets in the Passenger Terminal Building areas and other activities....
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.... to the AO, the company should have offered the entire passenger service fees collected to tax and thereafter should have debitedthe expenditure. The AO further observed that cash collection or the cash discount charges is nothing but a commission paid by the assessee company to Airlines operator towards collection of PSF. Assessee should have deducted TDS on collection charges as provided under section 194H of the Income Tax Act (hereinafter called as an "Act"). Since the assessee has not deducted the tax on such payment, the AO had disallowed collection charges or cash discount of Rs. 5,22,04,677/- in assessment year 2011- 12 paid by the assessee to the Airlines operator having invoked the provisions of section 40a(ia) of the Act and was added to the income of the assessee. 6. Assessee preferred an appeal before the CIT(A) with the submission that the AO failed to appreciate that the Airlines make payment to the assessee/appellant after retaining the amount of service fees/cash discount/prompt payment rebate. Firstly it is not liable to TDS and secondly, it was not possible for the appellant to deduct any tax at source since the assessee has never paid any amount to the Airlines....
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.... fees/cash discount/prompt payment rebate retained by them. The CIT(A) re- examined the claim of the assessee but was not convinced with the contentions of the assessee and confirmed the disallowance having relied upon the para 6 of the Circular No. 619 dated 04.12.1991. 9. Aggrieved, the assessee preferred an appeal before the Tribunal and reiterated its contentions as raised before the CIT(A). During the course of hearing, the learned counsel for the assessee invited our attention to the judgment of Hon'ble Delhi High Court in the case of CIT Vs. Ansal Landmark Township (P.) Ltd. (2015)(61 taxmann.com 45)(Del) in which it was held that proviso to section 40(a)(ia) inserted by the Finance Act, 2012 w.e.f. 01.04.2013 creates a legal fiction where an assessee fails to deduct tax in accordance with provisions of chapter XVIIB where such assessee is deemed not to be an assessee in default in terms of the first proviso to sub section (1) of section 201 of the Act, then in such event "it shall be deemed that assessee has deducted and paid tax on such sum on the date of furnishing of return of income by the resident payee referred to in said proviso". Reliance was also placed upon the o....
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.... which the dispute was with regard to nature of payments by the Airlines Operators to the airport authorities in the hands of Airlines operators. In the case of Jet Airways on which heavy reliance was placed the contention of the assessee was that it was collecting the PSF on behalf of the Airlines Operators and after collecting it, it was paid to them. Therefore, there is no liability of TDS under section 194I of the Act. In that case, the Tribunal has categorically observed that Airlines Operator i.e., Jet Airways only collect the PSF from the passengers for and on behalf of the of the Airport Authorities/Operators and passes them to the Airport Authorities/Operators. Therefore, provisions of section 194I are not attracted. The relevant observation of the Tribunal in the case of ACIT Vs. Jet Airways in ITA No.5264/Mum/2012 is extracted hereunder for the sake of reference: "12. We have carefully considered the rival submissions and perused the orders of the authorities below and the relevant material evidence brought on record. Let us first see the cause of PSF, cause lies in Rule 88 of the Indian Aircraft Rules, 1937, which provides as under :- "the licensee is entitled to co....
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.... of systematic use of land specified for consideration under an ITA No.5264/12 arrangement, which carries the characteristics of lease or tenancy. A mere use of the land and payment charged, which is not for the use of the land but for maintenance of the various services including technical services would not technically bring the transaction and the charges within the meaning of either lease or sub-lease or tenancy or any other agreement or arrangement or any nature of lease or tenancy and rent. For these observations, we draw support from the decision of the Hon‟ble Madras High Court in the case of CIT Vs. Singapore Airlines Ltd., reported in (2012) 252 CTR (Mad) 429. 14. It would not be out of place to consider the CBDT Circular No.1/2008, dated 10th January, 2008 relating to the clarification regarding the applicability of provisions of Section 194-I of the Act to payments made by the customers on account of cooling charges to the cold storage owners, wherein the CBDT had the occasion to consider the representations in respect of the issue, whether the customer hires the building, plant and machineries etc., without packages for reservation for a required period are kep....
