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TMI Blog2013 (5) TMI 1019X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee is a subsidiary company of Uttar Pradesh Power Corporation Limited (UPPCL). The assessee company is engaged in the distribution of electricity, construction lines and providing services to the consumers. During the assessment proceedings, the A.O. noticed that the assessee claimed provision for bad and doubtful debts for amount of ₹ 14,43,84,206/-. The A.O. after considering the assessee's submission observed that provisions of Section 36(1)(vii) of the Income Tax Act, 1961 ('the Act' hereinafter) has not been satisfied and it is only provision made in the books of account and hence not allowable. The A.O. made addition of ₹ 14,43,84,206/-. 5. The CIT(A) deleted the addition as under :- (Paragraph no.6, page nos.11 & 12) "6. As regard, Disallowance of Bad & Doubtful Debts of ₹ 14,43,84,206/-, I have gone through the facts of the case, assessment order framed by the Assessing Officer and submissions of the appellant put forth during the course of hearing. The appellant has made provision for bad & doubtful debts ₹ 14,43,84,206/- against revenue for sale of power @ 5% on incremental basis. This provisions has been made as per the guide line of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the year under consideration. The CIT(A) deleted the said addition as under :- (Paragraph no.7, page no.12) "7. As regard, the addition under the head prior period expenses of ₹ 1,20,59,311/- I have gone through the facts of the case, assessment order framed by the Assessing Officer and submissions of the appellant put forth during the course of hearing. The assessee were incurred the said expenses for employees cost administration during the course of incorporation of company and it should be allowed u/s 35D of the Income Tax Act, 1961. I have considered the facts and circumstances of the case and reliance on the order of assessing officer for A.Y. 2004-05 and the expenses claim by the assessee ₹ 1,20,59,311/- is hereby deleted." 9. We have heard the ld. Representatives of the parties and records perused. The A.O. disallowed expenditures on the ground that these are prior period expenses. However, the CIT(A) deleted the said addition accepting the assessee's contention that these expenses were allowable under section 35D of the Act and the assessee has claimed only 1/5th of the expenditure which is in accordance with section 35D of the Act. Whether the claim of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itures were pertaining to employees of the assessee company and not the employees of the separate trust. 13. We have heard the ld. Representatives of the parties and records perused. The admitted facts of the case are that the expenditures were incurred on account of salary and others pertaining to employees of the assessee company. The employees of the assessee company were working on deputation to maintain record of the employees' gratuity, provident fund and other account of the trust. In order to constitute expenditure mentioned under section 37(1) of the Act, one of the important condition to be satisfied is that expenditure incurred should be wholly and exclusively for the purpose of assessee's business. As stated above that in the case under consideration the admitted facts are that the expenditures incurred pertained to the maintenance of record of employees' gratuity and other benefits like PF etc. The employees of the assessee company has been deputed for discharging this duty after U.P. Government has crated the trust for the employees. In the light of the fact that there is no dispute that the expenditures were incurred wholly and exclusively for the purpose of assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . made disallowance. 16. The CIT(A) deleted the said addition as under :- (Paragraph no.11, Page nos.13 & 14) "11. As regard, the addition under the head Depreciation of ₹ 69,55,61,698/-, I have gone through the facts of the case, assessment order framed by the Assessing Officer and submissions of the appellant put forth during the course of hearing. During the course of appellate proceedings counsel for the appellant submitted that the said disallowances of depreciation in the AY 2004-05 and 2005-06 has already been deleted by the CIT(A), Varanasi vide order dated 12.03.2007 and 19.03.2009. And also the said order has been confirmed by the Hon'ble Income Tax Appellate Tribunal Allahabad for both the years vide order no.ITA No.237/(Alld.)/2007 dated 20.11.2008 and ITA No.99/(Alld.)