TaxTMI 
TaxTMI 
2021 (3) TMI 1040
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....ned PCIT has erred in holding that the order dated 9 March 2016 passed under section 143(3) of the Act ('Order') by the Deputy Commissioner of Income-tax - 2(3)(2) ['Learned AO] was erroneous and prejudicial to the interests of revenue. 3. The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject, the Order passed by the Learned AO was neither erroneous nor prejudicial to the interest of the revenue and the order dated 26 November 2018 passed by the Learned PCIT under section 263 of the Act is erroneous and bad in law. 4. The Appellant craves leave to add, amend, alter, modify or withdraw any of the above grounds of appeal." 2. Briefly stated, the assessee company which is engaged in the business of generation of solar power had e-filed its return of income for A.Y. 2014-15 on 28.11.2014, declaring a total income of Rs. 8,83,36,467/-. The return of income was initially processed as such under Sec.143(1) of the Act. Subsequently, assessment was framed by the A.O vide his order passed under Sec. 143(3), dated 23.12.2016 and the income of the assessee was determined at Rs. 9,48,50,070/- unde....
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....tice (SCN) to the assessee and called upon it to put forth an explanation as to why the assessment order passed by the A.O under Sec. 143(3), dated 23.12.2016 may not be revised under Sec. 263 of the Act. In reply, the assessee objected to the exercise of jurisdiction by the PCIT under Sec. 263 of the Act. It was inter alia submitted by the assessee that as the assessee‟s claim for deduction of forfaiting charges of Rs. 3,85,56,552/- was allowed by the A.O after examining all the relevant documents and satisfying himself as regards the assessee‟s entitlement towards claim of the said deduction, therefore, the jurisdiction of the PCIT to revise the assessment order under Sec. 263 was clearly ousted. To sum up, it was the claim of the assessee that the order passed by the A.O was neither erroneous nor prejudicial to the interest of the revenue since the same was passed after due examination of the facts in detail. On merits, it was submitted by the assessee that the forfaiting charges of Rs. 3,85,56,552/- incurred by the assessee during the year under consideration had not been capitalised to the solar power plant. Elaborating on its aforesaid claim, it was submitted b....
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....ppeal before us. As observed by us hereinabove, the PCIT had exercised his revisional jurisdiction, for the reason, that he held a conviction that the allowing of the assessee‟s claim for deduction of forfeiting charges of Rs. 3,85,55,552/- by the A.O had therein rendered the assessment order as erroneous insofar it was prejudicial to the interest of the revenue within the meaning of Sec.263 of the Act. Also, we find, that the PCIT was of the view that the forfaiting charges incurred by the assessee post commencement of its business operations being in the nature of a capital expenditure could not have been allowed as a deduction to the assessee. 6. For a fair appreciation of the issue under consideration we shall briefly cull out the facts therein involved. As can be gathered from the records, the assessee is a wholly owned subsidiary company of "Kiran Energy Solar Power Private Limited" (for short 'KESPPL‟). KESPPL had signed a power project agreement with Gujarat Urja Vikas Nigam Limited for developing and operating 20 MW Solar Power Plant. KESPPL had for the purpose of developing a 20 MW Solar Photovoltaic Power Plant entered into an Engineering Procurement & Con....
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....y the A.O under Sec. 143(3), dated 23.12.2016 had been revised by treating the same as erroneous and prejudicial to the interest of the revenue within the meaning of Sec.263 of the Act. On a perusal of the order passed by the PCIT under Sec. 263 of the Act, we find that he was of the view that the assessee company had capitalised the forfaiting charges of Rs. 3,85,56,552/- to the solar power plant account. Backed by his aforesaid conviction, the PCIT was of the view that now when the forfaiting charges had been capitalised by the assessee company, the allowance of the same as a deduction as claimed by the assessee in its profit and loss account under the head forfaiting charges had resulted in a double deduction to the assessee. On a perusal of the records to which our attention was drawn by the ld. A.R in the course of hearing of the appeal, we find that the aforesaid observation of the PCIT is absolutely misconceived. As observed by us hereinabove, the assessee company had commenced its commercial operations from 9th July, 2012. We find that the forfaiting charges of Rs. 2,77,81,845/- [Rs. 1,72,18,406/- relatable to the F.Y. 2011-12 AND Rs. 1,05,63,439/- relatable to the perio....