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....A perusal of the aforementioned rule clearly shows that it is a statutory liability for every licensee to collect PSF. Since it is a statutory liability and the meaning given by the statute has to be considered and in this case the Indian Aircraft Rules, 1937 has used the term "Fees", therefore, same meaning has to be given while considering the PSF. It is not in dispute that the assessee is only acting as a conduit between ITA No.5264/12 the embarking passengers and the Central Government agency. This view is also AIR INDIA LTD. fortified by the fact that out of Rs. 200/-, Rs. 130/- is the security component, which is deposited in a separate escrow account, which is operated and can be utilized by airport concerned only to meet the security related expenses of that airport. 13. Further it is pertinent to note that the CBDT in its Office Memorandum dated 30-06-2008 has clearly stated the fact that the licensee of the airport i.e. the airport operator, is required to collect the PSF is initially collected by the concerning airlines from the passengers and then handed over to the respective airport operator/authority. Thus, it is absolutely clear that the assessee only collects t....
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....4-I is not applicable to the cooling charges paid by the customers of the cold storage. Applying the same analogy, the PSF charges paid by the assessee on behalf of its customers, do not attract the provisions of Section 194-I of the Act. 15. Considering all these judicial decisions in the light of the facts of the case, we do not find any error/omission in the findings of the CIT(A). Hence, the assessee succeeds and the revenue fails and the findings of the CIT(A) are confirmed. Accordingly, grounds No.1 & 2 are hereby dismissed. 16. In the result, the appeal of the revenue is dismissed." 11. On a perusal of the aforesaid decision of the co-ordinate bench, it is evident that the Bench, while deciding the issue has held that PSF collected by the Airline from the passengers for payment to Airport Authority of India / Airport developer is not rent, hence, provisions of section 194-I are not applicable. As the Department has failed to bring to our notice any other decision expressing a contrary view, respectfully following the decision of the co-ordinate bench of the Tribunal in Jet Airways (India) Ltd. (supra), we uphold the decision of the learned Commissioner (Appeals) by dis....
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.... the collection charges or the commission, whatever nomenclature is given, retained by them assumes the character of commission paid by the Principal to its agents and the Principal is required to deduct the TDS on such payments to its agent under section 194H of the IT Act. In the light of these facts, we are of the considered view that the assessee is required to deduct the TDS on the amount retained by the Airlines while making the payment to the assessee. Our attention was also invited to the proviso to section 40(a)(ia) of the Act, according to which if the respondent has paid the tax on the receipt and filed the return before the due date of filing the return, the assessee cannot be deemed to be in default. 15. The scope of proviso was examined at number of occasions by the Tribunal and various High Courts. The Hon'ble Delhi High Court in in the case of CIT Vs. Ansal Landmark Counsel Pvt. Ltd., (supra) examined this aspect and has held that though the proviso was inserted w.e.f. 01.07.2012, but it was declaratoryand curative in nature and has retrospective effect from 01.04.2005 being the date from 40(a)(ia) inserted by the Finance Act, 2004. The relevant observation of the ....
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....as the present case is concerned, it is not disputed by the Revenue that the payee has filed returns and offered the sum received to tax. 13. Turning to the decision of the Agra Bench of ITAT in Rajiv Kumar Agarwal v. ACIT (supra ) , the Court finds that it has undertaken a thorough analysis of the second proviso to Section 40 (a)(ia) of the Act and also sought to explain the rationale behind its insertion. In particular, the Court would like to refer to para 9 of the said order which reads as under: "On a conceptual note, primary justification for such a disallowance is that such a denial of deduction is to compensate for the loss of revenue by corresponding income not being taken into account in computation of taxable income in the hands of the recipients of the payments. Such a policy motivated deduction restrictions should, therefore, not come into play when an assessee is able to establish that there is no actual loss of revenue. This disallowance does deincentivize not deducting tax at source, when such tax deductions are due, but, so far as the legal framework is concerned, this provision is not for the purpose of penalizing for the tax deduction at source lapses. There ....