/2009 dated 04.09.2009. I have considered the facts of the case and also gone through the relevant appellate order. In this case, the basis on which the disallowance has been made by the Assessing officer is not in existence as the said addition has been deleted by the CIT(A) vide his above referred order and the departmental appeal on this issue has been dismissed by the Hon'ble ITAT, Allahaba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the appellant put forth during the course of hearing. The disallowance has been made by the assessing officer on ground of full justification of this is not available. I am unable to uphold these disallowances on this ground because prima-facie there is no provision in the act for disallowance on the ground of full justification of this is not available regarding genuineness. There is no finding by the Assessing Officer that expenditure was not incurred for the purpose of business. The Assessing officer has called for the various details which was produced before him. In absence of any exercise by the Assessing Officer in identifying such non genuine expenses and establishing the facts, the disallowance based on estimate can not be sustained. Apart from the facts that the case clearly gets hit by the decision in the case of M/s. Chandra Confectionery P. Ltd. reported in 2003(2) MTC 1022,wherein it has been held by the Hon'ble ITAT Bench, Lucknow that such adhoc disallowances, without assigning any reasons and without pointing out any defect, are unjustifiable. It is worth mentioning that the assessee is a public sector company of Government of U.P. and add-hoc disallowance of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der dated 12.03.3007. In the light of the fact, we do not find any infirmity in the order of CIT(A). Order of CIT(A) is confirmed on the issue. 21.1 In the result, ITA No.228/A/2011 is partly allowed for statistical purpose. ITA No.229/A/2011 for A.Y. 2008-09 22. The first effective ground is in respect of disallowance of ₹ 22,51,93,495/- out of the interest expenditure. During the assessment proceedings, the A.O. noticed that the assessee has claimed interest expenditure of ₹ 58,38,11,563/- towards the financial institution Rural Electrification Corporation Limited, out of which an amount of ₹ 22,51,93,495/- has been shown as outstanding as on 31.03.2008. The A.O. invoked section 43B of the Act and made addition on the ground that the assessee has failed to furnish proof of payment made before furnishing of return of income. The CIT(A) deleted the addition as under :- (Paragraph no.11, page nos.14 & 15) "11. As regard, the addition made under the head Interest payment to Financial Institutions u/s 43B of the Income Tax Act, 1961 of ₹ 22,51,93,495/-, I have gone through the facts of the case, assessment order framed by the Assessing Officer and su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, we notice that the CIT(A) has deleted the addition accepting the assessee's contention that interest payable was adjusted against amount from RE subsidy which was released by the U.P. Government. The U.P. Government has released the RE subsidy of ₹ 44,41,00,000/- and the said amount of interest ₹ 22,51,93,495/- were adjusted against RE subsidy. The Revenue did not dispute about the fact, therefore, in the light of above discussion and in the light of decisions cited above, we find that the CIT(A) has rightly deleted the addition. 25. The second ground is in respect of addition on account of disallowance out of various expenses ₹ 55,54,087/-, ₹ 4,77,24,356/- and ₹ 12,17,841/- out of miscellaneous expenses, repair and maintenance and printing and stationery. The ld. Representatives of the parties submitted that this issue is similar to ground no.5 of A.Y. 2007-08 which has been decided in para no.21 of this order. Following the said discussion, we confirm the order of CIT(A). 26. The third ground is in respect of disallowance of ₹ 1,47,11,91,680/- out of depreciation. The ld. Representatives of the parties submitted that this issue is also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18.00 40452.00 301053.54 500823.54 30.04.2009 06.04.2009 14.05.2009 3. Allahabad Zone 415225.00 04.04.2009 4. Varanasi Zone 109554.00 12410.00 45748.00 171508.00 30.04.2009 30.04.2009 07.04.2009 In view of above factual position the appellant company has already submitted details of deposit of aforesaid TDS but, the Assessing Officer without considered the said case had disallowed the same. Hence the addition made on said count is hereby deleted and Assessing Officer is directed to allow the claim made by the assessee after verification of tax challan." 32. We have heard the ld. Representatives of the parties and records perused. Since the amount has been deposited and the CIT(A) directed the A.O. to verify the date of payment and Challan, in the light of the fact, we do not find any infirmity in the order of CIT(A). Order of the CIT(A) is confirmed.. 33. The fifth ground is in respect of ₹ 71,75,671/- on account of prior period expenses. This ground is similar to ground no.2 in A.Y. 2007-08 which has been decided in paragraph no.9 of this order. Following the said discussion, we send back the issue to the file of CIT(A) with identica ..... X X X X Extracts X X X X X X X X Extracts X X X X
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