Income Assessed in Subsequent Year doesn’t cause loss to Revenue when Tax Rates are Same: ITAT [Read Order]

The Income Tax Appellate Tribunal ( ITAT ), Mumbai in Dy. Commissioner of Income Tax vs. M/s. Deloitte Touche Tohmatsu held that when the Tax Rates applicable in both the years is same there is no loss to the Revenue if the income is assessed in the subsequent assessment year.

The assessee is engaged in the business of providing Corporate Finance Service, Bid Support Services, and vendor Assistance. In the returns filed by the assessee for the assessment year 2008-2009, an amount of Rs.10.78 Cores was shown as Professional Fees. The assessee had not shown any work-in-progress either on the balance sheet or the Profit and Loss Account. Upon examining the professional ledger, the Assessing Officer (A.O) found that the assessee the assessee had received an amount of Rs.1.48 Crores from various concerns in the month of April 2008. As the assessee was providing services requiring due diligence relating to the financial restructuring activities of various corporate entities, the A.O observed that the assessee required substantial time to complete/submit the reports to its clients. Therefore, according to the Assessing Officer, the professional income received by the assessee in the month of April 2008 has to be considered as the value of work done during the financial year 2007–08. The Assessing Officer further observed that for such work done the assessee must have claimed relatable expenses in financial year 2007–08. The A.O held that payments received in April 2008, were in respect of work completed in the financial year 2007–08 relevant to the assessment year under dispute. Accordingly, he added back the amount of Rs.1.48 Crores, to the income of the assessee. The assessee challenged the addition before the first appellate authority.

The Commissioner of Income Tax (Appeals) (CIT(A)) deleted the additions made by the A.O. Revenue appealed before the ITAT. The Counsel for the Revenue strongly supported the order of the A.O, while the counsel for the assessee reiterated the order of the CIT(A) and submitted that

the assessee has not only received the disputed professional income in the subsequent financial year 2008–09 relevant to the assessment year 2009–10 but the assessee has also accounted for and offered the said professional income of Rs.1.48 Crores, in the subsequent assessment year i.e., A.Y. 2009–10. He submitted, the assessee has raised the bills in the month of April 2008 and has also received payment in April 2008. Therefore, the professional income was correctly offered to tax in the assessment year 2009–10.

The ITAT bench comprising of Judicial Member Saktijit Dey and Accountant Member Rajesh Kumar “Notably, on a perusal of the orders passed by the Co-ordinate Bench in assessee’s own case for assessment years 2009–10, 2010–11 and 2011–12, as referred to above, it is seen that identical issue has been decided in favour of the assessee considering the fact that the assessee has accounted for the income in the assessment year, wherein, the bills were raised and income was received. Moreover, as held by the Hon’ble Supreme Court in case of CIT v/s Excel Industries Ltd. 38 Taxman 100 (SC), when the tax rate applicable in both the years is same there is no loss to the Revenue if the income is assessed in the subsequent assessment year. Thus, respectfully following the decision of the Co–ordinate Bench in assessee’s own case as referred to above, we uphold the decision of the learned Commissioner (Appeals) on this issue.”