TaxTMI 
TaxTMI 
2015 (10) TMI 597
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....der. 2.On the facts and in the circumstances of the case, the ld. CIT(A) erred in deleting the addition made in respect of lower provision for FOCA than authorized by MERC order without appreciating that though the MERC order was issued at a later date, It was received before the closure of books of accounts and hence, required to be given effect in the said books. 3. On the facts and in the circumstances of the case, the ld. CIT(A) erred in allowing the claim of write-off of capital items of Rs. 7.41 lakhs without appreciating at write-off of items of capital nature is not allowable as deduction or char e to P&L a/c irrespective of the amount involved. 4. On the facts and in the circumstances of the case, the ld. CIT(A) erred in allowing the claim of set-off of b floss/unabsorbed depreciation without appreciating that in the case of MSEB, no loss or unabsorbed depreciation was allowed to be carried forward in the final order for AY 2006-07 and hence. there cannot be any eligibility for set-off or allowance of loss or unabsorbed deprecation in the case of assessee under any provisions. 5. The appellant prays that the order of CIT(A) on the above ....
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....and wide areas including Naxalite infected remote areas. In addition to the above it was further seen by us that the Ld. CIT(A) had called for a remand report. The Ld. AO had sent the remand report and the same was considered by the Ld. CIT(A) before passing the appellate order. Under these circumstances admission of additional evidences is justified. We derive support from the judgment of Hon'ble Delhi High Court in the case of Virgin Securities & Credits (P)(Ltd. 332 ITR 396 (Del.). Thus, viewed from all the angles, we find that admission of additional evidences by the Ld.CIT(A) in the case of the assessee is on the basis of proper reasoning and has been done in view of principles of natural justice and the same is held to be justified and ground no.1 of the revenue's appeal is dismissed. 6. Ground no.2, in this ground the revenue has challenged the action of Ld. CIT(A) in deleting the addition made by AO in respect of lower provision for Fuel and Other Cost Adjustment ["FOCA"] authorized by Maharashtra Electricity Regulatory Commission. The Ld. AO has discussed the issue in para 4.1 and 4.2 of the assessment order. The assessing officer has made addition of Rs. 346.57....
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....n of electricity in the State of Maharashtra. During the year, the MSEB was trifurcated into three new companies and each company took over one activity of MSEB. The erstwhile MSEB was under statutory control of Maharashtra Electricity Regulatory Commissioner (MERC) in respect of tariff of electricity to be charged from the public. After trifurcation, all the three new companies including appellant were under control of MERC. The appellant was purchasing electricity from MSE Power Generation Co. Ltd., but it could purchase at the rate to be approved by the MERC. Similarly, the appellant was selling electricity to the public but the selling rate was subject to approval by the MERC. Till the approval was not received, the appellant was accounting sale of electricity to public on actual basis. The rate to be approved by MERC (at a later date) could be less or more. The appellant's previous year ended on 31.3.2006 and till that date, the MERC order was not received. Therefore, apart from electricity charges, the appellant provide / accounted for revenue of Rs. 1063.95 crore towards FOCA (i.e. Fuel and Other Cost Adjustment to be charged from public) till the end of previous year. H....
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....t that since the MERC order dtd. 07.09.2006 was received 01. 26.09.06 i.e in the next assessment year, the effect of MERC order was required to be given in subsequent assessment year. The same principle applies in case of appellant and therefore, effect of MERC order dated 05.05.06 and 01.06.2006 were correctly given by appellant in next assessment year. 4.3( e) The MERC in their order also decided and ordered that the excess FOCA charges were to be collected by the appellant from public in the bills for the months of June, July and August 2006, which were falling in the PY 2006-07 relevant to next assessment year. Thus, when the appellant was debarred from collecting the FOCA before June, 2006, how the appellant could have offered the same in the P.Y ended on 31.03.06. As per direction of MERC, such FOCA was collected by appellant and correctly offered as revenue in the next assessment year. 4.3(f) considering the entirety of facts and circumstances, the binding nature of MERC order, and directions of MERC, principles of accruals of income and the fact that there was no loss of revenue (since offered in next year), the addition made by A.O is hereby deleted." ....
