TMI Blog2014 (11) TMI 594X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee has claimed deduction for provisions of bad and doubtful debts under section 36(1)(vii) of the Act which only deals with actual claim of deductions - provision for bad and doubtful debts cannot be allowed u/s 36(1)(vii) – the order of the CIT(A) is upheld – decided against assessee. Interest in consumer security disallowed – Invocation of section 43B – Held that:- Assessee has made provision for payment of interest on consumer securities, but it was not in fact paid even in succeeding years, as it depends upon certain happenings or the events. If the assessee has debited a particular interest to this account, a corresponding credit entry should have been made in the accounts of the consumer - But the assessee without crediting the corresponding interest to the account of the consumers intend to claim expenditure of provision of interest on consumer securities, even the payment depends upon certain happenings or events - it is not clear that as to in how many cases interest were paid to the consumers - CIT(A) has not adjudicated the issue in detail - Considering the complexity of facts with regard to the issue of provision for interest, the is required to be remitted back ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l charge at the rate equal to 2% per month or part thereof on the amount which is subject to delay - The text and tenure of the clause speaks that late payment surcharge is of compensatory nature on account of delay in payment - Therefore, it can be treated as revenue expenditure - the payment is of compensatory nature and no disallowance is called for – the order of the CIT(A) is upheld – Decided against revenue. - ITA No. 311/LKW/2014, ITA No. 318/LKW/2014 - - - Dated:- 14-11-2014 - Shri Sunil Kumar Yadav And Shri. A. K. Garodia,JJ. For the Petitioner : Shri. O. P. Shukla, Advocate For the Respondent : Shri. Rajiv Jain, CIT (DR) ORDER Per Sunil Kumar Yadav: These cross-appeals are preferred by the assessee as well as the Revenue against the order of the ld. CIT(A) pertaining to assessment year 2004-05. 2. Since these appeals were heard together, these are being disposed of through this consolidated order for the sake of convenience. We, however, prefer to adjudicate these appeals one after the other. I.T.A. No. 311/LKW/2014: BY THE ASSESSEE: 3. This appeal is preferred by the assessee against the order of the ld. CIT(A) mainly on two ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been disallowed since the provisions made from pretax receipts cannot be permitted, since there is no mention of the actual liability on account of bad debts which could be technically allowable. 7. Aggrieved, the assessee has preferred an appeal before the Tribunal and reiterated its submissions as raised before the ld. CIT(A). 8. The ld. D.R., on the other hand, has submitted that as per provisions of section 36(1)(vii) of the Act, only written off; and bad doubtful debts are allowable and not provisions for the same. The provisions for bad and doubtful debts can only be allowed under section 36(1)(viia) of the Act only in those cases where assessee is a scheduled bank or a public financial institution, etc. Therefore, provisions of section 36(1)(vii) of the Act cannot be invoked for allowing provisions for bad and doubtful debts. The ld. D.R. has further placed reliance upon the order of the ld. CIT(A). 9. Having given a thoughtful consideration to the rival submissions and from a careful perusal of the orders of the authorities below, we find that the assessee has made provisions for bad and doubtful debts against sale of powers at 50% of incremental basis. Accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of the assessee. 12. An appeal was filed before the ld. CIT(A) with the submission that all the consumers are not a Govt. bodies and has not taken any loans or advances from the consumers to whom interest has been paid. It was further contended that it was not a liability under section 43B of the Act, which has to be paid within the stipulated time limit or before filing of return of income. It was further contended that it was mandatory for the assessee to provide interest on consumer security @ 3% but these amounts will not be credited to the payee accounts and only the interest charges on consumer security should be adjustable from the outstanding bills of the consumer after end of March and bill raised in the month of April. If the assessee could not make provision of security deposit, penal liability will be arisen on the person concerned who has not made the said provision. The interest amount provided to the consumer may not be paid as it all depend upon the happening of the event, such as surrender of the meter, its disconnection, etc. The ld. CIT(A) was not convinced with the explanations of the assessee and confirmed the order of the Assessing Officer. 