TaxTMI 
TaxTMI 
2013 (10) TMI 1238
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....ng Rs.40,25,052/- claimed by the assessee as written off amount for intangible assets ? 3] Whether on the facts and in the circumstances of the case, the Tribunal was, in law, justified in allowing Rs.23,00,000/- payment of interest made to the State Government out of fictitious assets? 4](a) Whether on the facts and in the circumstances of the case, the Tribunal was, in law, justified in allowing Rs.14,92,70,091 claimed by the assessee as amount capitalised out of revenue expenditure ? 4(b) Whether on the facts and in the circumstances of the case, the Tribunal was, in law, justified in confirming the order of the C.I.T.(A) reducing the amount out of capitalised expenditure of capital nature for the different distribution divisions of the assessee concern ?" 2. We have heard Sri Shambhu Chopra, learned Senior Standing Counsel appearing for the Income Tax Department and perused the record. No one appears on behalf of the respondent-assessee. 3. With regard to the question in R.A. No.114 (Alld.) of 1988, as reproduced above, Sri Shambhu Chopra submits that during the assessment year in question the assessee has claimed Rs. 1,23,00,000/- under the head "expenses for tr....
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....assessing officer, while disallowing the expenses on the apprehension of it being of capital nature has not pointed out as to which entry of expenditure is of capital nature. In the assessment order the assessing officer has observed that the expenses under the head 'transmission' during the last year was Rs.7,53,494/-, and that the assessee does not know as to what expenditure is and its nature and therefore, double of the expenditure as incurred in the last year is allowed for this year and the balance of Rs.51,00,961/- is disallowed and capitalized. While doing so the assessing officer has not considered the aforesaid sum of Rs. 51,00000/- for depreciation. We find that the disallowance made by the assessing officer was without any basis. Since, the accounts of the assessee were not only audited by the departmental auditors, but also by the Accountant General, if there was any discrepancy with regard to the nature of expenditure shown under the head 'transmission expenses' it should have been specifically pointed out entry-wise. The I.T.A.T. has considered all the facts and has correctly deleted the addition by the assessing officer and maintained by the C.I.T. (Appeals ). The f....
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.... by the department. And in any case, except that variation in the amount, part of allowance will create accounting problem in subsequent years, no material benefit will accrue to the department or any loss to the appellant. Under the circumstances, it is held as a matter of practical proposition that the claim as made should be allowed as such. As regards the interest paid on loans from I.D.B.I., the liability being interest for the current year is a revenue expense and allowable as a deduction in computing the income/profit or loss of the undertaking. Accordingly, the claim of Rs.40,25,052/- is considered an allowable deduction. The I.A.C. (A ) was not justified in rejecting the claim. The disallowance so made is hereby deleted (Relief Rs.40,25,052)". 9. The order of the C.I.T. (Appeals), was carried by department in appeal before the I.T.A.T. The I.T.A.T. Considered the facts and evidences on record in paragraphs-7 and 8 of the impugned order, and has recorded its conclusion in paragraph-9 as under : "After hearing both the sides at length and after we have gone through the background of the case and the obligation on the part of the assessee as spelled out by the C.I.T.(A)....
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....e justified. The sums paid by the State Government at the time of acquisition of private sector electricity undertakings had been converted by the State Government into loans to the Board with a stipulation to charge of interest. Although the Board has been representing that these loans should be written off, till they are written off, the appellant's liability subsists. Upto the end of the accounting year relevant to the assessment year 1977-78, the State Government had not acceded to the appellant's request. Under the circumstances, the loans given in respect of fictitious assets were liable to the payment of interest and, if any interest is paid thereon, it would constitute an allowable deduction. At the same time, since the actual payment of interest is much less than the total liability worked out on accrual basis, it cannot be said that any part of the interest paid related to the fictitious assets. On either count, the disallowance cannot be justified. The disallowance made by the I.A.C. (A) is accordingly deleted. (Relief Rs.23 lacs )." 14. Aggrieved by the order of C.I.T. (Appeals ), the revenue filed an appeal before the I.T.A.T., which has upheld the findings recorded....
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....& A.G. of India. Since it is not possible to work out the percentage year after year, the findings of the working group in the year 1968 is being uniformly adopted for all the subsequent years. The I.A.C.(A) has increased this percentage without giving any basis. The capitalization done by the I.A.C.(Asst.) as such is unjustified. Para 8.2 :- I have considered these contentions. It is general practice that all electricity boards to bifurcate its establishment and general expenses between capital and revenue depending on the expenditure of capital work going on in each particular unit/ division. It is for this reason that certain divisions 100% of the expenditure is being capitalized where only capital project is in progress, 60% where major part of the work is of capital nature while in other units the bifurcation is 50, 50 (fifty fifty). It is only in respect of combined construction and the maintenance units where major part of the work is maintenance and distribution, that the appellant has been uniformly adopting 12/1/2 % of such expenditure as capital. It is true, that the appellant had shown his inability to give exact working of expenditure relating to capital projects....