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2018 (7) TMI 1173 - HC - Income TaxRevision u/s 263 - affirmation made by the Tribunal of the electricity charges for the period prior to the purchase being taken as capital expenditure - Order erroneous and prejudicial to revenue - Held that:- No discussion by the AO of having accepted the claim of the assessee that the remittance of prior electricity charges under One Time Settlement Scheme was a revenue expenditure. The learned counsel for the assessee has relied on Annexure-C reply submitted before the AO to contend that the specific claim along with the demand letter received from the KSEB was produced before the AO. However, that is not to say that the AO had come to a conclusion as to whether the claim was allowable as a revenue expenditure. The AO erroneously did not disallow electricity charges paid; claimed as revenue expenditure, erroneously assuming that the charges are for the subject year. There is hence erroneous assumption of facts and wrong application of law. It cannot also be said that the claim raised as revenue expenditure is a plausible view, for the reasoning already supplied by us that the electricity charges for the period prior to sale was a hidden cost which had to be settled by the assessee after the sale. We are of the opinion that there was an erroneous decision entered into by the AO which could have been revised under Section 263, provided there is a prejudice caused to the Revenue. The mere fact that capital expenditure could be claimed as depreciation cannot avoid the prejudice caused to the Revenue. First of all, the capital expenditure could be claimed as depreciation only in the course of a period of years. Then it would depend upon whether there was any profit earned by the assessee in the subsequent years. Further the question whether prejudice is caused has to be examined on the tax liability for the subject year and not the anticipated claims that could arise in the future years which again is dependent on various elastic factors. We are of the opinion that there is clear prejudice caused to the revenue - decided against assessee
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