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TMI Blog2023 (12) TMI 1225X X X X Extracts X X X X X X X X Extracts X X X X ..... ert through SMS, as required by clause 11 of the National Faceless Appeal Scheme (NFAS), so that the order cannot be regarded as served on 28.6.2022, the date of the impugned order and its uploading. It was only later, in December, 2022, while accessing it's account on the Revenue's portal that the assessee became aware of the passing of the impugned order and took immediate steps for filing the appeal. The facts averred per the petition, i.e., non-uploading on the mobile application and non-receipt of the alert, are not contested by the Revenue. Under the circumstances, we have no hesitation in accepting the explanation. The delay was accordingly condoned, and the appeal admitted. This effectively also answers the assessee's Gd. 2 - not pressed before us, assailing the validity of the impugned order on account of its transmission being not as per NFAS; Gd. 1 being general in nature, not warranting any adjudication. 3. The appeal raises two issues, which we shall take up in seriatim. The first and the principal adjustment to the returned income is an addition on account of lapsed liability in respect of refundable deposits. The assessee, a manufacturer of ice-cream and frozen food ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the matter. And, that there was, further, no dispute as to the matter under appeal being identical to that for the earlier years, decided by the Tribunal and having since attained finality, pre-empting any further query by the Bench. Secondly, the issue being claimed to be decided by the Tribunal, we shall, where indeed so, be bound to follow the same in view of judicial precedence. Where, however, unable to persuade ourselves to follow the same, the matter is to, stating reasons, be referred for consideration by a larger Bench. 5.2 The first issue before us is, accordingly, qua precedence; it being a common ground during hearing that the issue arising for adjudication on merits, delineated at para 3 above, and toward which we may also reproduce the assessee's relevant Ground, being the only ground qua the impugned addition, i.e., besides para 3.1 of the assessment order, as under: "Lapsed liability on freezer deposit 3.1. In the assessment of earlier years in the case of the assessee, the issue involved is addition made on account of lapsed liability in respect of freezer deposits taken by the assessee from its dealers. The assessee-company manufactured ice creams and froz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch in turn again extracts from the Tribunal's order in the assessee's case, also read out during hearing: "7. Since the co-ordinate bench has already taken a view on identical issue, by following the said decision, we hold that the deposits collected from vendors cannot be considered as the income of the assessee so long as the agency agreement continues. Accordingly, we set aside the order of Ld. CIT(A) on this issue in the hands of both the assessees and direct the AO to delete the addition made on this issue in the hands of both the assessees herein". The Tribunal's order for AY 2011-12 and, indeed, that followed by it, is again not the parent order; the latter again referring to and following another order by it's Division Bench in the assessee's case, details of which are not specified. While this clarifies the issue arising for adjudication on merits to be the same as that for the current year, removing the confusion arising due to reference to s. 41(1), clearly inapplicable, by the Tribunal for AY 2014-15, even as it purportedly follows the orders for the earlier years, which bear no reference to s. 41(1), it does not inform the specific reason for the decision. That is, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Aggrieved, the assessee is in appeal before the Tribunal. The learned AR submitted that the issue in question is decided in favour of the assessee by the order of the Tribunal in assessee's own case in ITA No.199/Coch/2016 (order dated 16.11.2016) for assessment year 2011-2012. 5. The learned Departmental Representative supported the orders of the Income Tax Authorities. 6. We have heard rival submissions and perused the material on record. On identical facts, the Tribunal in assessee's own case (supra) by following the earlier Tribunal order, had held that addition u/s 41(1) of the I.T. Act is not warranted. The relevant finding of the Tribunal for assessment year 2011- 2012 (supra), reads as follows:- "3.4 We have heard the rival parties and perused the material on record. In assessee's own case, the division bench of the Tribunal have decided the matter in favour of the assessee, by following the earlier orders of the Tribunal. The relevant findings of the Tribunal in assessee's own case read as follows: "4. We have considered the rival submissions on either side and relevant material on record. The issue arises is whether the deposits in respect of the freezer has to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttached with a liability to refund. The assessee never admitted this amount as income in the books. Only accrued income arose to the assessee during the relevant previous year also can be brought to tax under the Income-tax provisions which is a settled law. In other words, there must be a debt owned to the assessee and until this is created in favour of the assessee as a debt due to the assessee, it cannot be said as income accrued. Hence, the decision relied by the Jr. D.R. in the case of CIT vs. T.V. Sundaram Iyengar and Sons cited supra, is clearly distinguishable on