TaxTMI 
TaxTMI 
2022 (7) TMI 1498
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.... sake of convenience. ITA No. 2858/Ahd/2015 is taken as a lead case. 2. The Grounds of appeal raised by the assessee are as under: "1.0 The learned Commissioner of Income Tax (Appeals) has confirmed the disallowance of deferred revenue expenditure amounting to Rs. 41,16,000/- written off during the year without considering the facts in right spirit. 2.0 The learned Commissioner of Income Tax (Appeals) has confirmed the disallowance of Miscellaneous losses and write offs amounting to Rs. 3,81,36,000/- on the ground that the claim has not been substantiated by any documentary evidences. 3.0 The learned Commissioner of Income Tax (Appeals) has confirmed the addition of Rs. 28,75,12,000/- made on account of Capital Grants & Subsidies and Consumers' Contribution on the ground that the appellant should transfer 15% of the total Grants/subsidies/consumer contribution received during the year as against 10% offered by the appellant. 4.0 The learned Commissioner of Income Tax (Appeals) has confirmed the additions of the income shown under the head "Other Income" in the Profit & loss Account amounting to Rs. 19,08,000/- as Income from Other Sourc....
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....r impugned before us in the absence of any changed circumstances. Hence, the said ground of appeal filed by the assessee is found to be devoid of any merit and thus, dismissed. 7. Ground No. 2:-The next ground relates to disallowance of miscellaneous losses and write off amounting to Rs. 3,81,36,000/- on the ground that the claim has not been substantiated by any documentary evidences. 8. We have heard the rival submissions made by the respective parties, and we have also perused the relevant materials available on record. 9. The Ld. AO decided the issue against the assessee in the absence of any documentary evidences. Before the Ld. CIT(A) the assessee submitted the break-up of expenditure as under: Miscellaneous Expenses written off Amount (Rs.) Bad Debts Written off- Due from Consumer 12030512.20 Shortage on physical verification of MAT Stock 4184022.59 Loss of Material by Pilferage etc. 360913.74 Loss or cash written off 149594.00 Waiver of delayed payment charges (DPC) 782716.76 Waiver of Charges on Govt. Dues 10740170.20 Comp. for Inju., Death, Damages-Outsiders 6893636.00 Loss on obsolescence of Fixed Asset ....
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....ged before us. 12. During the course of assessment proceeding upon verification of the balance sheet it was found that the opening balance of capital grant in the reserve and surplus shown at Rs. 40923.36 lakhs and closing balance thereof was shown as Rs. 51,752.22 lakhs for the year under consideration. The Ld. AO was of the view that in the event that grant is in the nature of capital it should have been deducted from the capital fix assets or otherwise if it is revenue in nature then it has to be revenue income in the hands of the assessee. The assessee was asked to explain the nature of grant and treatment to the account for the said grant whereupon the assessee submitted the following: "As per the Accounting Policy followed by the DGVCL, the consumers' contribution and capital grants received towards cost of Capital Assets are not reduced from the cost of assets. All the receipts of Consumers' contribution & Capital Grants received from 01.04.2005 are created as Deferred credit and 10% of the year end balance is transferred to profit and loss Account. The consumers' contribution & Capital grants received towards cost of capital Assets is treated as a de....
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....ification of the proportionate amount of grant relating to different assets and to pass orders. On this aspect, he has drawn our attention to Page 56 of the Paper Book filed before us wherein the order cited above passed by the Coordinate Bench has been annexed. 14. On the other hand, the Ld. DR further has relied upon the order passed by the authorities below. 15. We have heard the rival submissions made by the respective parties, and we have also perused the relevant materials available on record. 16. We find that on the identical issue as submitted by the Ld. A.R. in ITA No. 652/Ahd/2013 for A.Y. 2009-10 the Coordinate Bench has been pleased to set-aside the issue to the file of the Ld. AO for adjudication afresh for verifying the proportionate amount of grant relevant to different asset. The relevant observation of the Coordinate Bench is as follows: "13. The Learned AO finalized the issue by making an addition of Rs. 24,17,88,400/- which was, in turn, confirmed by the Learned CIT(A) and added to the total income of the assessee. While confirming the addition, the Learned CIT(A) observed as follows: "6.3 I have considered the submissions. It has been ....
