TaxTMI 
TaxTMI 
2022 (4) TMI 1386
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....ited by banks. 2. The Ld CIT(A) erred in law, on facts and in the circumstances of the case in confirming the disallowance of Prior Period Expenses of Rs. 92,83.00 lacs, as detailed in page 11 para 5.3 of the appellate order and para 4 of Page No.2 of the Asst order, being conversion of guarantee fee payable for sovereign guarantee for Bonds issued, into share capital payable to the Government of Maharashtra." 03. Assessee is a company engaged in the business of infrastructure development such as construction of flyovers, bridges, roads etc. It is fully owned by Govt. of Maharashtra. 04. It filed its return of income on 30th September, 2009, declaring income of Rs.382,61,28,565/- which was subsequently revised on 30th March, 2011 at a loss of Rs.518,51,54,960/-. The case of the assessee was picked up for scrutiny. Assessment order u/s 143 (3) of the income tax act, 1961 (the act) was passed on 23/12/2011 at a total loss of Rs. 418,88,24,900/-. 05. The learned assessing officer has made following additions/disallowances to the total income:- a. addition on account of excess interest paid of Rs. 68,030,000/- b. addition of Rs. 928,300,000 on account of charging of 2% as guar....
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.... Bank for excess interest charged which was neither reversed nor confirmed by the Bank as the same was under the review of the banker. Therefore, the disallowance of said Rs. 6.80 Crores needs to be deleted. It is submitted that both lower authorities have ignored the fact that any recovery in subsequent years would be offered for tax and the very fact that the appellant has offered reversal of Interest claimed of earlier years amounting to Rs. 1.53 Crores during A.Y. 2009-10. Therefore, any notional interest cannot be disallowed based on a general observations in the Financial Statement. Without Prejudice, it is submitted that both the lower authorities have Ignored the fact that the said disallowance of Rs. 6.80 Crores is a cumulative amount for more than 3 years and therefore in any event disallowance can be restricted to Rs. 26.29 Lakhs only which is the excess interest charged for the A.Y. 2009-10. He also referred to Page 10 of P/B showing year wise excess Interest charged by banker. 09. The learned departmental representative vehemently supported the orders of the lower authorities. He submitted that when the interest has been excess charge by the bankers to the assessee an....
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....of Maharashtra in a cabinet meeting decided to charge guarantee fee and subsequently to convert guarantee fee into equity share capital of the assessee. Further, on 24 February 2010, the guarantee fee payable is decided at the rate of 2% and it is a cashless transaction resulting into creation of equity share capital of the appellant. In terms of those resolutions assessee was to pay Rs. 9000 283 lakhs as a guarantee fee to government of Maharashtra which was to be converted into equity share capital of the assessee company. Therefore, the guarantee fee was considered as expenditure allowable to the assessee. In the revised return, such claim was made. The learned assessing officer disallowed the above claim stating that the entire loss claimed on this account of Rs. 9000 283 lakhs is not allowable because this scheme of arrangement of government of Maharashtra is not contributing and capital but charging 2% as guarantee fee from Assessee Company and giving it back in the form of share capital. He further held that this arrangement is nothing but increasing revenue loss on one hand and Simon tenuously increasing capital of the company. Accordingly, he disallowed the guarantee fee p....
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....the P/B.). 2.4.3. Both the lower authorities have ignored the fact that the said Guarantee Commission was claim as "Prior Period Expenses" as the same was crystalized & accrued based on the GR issued by the State Government of Maharashtra on 23.03.2010.i.e. after the Balance sheet period of 31.03.2009 but before signing of the Balance sheet on 21.2.2011. (Copy of GR at Pg 49 of P/B) 2.4.4. It is submitted that the same is allowable business expenditure U/sec. 37 as under the Income tax Act there is no prohibition that expenditure can not be paid in the form of equity share. 2.4.5. The appellant has relied upon following judicial decisions: (i) CIT V/S IPCL 74 taxmann.com 163 (Guj). ii) CIT V/S Karnataka Power Corpn. Ltd 281 Taxman 600 (Karnatak) (iii)Saurashtra Cement & Chemical Ind Ltd 80 Taxman 61 (Guj) iv) Tata Communications Ltd V/S JCIT 32 taxmann.com 199 (Mum) (v) DCIT V/S Motech Software (P) Ltd. 63 SOT 17 (Mum) 013. The learned departmental representative vehemently supported the orders of the lower authorities. 014. We have carefully considered the rival contention and perused the orders of the lower authorities. Fact shows that government of Maharashtra ....