TaxTMI 
TaxTMI 
2017 (7) TMI 604
X X X X Extracts X X X X
X X X X Extracts X X X X
....or assessment year 2006-07, the cross appeals in ITA No. 19/Chd/2011 & ITA No.26/Chd/2011 are directed against the order of learned Commissioner of Income Tax (Appeals), Panchkula dated 22.10.2010 for assessment year 2007-08, and the appeal of the assessee in ITA No.698/Chd/2012 is directed against the order of learned Commissioner of Income Tax (Appeals), Panchkula dated 18.4.2012 for assessment year 2008-09. 2. Since the issues arising in all the above appeals are common, they were heard together and are being disposed off by this consolidated order for the sake of convenience. 3. We will first deal with the appeal of the Revenue in ITA No.454/Chd/2010. ITA No.454/Chd/2010 : (Revenue's Appeal): 4. The revised ground No.1 raised by the Revenue reads as under : "1. Whether on the facts and circumstances of the case the Ld. C1T (A) was justified in deleting the addition of Rs. 4,66,12,183/- made by the Assessing Officer on account of prior period expenses despite the fact that assessee is following a mercantile system of accounting and thus only those expenses which relate to current year can be allowed against the income." 5. In this ground, the Revenue has ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ritten submissions of the counsel. In view of the fact that the liability of the expenses crystallized during the year under consideration the AO is not justified making disallowance of these expenses. The addition made by the AO is ordered to be deleted. This ground of appeal is allowed." 8. Against the impugned order, the Revenue has come up in appeal before us. Before us the learned counsel for the assessee relied upon the submissions made before the learned CIT (Appeals) and the order of the CIT(A), while the learned D.R. relied upon the order of the Assessing Officer. 9. We have heard the contentions of both the parties. We find that the order passed by the Ld. CIT (Appeals), allowing this ground raised by the assessee, is a cryptic and non-speaking order. The Ld. CIT (Appeals) has given no reason for holding that the liability pertaining to the impugned expenses crystallized in the year under appeal, except for stating that the assessee explained that the expenses crystallized during the year and filed details of the same. The Ld. CIT (Appeals) has simply accepted the assessee's contentions that since bills pertaining to the expenses were received in the impugned year, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....an under Central Assistance for renovation and modernization. The assessee stated that the loan amounting to Rs. 15,82,47,351/- was taken by erstwhile HSEB, which has been transferred to the assessee and the interest on the same had been correctly claimed by the assessee as revenue. The assessee stated that a loan of Rs. 50,04,98,245/- which was taken for new projects and interest on the same had already been capitalized while the balance loan having been taken on existing assets had been correctly claimed as revenue. The learned CIT (Appeals) after considering assessee's submissions and going through details filed by it allowed the assessee's claim for expenses. 15. Before us, the learned counsel for the assessee reiterated submissions made before the learned CIT (Appeals) and stated that having capitalized the interest which related to projects under construction, the balance related only to interest paid on loans on account of completed projects which were to be treated as revenue in nature as per the provisions of section 36(1)(iii) of the Act. 16. The learned D.R., on the other hand, relied upon the order of the Assessing Officer. 17. We have heard the contentions of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Revenue is, therefore, allowed for statistical purposes. 22. We will now deal with the cross appeals in ITA Nos.453 & 398/Chd/2010, taking up the assessee's appeal in ITA No.453/Chd/2010 first. ITA No.453/Chd/2010 : (Assessee's Appeal): 23. The grounds of appeal raised by the assessee in its appeal read as under: "1] That the order passed by the CIT (A) confirming the additions made by the learned Assessing Officer is illegal, arbitrary, and has been passed in a haste and has ignored basic aspects an facts of the case thus causing undue hardship to the assessee. 2] That the CIT (A) has erred both on facts and law in confirming the disallowance of Rs. 1,57,47,347/- on account of depreciation relatable to capital grant in aid received. The addition is unjustified has been made without considering the facts of the case correctly and deserves to be deleted. It is preyed that addition of Rs. 1,57,47,347/- may kindly be ordered to be deleted. 3] That the appellant craves to add, delete, concede, modify any or all the grounds of appeal at the time of hearing of appeal." 24. The only issue in the present appeal relates to the dis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ot attracted. The learned counsel for the assessee further stated that on the grant-in-aid utilized to the extent of Rs. 1,17,44,719/- the assessee had itself not claimed depreciation to that extent having reduced the same from the cost of the asset. 