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TMI Blog2014 (6) TMI 1015X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Assessing Officer („AO‟) in disallowing deduction of Rs. 31,16,176, being 20% of expenditure incurred on "Export Promotion Expenses [Foreign Travelling of Directors]" on the erroneous ground that the appellant had not submitted complete details of the expenses incurred on foreign travels of directors and that the same was not related to the business of the appellant. 2.1 That the CIT(A) erred on facts and in law in holding that the appellant had failed to produce the itineraries of the foreign tours undertaken by the directors to justify that the same had been undertaken wholly and exclusively for the business of the appellant company. 2.2 That the CIT(A) erred on facts and in law in not appreciating that any expenditure incurred for the purpose of exploring new business opportunities in the existing line of business of the appellant is revenue in nature and admissible business expenditure." 2. Ground no. 1 relates to the issue regarding claim of deduction by the Assessee in respect of Rs. 6,29,11,949/- representing deposit of electricity duty as per the directions of the Hon'ble Odisha High Court. 2.1 The brief facts relating to this ground are that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate to recover the differential amount till further orders without the leave of this Court." Copy of the final order of the Hon'ble Odisha High Court as well as the order dt. 6.5.2010 and the interim order dt. 1.10.2010 passed by the Hon'ble Supreme Court were not filed before us. On the basis of the interim order of the Hon'ble High Court it was contended that the Assessee has paid differential electricity duty in the designated "no-lien" bank account in the State Bank of India. The amount so deposited during the impugned assessment year was Rs. 6,29,11,949/-. The ld. AR contended that since the amount has accrued during the year and Assessee was following the mercantile system of accounting, the Assessee had debited the entire amount of electricity to its Profit & Loss account. The said amount was deductible u/s 37(1). The Assessee has not treated the said amount to be a contingent liability. For this, our attention was drawn towards the published accounts for the year ended 31.3.2009 (internal pg. 37, 43 & 46). The AO applied the provisions of Sec. 43B to the differential amount amounting to Rs. 6,29,11,949/- and disallowed the same. The said amount was not disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our opinion, this expense has accrued during the year. The liability since accrued during the year and the expenses for the electricity duty has been incurred wholly and fully for the purpose of the business of the Assessee, these expenses are allowable u/s 37(1) of the Income Tax Act. This is due to the fact that whenever a consumer needs power it has to approach the State Electricity Board to supply the power and it enters into a proforma contract but as respect to the rate/s at which the power is to be supplied, the relationship between the State Government and the consumer is not contractual, for the fixation of the tariff is governed by the Electricity (Supply) Act, 1948. Thus, in relation to the rate(s) at which the power supply will be available to it, the position of the consumer is not that of a party to a contract but one of status. This is so because so far as power tariff is concerned, it is imposed on the consumer by law without the consent of the consumer. Thus, the liability to pay power tariff, in our opinion, is not contractual in nature but is status based. The liability to this accrues, therefore, in the year in which the power has been consumed and this liabili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous year in which such sum is actually paid by him : [Provided that nothing contained in this section shall apply in relation to any sum which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return." From the preamble of this section it is apparent that this section is applicable only if a deduction is otherwise allowable to the Assessee in any other provisions of the Income Tax Act. We have already held that the Assessee is entitled for deduction in respect of electricity duty as per the demand raised by the State Government for the impugned assessment year during the impugned assessment year in view of the decision of the Hon'ble Supreme Court in the case of Kedarnath Jute Manufacturing Co. Ltd. vs. CIT, 82 ITR 363 (SC) (supra). Therefore, in the case of the Assessee we have to see whether the Assessee is hit by the restrictions put by Sec. 43B. As is apparent from the said provision, the Assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relating to this ground are that the AO noted that the Assessee has claimed foreign travelling expenses of the Directors to the tune of Rs. 1,55,80,882/- and Director-wise break up was filed by the Assessee. Assessee was asked to furnish the details of the expenditure claimed under the head foreign tour travel alongwith tour programme and supporting evidence. The AO noted that the Assessee has filed sketchy details of the expenditure for 4 Chairman/Directors as under : 1. Dr. Bansidhar Panda, Executive Chairman - Rs. 28,37,884/- 2. Sri Subhrakanta Panda, Managing Director - Rs. 96,38,029/- 3. Sri Jayant Kumar Mishra, Director (Corporate) - Rs. 8,81,728/- 4. Sri Baijayant Panda, Vice-Chairman - Rs. 22,23,241/- Total Rs. 1,55,80,882/- The AO noted that the above Directors have visited various places such as London, San Francisco, Japan, Germany, Dubai, Seoul, Tokyo, South Korea, Bangkok, Johansburg, South Africa etc. mainly to explore the potential market of ferro alloys consumers in respective countries bu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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