TMI Blog2021 (1) TMI 913X X X X Extracts X X X X X X X X Extracts X X X X ..... paid space rent to the ' assessee company @ ₹ 200/- per sq. mtr. p.a. in an earlier year. Subsequently, the rate of space rent was enhanced by the assessee company on year to year basis which was contested by the NSC. Accordingly, the assessee company has accounted for income @ ₹ 200/- per sq. mtr. per year in the Income Expenditure Account as NSC had paid @ ₹ 200/- per sq. mtr. p.a., but contested the increase in rates. The element of enhanced space rent over ₹ 200/- per sq. mtr. p.a. (disputed amount) was kept out of books as Contested dues not accounted for and disclosed in the Notes to the Accounts. The assessee is essentially relying on the Accounting Standard 9 issued by the Institute of Chartered Accountants of India relating to Recognition of Income in accordance with para 10 which states that if at the time of raising any claim, it is unreasonable to expect ultimate collection, revenue recognition should be postponed. As regards the other department viz. Crafts Museum, they have not paid any space rent to the assessee company and are maintaining that they were in possession of the space even prior to the formation of the assessee compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that assessee is following mercantile system of accounting and rental income has not accounted in the books. The income as per mercantile method of accounting has to be offered to tax on accrual basis. Such income which has accrued but not received is shown as receivable or under the head Sundry Debtor as the case may be in the Balance Sheet. Such income is entitled as and to be written off subsequently when it actually becomes bad, as per provisions of the Act. 2. In so far as the issue raised in ground no.1, the same stands covered in favour of the assessee by the judgment of Hon ble Delhi High Court in the appeal for the Assessment Year 2008-09, wherein the Hon ble High Court in the appeal preferred by the assessee in ITA No.167 168/2012 has allowed both the expenditure, i.e., capital expenditure and depreciation as application of income. This order of the Hon ble High Court has been followed by the ITAT in assessee s own case in the Assessment Years 2009-10, 2010- 11 and 2011-12. 3. Similarly, in so far as the issue raised in ground no.2 is concerned, also stands covered in favour of the assessee by the order of the Tribunal in the appeals for the Assessment Yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ances that the Kerala High Court in the last portion of paragraph 6, as quoted above, has stated that the assessee would be entitled to write back depreciation and if done, the Assessing Officer would modify the assessment determining the higher income and allow recomputation of depreciation written back for the purpose of application of income for charitable purposes in future or subsequent years. This may lead to its own difficulties and problems as suddenly the entire depreciation written off would have to be added first and then in one year substantial application of income would be required. This may be impractical and would disturb the working of many a charitable institutions. The legal interpretation which has continued since 1984, if disturbed and implemented, would not appropriately resolved. Consistency and certainty is more appropriate. 16. The equally plausible and consistent interpretation of clause (a) of Section 11(1) of the Act is that income derived from property must be calculated as per the principles of the Act. The said clause is not a computation provision and does not disturb the income earned or available but postulates that the income as computed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any claim, it is unreasonable to expect ultimate collection, revenue recognition should be postponed. As regards the other department viz. Crafts Museum, they have not paid any space rent to the assessee company and are maintaining that they were in possession of the space even prior to the formation of the assessee company. On the same analogy of NSC and following AS 9, the assessee company has not raised any invoice for the space rent on Craft Museum any disclosed the disputed amount of space rent relating to the Assessment Year under reference, in the Notes to Accounts. Assessee has not recognised the licence fee pertaining to these departments as income in the books in accordance with para 10 of the Accounting Standard 9 which states that Revenue from sale or service transactions should be recognised when the requirements as to performance set out in paragraphs 11 12 are satisfied, provided that at the time of performance it is not unreasonable to expect ultimate collection. If at the time of raising any claim it is unreasonable to expect ultimate collection, revenue recognition should be postponed. 7. This precise issue has also been considered by the Tribunal in the ea ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