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....responding income is duly brought to tax. That will be going much beyond the obvious intention of the section. Accordingly, we hold that the insertion of second proviso to Section 40(a)(ia) is declaratory and curative in nature and it has retrospective effect from 1st April, 2005, being the date from which sub clause (ia) of section 40(a) was inserted by the Finance (No. 2) Act, 2004." 14. The Court is of the view that the above reasoning of the Agra Bench of ITAT as regards the rationale behind the insertion of the second proviso to Section 40(a) (ia) of the Act and its conclusion that the said proviso is declaratory and curative and has retrospective effect from 1st April 2005, merits acceptance." 16. But this aspect was not examined by the CIT(A). Since it requires verification of facts, we feel it proper to set aside the order of the CIT(A) and restore the matter to the file of the AO with the direction to readjudicate the issue in the light of proviso to section 40(a)(ia) of the Act, after affording opportunity of being heard to the assessee and if it is established that the respondent has paid the tax and filed the return in time, the assessee should not be held in default....
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....rein it was held that duty credit should be recognized as other income and further the cost of fixed asset inclusive of duty payable is eligible for depreciation. The AO was of the view that assessee should have offered to tax the duty credit entitlement for the assessment year in which the assessee became entitled to the duty credit. The AO accordingly made an addition of Rs. 19,91,32,992/- in assessment year 2011-12 having observed that assessee has recognized the principle by offering to tax the duty credit entitlement to tax for assessment year 2014-15. 19. Assessee preferred an appeal before the CIT(A) with the submission that under the SFIS scheme, assessee became entitled to SFIS duty credit scrips amounting to Rs. 8.82 crores based on the foreign exchange earned by the assessee company during the financial year 2010-11. It was further submitted that assessee company has cumulatively utilised duty credit scrips amounting to Rs. 89.60 crores upto the financial year 2012-13 against the payment of custom duty which was required to pay on import of capital goods/consumables. The complete details of year wise duty entitlement and its utilization from financial year 2007- 08 to f....
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....ther and not necessarily in form of cash. It could be seen from the abovedefinition that any assistance from the Government whether in cash or kind given eitherfor past or future compliance with certain conditions would constitute a government grant. The featuresof the duty credit entitlement certificate reveals that it is in the form of assistance given by the government. Further, as per AS-12, there are two approaches for accounting of government grant i.e. capital approach under which the grant 'is treated as part of shareholder's fund and the' income approach under which the grant is taken to income- over one or more periods. As the Company has used the scrips for the payment of custom duty on purchase of capital assets only, the assessee company has treated the government grant as 'related to specific fixed assets and presented the same as deduction from the gross value of fixed assets in its books of account. Thus grant is recognized in profit & loss account over the useful life of a depreciable assets by way of a reduced depreciation charge. 5. The Appellant had cumulatively utilized SFIS scrip amounting to Rs. 41.27 Crores (approx.) out of Rs. 45.62 Cror....
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....or reimbursement (by whatever name called), then, so much of the cost as is relatable to such subsidy or grant or reimbursement shall not be included in the actual cost of the asset to the assessee: Provided that where such subsidy or grant or reimbursement is of such nature that it cannot be directly relatable to the asset acquired, so much of the amount which bears to the total subsidy or reimbursement or grant the same proportion as such asset bears to all the assets in respect of or with reference to which the subsidy or grant or reimbursement is so received, shall not be included in the actual cost of the asset to the assessee. The appellant has utilized the SFIS duty scrips of Rs. 41.27 Crores against payment of capital goods and claimed depreciation on such reduced amount after the asset was capitalized and put to Use. 9. The Appellant most humbly submits that the learned AO failed to appreciate and ought to have held that mere accrual of the entitlement of SFIS duty credit scrips would not be considered as income. The Appellant is only eligible to obtain the SFIS Scrips on the foreign exchange earned during the year but the process for obtaining the same have not been....
