TMI Blog2022 (9) TMI 705X X X X Extracts X X X X X X X X Extracts X X X X ..... r any income is real or hypothetical and that whether there is a corresponding liability of the other party to pay the amount to the assessee and that the probability of realization of income by the assessee are the factors that are to be considered to determine whether an income has accrued or not. We would also like to place reliance on the decision of CIT vs Neon Solutions Pvt Ltd [ 2016 (4) TMI 1162 - BOMBAY HIGH COURT] which was also relied on by the Ld.CIT(A) for the fact that even in accrual method of accounting, income which cannot be realized and the collection of the same is uncertain, the same cannot be accounted. No infirmity in the decision of the Ld.CIT(A) and we hereby uphold the order of the Ld.CIT(A). Resultantly, the appeal filed by the Revenue is dismissed. - ITA 2976/Mum/2018, C.O. 126/Mum/2019 (Arising out of ITA 2976/Mum/2018) - - - Dated:- 12-9-2022 - Shri Amarjit Singh (Accountant Member) And Smt. Kavitha Rajagopal (Judicial Member) For the Assessee : Shri Anil R Wani, Adv For the Department : Shri R.A. Dhyani, Sr.AR ORDER PER KAVITHA RAJAGOPAL (JM): The captioned appeal has been filed by the Revenue as against th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound recordings on behalf of its members. It is submitted that the copyright for music albums continued to be vested with the trust. The assessee company was entitled to collect copyright licence fee / royalty from parties like broadcast companies, etc. on behalf of its members and after deducting / recouping the expenses on administration and local expenses for all these, the balance amount of licence fees was distributed among the concerned members. 4. The assessee filed its return of income for the impugned assessment year on 14/09/2010 declaring total income of Rs.1,51,01,502/-. The assessee s case was selected for scrutiny and assessment order under section 143(3) was passed on 27/12/2013 determining total income at Rs.1,54,05,720/-. After that assessee s case was reopened after issuing notices under section 148 of the Income-tax Act, 1961 for the reason that as per form 26AS, TDS aggregating to Rs.78,37,644/- was not reconciled and that the assessee has neither taken credit for such TDS nor has it declared the income pertaining to the impugned TDS amount. The Assessing Officer then made an addition of Rs.7,83,76,440/- as undisclosed income determining the same from the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for: The company accounts for income when they receive the log records (usage reports) from the users/licensees for music used by them. The company processes -the log records, identifies the songs to respective members/music labels. Once this whole exercise is completed, the company accounts for the income by invoicing the licensees and simultaneously makes a provision for royalty payment. The accrual of income can only happen when the log records (usage reports) are received from the licensees and music labels identified and invoice is raised. At times, it happens that the log reports given by the user may, due to his error, include songs of independent music companies, who are not members of the Company, which needs re be rectified at the time of processing of logs. Here, it is to be noted that the Company administers copyrights of only music labels who are its members' and not those of non-members. Mere receipt of amount does not amount to accrual of income. At times, it also happens that broadcasters/licensees makes provision for royalty payment in their books (for reasons best known to themselves) but subsequently no payment nor log records are received by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the backdrop set out above and having regard to the method of accounting followed by the Appellant as also the Typical nature of the composition of the Appellant and nature of its activities, it is most respectfully submitted that the impugned addition is grossly unfair and is clearly untenable in that: a. As explained at length in the letter of Appellant dated 13/12/2016, the Appellant had disputes with some of the Radio Broadcasters etc. b. In some cases, the License Agreements had expired and despite this, the concerned FM stations continued to broadcast the copyright music and thus, violate the copyright laws. c. Accepting any payments from such parties and other parties with whom there were disputes would amount to regularizing their infringement and thereby adversely affecting the Position of the Appellant. This, would also prevent Appellant from obtaining the legal injunction against such parties. This would also set a wrong precedent in the market and would encourage other Broadcasters to also take copyright violations lightly. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o year and in scrutiny assessments made in the past as also in the later years, this method of accounting has been accepted and additions similar to the impugned additions have been made in any other years. 4.4.5 The appellant has also attempted to reconcile vide letter dated 12/12/2016, the TDS amount and related income which were not taken credit of was explained. Vide the Chart accompanying the said letter, the Appellant has explained: i. Cases of TDS where the Appellant did not raise Invoices, nor was there any contract with the Party nor was any amount received/accepted from the Party. In such cases mere TDS would not tantamount to accrual of income as there were disputes and litigation with such parties. j. Instances of TDS where there was no recognition of TDS concerned income due to ongoing litigation and legal suits filed. k. Instances of TDS where the related income was declared in later or earlier years based on the method of accounting followed by the Appellant. l. Your Honor may readily appreciate that the Appellant had filed a full ; . reconciliation and had explained at length each entry of TDS of Rs.78,,37,644 and how the related i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unting for revenue recognition followed by the assessee has been consistently accepted and no addition was made in earlier years as well as in subsequent years. The assessee has also furnished copies of the assessment order pertaining to assessment years 2009-10, 2010-11, 2012-13 to 2015-16 before the lower authorities. The assessee claims that there was no change in the method of accounting followed by the assessee and that the assessee being a society of members has no right to retain any such income. The assessee is duty bound to distribute any income received by it to the concerned member. The assessee is entitled only to the expenses incurred in performing such activities. The Ld.CIT(A) has relied on the following decisions:- 1. Shoorji Vailabhdas 46 ITR 144 (SC), 2. Morvi industries 82 ITR 835 3. Godhra Electricity co 225 ITR 746, 12. We have considered the judicial precedents in the abovesaid decisions which reiterated the principle that it is essential to consider whether any income is real or hypothetical and that whether there is a corresponding liability of the other party to pay the amount to the assessee and that the probability of realization of in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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