AI Drafter 
TaxTMI 
TaxTMI 
2018 (11) TMI 1868
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....ailed to appreciate the fact that before proceeding for disallowances the AO has conducted necessary examination and ground work, which are evident from the recording of note sheet. 3. That the department craves leave to add, modify or alter any of the ground(s) of appeal and/or adduce additional evidence at the time of hearing of the case." 3. After hearing the ld DR for the Revenue, we note that issue raised by the Revenue is fully covered in favour of the assessee, as evident from the order of the ld CIT(A), wherein the ld CIT(A) held as follows: Issue relating to prior period expenses of Rs. 12,65,000/- "1. I have carefully considered the action of the Ld. A.O. in making the impugned disallowance of Rs. 12,65,000/- on account of the claim of the prior-period expenses. The Ld. A.O. has remarked that the appellant assessee had claimed Rs. 3,03,96,000/- as net period income (expenditure) in its P & L Account, and that the amount includes period expenses/losses amounting to Rs. 12,65,000/-. Thereafter, the Ld. A.O. has observed that as the said portion of expenditure is not an allowable expenditure as per Income Tax Act, 1961, the impugned amount of Rs. 12,6....
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....are maintained on mercantile basis and that it related to a transaction of the previous year. 4. The above judgment was followed by the Hon'ble Jaipur Tribunal in the case of DCIT vs M/s. Rajasthan Co-operative Dairy Federation Ltd. (ITA No. 79, 80 & 81/JP/2015). In view of the findings above, and the legal matrix as elucidated by the above judgments, I find that the action of the Ld. AO in disallowing certain prior period expenses was not justified in the facts and circumstances of the case. The same are accordingly deleted, and this ground of appeal allowed in favour of the assessee-appellant." 4. We note that certain expenses relating to earlier years aggregating to Rs. 12,65,000/- had been debited to prior period expenditure since those expenses had been finalized during the year.In each case where the accounts are maintained on mercantile basis it has to be found in respect of any claim, whether such liability was crystallized and quantified during the previous year so as to be required to be adjusted in the books of accounts of that previous year. Considering, the assessee`s facts and circumstances, we note that liability of expenses of Rs. 12,65,000/- ha....
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.... being a member of ERPC contributed as per statute to ERPC Establishment Fund & ERPC Fund every year. In making the aforementioned submissions, it has been contended by the appellant, that as these were statutory contributions [and notcontractual payments] these payments would not attract any of the provisions relating to the requirement of making TDS while making the impugned payments. 2. I have carefully examined the submissions of the Ld. A.R made in the matter during the course of the appeal. I have also analyzed the documents relating to the ERPC (Conduct of Business Rules)2011; ERPC (Technical Co-ordination Sub- committee) Regulations, 2011, ERPC (operation Co-ordination subcommittee) Regulations, 2011, ERPC (Commercial Sub-Committee) Regulations, 2011, ERPC (Protection Sub-Committee) Regulations, 2011, ERPC (Establishment fund) Regulations, and the ERPC Fund regulations, 2011. Chapter V of the document relates to the methodology of the creation and utilization of the Fund. It may be worthwhile to reproduce the relevant extracts as under: [ quote] EXPENDITURE OF ERPC 23. MOP communication to CEA vide, letter no. A-60016/59/2005 Adm .. dated....
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....asis of roster on its turn). 27. Deleted. 28. Expenses related to sub-committee meetings held at ERPC HQ shall be met out of the fund named "ERPC FUND", which shall be created and got maintained by ERPC for this purpose. ERPC shall make regulations on "ERPC Fund". 29. Expenses related to activities as a consequence of functions entrusted by IEGC, other regulations / orders of CERC, shall be met out of the "ERPC Fund" mentioned in para-(28) above. 30. Expenses related to discharge of any other functions deemed fit by ERPC shall be met out of the "ERPC Fund" mentioned in para-(28) above. 31. Air/Rail ticket(s) of appropriate class in relation to the journeys of travelling of Secretariat officer(s) for attending ERPC meeting or ERPC sub-committee meetings shall be provided by the constituents. Such ticket(s) shall be purchased out of 'EPRC Fund' mentioned in para (28) above. [unquote] 3. After analyzing the issue at hand, I find myself in agreement with the contentions of the ld. AR for the appellant that the appellant (M/s WBSETCL) being a member of EPRC has contributed as per Statute to EPRC Establishment Fund & ERP....
