2018 (11) TMI 1484

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.... Rs. 3,16,68,000/- made by the AO on account of disallowance of netting off of income during trial run with trial run expenses. 2. On the facts and circumstances of the case Ld. CIT(A) has erred in allowing capitalization of expenses without giving a finding on the veracity of the expenses particularly when supporting evidences ij support of the expenses were not filed before the AO." 2. The facts in brief are that Assessee Company is engaged implementation of 192MW Allian Duhangan Hydroelectric Project on the river Allian and Duhangan in Kullu District of Himachal Pradesh and is mainly in the business of generation and sale of electricity. The assessee company started the commercial generation of electricity w.e.f. 29th July, 2010 and c....

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....0-28.07.2010     (Rs. '000) (Rs. '000) INCOME       Turnover   401,151 31,668 Other income 15 2,960 - TOTAL   404,111 31,668 EXPENDITURE       Bulk power transmission charges   118,541 - Personnel expenses 16 85,759 3,864 Operating and other Expenses 17 202,082 9,885 Depreciation 4 556,230 - Financial expenses 18 568,032 35,293 TOTAL   1,530,645 49,042 Loss before tax   (1,126,534) (17,374) 4. It was further submitted that, it would be inconsistent to hold that the expenditure incurred by the assessee prior to the setting up would be of a capital nature but that the receipts would be of a revenue nature. The assessee company....

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....nd only net affected cost was ultimately capitalised. The actual expenses incurred during the trial run period was in fact Rs. 4,90,42,000/-. He held that, it is very difficult to appreciate the stand of the Ld. AO, because if expenditure incurred by the assessee during the trial period has treated to be capital in nature then for the same period, receipts for the same period can be held to be revenue in nature. He thus, upheld the contention of the assessee that neither under the law nor under accounting principle such an income capitalised can be treated as revenue income and deleted the addition. 7. After considering the rival submissions made by the parties and on perusal of the relevant finding given in the impugned order, we find tha....