Pr. Commissioner of Income-tax v. Essel Agro Pvt. Ltd - 2019-LL-0805-63

Citation	2019-LL-0805-63
Appellant Name	Pr. Commissioner of Income-tax
Respondent Name	Essel Agro Pvt. Ltd.
Court	HIGH COURT OF DELHI AT NEW DELHI
Relevant Act	Income-tax
Date of Order	05/08/2019
Assessment Year	2006-07
Judgment	View Judgment
Keyword Tags	deferred revenue expenditure • commission • principle of matching concept
Bot Summary:	This is an appeal by the Revenue against the order dated 18 th January, 2019 passed by the Income Tax Appellate Tribunal in ITA No.2158/Del/2011 and cross objections 190/Del/2011 for the Assessment Year 2006-07. The issue that is sought to be urged by the Revenue is whether the ITAT erred in affirming the order of the CIT by allowing the Assessee to book all of the revenue expenditure corresponding to the distributors commission, distributors incentives and outward freight cartage in the year under consideration whereas according to the Revenue it was required to be spread over on the basis of the matching principle 3. The Court finds that the ITAT proceeded on the basis that once the CIT had accepted the distributors commission and distributors incentives it was held that there was nothing like deferred revenue expenditure qua those items. Learned counsel for the Revenue has placed reliance on the observations of the Supreme Court in J. K. Industries Limited v. Union of India 297 ITR 176 SC where it is stated that matching principle today forms an important component of accrual basis of accounting. While as a general proposition this may be acceptable, the fact remains that the Assessee claimed the entire expense as revenue expenditure in his accounts for AY 2006-07 and if sought to be altered on the basis of the above principle it would indisputably affect the accounts of the subsequent year. This is significant because in the AY in question, the AO has not rejected the accounts on the basis that it does not present the true and correct picture of the business of the Assessee. In that view of the matter, the Court finds that that view taken by the ITAT is a plausible one and does not give rise to any substantial question of law.

IN HIGH COURT OF DELHI AT NEW DELHI ITA 724/2019 PR. COMMISSIONER OF INCOME TAX, Appellant Through: Mr.Ruchir Bhatia, Senior Standing Counsel for Revenue. versus ESSEL AGRO PVT. LTD Respondent Through: Mr.Mayank Nagi, Advocate. CORAM: JUSTICE S.MURALIDHAR JUSTICE TALWANT SINGH ORDER % 05.08.2019 1. This is appeal by Revenue against order dated 18 th January, 2019 passed by Income Tax Appellate Tribunal (ITAT) in ITA No.2158/Del/2011 and cross objections 190/Del/2011 for Assessment Year 2006-07. 2. issue that is sought to be urged by Revenue is whether ITAT erred in affirming order of CIT (A) by allowing Assessee to book all of revenue expenditure corresponding to distributors commission, distributors incentives and outward freight cartage in year under consideration whereas according to Revenue it was required to be spread over on basis of matching principle ? 3. Court finds that ITAT proceeded on basis that once CIT (A) had accepted distributors commission and distributors incentives it was held that there was nothing like deferred revenue expenditure qua those items. 4. Learned counsel for Revenue has placed reliance on observations of Supreme Court in J. K. Industries Limited v. Union of India (2008) 297 ITR 176 SC where it is stated that matching principle today forms important component of accrual basis of accounting. While as general proposition this may be acceptable, fact remains that Assessee claimed entire expense as revenue expenditure in his accounts for AY 2006-07 and if sought to be altered on basis of above principle it would indisputably affect accounts of subsequent year. This is significant because in AY in question, AO has not rejected accounts on basis that it does not present true and correct picture of business of Assessee. 5. In that view of matter, Court finds that that view taken by ITAT is plausible one and does not give rise to any substantial question of law. appeal is dismissed in above terms. S.MURALIDHAR, J. TALWANT SINGH, J. AUGUST 05, 2019/mr Pr. Commissioner of Income-tax v. Essel Agro Pvt. Ltd

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