TMI Blog2012 (8) TMI 190X X X X Extracts X X X X X X X X Extracts X X X X ..... at year, A.O. was duty bound to compute disallowance under Section 14A by applying a reasonable method – matter remanded to AO Addition made for reversal of sale - as per the assessee, it had to be either allowed as bad debts since amounts were irrecoverable or as business loss - Held that:- assessee having already accounted and offered to tax the amounts as per the tariff in the power purchase agreement, it could claim as a bad debt the excess billings which it came to know, only on determination of tariff by CERC. - ITA Nos.711, 712 & 713/Mds/2010 - - - Dated:- 11-4-2012 - Abraham P George, Challa Nagendra Prasad, JJ. For Appellant: Smt Chandana Ramachandran, CIT-DR For Respondent: Shri Vikram Vijayaraghavan, Adv. ORDER Per: Abraham P George: These are appeals filed by the Revenue for the respective assessment years. For assessment year 2002-03, Revenue is aggrieved that CIT(Appeals) held re-assessment proceedings to be not valid. For assessment years 2006-07 and 2007-08, Revenue is aggrieved that CIT(Appeals) deleted disallowance made under Section 14A of Income-tax Act, 1961 (in short 'the Act') in relation to the income claimed as exempt by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and distribution of electricity and hence, eligible to claim deduction under Section 80-IA of the Act, this was not accepted by the Assessing Officer. According to the A.O., there could not be any presumption that Assessing Officer had examined all possible angles and aspects of the claim under Section 80-IA of the Act. As per the A.O., all industrial undertakings would not be covered by the provisions of Section 80-IA of the Act, and the said Section could be applied only where assessee was manufacturing any article or thing. Generation of electricity was not manufacture of articles or things and hence, assessee s case was legitimately reopened. Thus, the A.O. proceeded with the re-assessment and completed it disallowing the claim made by the assessee under Section 80-IA of the Act in respect of its Units-V VI. 5. In its appeal before ld. CIT(Appeals), argument of the assessee was that in the original assessment, all aspects relating to claim under Section 80-IA of the Act, were properly considered by the Assessing Officer. Assessing Officer had excluded certain items from its claim of Section 80-IA of the Act. After making a detailed analysis of the computation of its income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urnished to the Assessing Officer during the course of original assessment proceedings. Further, learned A.R. submitted that all aspects relating to claim of deduction under Section 80-IA of the Act were considered by the Assessing Officer and such claim was allowed in the earlier assessments also. Assessing Officer had raised a specific question as to how mining operation would be eligible for claiming of deduction under Section 80-IA of the Act and at page 28 of paper-book, it was submitted by the assessee that mining operation involved commercial production and therefore, Section 80-IA of the Act was applicable to such mining operation as well. Therefore, according to him, Assessing Officer, during the course of original assessment proceedings, had formed a clear opinion that in respect of electricity produced by the assessee, deduction under Section 80-IA of the Act was available to the assessee. Hence, learned A.R. submitted that the assessment was reopened only based on a change of opinion. 8. We have perused the orders and heard the rival submissions. It is not disputed that assessment for impugned assessment year was originally completed under Section 143(3) of the Act. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A of the Act in respect of electricity produced by the assessee and he had doubts only with regard to such claim insofar as mining of lignite was concerned. Therefore, the argument of the Revenue that Assessing Officer had not formed an opinion as to whether production of electricity was eligible for deduction under Section 80-IA of the Act at the time of original assessment, falls flat. Further, the original assessment order placed at paper-book pages 3 to 13 clearly deals with the claim of deduction under Section 80-IA of the Act with respect to Mines-II, Units-V, VI VII. Assessing Officer had, after discussing various aspects of such claim, allowed it but, certain disallowances were made for income-tax reimbursement. He considered income-tax reimbursement not as income derived from power generation activity. All these would amply show that Assessing Officer had applied his mind at the time of original assessment proceedings. Re-assessment having been started after the lapse of four years period from the end of the relevant assessment year, decision of Hon ble Apex Court in the case of Kelvinator of India Ltd. (supra) which had approved the decision of Full Bench of Delhi High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulsion and there was no expenses incurred for earning the interest income, we are inclined to remit the issue back to the file of A.O. for consideration afresh. We, therefore, set aside the orders of the authorities below and remit on this aspect back to A.O. for consideration afresh in accordance with law. Assessee can bring to the notice of the A.O. any case law relevant to the issue and A.O. shall proceed in accordance with law. 14. Thus, appeal of the Revenue for assessment year 2007-08 is allowed for statistical purposes. 15. In its appeal for assessment year 2007-08, apart from a ground relating to deletion of disallowance made under Section 14A of the Act, Revenue is also aggrieved that the CIT(Appeals) deleted an addition made by the A.O. for reversals relatable to earlier years sales adjustment. 16. Insofar as the issue of disallowance under Section 14A is concerned, we have already held in Revenue s appeal for 2006-07 that the matter requires a re-visit by the A.O. Same directions are given here also. 17. Coming to the other ground regarding deletion of addition made for reversal of sale figures, facts apropos are that assessee had, during the relevant previous ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd to prior periods as well. 3. The power tariff for NLC project was revised by the CERC as follows:- Project Period Date of CERC order TS-I 2004-09 26.09.2006 TPS-I Expansion 2004-2009 23.03.2007 TPS-II 2001-2004 23.03.2007 4. According to the CERC order a reduction was made in respect of power income that has been already billed, accounted and also taxed in prior years to the extent of Rs.502.15 crores . The order having been received during the previous year relevant to the AY 2007-08, the amount of Rs.502.15 crores was written off in the books of accounts by adjustment against sales. The ld. A.O. disallowed the same on the ground that the reversal relates to prior years. 5. The appellant submits that the profits and gains of the business will have to be measured in accordance with the normal system of accounting regularly followed. The stand taken by the A.O. would tantamount to a reasoning that were incomes are determined pursuant to PPA, the entire accounts are to be kept open till disposal by CERC of the issues relating to the final dete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per power purchase agreements and not according to tariff determined by CERC. 21. Per contra, learned A.R. strongly supported the order of ld. CIT(Appeals). 22. We have perused the orders and heard the rival submissions. It is not disputed that CERC is the authority for determining power tariff. It is also not disputed that power tariffs were determined by the CERC in the relevant previous year for earlier years as well. Assessee had in the earlier years billed according to power purchase agreement with its respective customers. Even if we consider that the adjustment pertained to income relatable to earlier years, it still remains a fact that assessee could not recover such amount from the concerned customers since the customers were bound to pay only as per the tariff determined by CERC. This being so, if it is not allowed as bad debt, it is surely a business loss of the assessee. As held by the Hon ble Apex Court in the case of CIT v. Woodward Governor India Pvt. Ltd. (312 ITR 254) , even business loss incurred in normal course of business is eligible for deduction under Section 37 of the Act. We are, therefore, of the opinion that ld. CIT(Appeals) was justified in allo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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