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.... present case, e Duty Credit scrips granted is towards utilizing the same for payment of custom duty on capital goods imported from abroad and thus the same shall be in the nature of capital receipt to be reduced from the capital receipt for the purpose of claiming depreciation thereon. And in fact the appellant has accorded the same treatment in its tax return which is in accordance with accounting Standard 12 issued by ICAI, provisions of section 43(1) read with Explanation 9 and 10 and the settled legal position on the issue. 12. Further, it is relevant to note that in due furtherance of the Income Computation and Disclosure Standard VII (ICDS) dealing with Government Grants notified by the Central Board of Direct Taxes vide Notification No. SO 892(E) dated 31st March, 2015 with effect from Ay 2016-17 which are applicable for computation of income chargeable under the head Profit & Gains of business or profession' or 'Income from other sources', any government grant such as subsidies, cash incentives, duty drawbacks, waiver, concessions, reimbursements etc. in case it relates to: a) Depreciable assets - shall be deducted from actual cost of the asset or written d....
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....sions of the Act shall prevail to that extent. 13. It is respectfully submitted that the Hon'ble Supreme in the case of Commissioner of Income Tax, Madras vs. Ponni Sugars & Chemicals Limited, Civil Appeal No.5694 to 5715 of 2008, [2008] 174 Taxman 87 (SC) has settled that, it is the object for which subsidy/assistance is given, that truly which determines nature of subsidy. The character of the receipt in the hands of the assessee has to be determined with respect to the purpose for which the subsidy is given. In other words, in such cases one has to apply the 'Purpose Test'. The point of time when the subsidy is paid is not relevant. The source is immaterial; the form of subsidy is also immaterial. If the object of the subsidy scheme was to enable the assessee to run the business more profitably, then the receipt was on revenue account. On the other hand, if the object of the assistance under the subsidy scheme was to enable the assessee to set up a new unit or to expand its account. Therefore, it is the object for which the subsidy/assistance is given which determines the nature of incentive subsidy. The form of the mechanism through which the subsidy is given is irrel....
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....he order of the AO having relied upon the report of the Expert Advisory Committee of the ICAI wherein they have opined that such amount would be in the nature of revenue receipt whereas the Hon'ble Supreme Court in the case of CIT Vs. Ponni Sugars Ltd., (2008, 174 Taxman 87(SC) has held that it is the object for the subsidy given, that truly determines the nature of subsidy assistance. The character of subsidy received in the hands of the assessee has to be determined with respect to for the purpose for which subsidy is given. Since the CIT(A) has not adjudicated the issue in the light of submissions made by the assessee and rather in the light of the judgment of the Apex Court this order deserves to be set aside. The learned DR on the other hand has placed heavy reliance upon the order of the CIT(A). 21. Having carefully examined the orders of the authorities below in the light of rival submissions, we find that undisputedly under the SFIS, the assessee company became entitled to duty credit entitlements certificate from the Director General of Foreign Trade, Government of India,for custom duty credit scrips which are to be used for import of any capital goods including spares, ....
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....g the impugned assessment year. The aspect where disallowance can be made in the absence of exempted income was examined by the Tribunal and relying upon the order of the High Court and the Apex Court it was held that in the absence of any exempted income, no disallowance under section 14A can be made. The relevant observation of the Tribunal in the case of case of DCIT Vs. MFar Holdings Pvt. Ltd., is as under: "4. Having carefully examined the orders of authorities below, we find that undisputedly the assessee has not earned any exempted income. Now it is settled position of law that whenever assessee did not earn any exempt income, no disallowance could be made u/s. 14A of the Act. In this regard, the Hon'ble Delhi High Court in the case of Cheminvest Ltd. v. CIT, 378 ITR 33 (Del) has categorically held that section 14A envisages that there should be actual receipt of income which was not includible in the total income during the relevant previous year for the purpose of disallowing any expenditure in relation to the said income. Wherever there is no exempt income includible in the total income of the assessee, the provisions of section 14A cannot be invoked. The relevant obser....
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....action attracts capital gains tax. It is an undisputed position that respondent assessee is an investment company and had invested by purchasing a substantial number of shares and thereby securing right to management. Possibility of sale of shares by private placement etc. cannot be ruled out and is not an improbability. Dividend may or may not be declared. Dividend is declared by the company and strictly in legal sense, a shareholder has no control and cannot insist on payment of dividend. When declared, it is subjected to dividend distribution tax." 17. On facts, it was noticed in CIT v. Holcim India (P.) Ltd. (supra) that the Revenue had accepted the genuineness of the expenditure incurred by the assessee in that case and that expenditure had been incurred to protect investment made. 18. In the present case, the factual position that has not been disputed is that the investment by the assessee in the shares of Max India Ltd. is in the form of a strategic investment. Since the business of the assessee is of holding investments, the interest expenditure must be held to have been incurred for holding and maintaining such investment. The interest expenditure incurred by the asse....