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.... Bench, Kolkata in ITA No. 1822/K/2012 have decided the matter in favour of the appellant. The relevant portion of the orders of the Hon'ble ITAT is reproduced below: "(1). Whether on the facts and the circumstances of the case, the Ld. CIT(A)-I, Kolkata has erred in both law and facts in observing that interest income did not belong to the assessee company? (2) Whether on the facts and the circumstances of the case, the Ld. CIT(A)-I, Kolkata has erred in both law and facts in deleting the addition on accountof interest Rs. 3,46,97,166/- to the total income of the assessee without showing any reasons thereof." 3.Briefly stated facts are that assessee during the course of assessment proceedings before the AO explained as to why interest amounting to Rs. 3,46,97,166/- on which TDS of Rs. 39,31,189/- was deducted, is not offered as income of the assessee. This interest income was earned on account of deposits made with Axis Bank Ltd. The assessee explained that West Bengal State Electricity Transmission Co. Ltd, (WBSETCL for short) is a West Bengal Government Enterprise and the State Transmission Utility (STU for short). It is licensed u/s 14 of the Electric....
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....lacs. For payment above Rs. 5 lacs such cheque signing authority shall be jointly with DDO and the officer in charge of SLDC. ii). All deposit for UI charges payable by any licensee shall be through bank draft in favour of the said account or through electronic clearance system where such facility is available. Cost of such draft and services shall be payable by the depositor. iii).UI charges received by any entity shall be through account payee cheque or through electronic clearance system where such facility is available. iv).SLDC shall maintain the accounts of the said fund separately and such account shall not be considered as the part of the accounts of the SLDC. v).Accounts of such fund shall be audited by Chartered Accountant / Cost Accountant in full time practice for every financial year within 30th June of the succeeding year and such audited accounts shall be subsequently submitted to the Commission within 31st July of that year for approval. vi).The entity shall pay the UI charges within 10 days of the billing date in pursuance to regulation 7.2 of the State Grid Code. The DDO will activate the Letter of Credit (c) if the amo....
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....DC at all. In such a circumstance, pit can be concluded that the PAN correctly utilized for maintenance of the account is the PAN of the Assessee-company, and not merely because a separate PAN was not available for SLDC. Further, whereas the accounts were opened in terms of the scheme formulated by the West Bengal Electricity Regularity Commission (WBERC), and it is this body that directs the levy of UI charges as well as any other such payments & C, the funds have not been transferred to WBERC as such, nor does the incomes incidental to the deposit form part of the income of the Commission. In essence, therefore, the funds are in the nature of a security deposit, from which penal charges are deduced from time to time in connection with the maintenance of power generation and withdrawal schedules. The funds deposited are unquestionably the funds of the Assessee-company, even if withdrawal from the same is governed by the directives of the regulatory commission. Further yet, as provided for in regulation 5.14.8 of the WBERC (terms and conditions of tariff) regulations, 2007, the Assesseecompany, being a licensee, is entitled to part of the amounts remainin....
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.... and gone through the facts and circumstances of the case. We find from the facts of the case that this Interest of Rs. 3,46,97,166/- did not belong to the assessee nor it was an income in the hands of SLDC and the said income should not be considered in the assessment of the assessee. It is a fact that the Income arising out of the Investments made out of the Balance of UI charges, actually belonged to WBERC which was a Commission formed by the Government and consequently such interest being the income of the Government, there should not arise any taxability thereof. However, the Assessing officer observed that according to him SLDC was merely the custodian of the account and allegedly it did not have any proprietary rights to the funds or incidental incomes generated there from. The Assessing Officer also stated that deposits had been made from the funds of the assessee and not of SLDC and the funds did not form parts of the account of the SLDC at all. The Assessing Officer went on to hold that the assessee's PAN had correctly been utilized for the maintenance of the Account. The Assessing Officer also stated that in his Order that the accounts have been opened in terms of the sc....