28. The Ld. DR, on the other hand,, relied upon the order of the lower authorities and stated that Explanation-10 to section 43 of the Act was in any case attracted as the utilization of the aid was towards capital assets only and on account of the express provisions of the Act, the disallowance of depreciation had been rightly made. 29. Having heard the rival contentions, we find that there is no case at all for making any disallowance of depreciation. The contentions of the assessee before the Ld. CIT (Appeals) that it had used only a part of the grant in-aid for acquiring assets, which was set off from the value of the assets, while the balance, which was not utilized, was reflected as liability in the Balance Sheet, has remained uncontroverted. Even before us, the Revenue has not controverted this assertion of the learned counsel for the assessee. In fact, the learned counsel for the assessee established this fact before us b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cquiring of capital assets, without pointing out how, when the assessee had categorically stated that the same had been reflected as liability in the Balance Sheet, meaning thereby that it has not been reduced from the cost of any asset since none was acquired. Thus, it remains an uncontroverted fact that the balance grant-in aid was not utilized for acquiring any asset. In such circumstances, we hold that Explanation-10 to section 43(1) of the Act, is not attracted since it clearly states that where a part of the asset is acquired directly or indirectly through grant or subsidy, the cost of the asset is to be reduced from the same. Explanation-10 to section 43(1) of the Act reads as under: "Explanation 10.-Where a portion of the cost of an asset acquired by the assessee has been met directly or indirectly by the Central Government or a State Government or any authority established under any law or by any other person, in the form of a subsidy or grant or reimbursement (by whatever name called), then, so much of the cost as is relatable to such subsidy or grant or reimbursement shall not be included in the actual cost of the asset to the assessee" 32. It is evident from....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uction of TDS on payment of transportation charges by the assessee. 37. Brief facts relating to the issue are that during the assessment proceedings, the Assessing Officer observed that the assessee was purchasing coal primarily from Central Coal Fields Limited and Coal India Limited and the purchase invoice of the colliery indicated that transportation charges were also being paid by the assessee on purchase of coal and were included as a separate head in the bill. The Assessing Officer also observed that while making the payment of the charges no TDS was deducted by the assessee on transportation charges. On being asked to explain the same, the assessee stated that its contract with Coal India was not a transport contract of sale and, therefore, it was not required to deduct any TDS. The Assessing Officer did not accept the argument of the assessee and held that since the bills specified the purpose f payment on account of transportation charges, TDS was required to be deducted on the same in accordance with the provisions of section 194C of the Act. The Assessing Officer held that inclusion of transportation charges in the bill did not change the nature of payment being for t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....howed transportation charges and collected the same from the assessee, the payment made on account of the same was to be treated as for the purpose of transportation of coal attracting the provisions of section 194C of the Act on the same. 40. The learned counsel for the assessee, on the other hand, relied upon the order of the Ld. CIT (Appeals) and on the decision of the I.T.A.T., Chandigarh Bench in the case of Haryana Tourism Corporation Limited (supra) in this regard. 41. We have heard the rival contentions. We find no infirmity in the order of the CIT (Appeals) deleting the addition made under section 40(a)(ia) of the Act. It is not disputed that the transportation charges were paid to the suppliers of coal who included the same in the bill relating to supply of coal raised by them. It is also not disputed that the contract between the assessee and suppliers of coal related to supply of goods/coal. The fact that the transportation was to be undertaken by the supplier of goods as part of the contract for sale of goods, as stated by the assessee before the lower authorities, has also not been controverted by the Ld. CIT (Appeals), nor by the Ld. DR before us. In view of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ith these facts, it was found that as the assessee had not paid any amount to the procurement agencies on account of transportation, interest or storage charges as such, accordingly, there was no liability for deduction of tax. 3. The contention of learned counsel for the Revenue that in fact all these factors had been taken care of while fixing the price at which the food grain was to be billed to the assessee, carries no weight. If expenses incurred by a person on account of transportation, interest, storage, etc., are added to the cost of the goods, it cannot be inferred that the person who is billed had paid certain amount on account of those services separately as the same becomes part of the commodity so sold. For the reasons mentioned above, we do not find any substantial question of law arises in the present appeal. The same is accordingly dismissed." 42. In view of the above, we hold that, there was no work contract between the assessee and the supplier of coal and hence the Ld. CIT (Appeals) has rightly held that the liability of the assessee to deduct tax under the provisions of section 194C of the Act did not arise in the present case. The Ld. CIT (Appeals),....