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TaxTMI 
TaxTMI 
TaxTMI 
2019 (11) TMI 1111
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....ula ITA No. 431/Chd/2019 A.Y. 2015-16 22/01/2019 CIT(A), Panchkula ITA No. 452/Chd/2019 A.Y. 2012-13 06/03/2018 CIT(A)-2, Gurgaon 2. Since the issues involved are common and the appeals were heard together so these are being disposed off by way of this consolidated order for the sake of convenience and brevity. 3. At the first instance we will deal with the appeal in ITA No. 741/Chd/2018 for the Assessment Year 2009-10. Following grounds have been raised in this appeal: 1. Whether on the facts and circumstances of the case the Ld. CIT(A) has erred to allow the appeal of the assessee and to delete the addition of Rs. 21,67,62,978/- made account of fuel related losses by holding the same being legitimately claimed by the assessee . 2. Whether on the facts and circumstances of the case the Ld. CIT(A) has erred to allow the appeal of the assessee and to delete the addition of Rs. 4,97,25,987/-made on account of renovation and modernization of projects which is incorrect as the said expenditure is capital in nature and the benefit is spread over the years and therefore, not allowable expenditure to the assessee. 3. It is prayed that ....
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....fter asked the assessee to furnish the evidence on the basis of which the said loss was claimed. 7.2 In response the assessee vide written submission dt. 20/12/2011 submitted as under: "Further to the personal attendance of the undersigned and submissions made earlier and explanation given regarding fuel related coal losses by the concerned representative of the assessee, we bring out as under for your kind consideration and taking necessary action in the matter: FTPS is getting coal from subsidiaries coal companies of Coal India Limited. The assesse is getting supply of coal from far off places. The coal generally travels the distance of 1100 KM to 1350KM before it is unloaded at the place of the assessee. The difference in weight of coal at loading point viz-a viz. unloading point is called transit losses. The main reason of transit losses are as under: 1. Evaporation of surface moisture 2. Windage losses during transportation The documentary evidences in respect of transit losses such as invoice of the supplier depicting quantity of coal supplied by the supplier and weighbridges slips depicting quantity received by the assesssee an....
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....ted transfer the title of goods to HPGCL after loading of coal in Railway wagons and its weighment. It is submitted that the transit losses to the tune of Rs. 43,35,25,957/-occurred during course of carrying out the business and that these losses are not capital in nature. It is highlighted these losses occurred on account of natural process and were beyond control of the appellant and in the given circumstances there was no possibility for the appellant to prevent, recoup or reduce these losses. Out of the total loss of Rs. 43,35,25,957/- recorded in the books of accounts, a sum of Rs. 21,67,62,978/- being 50% of the loss recorded in the books was disallowed. The contention and basis of making addition of Rs. 21,67,62,978/- are rebutted point-wise, hereunder: 1. LOSS OF COAL DURING TRANSIT NOT INSURABLE It is submitted that as per policy of Insurance companies, losses of coal occurring on account of evaporation of surface moisture and windage during course of transportation is not insurable. A copy of letter of Senior Branch Manager, New India Assurance Company Limited, Panchkula, wherein it has been stated out that losses occurring during course of tran....
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....oks of accounts have been duly verified by the auditors and no adverse inference has been drawn in this regard. It may be relevant to state here that since these losses (fuel related losses) have occurred during course of carrying out the business activities and are neither in the nature of personal expenditure, nor capital expenditure, the same are allowable under the provisions of section 37(1) of the Act. In view of above, observations made by the AO in the order of assessment which are the basis of making this disallowance and the point wise reply to the observations of the AO, in a tabular form are addressed hereunder :- Sr. No. Observations of Assessing Officer in Order of assessment Reply to the Observations 1. How the fuel loss was calculated? Whether there is any weighment was done at the receipt side. FTPS has installed weigh bridges in the plant for weighment of coal on receipt of Rake and regular weighments were carried out. The amount of loss was calculated for the proportion of quantity lost, which was arrived after calculating the difference between weighment of particular rake made at time of loading over weighment of particular r....
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.... thermal power plants). Loss on account of evaporation of surface moisture, windage loss takes place during transportation in the normal course are beyond the control of the appellant. II. Insurance cover on these Transit losses is not offered by insurance companies and therefore the appellant does not have any choice other than to bear losses at its own. III. Freight charges for coverage of this loss by railway authorities, as per clause (12) appearing in the Goods Tarrif of Railways are much higher than the amount of loss actually suffered by the appellant. IV. The accounts of the appellant are subject to audit under various laws and the genuineness and legitimacy of transactions (loss suffered by the appellant) cannot be doubted/ challenged. V. The losses recorded in the books of accounts have occurred during course of carrying out business activities are related to its business and are allowable expenditure under the provisions of section 37(1) of the Act. The losses are verifiable and have been deduced from basic record/ documents in possession of the appellant. VI. Amount to the extent of 50% of the total loss has been disallowed b....
