2017 (8) TMI 1624

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....ommissioner of Income-tax, Circle 31 (1), New Delhi (hereinafter referred to as 'the Revenue'), by filing the present appeal sought to set aside the impugned order dated 27.03.2014 passed by the Commissioner of Income-tax (Appeals)XXVI, New Delhi, for the Assessment Year 2009-10 on the grounds inter alia that :- "(i) The CIT(A) has erred in admitting additional evidence in the form of letter of DGH dated 27.03.2009 under Rule 46A without providing opportunity to the AO. (ii) The CIT(A) has erred in deleting disallowance of Rs. 43,25,00,000/- made by the AO on account of Royalty payable to state govt. being unascertained liability as the same were debited on estimate basis." 3. Appellant, M/s. Oil Industry Development Bo....

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....ness respecting applicable accounting standards. (4) That Ld. CIT (A) has completely overlooked that the inherent character of contingent liability is some demands 1 claims which 'mayor may not happen and not some acts dutifully provided thus to categorize the royalty payable to Arunachal Pradesh and Gujarat Government in the ambit of contingent liability as they are bound to happen because such discretion of providing royalty expenses is monitored and devised by the management at every step on regulators directives. (5) That Ld. CIT (A) has erred in upholding disallowance of Rs. 1,62,49,000/- u/s See 14A as provisions of See 14A have no application in the instant case since the appellant had no exempted income in the ....

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....s accounting system for same receipt and expenditure from cash to accrual method of accounting and thereby claimed royalty payment on accrual basis on the basis of quantification as per the existing guidelines of Office of Directorate General of Hydrocarbon (DGH). 5. In the appeal filed by the Revenue for AY 2009-10, the first issue raised by the Revenue by way of filing the present appeal is admitting additional evidence by the ld. CIT (A) in the shape of letter of DGH dated 27.03.2009 under Rule 46A without providing opportunity of being heard to the AO and second issue raised in the aforesaid appeal for AY 2009-10 is disallowance of Rs. 43,25,00,000/- made by the AO on account of royalty payable to the State Government being unascerta....

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.... way of challenging the impugned order passed by ld. CIT. 8. We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case. Grounds No.1 & 2 of ITA No.3568/Del/2014 for AY 2009-10 filed by the Revenue Grounds No.2, 3 & 4 of ITA No.4221/Del/2014 for AY 2010-11 filed by the assessee 9. So far as appeal bearing ITA No.3568/Del/2014 filed by the Revenue is concerned, CIT (A) deleted the disallowance of Rs. 43,25,00,000/- made by the AO on account of royalty payment made to the State Government as unascertained liability is concerned, the said disallowance has been deleted ....

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....9,000/- u/s 14A by rejecting the contentions raised by the assessee that no expenses have been incurred by the assessee to earn the exempt income during the year under assessment. CIT (A) observed that "it cannot be ruled out that there is a proximate relationship between office establishment expenditure and interest expenditure to the investment resulting income not chargeable to tax." Ld. CIT (A) relied upon order passed by the Tribunal in case of Cheminvest Limited vs. ITO - 124 TTJ 577 (Del.)(SB) by holding that, "if an expenditure is incurred in relation to income which does not form part of total income, it has to suffer disallowance irrespective of the fact whether any income is earned or not." However, this decision has been overrul....