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....fore, the PCIT had exceeded his jurisdiction and revised the assessment order only for the purpose of substituting his view as against that arrived at by the A.O. In order to buttress his aforesaid claim the ld. A.R had taken us through the relevant pages of the assessee‟s 'Paper book‟ (for short "APB"). On a perusal of the records, we find that the assessee had debited forfaiting charges of Rs. 3,85,56,552/- in his profit and loss account for the year under consideration. As per the records, the assessee vide letters dated 24.10.2016 and 10.11.2016 had furnished with the A.O the complete details of the forfaiting charges of Rs. 3.85 cores which were debited by it in its profit and loss account for the year under consideration. In fact, a reference of the aforesaid letters is found in the letter dated 22.12.2016 that was filed by the assessee with the A.O. Apart from that, the assessee had also furnished a photocopy of the "Support Services Agreement", dated 31.03.2012 that was entered into between the assessee company and its holding company, viz. M/s Kiran Energy Solar Power Private Limited. Further, the assessee had in the course of the assessment proceedings plac....
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....nt for the year under consideration had been worked out. On a query by the bench that as to what was meant by the term "Amortization of forfaiting charges for F.Y. 2013-14" as was mentioned against the aforesaid amount of Rs. 3,85,56,552/-, it was clarified by the ld. A.R that considering the abovementioned working in toto it could safely or rather inescapably be gathered that the said amount pertained/related to the year under consideration. On a perusal of the notice issued by the A.O under Sec. 142(1), dated 19.07.2016, we find that the assessee was as per Query No. 3 specifically called upon by the A.O to furnish details of the forfaiting charges of Rs. 3,85,56,552/- along with an explanation as to how the same was allowable as a deduction under Sec. 37 of the Act. Apart from that, the A.O had vide Query No. 9 directed the assessee to furnish the soft copy of PPA agreement, EPC agreement, commencement certificate etc. Further, as per a notice issued under Sec. 142(1) r.w.s.129, dated 16.12.2016 the A.O as per Query No. 1 referring to Note No. 22 of the assessee‟s profit and loss account for the year under consideration had called upon it to submit the details as regards t....
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....e assessee‟s claim for deduction of forfaiting charges had in the course of the assessment proceedings arrived at a plausible view, the PCIT thereafter could not for the purpose of substituting his view as against that arrived at by the A.O validly taken recourse to proceedings u/s 263 of the Act. Our aforesaid observation is fortified by the judgement of a coordinate bench of the Tribunal, i.e ITAT, Mumbai in the case of Narayan Tatu Rane Vs. ITO, Ward 27(1)(1), Mumbai (2016) 70 taxmann.com 227 (Mum). 10. As regards the contention of the ld. D.R that the A.O had failed to record in the assessment order any finding as regards the assessee‟s claim for deduction of forfaiting charges of Rs. 3.85 crore, we are of the considered view that on the said standalone basis the PCIT could not have invoked his revisional jurisdiction u/s 263 of the Act. In our considered view as long as the assessment record reveals that the A.O had raised queries and carried out verifications in respect of an issue during the course of the assessment proceedings, it would suffice for concluding that he had duly applied his mind and arrived at a view on his part. Accordingly, a mere absence of a....
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....wed to form part of the actual cost of such asset after the same had been put to use. Accordingly, besides the price of the plant and machinery, all other items of expenditure incurred in connection with its acquisition including interest incurred before the commencement of production on capital borrowed to acquire such asset would together constitute the cost of asset. As such, by way of an analogy it can safely be concluded that now when the assessee in the case before us had commenced its commercial operations on 09.07.2012, thereafter, no part of the forfaiting charges could have been capitalised to the solar power plant. As regards the observation of the PCIT that the A.O had failed to consider as to whether the forfaiting charges incurred by the assessee were in the nature of a capital expenditure or a revenue expenditure, we are unable to find favour with the same. In our considered view, as the forfaiting expenditure incurred by the assessee had not resulted in any enduring benefit to the assessee company, therefore, the same could not have been considered as capital in nature. As observed by the Hon'ble Supreme Court in the case of Empire Jute Co. Ltd. Vs. CIT (1980) 124 I....