TaxTMI 
TaxTMI 
2019 (2) TMI 705
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.... be capital receipt. (ii) On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in deleting the addition amounting to Rs. 95,83,279/- on account of legal claims ignoring that the amounts involved are penal in nature and hence are not allowable. (iii) The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal. 2. Brief facts of case are as under: The assessee filed return of income on 29.09.2008, declaring loss of Rs. 84,73,35,870/- which was subsequently revised on 29/03/10 declaring revised loss of Rs. 64,49,30,204/-. Notice under section 143(2) of In.T.Act, 1961 (the Act) was served upon assessee along with questionnaire. In response to statutory notices, representative of assessee appeared before Ld.AO and filed details as called for. 2.1. Ld.AO observed that assessee had received a sum of Rs. 19,65,18,794/- as service line deposit which was treated by Ld.AO as non-refundable deposit. 2.2. Further Ld.AO observed that assessee claimed legal expenses of Rs. 3,83,33,117/-. Ld. AO called for nature of payment. From details filed, i....
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....ime of providing new connections, to recover the expenditure incurred on such equipments and it is a one time charge levied on the consumers at the time of taking new connections and thereafter it is the responsibility of the BRPL for repair/replacement of the service line. It has been noted that the assessee was charging service line deposits as well as development charges from the consumers as per the rules and notification of Delhi Electricity Regulatory Commission (BERC). The capital expenditure incurred in respect of service line deposits on account of service line cables, cost of G.I. pipes, bricks etc. were capitalized under the head 'meter accessories' (on which deprecation was claimed at the rate of 80% but was reduced by the Assessing Officer to 25%). However, the capital expenditure incurred on development charges were duly included under the head "plant and machinery", which was subject to the normal depreciation @ 25%. It was accordingly submitted that the development charges are required to be D-capitalized from the plant and machinery @ 25% and service line deposits from plant and machinery (meter) @ 80% in accordance with the provisions of sec. 43(1) of the Act. Aga....
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....vant cost of plant and machinery in accordance with sec. 43(1) of the Income-tax Act, 1961, explained the assessee. 17.4 With regard to the observation of the Assessing Officer that the assessee is engaged in selling electricity to the consumers from whom it charges fees in the name of energy charges and these energy charges are in the nature of Revenue receipts, the submission of the assessee remained that the nature of service line receipts are entirely different from the nature of the energy charges and the service line receipts deserve to be reduced from the cost of the relevant plant and machinery in accordance with sec. 43(1) of the Income-tax Act, 1961. On the other hand, energy charges are recovered from consumers for the amount of electricity consumed by them at the prevailing tariff, which is of the Revenue nature. Accordingly, both these receipts, namely, energy charges and service line receipts have different characteristic and therefore, could not be measured with the same yard-stick. We find substance in the submission of the assessee as there is no dispute on the facts of the case. Discussing these submissions of the assessee and meeting out the observations of th....
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.... submitted that deduction of expenditure amounting to Rs. 3,83,33,117/- was made under section 37 of the Act. He submitted that Ld.AO without giving any specific reference to an expenditure incurred under legal claims disallowed ad hoc 25% of expenses considering same to be penal in nature. 9.2. Ld.CIT(A) deleted addition by following order of his predecessor for assessment year 2006-07 and 2007-08. It has been submitted that facts and circumstances are same in year under consideration. 9.3. Ld.Sr DR though supported order of Ld.AO could not controvert aforestated arguments advanced by Ld.AR. 10. We have perused submissions advanced by both sides in light of records placed before us. 10.1. It is observed that, this Tribunal has decided issues in preceding assessment years in assessee's own case vide order dated 05/10/15 as under: " 44.3. Further, even the assessing officer has failed to pin-point any specific expenditure which is penal in nature and has merely made an ad-hoc disallowance @ 25% of such expenditure, merely on the basis of assumption. 44.4. Even otherwise, payments made to customers and others in lieu of civil claims/ suits, arbitration, etc., are merely in t....