facts. In that case, assessee itself admitted this as income as per the book entries. Hence, it is distinguishable. The decision relied by the ld. counsel for the assessee in the case of CIT vs. Realest Builders and Services Ltd. - 307 ITR 202 (SC) in addition to the following cases - (a) Siddheswar Sahakari Sakhar Karkhana Ltd. vs. CIT & Others - 270 ITR 1 (SC); (b) Bharat Petroleum Corporation Ltd. vs. CIT - 202 ITR 492 (Cal). (c) Sugauli Sugar Works (Impugned) Ltd. - 236 ITR 518 (SC); 5 I.T.A. Nos. 73- 79/Coch/2014 (d) Star India P. Ltd. vs. Addl. CIT - 311 ITR (ST) 235 (Mumbai). (e) Govind Prasad Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication before the Hon'ble jurisdictional High Court. No contrary High Court judgment has been cited. Hence, respectfully following the order of the division bench of the Tribunal, in assessee's own case (supra), we uphold the order of the first appellate authority as correct and in accordance with law and no interference is called for. It is ordered accordingly." 7. Though the above order of the Tribunal was challenged by the Revenue before the Hon'ble High Court of Kerala, it is confirmed that the Revenue has withdrawn the appeal pending before the Hon'ble High Court on account of low tax effect. Since the Tribunal has decided the issue in favour of the assessee, we delete the addition made u/s 41(1) of the I.T. Act. It is ordered accordingly." (emphasis, ours) Why we wonder the parent order, which is, as stated, in the assessee's own case, not adduced, relying instead on the orders in the case of other assessees following the same? And this happens time and again, as in the appellate proceedings before the Tribunal for AY 2011-12, AY 2014-15, and then again for AY 2015-16. Be that as it may, the foregoing confirms what stands stated hereinbefore, i.e., qua the contents of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing is rather to the contrary, i.e., of a provision being not applicable. It is nobody's case that the section cited in the 'precedent' is wrong, nor could be inasmuch as, as afore-noted, there is nothing therein (or in the orders further relied upon) stating the reason for the non-maintainability of the applicable provision, i.e., s. 28(i). 5.4 Continuing further, even as we have, in the absence of any reason for it's decision, i.e., of accrual of income being only on the termination of the agreement, stated of absence of a ratio decidendi, which only constitutes the judicial precedent and is binding (Sree Bhagavathi Textiles Ltd. v. CIT[2000] 244 ITR 496 (Ker)), it is, strictly speaking, not the case. Though generally regarded as it's ratio, the reason for the decision, absent in the instant case, may not necessarily be the ratio of a decision, which is the principle or the statement of law on which the decision is founded. As explained in The Mavilayi Service Cooperative Bank Ltd. & Ors. v. CIT [2021] 431 ITR 1 (SC), the statement of the principles of law applicable to the legal problems disclosed by the facts alone that is the binding ratio of a case; the judgment based on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding with the rate of depreciation, i.e. @25% p.a. The amount refundable thus reduces at a defined rate each passing year. This ascertained reduction in the amount refundable and, thus, the ceasing of the assessee's liability qua deposit is regarded as it's income by Revenue. How, one wonders, being axiomatic, could that be disputed, signify as it does the right to receive, case law on which is legion, viz. Keshav Mills Ltd. vs. CIT (1953) 23 ITR 230 (SC) Turner Morrison & Co. Ltd. v. CIT [1953] 23 ITR 152 (SC) E.D.Sassoon & Co. Ltd. v. CIT[1954] 26 ITR 27 (SC) Morvi Industries Ltd. v. CIT[1971] 82 ITR 835 (SC) R.B. Jodha Mal Kuthiala v. CIT [1971] 82 ITR 570 (SC) CIT v. Excel Industries Ltd. [2013] 358 ITR 295 (SC) The amount having been already received, income arises to that extent; the assessee acquiring a dominion or unqualified right over the same. That the assessee may not have appropriated it as it's income in it's accounts is another matter, it being trite that that the passing or, as the case may be, non-passing of accounting entries is not determinative of the matter. Accounting entries do not create income, but only recognize it. Non-booking of income in ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect, incurred in relation to taxable income, disallowing the balance. Until and unless there is diversion of funds, of which there is no whisper, the term loan, as indeed working capital loan/advance, are for business purposes, would not stand to be allocated, which is only qua common expenses. The assessee has also claimed that it has sufficient funds of it's own, i.e. vis-a-vis the investment yielding non-taxable income, being at an average of Rs. 305 lakhs and Rs. 19 lakhs respectively, and that therefore no part of the tax-free investment could be regarded as financed from interest bearing borrowings. The matter is completely factual. It is only in the absence of the assessee exhibiting it's case with reference to facts and figures that the average formula prescribed u/r. 8D comes into play. The comparison as made is misplaced. The term loan, for example, does not finance the fixed assets to the extent of 100%, so that the balance is by own capital, as indeed the repayment of the term loan, increasing the share self-financed to that extent. Similarly, for the working capital borrowing, which also entails margin money. Money has no bones and, therefore, it is only the fund flow ..... X X X X Extracts X X X X X X X X Extracts X X X X
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