AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (5) TMI 408
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.... at Rs. 99,53,591/-. Further, as per the balance sheet, a sum of Rs. 3,14,30,524/- has been shown as receivable which has been computed by adding income and service tax and deducting TDS thereon. He, therefore, asked the assessee to explain as to why the income/receipt for the year under consideration may not be taken at Rs. 3,10,81,172/-. He asked the assessee to furnish all documentary evidence to support the claim and furnish the financial statements with schedules of M/s Hyundai Motor India Ltd. for the year ending 31.03.2013 showing the amount booked by the said concern and the amount shown as advance in their books. The assessee, in response to the same, submitted that the income is recognized at cost plus 8% which has been correctly followed by the assessee. It was submitted that the total expenses incurred by it is Rs. 92,16,288/- and profit @ 8% on the above comes to Rs. 7,37,303/-. Therefore, the total revenue has correctly been accounted by the assessee at Rs. 99,53,591/-. It was submitted that under Rule 3(b) of the Service Tax Point of Taxation Rules, service tax has to be paid on generation of invoice and it does not matter whether it relates to income or advance. It ....
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.... may be passed wherein the matter may remain suspended till a substantive assessment of HMI is carried out. 4. However, the Assessing Officer was not satisfied with the arguments advanced by the assessee. He noted that the revenue has to be recognized on the basis of the invoice raised upto 31.03.2013 for the following reasons:- "1. The important aspect to be noted here is that in its service tax return, assessee has accounted the gross revenue as Rs. 3,10,81,172/- and paid service tax accordingly. 2. In the copy of invoice raised, word advance has not been mentioned. 3. The amount received from M/s Hyundai Motors India Ltd has been immediately remitted to the holding company M/s Hyundai Capital Services Inc, Korea. 4. The Payer company, M/s Hyundai Motors India Ltd, has accounted the bill amount as expense and there has to be matching in the accounting standard of both the companies following mandatory mercantile system of accounting i.e., payee as well as payee . So accounting of the said income has to be in tune with the same for offering it for relevant year under consideration." 5. He noted that the assessee has raised the invoice, therefore, this payment was receive....
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.... assessee has a legal right to receive. 11. The appellant company admittedly maintains its accounts according to the mercantile system. In this system and as per Accounting Standards, credit entries are made in respect of amounts due immediately once they become legally due. In the present facts and circumstances of the case, there remains no doubt that the appellant has wrongly offered income receipt Rs. 99,53,591/- instead of Rs. 3,10,81,172/-. Accrued income represents the income which has been earned but yet not reclaimed and undoubtedly the income must be recorded in the accounting period in which it is earned. The assessee company has failed to recognize the entire income which arose in the previous year relevant to assessment year 2013-14 and rather shifted it to subsequent year which cannot be accepted being contrary to established laws. 12. Appellant's insistence that income has been recognized on the basis of installment plan agreed between the two parties as mentioned in Consulting Service Agreement (CSA) does not carry any credence as the said agreement is between two parties working under the same umbrella of 'Hyundai Groups of Companies' and such agree....
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....o Rs. 2,11,27,581/- which represents the amounts invoiced to customer as and when the billing milestone as per the CSA are triggered but in respect to which no services have been rendered neither any cost has been incurred by the appellant during the subject year. 4. That the CIT(A) and AO have failed to appreciate that the aforesaid advance received have been offered to tax in subsequent assessment year when the work is performed and cost is incurred, the addition of the same to the total income of subject assessment year shall amount to double taxation. 5. That the assessee has been recognising the income as per the applicable accounting standards and principles. Further the appellant has been consistently following this approach. Both the lower authorities have erred in disturbing the regular method of accounting followed by the appellant and disregarding the judicial precedent laid down in this regard by the Hon'ble Supreme Court. 6. That without prejudice to the above the method of recognition of income has been accepted by the department in subsequent years i.e AY 2014-15, as for the succeeding year returned income has been accepted in order under section 143(3) of the ....
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....n of the Assessing Officer that Honda Motors India Ltd., has claimed the same as expenditure in their accounts for the impugned year is concerned, he submitted that the assessee cannot be penalized for the wrong interpretation by the other company. Merely because they have declared the same as expenditure, it does not automatically become the income of the assessee. Further, in subsequent year, the assessee has declared the income, which has been accepted by the Revenue in the order passed u/s 143(3), therefore, it will amount to taxation of the same amount twice if the version of the Assessing Officer is accepted. He submitted that when the Assessing Officer is confirming the receipt from Hyundai Motors India Ltd., they could have also verified the date of agreement. Therefore, the whole basis on which addition has been made by the Assessing Officer and confirmed by the CIT(A) is not justified. 9. In his alternate contention, he submitted that the matter may be restored to the file of the Assessing Officer with a direction to verify as to what statement has been given by Hyundai Motors. Referring to the invoice raised by the assessee to Hyundai Motors Ltd., he submitted that th....
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....s of the Act and the interpretation of the term 'income' given in a large number of decisions of the High Courts, the Privy Council and also this Court. It is well-settled that income attracts tax as soon as it accrues. The application or destination of the income has nothing to do with its accrual or taxability. It is also well-settled that interest income is always of a revenue nature unless it is received by way of damages or compensation." 12. He also relied on the decisions of the Hon'ble Supreme Court in the case of CIT vs. Durga Prasad More (1971) 82 ITR 540 (SC) and in the case of Kedarnath Jute Mfg. Co. Ltd. vs. CIT 1971 AIR 2145. 13. It was also the submission of the ld. DR that the stamp paper was purchased on 26th March, 2013 and there is no date mentioned in the Consulting Service Agreement and the invoices from the month of December, 2012, therefore, the documents produced by the assessee are self serving documents. 14. The ld. counsel for the assessee, in his rejoinder, submitted that the Assessing Officer has made the addition on the basis of the agreement. Now, that it has been clarified by both the sides that the agreement which was signed on 26th M....