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ngs, the assessee contended that it had actual incurred an amount of Rs. 2,00,03,372/- as interest on account of renovation and modernization of project instead of Rs. 2,01,88,372/- which pertained to financial year 2003-04 relating to assessment year 2004-05. Further, the assessee stated that out of the impugned amount of Rs. 2,01,88,272/- a sum of Rs. 68,45,000/- had been capitalized by the assessee itself against renovation and modernization undertaken under APDRP scheme Faridabad. The assessee submitted detail of interest capitalized during the year which reflected the above sum of Rs. 68,45,000/-. The assessee further stated that the balance amount of interest pertained to incremental amount of loan under central assistance for renovation and miscellaneous taken by HSEB during the year 1989-90 and transferred to the assessee vide Haryana Government Notification dated 13.8.1999 against completed schemes/works and, therefore, had been correctly charged to the Profit & Loss Account. The Ld. CIT (Appeals) after considering assessee's submissions allowed assessee's appeal and deleted the disallowance made. 47. Before us, the Ld. DR relied upon the order of the Assessing Officer ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ccordance with law. 50. Ground Nos.(c), (d), (e) and (f) raised by the Revenue are, therefore, allowed for statistical purposes. 51. In effect, the appeal of the Revenue is partly allowed for statistical purposes. ITA No.1048/Chd/2010 : (Revenue's Appeal): 52. In this appeal the Revenue has raised the following grounds of appeal : "(a) Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 19.94 crores made by the AO u/s 40(a)(ia) on account of transport charges ignoring the substance of the transaction which is essentially a payment for the transport changes and not a payment for the purchase of goods ? (b) Whether on the facts and in the circumstances of the case, the Ld. CIT (A) has erred in deleting the addition of Rs. 19.94 crores made by the AO u/s 4()(a)(ia) ignoring the fact that the inclusion of transportation charges in the sales bill does not change the nature of payment being for the purpose of transportation especially when from the bills it is clear that the assessee made the payment specifically for the purpose of transportation? (c) Whether on the facts and in the cir....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ore the appeal is heard and disposed off. 4. It is prayed that the order of the Ld. CIT (A) be set aside and that of AO restored." 56. It is relevant to observe here that it was admitted by both the parties that the issue raised in the present appeal as also the facts and circumstances of this case are similar to that in ITA No.398/Chd/2010. We, therefore, hold that the findings given in ITA No.398/Chd/2010,vis-a-vis disallowance of transportation charges u/s 40(a)(ia) of the Act given at para 41 &42 of the order and vis-à-vis disallowance of interest on modernization and renovation of projects, given at para 48-50 of the order, shall apply to this case also with equal force. 57. The appeal of the Revenue is therefore partly allowed for statistical purposes. ITA No.26/Chd/2011 : (Assessee's Appeal): 58. In this appeal the assessee has raised the following grounds of appeal : "l. That the order passed by the CIT(A) in confirming the additions made by the AO are illegal, arbitrary, have been passed in a haste and have ignored basic aspects and facts thus causing undue hardship to the Appellant. 2.That the CIT(A) has erred both on facts an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eld. This ground of appeal is rejected. " Agreeing with my predecessor, the addition of Rs. 27,05,917/- made by the AO on account of guarantee charges is upheld. This ground of appeal is dismissed. This ground of appeal is regarding addition of Rs. 6,94,164/- relating to the commitment charges. The AO has treated this expenditure as capital expenditure. The counsel on the other hand argued that this amount have been paid to the Haryana Govt. for borrowing money for funding working capital requirement. My predecessor while deciding similar ground of appeal in the earlier year observed as under :- "I do not find any merit in the argument of the counsel. The counsel has not furnished any evidence in support of his contention that the commitment charges have been paid for working capital borrowing and not for financing of capital projects. The AO has rightly treated this expenditure as capital in nature in the absence of any evidence. The addition made by the AO is justified and is upheld. This ground of appeal is rejected." 61. Before us, the Ld. DR argued that identical disallowance made in the preceding years i.e AY 2006-07 & 2004-05, which had been upheld by th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of Rs. 271034982 may kindly be ordered to be deleted. 3. That the CIT (A)has erred both on facts and law in confirming the addition of Rs. 19448372 being expenditure incurred on renovation and modernization of projects. The additions is untenable, illegal and is not based upon correct appreciation of provisions of law and has been confirmed by CIT(A) without considering the past history of the appellant and therefore the same deserves to be deleted. It is prayed that addition of Rs. 19448372 may kindly be ordered to be deleted. 4. That the CIT (A) has erred both on facts and law in confirming the addition of Rs. 3216500 on account of guarantee charges. The addition is unjust, illegal and deserves to be quashed. It is prayed that addition of Rs. 3216500 may kindly be ordered to be deleted. 5. That the CIT (A) has erred both on facts and law for initiating proceedings u/s 201 of Income tax Act for non deduction of TDS on interest. The proceedings have been initiated by the CIT(A) without any cogent reasons and without any material available on record. The proceedings initiated by the CIT (A) under section 201 therefore ar....