Principal Commissioner Of Income Tax-I, Coimbatore-18 v. M/S.tamil Nadu State Transportcorporation (Coimbatore Division)Ltd., Coimbatore-43

IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated : 02.9.2020 Coram : THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAM AND THE HONOURABLE MRS.JUSTICE PUSHPA SATHYANARAYANA Tax Case Appeal Nos.257 & 258 of 2020 Principal Commissioner of Income Tax-I, Coimbatore-18...Appellant/ Appellant Vs M/s.Tamil Nadu State TransportCorporation (Coimbatore Division)Ltd., Coimbatore-43....Respondent/ Respondent APPEALS under Section 260A of the Income Tax Act, 1961against the common order dated 15.10.2019 made respectively inITA.Nos. 1897 & 1898/Chny/2018 on the file of the Income TaxAppellate Tribunal, Chennai 'B' Bench respectively for theassessment years 2009-10 and 2014-15 and the Appellate orderdated 27.03.2018 made in Appeal No.224/16-17 passed in theCommissioner of Income Tax (Appeals)-1,Coimbatore of Income Tax(Appeals)-1,coimbatore and the Assessment Year 2014-15 and theAppellate order dated 27.03.2018 made in Appeal No.101/16-17passed in the Commissioner of Income Tax (Appeals)-1 Coimbatorefor the Assessment Year 2009-2010 and the Assessment order dated29.12.2016 made in C.NO.199/35/OSCA/16-17 PAN NO.AAACC9092 Mpassed in Assistant Commissioner of Income Tax,Corporate Circle2,Coimbatore for the Assessment order dated 25.08.2016 made inPAN .NO.AAA CC9092 M passed in Assistant commissioner of IncomeTax ,Corporate circle 2,coimbatore, for the Assessment Year2009-2010. For Appellant: Mr.T.R.Senthilkumar, SSC assisted by Ms.K.G.Usharani, JSCFor Respondent:Mr.R.Vijayaraghavan for M/s.Subbaraya Aiyer Padmanabhan COMMON JUDGMENT (Judgment was delivered by T.S.Sivagnanam,J)We have heard Mr.T.R.Senthilkumar, learned Senior StandingCounsel assisted by Ms.K.G.Usharani, learned Junior StandingCounsel appearing for the appellant – Revenue andMr.R.Vijayaraghavan, learned counsel accepting notice for therespondent – assessee. 2. These appeals, filed by the Revenue under Section 260A ofthe Income Tax Act, 1961 (for brevity, the Act), are directedagainst the common order dated 15.10.2019 made respectively inITA.Nos.1897 & 1898/Chny/2018 the file of the Income TaxAppellate Tribunal, Chennai 'B' Bench (for short, the Tribunal)respectively for the assessment years 2009-10 and 2014-15. 3. The Revenue has filed these appeals by raising thefollowing reframed substantial question of law : “Whether, on the facts and circumstances ofthe case, the order of the Appellate Tribunal isjustifiable on the ground that if there is notax merit, the assessee need not disclose thefull details in the profit and loss account,which is against the Accounting Principle AS12 ?” 4. After elaborately hearing the learned counsel for theparties and carefully perusing the common order passed by theTribunal, we find that not only the Tribunal, but also theCommissioner of Income Tax (Appeals)-1, Coimbatore rightlydeleted the addition made by the Assessing Officer in respect ofthe expenditure incurred by the respondent for giving concessionpass to school students. 3. The Revenue has filed these appeals by raising thefollowing reframed substantial question of law : “Whether, on the facts and circumstances ofthe case, the order of the Appellate Tribunal isjustifiable on the ground that if there is notax merit, the assessee need not disclose thefull details in the profit and loss account,which is against the Accounting Principle AS12 ?” 4. After elaborately hearing the learned counsel for theparties and carefully perusing the common order passed by theTribunal, we find that not only the Tribunal, but also theCommissioner of Income Tax (Appeals)-1, Coimbatore rightlydeleted the addition made by the Assessing Officer in respect ofthe expenditure incurred by the respondent for giving concessionpass to school students. 