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....t have been earned as a result of the expenditure." 21. There is merit in the contention of Mr. Vohra that the decision of the Supreme Court in Rajendra Prasad Moody (supra) was rendered in the context of allowability of deduction under section 57(iii) of the Act, where the expression used is "for the purpose of making or earning such income". Section 14A of the Act on the other hand contains the expression "in relation to income which does not form part of the total income". The decision in Rajendra Prasad Moody (supra) cannot be used in the reverse to contend that even if no income has been received, the expenditure incurred can be disallowed under section 14A of the Act. 22. In the impugned order, the Income-tax Appellate Tribunal has referred to the decision in Maxopp Investment Ltd. (supra) and remanded the matter to the Assessing Officer for reconsideration of the issue afresh. The issue in Maxopp Investment Ltd. (supra) was whether the expenditure (including interest on borrowed funds) in respect of investment in shares of operating companies for acquiring and retaining a controlling interest therein was disallowable under section 14A of the Act. In the said case, admitt....
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.... against the relief allowed by CIT(Aappeals) before the ITAT which is pending for disposal. Considering, non- acceptance of order of CIT(Appeals), the AO based on the decision given in the assessment order of AY 2007-08 should have allowed deduction for 1/30th of upfront fees. - The Appellant prays that the AO be directed to allow the deduction for 1/30th for upfront fees. - The learned AO in the assessment order for AY 2007-08 had held repair and maintenance expenditure as capital in nature and allowed 1/301h or the total expenditure for the relevant assessment year. Further, the learned AO allowed depreciation on the ground that the said expenditure was capital in nature and has allowed depreciation thereon for AY 2008-09 to 2010-11. - In first appeal against the said order for AY 2007.-08 to 2010-11, the said repair and maintenance expenditure has been held allowable as revenue expenditure by Your Honour's predecessor. However, the AO has not accepted the decision of CIT(Appeals) arid the Revenue has filed further appeal against the relief allowed by CIT(Appeals) before the ITAT which is pending for disposal. Considering, non - acceptance 6f order of CIT(Appeals), the ....
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.... an amount of Rs. 8,64.31,498/- by treating the duty credit entitlement under SFIS accrued as grant related to revenue on completion of assessment U/s. 153A which was reduced from the capital cost for the purpose of allowing depreciation in the original assessment proceedings u/s 143(3) of the Income Tax Act. 2 The Appellant therefore prays that the Assessing officer be directed not to allow an amount of Rs. 8,64,31,498/-. Ground III: Addition by including the revenue of Rs. 69,04,00,000/- from National Aviation Company India Ltd on accrual basis: 1. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in upholding the action of the AO in including the revenue of Rs. 69,04,00,000/- from National Aviation Company India Ltd on accrual basis on completion of assessment U/s. 143(3) r.w.s 153A of the Income Tax Act. 2. The CIT(A) failed to appreciate and ought to have held that in view of uncertainty in collection of revenue of Rs. 69,04,00,000/- from National Aviation Company India Ltd are to be taxed on receipt basis. 3. . The Appellant therefore prays that the Assessing officer be directed to delete the addition made of Rs. 69.04,00,000/....
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....ara. Hence, following the same, we confirm the order of the CIT(A). 29. Ground No. 3 relate to addition on account of inclusion of revenue from National Aviation Company India Ltd., (NACIL) on accrual basis of Rs. 69,04,00,000/-. The facts in brief borne out from the record are that the assessee company, as per notes of accounthas for the period from October 2011 to March 2012 recognised revenue from the services rendered to M/s. National Aviation Company of India Ltd., (NACIL) which includes its affiliates like Air India, Indian Airlines and Alliance Air , Air India Charters and Centaur Hotel on cash basis when the assessee company is following the merchantile basis where the revenue is to be recognized on accrual basis. The assessee company for the financial year for all other revenues has followed mercantile system of accounting including for the revenues generated fromM/s. NACIL and its affiliates till September 2011. The assessee was asked to explain for the diversion from the regular method of accounting by issuing a show cause notice dated 27.11.2014 as to why the revenues from M/s. NACIL should not be recognized on accrual basis. In response thereto, the assessee filed a l....
