Income Tax Appellate Tribunal - Delhi
Cbm Industries Ltd., New Delhi vs Department Of Income Tax on 3 January, 2011
ITA NO. 1417/DEL/2011
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "B" NEW DELHI
BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER
AND
SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER
I.T.A. No. 1417/Del/2011
A.Y. : 2006-07
DCIT, Circle 3(1), vs. M/s CBM Industries Limited,
New Delhi 45, 1st floor, Community Centre,
Phase-1, Naraina, New Delhi
(PAN/GIR NO. : AAACC3576C)
(Appellant ) (Respondent )
Asseessee by : Sh. Manu Sud, CA
Department by : Ms. Y. Kakkar, Sr. D.R.
ORDER
PER SHAMIM YAHYA: AM This appeal by the Revenue is directed against the order of the Ld. Commissioner of Income Tax (Appeals) dated 03.1.2011 pertaining to assessment year 2006-07.
2. The issue raised is that Ld. Commissioner of Income Tax (Appeals) erred in deleting the addition of 2486050/- made on account of capitalization of BOT (Build, Operate & Transfer) assets.
3. In this case, the assessee has written off BOT assets to the extent of ` 24,86,050/- by debiting the same to the profit and loss account. Assessing Officer observed that since BOT assets are capital goods items which are utilized on regular basis for advertising and publicity of the assessee's clients and hence provide enduring benefit to the assessee, a query was put to the assessee as to why BOT assets written off not be capitalized. After considering the assessee's reply, 1 ITA NO. 1417/DEL/2011 the Assessing Officer noted that the BOT assets are in the nature of capital goods which are utilized by the assessee for advertisements on behalf of the clients. The assets are manufactured/produced as per the requirements of the client and hence new asset comes into existence which provides benefits for number of years and hence are enduring in nature. That is why, the assessee has himself termed, these goods as in the nature of 'assets'. However, the treatment given by the assessee in its accounts to write off these assets cannot be accepted. Assessing Officer further observed that there is no concept of deferred revenue expenditure in Income Tax Act. The assessee cannot write off a capital asset after use for certain number of years when it is evident from its reply that the asset is of enduring nature. He has to capitalize the asset and claim depreciation thereon as per the provisions of the Act. The Assessing Officer, therefore, capitalized the sum of ` 24,86,050/- and depreciation @ 15% was allowed thereon.
4. Upon assessee's appeal, it was submitted to the Ld. Commissioner of Income Tax (Appeals) that the assessee has claimed that the said sum as revenue expenditure on account of BOT assets write off which represents 1/5th of total cost of the project executed by the assessee by NOIDA Authority under agreement dated 24.12.2001 on BOT basis for the period of 5 years. The Assessing Officer on the other hand capitalized the sum of ` 24,86,050/- and after allowing depreciation @ 15% thereon, made the addition of ` 21,13,142/- in the assessee's income. It was further submitted that the issue is covered by the ITAT decision in assessee's own case in the immediate preceding assessment year. Considering the same, Ld. Commissioner of Income Tax (Appeals) noted that there was no change in the facts and circumstances of the case, hence, following the 2 ITA NO. 1417/DEL/2011 tribunal's decision in the immediate preceding year, he directed the addition to be deleted.
5. We have carefully considered the submissions and perused the records. We note that Ld. Commissioner of Income Tax (Appeals) has decided the issue in assessee's favour by following the Tribunal's decision in assessee's own case. The relevant portion of which reads as under:-
"3.5 We have considered the facts of the case and submission made before us. It is seen that the revenue has accepted the method of accounting followed by the assessee for six years in respect of Kerala project. It has also accepted the method for four years in respect of Noida Project. This is the last year for Kerala project and last but one year of Noida Project. It has nowhere been challenged that the method of accounting followed by the assessee gives distorted picture of profits. On the other hand, it has been claimed that the method furnishes fair and reasonable picture of profits. Therefore, the method should have been accepted in the first place on the principle of consistency as otherwise the assessment 3 ITA NO. 1417/DEL/2011 of earlier years will also have to be modified accordingly. In the case of IRB Infrastructure Limited (Supra), the assessee was accounting for the receipts in its books of account by reducing them from work-in-
progress, leading to no profit. The method of accounting was sought to be changed by amortizing the project expenses over a period of 16 years, being the period of BOT agreement. The Ld. Commissioner of Income Tax (Appeals) upheld this decision of the Assessing Officer. However, the Assessing Officer was not justified in taking a different view from the earlier years. Thus, it follows that a consistent method used by the assessee ought not to be changed especially when the method adopted by the assessee furnished a fair and reasonable view of the profits.
This follows from a number of decisions upholding the principle of consistency including the decision of Hon'ble Supreme Court in the case of Radhasoami Satsang vs. C.I.T. (1992) 193 ITR 321, relied upon in that case. Respectfully, following this decision, it is held that the lower authorities were not justified in 4 ITA NO. 1417/DEL/2011 modifying the books results based upon following a consistent method of accounting. Thus, this ground is also allowed."
6. Following the precedent as above, we do not find any infirmity in the order of the Ld. Commissioner of Income Tax (Appeals) and decide the issue in favour of the assessee.
7. In the result, the appeal filed by the revenue stands dismissed.
Order pronounced in the open court on 23/5/2011, upon conclusion of hearing.
SD/- SD/-
[A.D. JAIN] [SHAMIM YAHYA]
YAHYA]
JUDICIAL MEMBER ACCOUNTANT MEMBER
Date 23/5/2011
SRB
Copy forwarded to: -
1. Appellant 2. Respondent 3.CIT 4.CIT (A) 5. DR, ITAT
TRUE COPY
By Order,
Deputy Registrar, ITAT, Delhi Benches
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