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....rifying proportionate amount of grant relating to different asset. The Learned AR prayed for similar relief. The argument advanced by the Learned AR has been failed to be contradicted by the Learned DR. We find following observation was made by the Hon'ble Co-ordinate Bench while granting relief to the assessee: "15. The ground No. 3 of the appeal of the assessee is directed against the order of the CIT(A) in confirming the action of the AO in transferring 15% of the capital grants as income although the disallowance made under this head has been restricted to Rs. 18,93,11,850/- as against the disallowance of Rs. 30,97,61,800/- made by the AO. 16. The brief facts of the case are that on verification of subsidies and grants, the AO observed that the assessee has shown deferred government grants, subsidies, contribution at Rs. 7305.70 lakhs as on 1.4.2007 and the assessee had shown Rs. 15941.67 lakhs at the end of the year i.e. as on 31.3.2008. On show cause by the AO to explain the treatment in accounts of the subsidy, grants the assessee stated that during the year capital grant received from Government of Gujarat and other. The assessee submitted that in orde....
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....ct. After insertion of Explanation 10 of section 43(1) of the Act, the position of law was very clear. Since the assessee failed to reduce the capital grant against the cost of capital assets, and claimed excess depreciation, which was disallowed and worked out at 15% of the capital assets. 17. On appeal, the CIT(A) held that in assessee's case, 10% of grant under three heads namely "Subsidy towards cost of capital assets", "Grants towards cost of capital assets" and "Consumer contribution for capital assets" i.e. the grants appearing in Schedule-3 of the balance sheet as on 31.3.2008 were offered for tax. The amount of grant on which 10% was calculated was on the opening balance of grants of Rs. 73,05,70,492/-, and the grants received during the year was Rs. 103,56,34,226/-, aggregating to Rs. 176,62,04,718/-. As these grants were towards cost of capital assets, 15% of the same should have been reduced from the depreciation claimed on account of making adjustment in the 'actual cost' of assets as per Explanation 10 below section 43(1). Since the assessee has already offered for tax, 10% of the opening balance of grants plus grants received during the year unde....
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....could not point out any mistake in the above submission of the assessee, which we find is in accordance with law. We, therefore, set aside the orders of the lower authorities on this issue, and restore the matter back to the file of the AO for adjudication afresh after verifying the proportionate amount of grant relating to different asset, and applying the actual rate of depreciation which relate to these assets. Thus, this ground of appeal of the assessee is allowed for statistical purpose. Hence, in the absence of any changed circumstances as it appears from the records, we find no other alternative but to remit the issue to the file of the Learned AO for re-adjudication of the same and to pass order upon verification of the proportionate amount of grant relating to different assets and upon applying the actual date of depreciation relates to those assets. Hence, this ground of appeal preferred by the assessee is allowed for statistical purposes." Relying upon the observation and the decision taken by the Coordinate Bench we find it fit and proper to remand the issue to the file of the Ld. AO for re-adjudication of the same and to pass orders upon verification of the....
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....considered as income derived from its essential business activities. Likewise, the late payment by GRIDCO for the electricity supplied, is sought to be made up by GRIDCO by issuing bonds on which the Assessee earns interest. This also therefore, has a direct nexus with the essential business activity of the Assessee." In that view of the matter we find it fit and proper to direct the Ld. AO to consider the issue afresh upon examining the same in regard to the head of income upon considering the relevant evidence in the light of the observation made by the Hon'ble High Court as mentioned hereinabove. We, thus, pass order accordingly. This ground is allowed for statistical purposes. 21. Ground No. 5:-Disallowance of prior period expenses of Rs. 1,49,95,000/- is under challenged before us. 22. At the time of hearing of the instant appeal the Ld. Counsel appearing for the assessee submitted before us that the Coordinate Bench in ITA No. 996/Ahd/2011 for A.Y. 1998-99 has set-aside the identical issue to the file of the Ld. AO. On this aspect he has drawn our attention to Page 3 of the Paper Book filed before us. 23. We have heard the rival submissions made by the respect....
