TMI Blog2008 (12) TMI 740X X X X Extracts X X X X X X X X Extracts X X X X ..... head Excess cash account and has to be shown as liability in the balance sheet. The AO treated this as income of the assessee by following the earlier order in earlier assessment years in assessee s own case on similar excess cash. Learned CIT(A) confirmed the order of the AO. At the time of hearing, it was brought to our notice that in asst. yrs. 2001-02 and 2000-01, this issue was considered by the Tribunal and in ITA No. 504/Jp/2004, Tribunal, Jodhpur Bench has held that the liability in question is a liability of the bank and it has to be returned to the customers as and when they make a demand for payment. The Tribunal therefore, held that it cannot be considered as income of the assessee. In view of the above, addition confirmed by learned CIT(A) is directed to be deleted. First ground of the appeal of the assessee is allowed. Second ground of appeal of the assessee was not pressed and the same is dismissed as not pressed. Third ground of the appeal of the assessee reads as follows : The learned CIT(A) erred in law as well as on facts in sustaining addition of ₹ 2,85,695 under s. 43B/36(1)(va) of the IT Act. It is submitted that the payment to PF was made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eived later. 14. For making the impugned addition, the AO has made the following observations : The assessee while making the revised computation of income filed on 28th Dec., 2004 has deducted a sum of ₹ 1,75,22,89,506 being the interest on Government securities as credited by it in the P L a/c prepared on 31st March, 2002 and the assessee added back ₹ 1,61,90,96,191 being the interest on Government securities actually received/due on securities as per past practice followed by the assessee bank. The issue of taxability of interest on Government securities has been discussed in length by my learned predecessor in his order under s. 143(3) dt. 28th Feb., 2003 for the asst. yr. 2000-01 who has arrived at the conclusion that the interest on Government securities is assessable on accrual basis. The above view has also been accepted by learned predecessor in his order under s. 143(3) dt. 5th March, 2004 for the asst. yr. 2001-02. The decision of learned CIT(A) in deleting the addition made on this account in the asst. yrs. 1995-96, 1996-97, 1998-99 and 2000-01 has not been accepted by the Department and the further appeal against which before Hon ble Tribunal has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue had come up for consideration in assessee s own case in asst. yr. 1998-99 in ITA No. 11/Jd/2003, Tribunal, Jodhpur Bench. The Tribunal has noticed that the advances which were considered for the claim of deduction on account of bad debts by the assessee related to the advances given by rural branches. The AO was of the view that for eligibility of claim of deduction under s. 36(1)(viia) of the Act, the advances made by rural branches should be rural advances i.e. one made to persons involved in rural activities. This stand of the AO was rejected by the Tribunal for the following reasons : The bare reading of s. 36(1)(viia) makes it clear that the advance made by the rural branches are exempt under this section, irrespective of the facts that these are made to person(s) involved in the rural activities or otherwise. The above section is extracted below for ready reference. The learned Departmental Representative has only relied on the assessment order but could not deny the contention of learned Authorised Representative that in earlier years also such deletions were made and the Revenue has not filed appeal against the same. Meaning thereby this deletion has been accepted by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... page Nos. 100 to 107 of the paper book. AS-9 issued by ICAI deals with Revenue Recognition. The said Accounting Standard deals with recognition of revenue arising in the course of business of an enterprise from sale of goods or rendering of service and use of enterprise reserves which is interest, royalties and dividend. The Standard advocates two methods of recognizing income : one is completed service contract method and other proportionate completion method. These two methods have been explained in the Accounting Standard as follows : Completed service contract method is a method of accounting which recognizes revenue in the statement of profit and loss only when the rendering of services under a contract is completed or substantially completed. 23. Under the proportionate completion method, the standard recommends that income should be recognized proportionate to the period relevant to the previous year, where such income is in respect of services, which extends to the period even beyond the previous year. In proportionate completion method, the obligation to render services still continues beyond the end of the previous year also. 24. The assessee is a public limite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has to be deduced on the basis of accounting system regularly maintained by the assessee. Preparation of balance sheet in accordance with statutory requirement elsewhere cannot be a ground to determine the income disregarding regular method of accounting adopted by an assessee consistently. The assessee also pointed out that there is no loss to the Revenue inasmuch as the income which is not recognized during the previous year is offered to tax in other assessment year. The AO rejected this plea also. Consequently, a sum of ₹ 3.46 crores was brought to tax by the AO. 26. On appeal by the assessee, learned CIT(A) deleted the addition made by the AO. According to learned CIT(A), the AO has not spelt out as to how the changed method of accounting will be detrimental to the interest of Revenue. Learned CIT(A) also referred to AS-2 issued by the ICAI which has been notified as Accounting Standard to be followed under s. 145(2) of the Act. Clause 9 of AS-2 has been dealt with by learned CIT(A) as follows : (9) A change in an accounting policy shall be made only if the adoption of a different accounting policy is required by statute or if it is considered that the change wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of AS-2 which has been extracted by learned CIT(A) clearly provides that change in accounting policy shall be made, if the same is required by statute. In the present case, we have already seen that SEBI guidelines contemplates a listed company complying with Accounting Standard issued by ICAI while preparing its finance statement. Thus, there was requirement of law to change method of recognition of income by the assessee. We agree with the submissions of learned counsel for the assessee that the change in method of accounting of revenue recognition is a bona fide change. It has been submitted that such a system of accounting has been consistently followed subsequently by the assessee. There cannot be any loss to the Revenue in the circumstances. We are therefore of the view that the AO could not have ignored the method of revenue recognition as adopted by the assessee as the same was in conformity with the provisions of s. 145 of the Act. We, therefore, confirm the order of learned CIT(A) and dismiss ground No. 3 of the Revenue. In the result, appeal by the Revenue is dismissed. ITA No. 5285/Mum/2006 is an appeal by the assessee while IT(SS)A No. 253/Mum/2006 is appeal by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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