The Income Tax Appellate Tribunal (ITAT), New Delhi, presided by Shri Anil Chaturvedi, Accountant Member, and Shri Narender Kumar Choudhry, Judicial Member, delivered a landmark judgment in the case numbered ITA No. 1795/DEL/2022 concerning the assessment year 2016-17, wherein the Deputy Commissioner of Income Tax (DCIT), Circle-1(1), Exemption, New Delhi (Appellant) contested against the India Trade Promotion Organization (ITPO), New Delhi (Respondent).
The contention centered around the space rent income accrued to the ITPO, which the department claimed was ignored by ITPO, citing disputes over such income. According to the mercantile system of accounting, income has to be recognized on an accrual basis, which the appellant argued was not followed by the respondent given the income from space rent was under dispute and thus not accounted for.
The department’s appeal was primarily based on the supposed oversight by the respondent in not accounting for the disputed space rent income as per the principles of accrual accounting. The respondent was represented by Shri Kamal Bansal, CA, while the department was represented by Mohd. Gayasuddin Ansari, CIT(DR). The critical point of discussion was whether the respondent erred in law and facts by not including the disputed rent income in its accounts, as claimed by the appellant.
The tribunal, after hearing both sides, identified that the crux of the appeals lay in the accounting treatment of the disputed space rent income. It was found that the learned Commissioner of Income tax (Appeals), National Faceless Appeal Centre, Delhi, had followed the tribunal’s earlier orders in the respondent’s own cases for A.Y. 2012-13 in deleting such additions.
Furthermore, the counsel for the respondent pointed out that the issue had already been decided in the assessee’s favor by the Coordinate Benches of this Tribunal for A.Ys. 2009-10, 2010-11, 2011-12, which had been upheld by the Hon’ble Jurisdictional High Court of Delhi, providing a strong precedent.
The tribunal affirmed the order of the CIT(Appeals) and dismissed the revenue’s appeal, thereby ruling in favor of the ITPO. The final judgment emphasized the established legal position and the consistency in the treatment of similar issues in the past, signifying a precedent-based affirmation of the respondent’s stance on the matter.
This case sheds light on the importance of adhering to the mercantile system of accounting and recognizes the complexity involved in cases where income is under dispute. The decision underscores the principle of consistency and the reliance on judicial precedents in interpreting tax laws and accounting standards.
DCIT vs India Trade Promotion Organization: Appeal on Space Rent Income Dispute for A.Y. 2016-17
Manage the increasing number of hearings effortlessly by leveraging the legal AI revolution We are India's Leading revolutionary AI-powered legal platform where you can get enough insights into top cases and judgements.
Research Platform