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.... is allowed for statistical purposes." 25. Respectfully relying upon the order perused by the Coordinate Bench we are disposing of the ground by setting aside the issue to the file of the Ld. AO for de novo adjudication upon giving an opportunity of being heard to the assessee and upon considering the evidence which the assessee may choose to file at the time of hearing of the matter. This ground is allowed for statistical purposes. 26. Ground Nos. 6 & 7 has not pressed by the assessee. Hence, both the grounds raised by the assessee are dismissed as not pressed. ITA No. 3122/Ahd/2015 (A.Y. 2011-2):- 27. Ground No. 1:-Identical ground has already been decided by us in ITA No. 2858/Ahd/2015 for A.Y. 2010-11 as Ground No. 3 therein. In the absence of any changed circumstances the same shall apply mutatis mutandis. 28. Ground No. 2:-Identical ground has already been decided by us in ITA No. 2858/Ahd/2015 for A.Y. 2010-11 as Ground No. 4 therein. In the absence of any changed circumstances the same shall apply mutatis mutandis. 29. Ground No. 3:-Identical ground has already been decided by us in ITA No. 2858/Ahd/2015 for A.Y. 2010-11 as Ground No. 5 therein. In the abs....
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....nbsp; 2 2005-06 2008-09 Unabsorbed Depreciation Unabsorbed Depreciation 2,87,302,960 391,438,190 2,875,302,960 0 As per Order u/s 147 dtd. 22-01-2013 2009-10 Unabsorbed Depreciation 3,266,741,150 27,686,857 2,875,302,960 27,686,857 No asst. u/s. 143(1) Less Set Off A.Y. 2010-11 3,239,054,293 0 2,847,616,103 1,908,000 As per Order u/s. 143(3) dtd. 13-02- 2013 Less Set off A.Y. 2011-12 3,239,054,293 0 2,845,708,103 2,420,000 As per Order u/s. 143(3) dtd. 27-2- 2014 TOTAL U/A DEPRECIATION 3,239,054,293 2,842,288,103 36. According to the Ld. AO such claimed made by the assessee is higher business loss as compared to the business loss ascertained during the earlier assessment and therefore, the business loss claimed by the assessee has been restricted to 55,17,99,482/-. Though, the same was challenged before the First Appellate Authority by the assessee no deliberation has been made by the Ld. CIT(A). In that view of the matter....
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....ujarat. The disallowance was made by disallowing the claim as revenue expenditure as it is of enduring nature in the assessee's business and hence capital in nature." 4. When the matter was called for hearing, the learned counsel for the assessee pointed out that identical issue towards disallowance of guarantee fees paid to Government of Gujarat was reversed in the appellate proceedings in the other case, namely, DCIT vs. Gujarat Energy Transmission Corporation Ltd. ITA No. 633/Ahd/2013 concerning A.Y. 2009-10 order dated 05.09.2019. The learned counsel for the assessee accordingly submitted that the issue is squarely covered in favour of the assessee in identical fact situation, the order of the CIT(A) on the issue cannot be faulted. 5. The Ld. Departmental Representative for the Revenue, on the other hand, placed reliance upon the order of the AO without any specific rebuttal. 6. We have carefully considered the rival submissions and also perused the orders of the AO and CIT(A). 6.1 The CIT(A) has disposed off the issue in favour of the assessee as under: "5.1.4. I have considered the appellant's submission and the AO's ob....
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....jurisdictional Bench of ITAT had occasion to consider the allowability of guarantee commission paid to a Director of the company in respect of loans taken from the bank. In the case of Himalaya Machinery Pvt. Ltd., (ITA No. 738/Ahd/2009) for AY 2006-07, the Tribunal held, vide order dt. 5.6.2009, following the decision of the Rajasthan High Court in CIT. v. Metalising Equipment Co. Pvt. Ltd., 8 DTR 12, that the payment of commission for guaranteeing repayment of loan was allowable as revenue expense. In the instant case, the loan has been guaranteed by the Government of Gujarat. Hence, quite apart from the other sound reasons for treating the expenditure as revenue, it would be unrealistic to say that the appellant company could derive any undue advantage or collateral benefit by making such payment to the GOG. In view of the totality of the circumstances, I am of the opinion that the AO was not justified in treating the payment of guarantee commission (Rs. 8,39,04,550/-) as capital in nature. The addition is directed to be deleted." 5.1.5. Besides, the Hon'ble Supreme Court of India in its decision in the case of Sivakami Mills Ltd. 95 Taxmann 73 (SC) has held that gu....