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....he judgment of Hon'ble Supreme Court in the case of Excel Industries Ltd. (supra) and judgment of Hon'ble Delhi High Court in the case of CIT vs. CIT vs. Vishnu Industrial Gases P Ltd. (supra). Thus, the order of the Ld. CIT(A) on this ground is upheld and ground no.3 of revenue's appeal is dismissed. 14. Ground no.4 deals with the grievance of the revenue regarding action of Ld. CIT(A) in allowing the claim of set off of brought forward/loss/unabsorbed depreciation. The assessing officer has discussed this issue at para 15.1 to 15.3 on page no.4 to 5 of the assessment order. The Ld. AO has rejected the claim of the assessee of set off of brought forward /loss/ depreciation on the ground that the impugned brought forward/loss/depreciation does not belong to the assessee company but belong to erstwhile Maharashtra State Electricity Board (MSEB) which was trifurcated into three companies i.e. for generation, transmission and distribution. The assessee company being one of these three companies. In other words the assessee company was demerged out of erstwhile MSEB. The assessee company made this claim on the basis of a chart showing the brought forward loss and unabsor....
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....ssessment proceedings itself. Therefore, in terms of section 72A(4) r.w.s. 2(19AA) of the Act, the appellant was entitled for benefit of set off of balance b/f. losses I depreciation of MSEB against its income. The A.O. is directed to allow appellant's claim after verifying the facts in the case of MSEB. The year under consideration was last assessment year of MSEB and the first year of the appellant company. In case of MSEB, the figures of unabsorbed losses / depreciation of various years will go on changing on receipt of orders of appellate authorities, which will have bearings on the last assessment order of the MSEB and consequently on the first assessment year under consideration of the appellant. The A.a is directed to ascertain the fact of unabsorbed losses I deprecation in case of MSEB from time to time and allow the benefit of carry forward of the same in the. hands of appellant for the year under consideration. Subject to this observation, this ground of appeal is allowed. 16. Before us, both the parties argued this issue vehemently. Ld. DR relied upon the assessment order and submitted that the claim has been rightly rejected by the AO. On the other hand ld. Couns....
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.... connections 768.00 GROUND NO.2 The learned CIT (Appeals) erred in holding that the electricity duty collected ,and paid/adjusted by the appellant, amounting to Rs. 23291.59 lacs is covered/governed by the provisions of section 43B of the Income Tax Act, 1961, and rejecting the appellant's contention that electricity duty is not covered by the provisions of section 43B of the Act, which is contrary the facts of the case and is not as per the applicable provisions of the Act. GROUND NO.3 3. Without prejudice to ground no. 2 above, the learned AO erred in issuance of notice u/s. 271(1)(c) of the Act and the same be cancelled, since it is contrary to the facts of the case and is not as per the applicable provisions of the Act." 19. In ground no.1(a), the assessee has challenged the action of Ld. CIT(A) in confirming the disallowance made by the AO on account of excess provision for interest/ finance charges amounting to Rs. 52.79 lakhs. This issue has been discussed by the AO on paragraph no.8 at page no.3 of the assessment order whereas the Ld. CIT(A) has discussed this issue in para 7.1 to 7.3 on page no.17 of the appellate ord....
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....on and errors in transmission; * It is not disputed that the provision was made on the basis of the data available. * It would be impossible to make estimates which ere exact in the circumstances. * Excess provisions made in the Assessment Year 2006-07 was rectified in the subsequent year i.e., Assessment Year 2007-08 * The CIT(A) upheld the addition in the A.Y. 2006-07, however, directed the AO to grant subsequent relief in the A.Y. 2007-08 after verification of the claim. 21. We have heard both the parties and considered the material before us. It is settled law that expenditure can be allowed against the business income only if the expense has been incurred for the purpose of the business and has been incurred during the year under consideration and that the expenditure should not be a capital nature. All these three conditions are cumulative. It is an admitted position by the assessee also that the expenditure under consideration did not pertain to the year under consideration and the same was recorded in the books of account, as a result of an error. Therefore, in view of these facts we find that the AO has rightly disallowed the claim an....