5. The Assessing Officer, while completing the assessment,held that as per the Accounting Standard 12, the Governmentgrant that were receivable as compensation for expenses orlosses incurred in a previous accounting period for the purposeof giving immediate financial support to the enterprise with nofurther related costs should be recognized and disclosed in theprofit and loss statement of the period, in which, they werereceivable as an extraordinary item. The Assessing Officerpointed out that a sum of Rs.44.06 Crores receivable from theState Government as per G.O.Ms.No.315 for the 100% and 50%concessional passes issued to students during the year 2008-09were recognized in the profit and loss account for the yearended 31.3.2009 under the head 'Operational Income Reimbursementof Students Concessional Ticket', that the social cost to thetune of Rs.11.01 Crores to be borne by the assessee and that theoperational income was not reflected in the profit and lossaccount. 6. Hence, the Assessing Officer came to the conclusion thatas per the Accounting Principles, as soon as the bus passes wereissued to students, the face value of the passes should be takenas 'operating income' and a debit entry needed to be bookedagainst the Government account to the tune of the face value ofbus passes issued minus the amount collected from the collegestudents and after adjustment of the Government grantreceived/receivables, the balance unrealized debits were to betreated as 'revenue foregone' and written off as per thecommercial accounting principles. With these findings, theAssessing Officer added a sum of Rs.35,63,79,855/- to the totalincome of the respondent – assessee. 7. Aggrieved by that, the assessee carried the matter onappeal to the CIT(A). A similar finding was rendered by theAssessing Officer for the assessment year 2014-15 also. Onappeal before the CIT(A), in our considered view, the CIT(A)deleted the addition holding that the grant became payable onlywhen the Government Order was passed, that the grant becamereceived/receivable only when the grant was sanctioned and thatit was unrealistic to compute the notional loss in such cases.It was further pointed out that no useful purpose would beserved by treating the students' subsidy as income and writingoff as bad debts in the books when the expenditure incurred bythe Corporation was treated as social cost as per the GovernmentOrder. 8. This finding was tested for its correctness by theTribunal, which rightly confirmed the same by dismissing theappeals filed by the Revenue. We find no error or perversity inthe approach of either the CIT(A) or the Tribunal. Rather, boththe First Appellate Authority and the Tribunal rightlyappreciated the legal position and the purpose for incurringsuch an expenditure under the head 'social cost'. We find thatno substantial question of law arises for consideration. 9. Hence, the above tax case appeal is dismissed. No costs. Assistant Registrar(CS IV) //True Copy// Sub Assistant Registrar To 1.The Income Tax Appellate Tribunal, Chennai 'B' Bench. 8. This finding was tested for its correctness by theTribunal, which rightly confirmed the same by dismissing theappeals filed by the Revenue. We find no error or perversity inthe approach of either the CIT(A) or the Tribunal. Rather, boththe First Appellate Authority and the Tribunal rightlyappreciated the legal position and the purpose for incurringsuch an expenditure under the head 'social cost'. We find thatno substantial question of law arises for consideration. 9. Hence, the above tax case appeal is dismissed. No costs. Assistant Registrar(CS IV) //True Copy// Sub Assistant Registrar To 1.The Income Tax Appellate Tribunal, Chennai 'B' Bench. 2.The Commissioner of Income Tax (Appeals)-1 Coimbatore. 3.Assistant commissioner of Income Tax ,Corporate circle2,coimbatore.2,coimbatore. 4.The Principal Commissioner of Income Tax-I, Coimbatore-18 Income Tax-I, Coimbatore-18 +1cc to Mr.T.R.Senthil Kumar , Advocate SR.No. 28876 +1cc to M/s.Subbaraya Aiyer Padmanabhan , Advocate SR.No. 28883 A.SK(19/10/2020) TCA.Nos.257 & 258 of 2020