TaxTMI 
TaxTMI 
2021 (7) TMI 490
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....d in the circumstances of the case as well as in law, the Ld.CIT(A) erred in deleting the addition of disallowance of Rs. 36,63,345/- being insurance charges for HVDC project & Rs. 27,34,250/- being lease rentals for HVDC project made by the Assessing Officer without appreciating the fact that the expenses were prepaid expenses. 3. On the facts and in the circumstances of the case as well as in law, the Ld.CIT(A) erred in deleting the addition of disallowance of Rs. 92,83,326/- made by the Assessing Officer, being payment towards stamp duty and service fee without appreciating the fact that the expenditure relates to the loan taken for acquisition of fixed assets which must be capitalized. 4. On the facts and in the circumstances of the case as well as in law, the Ld.CIT(A) erred in deleting the addition of disallowance of Rs. 10,62,493/- made by the Assessing Officer, being freight on capital equipments, without appreciating the fact that freight on capital item is capital expenses and also assessee's reliance on ESAAR 1985 to support its claim was fully irrelevant. 5. On the facts and in the ci rcumstances of the case as well as in law, the Ld.CIT(A....
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....ht reduction of an amount of Rs. 5,87,29,000/- that was disallowed by the A.O by treating the same as a capital expenditure in the immediately preceding year i.e A.Y 2007- 08. It was observed by the CIT(A) that the A.O while framing the assessment for A.Y. 2007-08, vide his order u/s 143(3), dated 29.12.2009 had inter alia disallowed the aforesaid expenditure by treating the same as a capital expenditure. It was noticed by the CIT(A) that the aforementioned addition was made despite the fact that the necessary rectification entries were passed by the assessee in the subsequent year i.e in the period relevant to A.Y. 2008- 09. It was noticed by the CIT(A), that the aforesaid disallowance made by the A.O in A.Y. 2007-08 was on appeal vacated by his predecessor, subject to a direction, that the said expenses would be allowed in the subsequent year in which appropriate correction entries were passed by the assessee i.e the year under consideration, viz. A.Y 2008-09. Observing, that the A.O while framing the assessment for the year under consideration i.e A.Y. 2008-09 had failed to give effect to the directions of the CIT(A) and not allowed the deduction of the aforesaid amount of Rs. 5....
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....ubmitted before the A.O is reproduced as under: "This is as per the opening balances of Transfer Schemes received from the erstwhile MSEB. The said amount appears in the a/c code 46.737 (interest accrued but not due on Indian currency loan ILFS) - Rs. 0.42 crs. & a/c code - 46.746 (private bonds int accrued but not due) - Rs. 14.88 crs i.e total Rs. 15.30 crs. This will be cleared at the time of finalization of the Transfer Scheme." However, the A.O did not find favour with the aforesaid explanation of the assessee. Observing, that the liability of Rs. 15.30 crore represented an unexplained credit that was neither in existence nor payable, the same was added by him under Sec. 68 of the Act. On appeal, it was observed by the CIT(A) that the assessee was one of the successor companies to the erstwhile MSEB and was formed in the previous year relevant to the A.Y 2006-07 on the demerger/unbundling of the said MSEB. It was observed by the CIT(A), that as claimed by the assessee, and rightly so, on the demerger/unbundling of MSEB, both its assets and liabilities, to the extent the same pertained and were specifically allocable to the transmission undertaking were transferred ....
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....to the year under consideration, the same could not have been considered in the year under consideration for the purpose of addition u/s.68 of the Act, Since the liabilities were pertaining to the earlier years, duly shown in the balance sheets of earlier year and also as opening balance in the year under consideration, the appellant correctly made entries of interest accrued on such old liabilities. Such liabilities were received by the appellant on account of unbundling of erstwhile MSEB, which fact was not disputed. In support of its claim of liabilities (on which interest accrued during the year) pertaining to the earlier years* the appellant has filed copies of balance sheets of the concerned year and has also explained that similar objection was raised by CAG in the F.Y.2Q06-07 pertaining to A.Y.2007-08 which is reproduced as under: A/c code 46.7 - Accrued/unclaimed amount relating to borrowings - Rs. 53.96 crores Appellant's reply to the CAG objection Interest accrued is shown as Rs. 15.35 crores for which neither corresponding loan, bonds exists in the account nor relevant record are available for verification (HO & WM), hence the correctness of the amount is n....
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....ed by the assessee that the High Voltage Direct Current (HVDC) project was commenced by the erstwhile Maharashtra State Electricity Board (MSEB) on 13th November, 1998 (i.e in the financial year 1998-99) and was transferred to the assessee in terms of the unbundling scheme pursuant to which the transmission undertaking of MSEB was transferred to the assessee. In support of the aforesaid factual position that HVDC project was not a new one and was an existing project since last many years, the assessee placed on record supporting documentary evidence, viz. copy of the lease agreement dated 21.05.1997; and copy of the office notes dated 28.04.1999 and 25.05.1999. It was further submitted by the assessee that the insurance charges in question pertained to HVDC Terminal Station situated at Chandrapur and HVDC RS O&M Circle situated at Padghe, and the said charges were by no means in the nature of a capital expenditure. Also, copy of the journal voucher evidencing the payment of lease rentals of Rs. 27,34,250/- was filed in the course of the assessment proceedings. It was further submitted before the A.O that a similar issue had came up in the assessee"s case for A.Y. 2006-07, and th....