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....ppropriate direction has already been issued to allow the claim in the correct manner and in the correct year. We find the ground of the assesse is to be devoid of merits and the same is dismissed upholding the order of the Ld. CIT(A) on this issue. 24. In ground no.1C the assessee is aggrieved with the action of Ld. CIT(A) in upholding the action of AO in making disallowance of Rs. 39.23 lakhs on account of capitalization of interest. The AO has discussed this issue in para 9 on page 3 of the assessment order whereas Ld. CIT(A) has discussed this issue in para 9 on page 3 of the assessment order whereas Ld. CIT(A) has discussed this issue in para 9 on page no.21 to 22 of the appellate order. The Ld. CIT(A) has also not accepted the claim of the assessee mainly on the ground that the impugned expenditure was a capital nature and therefore, it was not allowable as an expenditure in the year under consideration. The Ld. Counsel has made following submission before us. "* The said additions were made on the basis of the CAG comment on the accounts of the appellant. * The AO has selectively relied on CAG comments and made additions to taxable while ignoring oversta....
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....s neither a capital receipt nor a liability but was in fact income of the appellant and therefore, the assessee company should have shown the same in the income account. Before us ld. Counsel has made his arguments in detail and the arguments made in the write up submitted by Ld. Counsel are reproduced hereunder for the sake of ready reference: * In light of the uncertainty and lack of clarity persisting at that point in time due to the then recent restructuring of the erstwhile MSEB which also happened in the same year, the payments though made by the Appellant, were accounted for as having being made by MSEBHCL for the various circle offices of the Appellant Company. * This entry was wrong because though the relevant expense / capital asset was debited / created in the books of accounts of the Appellant Company, corresponding credit was given to the MSEBHCL and not to the bank. account through which the payment was made since it was not clear at the relevant point of time as to which entity the bank account pertained to and since the position was not clear the account of MSEBHCL was credited. * This error was realized during the finalization of accounts....
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....ubmitted before Ld. CIT(A) that the assessee collected electricity duty from the consumers on behalf of the Government of Maharashtra and was required to pay the same to the Government. It was further submitted that since the GOM itself was required to make payment to the appellant under a variety of accounts, or to certain poor or backward region/section of society, at Nil or subsidized charges, to be recovered from the government, the GOM settles its inter se accounts with the appellant on account of electricity duty by setting off/adjusting the amount receivable against the amount payable. The inter se payments were thus effected through set off of mutually receivable/payable balances, for which notifications were issued by the GOM from time to time. The process of issue of such notification was complex and time consuming, since it involved a variety of procedure with various authorities. During the appellate proceedings the appellant furnished a copy of notidication dt.31.03.2008 issued by the GOM in support of its contention. 29. It is further submitted before the Ld. CIT(A) that the assessee did not account for this amount through its profit and loss account and only the n....
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....ot applicable in this case and reliance was placed by him on the following judgments: (i) CESC Ltd. Vs. CIT in ITA No.82/110/83/84 of 2004/2005 (ii) Kerala State Electricity Board vs. DCIT reported in (2010) 329 ITR 91 (iii) A.W. Figgis & Co. Ltd. vs. CIT reported in (2003) 256 ITR 268 (iv) CIT vs Ovira Logistics Pvt. Ltd. reported in (2015) 58 taxmann.com 206 33. It was further submitted by Ld. Counsel that the credit for the similar amount was granted by the AO in the assessment order passed for A.Y. 2007-08 copy of the assessment order is placed in paper book at page no.161 to 175 on our attention has been drawn on page no.174. On the other hand, Ld. DR relied upon the orders of authorities below and requested for confirming the order of Ld. CIT(A). 33A. We have gone through the arguments made by both the sides as well as the material placed before us.We have also considered the case laws relied upon by the ld. Counsel on this issue, copies of which have also been placed before us. It is seen that in the case of 'Kerala State Electricity Board'(su.),it was held by the Hon'ble High Court that in these circumstances the provisions....
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....e Kerala High Court in the case of Kerala State Electricity Board-vs-Deputy Commissioner of Income Tax (supra). We are of the opinion that Section 43B of the Income Tax Act is attracted to a case where payable is to be made to the State Government in the capacity of the State as a sovereign and not to a case where payment is to be made to the State Government in its capacity as a principal by an agent. In the instant case, the relationship between the State and the licensee is of a principal and agent/fiduciary and not that of a sovereign and a subject. 20) Looking at the issue from another angle, the electricity duty collected by the licensee from the consumers is so done by the licensee as an agent of the State and, hence, the same cannot be considered to a trading receipt in the hands of the licensee. It does not constitute income of the licensee and cannot be included in the licensee's income for the purpose of computation of income tax. It is not a business receipt of the licensee which the licensee collects on its own behalf in connection with its business of generating and supplying electricity. The licensee does not collect the electricity duty for its own cons....