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....ue to cyclone, flood and fire etc made for want of supportive evidence. We find that the CIT(A)'s order under challenges deals with Assessing officer's observations and assessee's arguments as under:- "6. Ground No. 5 of appeal is regarding disallowance of extra-"4 ordinary items amounting to Rs. 1,24,28,000/-. Assessing Officer disallowed loss on account of flood, cyclone, fire etc. of Rs. 124.28 lakh claimed under the head "Extra-ordinary items" on the ground that appellant had not submitted details such as nature of loss, how it was quantified etc. 6.1 In appeal, submissions as under were made:- "Ground No. 5: Disallowance out of Extra-ordinary items. The learned Assessing Officer has disallowed Extra-ordinary Items amounting to Rs. 1,24,28,000/- without any cogent reasons whatsoever. During the course of assessment proceedings, the learned Assessing Officer had called for the information relating to Extraordinary items vide item No. 29 of the notice dated 18-08-2010 issued under section 142(1) of the IT Act. The learned Assessing Officer had asked to give details and justification for allowability of the expenses. In resp....
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....hich heavy floods were there. The said subsidy was shown by the company as other income in Schedule-20 of the Annual Accounts. Thus it is submitted that the subsidy received for losses is shown as income and the expenses incurred for repairs, restoration work are shown as extra-ordinary items. In view of the facts and circumstances, it is submitted that the entire expenditure is incurred out of business expediency is of revenue nature and is fully allowable. It is only the accounting treatment that the said expenditure is shown as extra-ordinary items. The appellant, therefore, prays that the disallowances made on this count may be deleted. The appellant also invites your honour's kind attention to the fact that the similar issue has been decided favourably by the Hon'ble Commissioner (Appeals) in the case of Gujarat Energy Transmission Corp. Ltd., a sister concern of the appellant company, for the Asst. Year 2006-07 and 2007-08. The copy of the CIT(A)'s order passed for the Asst, Year 2006-07 is enclosed in Annexure-III." 6.2. I have considered facts of the case and appellant's submissions. Similar issue was considered by my learned predecessor CI....
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....contribution on the ground that the appellant should transfer 15% of the total grants/subsidies/consumer contribution receipt during the year as against 10% offered by the appellant. 52. Before the First Appellate Authority the assessee submitted that in assessee's own case for A.Y. 2012-13 the Ld. CIT(A) has deleted the addition. In that view of the matter considering the order dated 21.08.2015 passed by his predecessor, the Ld. CIT(A) hold that the said addition cannot be made to the Book Profit as this item has not been mentioned in any of the Clauses of the Explanation to Section 115JB of the Act. He, therefore, directed the Ld. AO to delete such addition. 53. At the time of hearing of the matter the Ld. DR relied upon the order passed by the authorities below. 54. At the time of hearing of the instant appeal the Ld. Counsel appearing for the assessee submitted before us that the issue may be directed to be decided by the Ld. AO. 55. We have heard the rival submissions made by the respective parties, and we have also perused the relevant materials available on record. 56. We find that the Ld. CIT(A) while dealing this ground for assessee's own case observ....
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....he detailed reasons given in para 7.2, whit reads as under: "7.2 The matter has been considered. The decision of Hon'ble Supreme Court in the case of Apollo Tyres (supra) is quite unambiguous. Only such items which are specifically mentioned in the Explanation to section 115JB need to be excluded or included, as the case be, and nothing more can be brought in. All the three items listed above do not feature in the Explanation. Otherwise, the disallowance u/s. 14A would be material in computation of the normal process of income while the second item interest on investment in bonds stands already included in the book profit. As far as the prior period expenses are concerned, there is no such mention in the explanation. The assessment order on the other hand is silent as to under which category it is being included for the matter to be further analyzed. Therefore, as the matter stands, none of the three items can be added for computation of book profit. 11. At the time of hearing before us, the Ld. D.R. could not pointed out how the view taken by the Learned Commissioner of Income Tax(Appeals) is not acceptable. We are, therefore, inclined to uphold the ....