TaxTMI 
TaxTMI 
2020 (10) TMI 1218
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.... of depreciation amounting to Rs. 8,52,682/- disallowed by the AO, when the assessee did not produce the details of the assets on which depreciation has been claimed @ 25%. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) is not justified in law as well as in facts in deleting the addition of Rs. 63,78,096/- made by the AO towards provision for guarantee commission, which was not - an allowable expenditure. 4. The appellant craves to alter, amend or add any other ground that may be considered necessary in course of the appeal proceeding. 3. Brief facts of the case are that the assessee M/s. Orissa Hydro Power Corporation Ltd. (OHPC), is a Public Sector Undertaking of the Government of Orissa, which is solely and wholly engaged in the business of generation of hydro power and for that purpose operates and maintains hydro power stations at 6 units, i.e. (i) Hirakud Dam in Sambalpur, (ii) Rengali Dam in Dhenkanal, (iii) Koiab Dam in Koraput, (iv) Balimela in Malkangiri, (v) Mukhigudauda & (vi) Chiplima. The assessee also operates one hydro power project as a joint venture i.e. Machakund Hydro Power Project with the Government of Andhra Pradesh.....
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....maintenance. In this regard, ld. DR relied on the order of AO and submitted that the assessee follows mercantile system of accounting as per which liability for expenses can be recognized and claimed only when the liability crystallizes. There is no scope to allow provision for any expenses, if the liability for the same has not crystallized or has not become ascertainable by the end of the relevant previous year. In the case of the assessee, apart from the expenditure incurred for maintenance of the dam of UIHEP, Mukhiguda, the provisions made for dam maintenance in respect of all other dams are contingent and unascertained liability, and, therefore, the AO has rightly disallowed the same. It was further contended by ld. DR that since the provision for dam maintenance is not an allowable expenditure, the CIT(A) is not justified in deleting the addition made by the AO. Accordingly, ld. DR submitted that the order of the AO deserves to be restored. 7. On the other hand, ld. AR relied on the order of CIT(A) regarding deletion of addition and submitted that the provisions made by the assessee in its accounts on year to year basis. It was also submitted that when a 'provision....
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....the amounts receivable. The Hon'ble ITAT, Cuttack Bench under similar circumstance for the AY 2004-05 in the appellant's own case in ITA No. 278/CTk/2010 vide order dt. 21.10.2011 has allowed the provision for dam maintenance. In view of the same, the addition of Rs. 7,89,47,465/- made by the AO is deleted." Ld. DR before us could not bring any cogent material on record to controvert the above findings of the CIT(A). Accordingly, we do not see any good reason to interfere in the above findings recorded by the CIT(A) in this regard and we uphold the same. Thus, this ground of appeal of Revenue is dismissed. 9. With regard to ground No. 2, ld. DR relied on the order of AO and submitted that when the assessee could not produce the details of the assets on which depreciation has been claimed @25%, the CIT(A) is not justified in allowing the claim of depreciation amounting to Rs. 8,52,682/-, which was rightly disallowed by the AO. Accordingly, ld. DR submitted that the order of the AO deserves to be restored. 10. On the other hand, ld. AR of the assessee relied on order of CIT(A) with regard to allowing the depreciation claimed by the assessee and submitted that the ass....
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....vides claim of depreciation on miscellaneous assets. During the year, against the opening balance of Misc. assets at Rs. 1,66,29,402/-, a sum of Rs. 1430,009/- was added during the year and depreciation of Rs. 8,52,682/- was claimed on such assets calculating the depreciation at 25% of the gross block. Particulars of assets as included under the aforesaid head i.e., miscellaneous assets are as under:- Books Rs. 55,512.00 Tarpuline Rs. 8,154.00 Water Filter Rs. 2,767.00 Tools Rs. 26,948.00 AMF mike speaker Rs. 49,628.00 Rs. 143,009.00 In course of hearing to the queries of the Ld. A.O., the assessee company appearing before the Ld. A.O. vide its written submission explained that the miscellaneous assets as aforesaid have been considered as plant and machinery and accordingly the depreciation as provided under the I.T. Rules for the plant and machinery have been claimed by the assessee on such assets. However, the Ld. A.O. without appreciation the explanation and observing that in absence of the break up of details of such assets not being furnished has disallowed the claim of depreciation of Rs. 8,52,682/- on such assets. In ....
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....and deleted the addition made on this count. Therefore, ld. AR submitted that the order of the CIT(A) in this regard deserves to upheld. 14. After hearing both the sides and perusing the entire material available on record, we find that though the AO found that the guaranteed commission has been paid by the assessee on the original guarantee amount whereas the same should have been paid on the reduced guarantee amount, however, the CIT(A) as per the letter No. SG-21/07/3810/F dt. 29.01.2008 issued by the Additional Secretary, Government of Odisha to the Dy. Accounting General (Commercial), found that the guarantee commission could not be reduced since the guarantee amount given by the Government of Odisha has not been reduced and the assessee is required to pay the guarantee commission on the maximum amount of guarantee irrespective of the loan outstanding as long as the guarantee amount itself has not been reduced. Accordingly, the CIT(A) held that the claim of guarantee commission is in accordance with the business requirement and as such allowable. The relevant observations of the CIT(A) in this regard are as under:- "10.2 I have considered the matter. I find much fo....