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....siness. The assessee has preferred an appeal before the CIT(A) and furnished the detailed submissions explaining the reasons for the conversion of method of accounting to cash basis. For the sake of reference, we extract the detailed submissions from the order of the CIT(A) as under: "Facts - The Appellant has entered into OMDA with Airport Authority of India (AAI), pursuant to which the appellant is required to undertake the functions relating to the operation, maintenance, development, design, construction, finance and management of the Indira Gandhi International Airport at New Delhi (IGI Airport) and to perform certain aeronautical and non-aeronautical services at the IGI Airport. It is submitted that major-source of revenue of the Company is from providing aeronautical services at the IGI Airport which includes landing fees, parking and housing fees, passenger service fee (PSF), Common User Terminal Equipment counter charges (CUTE) etc. All these charges are regulated by the Airports Economic Regulatory Authority of India (AERA) in terms of OMDA and the State Support Agreement (SSA). The income derived from providing Non-aeronautical services, which is primarily from allow....
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....#39;Air India') amounting to Rs. 132.61 Crores (approx.). However, against the above billing Air India has paid in aggregate an amount of Rs. 21.77 Crores only up to September 2011. Thus, the total amount of outstanding from Air India as on September 30`h 2011 increased to Rs. 191.88 Crores. It is submitted further that in terms of agreement, for the aeronautical services provided by the appellant, Air India was required to pay within 15 days from the date of invoice and in case of non-aeronautical services provided by the appellant Air-India is required to pay within 7 days from the date of invoice. With respect to increase in the amount of dues, the appellant had series of meetings and discussions at various levels with the senior officers of Air India, as well as Ministry of Civil Aviation (MoCA) in regard to non-payment of its dues on time against the services utilized by Air India, but no concrete resolution emerged. It is submitted further that the Company was having huge cash losses to the tune of Rs. 209 Crores (approx.) and 645 Crores (approx.) during the financial year 2010-11 & 2011-12 and non- payment of outstanding dues from Air India has further worsen the cas....
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....n 30th May, 2011 the following understanding was reached: a. Air India will submit a plan of settlement of dues by 2nd June, 2011 through MoCA confirming their commitment for payment of dues on immediate basis as well as going forward. b. Air India will remit Aero dues mainly on account of Landing, Parking and Housing charges on daily basis effective 1st June, 2011 for which DIAL will raise invoices on daily basis. c. Air India agreed to settle DF and PSF dues for the period upto 31st May, 2011 latest by 15th June, 2011. As per the above decision, the Company started raising invoices on daily basis effective from 1st June, 2011. However, there was no recovery from Air India side on the basis of above decision. The dues from Air India were constantly increasing despite continuous meetings and follow-ups with their senior management. - Thereafter, the Appellant on June 8u1 2011 and June 17th 2011 again sent reminder letter to Air India in relation to clearance of its outstanding dues. However, due to non-realization of dues from Air India, the Company vide its letter no. 581 dated June 24th 2011, explained the Secretary, MoCA, regarding the cash losses suffered by the Appel....
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....vere pressure on the cash flows of the company; iii, Inspite of the continuous outstanding from dues of NACIL and non-receipt of their payment, the company was paying its corresponding revenue share to AAI on the revenue recognized from NACIL, as per OMDA, thereby increasing the working capital deficiency and creating the negative cash flows for the company. iv. As per Companies Act 1956 every Profit and Loss account and Balance sheet of the company shall comply with accounting standards and accounting standards mean the accounting standards recommended by the Institute of Chartered Accountants of India. v. As per Accounting Standard -9, Revenue means the gross inflow of cash, receivables or other consideration arising in the course of the ordinary activities of any enterprise and Revenue on rendering services is recognized when all the following criteria have been satisfied: i. Performance has been achieved i.e. no significant uncertainty exists regarding the amount of consideration that shall be derived from rendering the service. ii. Revenue is measurable. iii. It is not unreasonable to expect the ultimate collection vi. As per Clause 9.2 of Accounting Standard-9, ....
