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2022 (8) TMI 1419 - AT - Income TaxDisallowance of prior period expenses - tax advantage accrued to the assessee or not? - HELD THAT:- Coordinate Bench in [2022 (7) TMI 1442 - ITAT AHMEDABAD] for A.Ys. 2010-11 & 2011-12 has set-aside the identical issue to the file of the Ld. AO. as held there is no immediate tax advantage accrued to the assessee by the claim of impugned prior period expenses per se. We therefore deem it expedient to restore the issue back to the file of AO for examining the issue de novo after verifying facts as may be considered necessary and expedient in accordance with law. The AO shall bear in mind the ratio laid down in the case of Adani Enterprises Ltd [2016 (7) TMI 1564 - GUJARAT HIGH COURT] while adjudicating the issue - This ground is allowed for statistical purposes. Addition of 15% of Capital Grants as against 10% offered by assessee - HELD THAT:- We find that on the identical issue as submitted the Ld. A.R. [2022 (7) TMI 1442 - ITAT AHMEDABAD] wherein held as per provisions of section 43(1) of the Act, the capital grant should be reduced from the cost/WDV of the relevant asset, and thereafter the depreciation is to be calculated. Thus, the capital grant receipt in respect of asset, on which depreciation is allowable at the rate different from 15% should be worked out as per the applicable rate. DR could not point out any mistake in the above submission of the assessee, which we find is in accordance with law - 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. Correct head of income - interest on loans to staff and other advances - “other income” or "business income" - HELD THAT:- As decided in Odisha Power Generation Corporation Ltd. case [2022 (3) TMI 539 - ORISSA HIGH COURT] Assessee offered an explanation regarding interest income earned by it, from advances given to its employees as well as provision of electricity and water charges collected from water through its employees and contractors for facilities in the township, receipt from transit hostel, sale of scrap, insurance claim etc. The facilities were given to its employees for better conditions of employment. This was to improve the overall efficiency of the undertaking which is devoted to the single purpose of generation of power. The Court, therefore, has no difficulty in accepting the submission of the Assessee that the interest received on advances and loans given to its employees are receipts in normal course of carrying its business and should be 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 - thus we 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 - This ground is allowed for statistical purposes. Nature of expenses - guarantee fees paid to the Government of Gujarat - revenue or capital expenditure - HELD THAT:- We have carefully considered the decision passed by the Coordinate Bench in .[2022 (7) TMI 1442 - ITAT AHMEDABAD] no reason to interfere of the order passed by the Ld. CIT(A) in deleting the guarantee fees paid to the Government of Gujarat - The ground preferred by Revenue is, therefore, fails and thus, dismissed. Claim of raising finance for specialized job allowable as Revenue expenditure. MAT - addition of Prior Period Expenses made while computing Book Profit computed under Section 115JB - HELD THAT:- No adjustment on account of prior period expenses is to be made in the net profit of the company for arriving at the book profits u/s 115JB. Treatment of Government Grant u/s. 115JB - assessee company has received capital grant which was transferred to the Reserve & Surplus account - CIT was of the view that the same should have been reduced from the cost of assets and since the same has not been done, the company has claimed excess depreciation thereby offering lesser Book Profits - HELD THAT:- We find that the ld. Principal CIT has ignored the fact that the grant in question was received in terms of the Financial Restructuring Plan from the Government and the company has accounted Government Grants in terms of the mandatory Accounting Standard (AS)-12 on "Accounting for Government Grants" prescribed by the ICAI -Considering the accounting treatment in the light of the Accounting Standard-12, we do not find any error on facts or in law. Therefore, to this extent the findings of the Id. Principal CIT are reversed.
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