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....fact & law. In view of the fact that it has been decided by various High Courts/Apex Court that the advance given to the contractor during the period of executing capital works should be treated as a capital receipt and interest accrued on such advances will be capitalized at the time of capitalizing the assets to the books of accounts of the assessee. Therefore, the addition on this account are liable to be deleted. 6. For that the assessee crave leaves to add, alter or amend any of the grounds of appeal either before or at the time of hearing of the appeal. 7. For these grounds and other grounds if any that will be adduced at the time of hearing. It is prayed that the order the order of assessment be quashed and the demand be annulled in the interest of justice and equity. 17. Out of the above seven grounds there are four substantial grounds have been raised and argued by the ld. AR of the assessee, which are as under:- i) Provision for leave encashment ii) Non-disclosure of dues from DOWR iii) Prior period expenses iv) Non-disclosure of interest on advance to contractor. Ground No. 1 : Provision for Leave Encashment : R....
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....t he will adjudicate the same as per the final judgment of the hon'ble Supreme Court in the case of Exide Industries Ltd. On this, the learned Commissioner of Income-tax-Departmental representative fairly agreed that the issue can be restored back to the file of the Assessing Officer. 16. We, after hearing both side find that the hon'ble apex court in the case of CIT v. Exide Industries Ltd. [SLP (Civil) 22889 of 2008] has stayed the operation of the judgment of the hon'ble Calcutta High Court. Once this is the position, we restore back this issue to the file of the Assessing Officer to adjudicate the same afresh in terms of the decision of the hon'ble apex court in the case of Exide Industries Ltd. (supra) Accordingly, this issue of the assessee's appeal is allowed for statistical purposes. 21. Similar issue has also been decided by the coordinate bench of the Tribunal in case of NALCO Ltd. ITA No. 106/CTK/2018, order dated 23.09.2019, wherein the Tribunal has restored the issue to the file of AO after observing as under:- "9. During the course of assessment proceedings, the AO observed that the provision for leave encashment has not been a....
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....acts to the present case, remit this issue to the file of the AO to examine and allow the claim and this ground of appeal is allowed for statistical purposes." Respectfully following the order of the Tribunal and we restore this issue to the file of AO to examine and allow the claim of the assessee and we allow this ground of appeal of the assessee for statistical purposes." We follow the reasoning of the Tribunal and accept the judicial precedence and remit the disputed issue to the file of AO to examine and allow the claim of the assessee. Accordingly, this ground of appeal is allowed for statistical purposes." Respectfully following the above observations of the Tribunal, we remit the issue to the file of AO to examine and allow the claim of the assessee. Ground No. 3 is allowed for statistical purposes." Respectfully following the above observations of the coordinate bench of the Tribunal in the above cases cited supra, we also remit this issue to the file of AO for fresh adjudication after providing reasonable opportunity of hearing to the assessee. Thus, ground No. 1 is allowed for statistical purposes. Ground No. 2 : Non-disclosure of dues fr....
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....hands of the assessee in year to year basis is a mundane requirement insofar as income tax is levied for the impugned Assessment Year only. The very intention on the basis to claim it as prior period expenses indicates that these expenses were not known to them but pertain to that year and they could not have been accounted in the year when they may have accrued which deficiency was required to be fulfilled by the learned CIT(A) when the substantial amount was deleted by him as computed by the Assessing Officer as prior period expenses. The sustenance of part addition on account of prior period expenses have been dealt item-wise by him in his order, which we are inclined to reproduce as follows, has to be considered otherwise. (i) Pay & allowances - Rs. 968,561/- : This was stated to be arrear salary paid to Shri Barinder Singh. It is seen that the order of reinstatement was passed on 16.11.2006 in case of this officer and his leave for the preceding period was sanctioned on 16.03.2007 along with sanction of increments for the preceding years on that day. On the basis of these orders passed by the OMC, the liability had crystallized in financial year 2006-07 and in 2007-08....
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....he assessee appellant before him. He required the evidence of their accrual in the impugned Assessment Year when it was the assessee's claim that they have crystallized in the impugned Assessment Year insofar as they all are revenue in nature and cannot be considered for disallowance even if they were incurred or accrued in the year they pertain to. In other words, we find the contention of the learned Counsel of the assessee appropriate that there is no method to foresee as to what revenue expenditure would have to be provided for after end of the Assessment Year if the accounts are to be balanced for approval by the share holders within six months of the close of the financial year. Therefore, a concept of claiming them as prior period expenses on the basis they having been actually incurred in the impugned Assessment Year has been declared as prior period expenses in accordance with the concept of mercantile system of accounting. In this view of the matter, we are of the considered view that the prior period expenses are bound to be allowed in the impugned Assessment Year having crystallized in the impugned Assessment Year. Therefore, the part confirmation of the addition ma....