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....enses were incurred for the period spread over to A.Y.2007-08 and 2008-09. In A.Y.2007- 08 the expenses pertaining to only that year were claimed and the balance expenses pertaining to this year (which were paid in A.Y.2007-08) had been claimed now in the year under consideration. Similarly the insurance expenses and lease rentals were paid during the year for the period 01.10.2007 to 30.09.2008. However, in the accounts, the expenditure pertaining to the period pertaining to the year under consideration were only claimed including the expenses which were paid in immediately preceding year. The appellant has explained the same as under: "Padghe Circle Particulars Ref. JV No. DR. CR. Paid in Advance in 2006-07 now reversed in apr.07 2285707 1 Payment of premium 16744 2 Paid in AY 2008-09 (50% booked in the FY2008-09) 2288150 3 Refund of excess premium paid 605418 4 Total 4590601 605418 Net Paid in AY 2008-09 3895183 Chandrapur Circle Paid for the year 2007-08 Premium paid Rectification entry for excess provision....
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....payment of stamp duty was w.r.t hypothecation of assets that were offered as security for availing of various loans by the assessee company from REC/PFC, the same, thus, was allowable as a revenue expenditure. Insofar the expenditure that was incurred towards service fees of Rs. 7,62,056/- was concerned, it was submitted by the assessee that the same comprised of the payments that were made towards service fee to Bank of India in respect of loans take from "Credit Suisee Switzerland" and "SEB Sweden". It was, thus, submitted by the assessee that as the aforesaid expenditure was incurred in the normal course of its business, the same, was therefore allowable as deduction u/s 37(1) of the Act. In support of his aforesaid contention the ld. A.R relied on the judgment of the Hon"ble Supreme Court in the case of India Cement Ltd. Vs. CIT, (1966) 60 ITR 52 (SC), wherein the Hon"ble Apex Court had held that the stamp duty, registration fees etc. paid for obtaining a loan was allowable as a business expenditure. However, the A.O did not find favour with the aforesaid contention of the assessee. Holding a conviction that the stamp duty, registration fees that was paid by the assessee for....
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....that the expenses e incurred for availing various loans and service fee for trusteeship for [MSEB bonds. It was also held in appeal order of A.Y.2006-07 that the said expenses were business expenses which did not create capital asset of enduring nature. We have deliberated at length on the issue in question and are persuaded to subscribe to the view taken by the CIT(A) that the aforesaid expenses, viz. Stamp Duty expenses: Rs. 85,18,270/-; and Service fees expenses: Rs. 7,62,056/-, having been incurred by the assessee in the normal course of its business, which had not resulted to creation of any capital asset of an enduring nature, thus were allowable as a deduction u/s 37(1) of the Act. Our aforesaid view is fortified by the judgment of the Hon"ble Supreme Court in the case of India Cements Ltd. Vs. CIT(A) (1966) 60 ITR 52 (SC), wherein it has been held by the Hon"ble Apex Court that the stamp duty, registration fees, lawyers fees etc. paid for obtaining a loan is allowable as a business expenditure. Accordingly, finding no infirmity in the view taken by the CIT(A), who in our considered view had rightly vacated the disallowance of Rs. 92,83,326/-, we uphold his order to the s....
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....made by the A.O, observing as under: ""6.3 I have considered the facts of the case. The A.O. disallowed the appellant's claim of freight expenses of Rs,10,62,493/- holding that the same were incurred on transportation of capital equipments. Probably the A.O. thought that the freight expenses were pertaining to the transportation of new capital equipments and therefore, should form part of cost of those new capital equipment. During the course of assessment proceedings, the appellant filed its submissions to the A.O. vide letter dtd.20.12.2010, During appellate proceedings, the appellant had filed a copy of the said letter. In that letter the appellant clearly explained that the freight expenses were transportation charges for repairs of transformer (Nasik Circle). The appellant also filed documentary evidences in respect of payment made towards freight charges on such repairs to the A.O. It was true that the freight expenditure was incurred for transportation/shifting of capital asset, however, such capital assets were existing capital assets and not the new capital assets purchased by the appellant. The appellant incurred such freight expenses on transportation of exi....
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....assessment u/s 143(3), vide his order dated 29.12.2009 for the said preceding year i.e A.Y 2007-08 disallowed the aforesaid expense by treating them as having been incurred in the capital field. The aforesaid additions were made in spite of the fact that the necessary rectification entries were passed in the subsequent year i.e in the year ended 31st March, 2008 relevant to A.Y. 2008- 09. On appeal, the CIT(A) confirmed the said action of the A.O, subject to a direction that the aforesaid expenses be allowed during the year in which the appropriate correction entries were passed by the assessee i.e in the year under consideration i.e A.Y 2008-09, without netting off of capital expenditure pertaining to assessment year 2007-08. It was submitted by the assessee that in the backdrop of the aforesaid specific direction of the CIT(A), the assessee had requested the A.O to allow a deduction of Rs. 5,87,29,000/- while computing its income for the year under consideration i.e A.Y. 2008-09, which, however, was rejected by him. After admitting the "additional ground of appeal" that was raised by the assessee, the CIT(A) taking cognizance of the fact that his predecessor while disposing off t....