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....ricity; d) Issue of licenses to persons seeking to act as transmission licensees, distribution licensees and electricity traders with respect to their operations within the state; e) Promote cogeneration and generation of electricity from renewable sources of energy by providing suitable measures for connectivity with the grid and sale of electricity to any person, and also specify, for purchase of electricity from such sources, a percentage of the total consumption of electricity in the area of a distribution license; f) Adjudicate upon the disputes between the licensees, and generating companies and to refer any dispute for arbitration; g) Levy fee for the purposes of this Act; h) Specify State Grid Cod consistent with the Grid Code specified under clause (h) of sub section (1) of section 79; i) Specify or enforce standards with respect to quality, continuity and reliability of service by licensees; j) Fix the trading margin in the intra-State trading of electricity, if considered, necessary; and k) Discharge such other functions as may be assigned to it under this Act. The commission is also require....
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....s in India by keeping surveillance on various factors like increase in cost of production of electricity, line losses, pilferage and other such related issues. For this purpose, the tariff fixed by electricity producing companies were subject to scrutiny by the electricity regulatory commission who examined expenditure incurred by these companies as regards their chargeability to cost of electricity calculated by these manufactures. While doing so, the factors relating to increase in efficiency and decrease in avoidable expenditure were taken into consideration. The electricity regulatory commission however did not check validity or commented on the validity, genuineness or correctness of the expenses incurred by the electricity generating companies. Perusal of the functions as stated above also reveals that the commission is a statutory authority whose main role is to ensure efficiency, cost effectiveness and adequate supply of power etc. to the general public in the State. In furtherance of its object it fixes the tariff to be charged for retail, wholesale and bulk supply etc. while fixing the tariff and allowing transit losses/various other expenditure, it takes into co....
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....not insurable. ii) Had the appellant opted for transport of coal at the risk of Indian Railways, freight charges payable for transit of coal would have been higher by 20% of the amount of freight paid by the appellant, which would have been much higher than the coal related loss suffered by the appellant. iii) The correctness, legitimacy and genuineness of loss has already been verified by the statutory auditors appointed u/s 619(3) the Companies Act and also by Comptroller and Auditor General of India. 3) It is further submitted that transit losses of coal are being suffered by the appellant since the date of inception and these losses have been in the range of 3.06% to 6.58% in the past i.e. much more that the transit loss of coal suffered by the appellant during the year under question . It may be relevant to mention here that these transit losses were duly allowed by the AO while completing assessment proceedings/reassessment proceedings upto the F.Y. 2007-08 (A.Y. 2008-09) and no disallowance in this regard was ever made by AO. Since, no disallowance in respect of transit loss of coal suffered by the appellant was made in the earlier years, ....
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.... loss of 0.8% as specified under the General Tariff Regulations of CERC and that the various Power Companies regularly sought relaxation of norm and higher allowance of transit loss of coal as per actual. He also pointed out that the State Commissions and CERC have exercised power to relax the norms when the Power Companies had established reasons and circumstances for exercising the relaxation. Thus 0.8% transit loss was a target loss but actual claim of Power Companies were always more due to factors beyond their control. 10.3 The Ld. CIT(A) observed out that in the assessee's case for the year under consideration, the HERC on representation by the assessee had allowed transit loss @ 2% for PTPS and @2.5% for FTPS as against 2.3% average loss claimed. He also pointed out that the CERC/HERC had set standards for the electricity industry to promote efficiency, economy & competitiveness and to regulate the tariff in view of both interest of consumer as well as the consideration that supply & distribution could not be maintained unless adequate charges for electricity supply ere adequately levied and duly collected and that while setting normative loss the Regulatory commission ha....
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....(A) pointed out that the assessee had submitted the details of nature of loss and method of computation of loss to the A.O. as well as before him which had been verified and examined. He also pointed out that coal loss had been computed on the basis of weighment of various rakes at the time of loading of coal in the railway wagons and final weighment made at weighbridges installed at the power plant upon unloading and the amount of loss was arrived at after calculating the difference between weighment of a particular rake made at the time of loading over weighment at the time of unloading. The Ld. CIT(A) mentioned that the difference in weight of coal which was called the transit loss was recorded first in the SMB Register, thereafter in the stock register and the books of accounts under the head "fuel related losses", and that the record in respect of fuel related losses suffered by "Panipat Unit" of the assessee corporation was examined by the A.O. while completing the assessment proceedings for the A.Y. 2009-10 and no adverse comments / discrepancies as regards to the records maintained by the assessee for fuel losses was observed by the A.O. while passing the assessment order. ....
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....mate basis i.e; 50% of the loss claimed by the assessee but no basis was given to arrive at the figure of 50%. On the other hand the books of accounts were maintained by the assessee in regular course of business, those were duly audited by the statutory auditors and the accounts were submitted to the office of the C&AG of India wherein no specific discrepancies were pointed out relating to fuel related loss claimed by the assessee. Ld. CIT(A) discussed the transit loss of coal as recorded by the assessee over the years which had been reproduced in the former part of this order which clearly shows that the loss was occurring year to year and was not consistent i.e; there was variation in every year and even HERC had also allowed the loss but that allowance was for the limited purpose of fixing the tariff and promoting efficiency of the companies which clearly shows that in such type of business there was always transit loss of coal. In the present case the A.O. while accepting the 50% of the loss as genuine and remaining 50% as non genuine, had not given any cogent reason or basis and even in the past such losses were accepted by the Department. 15. In the present case the findi....