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....her that the Appellant Company in accordance with the decision taken in its Board Meeting held on October 25' 2011 has recognized the revenue from Air India for the period starting from October 2011 to March 2012 on receipt basis in f inancial year 2012 -13. Accordingly, the Company has also paid the revenue share (c) 45 .99 % in terms of OMDA to AAI on the revenue from Air India on cash basis. iii. It is submitted further that the Appellant Company has recognized the revenue from Air India on receipt basis from October 1'2011 to March 31.''` 2012 in line with Clause 9.2 of AS-9 deals with "Revenue Recognition" issued by the ICAI which allows the deferment of revenue recognition till such time there is reasonable certainty of timing of its realization. The relevant extract is reproduced below: "9.2 Where the ability to assess the ultimate collection with reasonable certainty is lacking at the time of raising any claim, e.g., for escalation of price, export incentives, interest etc., revenue recognition is postponed to the extent of uncertainty involved. In such cases, it may be appropriate to recognise revenue only when it is reasonably certain that the ultimate....
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....ed to Air India which in turn creating a cash crunch situation in the appellant company. The assessee also issued a cash and carry notice to Air India in January 28, 2011 and thereafter vide letter dated 12.05.2011 the assessee company informed the Chairman and Managing Director of Air India regarding cashflow crises faced by the company and requested the Air India to reduce its outstanding by 75% immediately and also submit the action plan for reducing the balance outstanding to the extent of 25% only. Ultimately the meeting was convened with the Chairman and Managing Director of Air India Ltd., Joint Secretary, MoCA on 30.05.2011 in which certain decisions were taken and as per those decisions, assessee company started raising invoices on daily basis effective from 01.06.2011. However, there was no recovery from Air India side on the basis of the decisions. Dues from Air India were constantly increasing despite continuous meeting and follow upswith the senior management. Despite all repeated reminders and efforts, dues were not cleared and ultimately vide letter dated 24.06.2011, assessee has explained the Secretary, MOCA regarding cash losses suffered by the appellant due to non....
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....asis, we are of the view that he should be allowed as there is no loss to the revenue. Moreover, assessee was dealing with the public sectors which are engaged in essential services. Therefore, we do not find anything wrong in conversion of mode of recognition of revenue from mercantile to cash basis only with regard to receipt from M/s. NACIL and its affiliates. Accordingly, we set aside the order of the CIT(A) and direct the AO to accept the mode of recognition of revenue by the AO. 35. ITA No.581/Bang/2017 In this appeal, the assessee has assailed the order of CIT(A), inter alia, on following grounds: Ground I: Order passed under section 143(3) r.w.s. 153A is liable to be quashed 1. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in holding that in case a notice under section 153A is issued the Assessing Officer is bound to assess and reassess the total income of the Appellant. 2. The Assistant Commissioner of Income-tax, Circle-10(1), New Delhi has completed the assessment of the Appellant vide order dated December 29, 2009 passed under section 143(3) and in the course of such assessmentand examination was made. A search and sei....
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...., following the same, we set aside the order of the CIT(A) and restore the matter to AO to readjudicate the issue afresh after affording opportunity of being heard to the assessee in terms indicated in the foregoing appeals. 37. ITA No.596/Bang/2017 This appeal is preferred by the assessee assailing the order of the CIT(A), inter alia, on following grounds: Ground I: Addition on account of disallowance of collection charges of Rs. 4,53.88,032/- retained by the airlines under section 40(a)(ia): 1. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in upholding the action of the Deputy Commissioner of Income-tax, Central Circle 2(2), Bangalore (hereinafter referred to as AO) in making the disallowance of collection charges of Rs. 4,53,88,032/- retained by the airlines under section 40(a)(ia) on completion of assessment U/s. 153A. 2. The CIT(A) failed to appreciate and ought to have held that the provisions of section 194H of the Income Tax Act,1961 are not applicable in as much as there is no principal and agent relationship between the appellant and the airlines. Further the appellant has made detailed submission in support of claim tha....