13. No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies was paid or adjusted to the consumer account. Accordingly this matter is restored to the ld. CIT(A) for re-adjudication in terms indicated above. I.T.A. No. 318/LKW/2014: BY THE REVENUE: 17. This appeal is preferred by the Revenue against the order of the ld. CIT(A), inter alia, on following grounds:- 1. The CIT(A) has erred in law and on facts in allowing the relief of ₹ 9,90,82,803/-on account of non-payment of electricity duty u/s 43B without appreciating the fact that the crisis of fund and intention for payment of the same in future were admitted by the assessee itself before the AO whereas before the assessee has submitted before the CIT(A) that the same was paid on 28.07.2004. 2. The CIT(A) has erred in law and on facts in allowing the relief of ₹ 9,90,82,803/-on account of non-payment of electricity duty u/s 43B without appreciating the fact that this was not paid as per the provisions contained in that section and only adjustment entries with the holding company were made by the assessee in support of its payment. 3. The CIT(A) has erred in law and on facts in allowing the relief of ₹ 19,95,19,863/-on account of non-payment of interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty duty from the consumers which was transferred to the UPPCL, holding company of the assessee and UPPCL has adjusted the electricity duty from subsidy released by the Govt., therefore, it is a case of mere adjustment of the entries and provisions of section 43B of the Act cannot be invoked. 21. Having given a thoughtful consideration to the rival submissions and from a careful perusal of the orders of the authorities below, we find force in the contentions of the ld. counsel for the assessee that electricity duty received from consumers was immediately transferred to UPPCL, the holding company which adjusted the electricity duty subsidy released by the Govt. to reduce the loss of the company. The debit note was also accordingly issued by UPPCL to KESCO, the assessee. But these facts were not brought to the notice of the Assessing Officer and the Assessing Officer has invoked the provisions of section 43B of the Act for the reason that the assessee-company has not paid the amount on the date of filing of the return of income. These facts were brought to the ld. CIT(A) and the ld. CIT(A) has accepted the same and deleted the addition. Therefore, we are of the view that new facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce made by the Assessing Officer having invoked the provisions of section 43B of the Act is not correct. We accordingly find ourselves in agreement with the order of the ld. CIT(A) on this issue and we confirm the same. 26. Apropos ground No.4 which relates to trade tax liability of ₹ 7,78,488/- and ₹ 13,42,805/- (employees cost) was treated as a prior period expenses by the Assessing Officer while disallowing the same. 27. Before the ld. CIT(A), it was contended that these liabilities pertain to financial year 2003-04 which have been paid in due course and the Assessing Officer has wrongly mentioned that the liabilities pertain to prior period and wrongly debited under the head miscellaneous expenses. It was further contended that the expenses of ₹ 13,42,805/- was incurred during the course of incorporation of the company and before transferred scheme 2000 and it should be allowed under section 35D of the Act. Before the ld. CIT(A) assessee has filed written submissions in this regard which are extracted hereunder for the sake of reference:- That, It is hereby submitted that the assessing officer has also disallowed a sum of ₹ 7,78,488.00 under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 78,488/- pertains to financial year 2003-04, which has been paid in due course and the Assessing Officer has wrongly mentioned the fact that these liabilities pertain to prior period and wrongly debited under the head miscellaneous expenses. With regard to expenses of ₹ 13,42,805/-, it was contended that it should be allowed under section 35D of the Act. 31. Having given a thoughtful consideration to the rival submissions and from a careful perusal of the orders of the authorities below, we find that during the course of assessment proceedings, the Assessing Officer has asked the assessee to furnish explanations, as these expenses appear to be prior period expenses, but the assessee made a general explanation which was not accepted by the Assessing Officer and made disallowance. Whereas before the ld. CIT(A) assessee has taken altogether a different stand by raising a different plea. The new explanation was neither confronted to the Assessing Officer nor the ld. CIT(A) examined the correctness of the claim, making necessary enquiry by himself. In one line he accepted the claim of the assessee and deleted the addition. Therefore, we are of the view that the new explanation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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