Case Number: ITA 5922/DEL/2019
Appellant: ACIT Special Range-3, New Delhi
Respondent: Delhi Tourism & Transportation Development Corporation Ltd., New Delhi
Assessment Year: 2016-17
Case Filed On: 2019-07-08
Order Type: Final Tribunal Order
Date of Order: 2023-09-14
Pronounced On: 2023-09-14
This case involves the ACIT Special Range-3 (appellant) and Delhi Tourism & Transportation Development Corporation Ltd. (respondent) concerning the assessment year 2016-17. The main issues in this case are related to the treatment of revenue grants, advance excise deposits, and prior period expenses.
The Delhi Tourism & Transportation Development Corporation Ltd. (DTTDC) is a wholly-owned State Government company under the Government of NCT of Delhi. The company is engaged in various activities, including the development of tourism, upgrading transportation infrastructure, public utilities, trading in Indian made foreign liquor, country liquor, and construction work on behalf of the Government of NCT of Delhi.
For the assessment year 2016-17, DTTDC filed its return declaring a loss of Rs. (-) 10,34,77,592/-. The case was selected for scrutiny, and the Assessing Officer (AO) made several disallowances, leading to an assessed income of Rs. 9,50,06,930/-.
1. **Revenue Grants**: The AO disallowed unspent revenue grants amounting to Rs. 5,52,60,490/-. The AO argued that these grants should be treated as income for the current year.
2. **Advance Excise Deposits**: The AO disallowed advance excise deposits amounting to Rs. 7,85,53,053/- under Section 43B of the Income Tax Act.
3. **Prior Period Expenses**: The AO disallowed prior period expenses amounting to Rs. 43,96,415/-.
The respondent argued that the unspent revenue grants were shown as liabilities in the balance sheet as per Accounting Standard 12. These unspent grants are adjusted by the government from future grants to be received in subsequent years. Therefore, the unspent grants should not be treated as income for the current year.
The respondent cited previous tribunal orders in its favor, arguing that the advance excise duty paid should be allowed as a deduction in the year in which it is adjusted against the liability to pay excise duty on manufactured goods.
The respondent contended that the prior period expenses were consistently accounted for as per the mercantile system of accounting and were allowable based on judgments of higher judicial authorities.
The tribunal found that the respondent had been consistently treating unspent revenue grants as liabilities. The tribunal ruled that merely because the grant could not be utilized in the year of receipt, it could not be treated as the income of the respondent. Therefore, the disallowance made by the AO was deleted.
The tribunal referred to previous decisions in similar cases and upheld the respondent’s argument that the advance excise duty paid should be allowed as a deduction in the year it is adjusted. Hence, the tribunal deleted the disallowance made by the AO.
The tribunal noted that the issue of prior period expenses was settled in favor of the respondent by higher judicial authorities in similar cases. Therefore, the tribunal upheld the deletion of the disallowance of prior period expenses.
The Income Tax Appellate Tribunal, Delhi Bench, ruled in favor of the Delhi Tourism & Transportation Development Corporation Ltd. for the assessment year 2016-17. The tribunal deleted the disallowances made by the Assessing Officer regarding unspent revenue grants, advance excise deposits, and prior period expenses.
This case highlights the importance of consistent accounting practices and the adherence to accounting standards in the treatment of revenue grants and other financial transactions. It also underscores the necessity for assessing officers to consider precedents and higher judicial rulings when making disallowances.
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