9911796707
TMI Blog2020 (5) TMI 178X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. Regarding Ground No. 1, briefly stated the facts of the case are that during the course of assessment proceedings, the Assessing Officer observed that the assessee company has shown the grant utilized towards purchase of buses of Rs. 60,73,27,300/- in its balance-sheet for the financial year ended 31st March, 2012. The assessee company was asked to provide the complete details of the grant-inaid received during the year 2011-12 with justification for not offering the same to tax. 3. In response, the assessee company submitted that it receives two kinds of grant namely operational grant and grant for non-operational purposes such as for purchases of buses etc. As far as the operation grant is concerned, it was submitted that the same has been taken as Revenue grant and directly credited to profit and loss account and grants other than the operational grants are treated as capital grants and capitalized in the books of accounts. It was further submitted that method used to reflect the capital grant is to show assets at gross value in balance sheet and amount of grant has been shown in liabilities which has been further classified into utilized and unutilized grant. It was furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the balance sheet and addition is made to the total income of the assessee accordingly." 5. Being aggrieved, the assessee carried the matter in appeal before ld. CIT(A) and submitted that books of accounts of the assessee company are not only audited by the Chartered Accountant but also by Comptroller & Auditor General of India and no such defect or qualification has been pointed out by them. It was further submitted that the Assessing Officer has not pointed out which accounting standard and which provision of the Income tax Act has been flouted by the assessee company. The ld. CIT(A) after going through the submissions of the assessee and the financial statements of the assessee company stated that the complete details of the grant received, utilized and unutilized grant is available in the balance sheet dated 31.03.2012 of the assessee company. Hence, there is no justification for making the addition of Rs. 4,40,02,647/- as misapplication/misappropriation of the grant. Accordingly, the addition of Rs. 4,40,02,647/- so made by the AO was directed to be deleted by the ld. CIT(A). Against the said findings of the ld CIT(A), the Revenue is in appeal before us. 6. The ld. DR reit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts are not adequate enough to reconcile these two accounts and provide a clear picture. 9. It is no doubt true that the books of accounts of the assessee company have been audited by a Chartered Accountant and also by Comptroller & Auditor General of India and there is no qualification or finding regarding misappropriation of the grant. However, we find that the observation of the Assessing officer regarding misapplication/misappropriation of the grant is to be seen and appreciated in the limited context of examining the actual utilization of the capital grant received by the assessee company as to whether the capital grant is utilized for the purpose of meeting the specific end use for which the capital grant has been granted or for meeting other operational expenditure. The same will help determine the character of the receipt in the hands of the assessee company. In a scenario, the capital grant is utilized for purchase of buses and other fixed assets for which it has been granted, the same would be in nature of capital grant and not chargeable to tax. Where the capital grant is utilised for meeting the operational expenditure of the assessee company, the Assessing Officer is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st revenue collected by RSRTC on behalf of JCTSL which was a asset of JCTSL. Thus transactions made with RSRTC are genuine and expenditure cannot be disallowed." 11. The reply so filed by the assessee company was not found tenable and the relevant findings of the Assessing officer are as under: "1. The assessee is solely dependent on the monthly collection 85 expenditure statements given by RSRTC. The assessee is not in position to accurately assess/genuineness of the income and expenditure of the respective period. 2. The assessee is also not aware about the various statutory compliance applicable on the said expenditure and incomes. 3. The collection agency (RSRTC) is violating the terms of agreement entered on 06.06.2011 for the collection of revenue and its remittance by way of deposit in the designated collection account, means thereby the collection agency having no right for adjustment of the expenditure. 4. As replied by the assessee for adjustment of the collection with expenses incurred under rule 6DD is also not applicable in the assessee's case, because the assessee has not rendered the service to RSRTC, therefore, inter-head adjustment is not possible. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has effected the reporting of revenues in the financial statements and offering the same to tax in the return of income has not been stated at all by the Assessing officer. Therefore, where there is no finding by the Assessing officer that the revenue so collected has not been offered to tax, there cannot be any basis for making addition in this regard. 14. Considering the matter from another perspective, as it is emerging from the records, RSRTC incurs the expenditure on behalf of the assessee company out of such revenue collection in cash and then, remits the balance amount to the assessee company. On the expenditure so incurred by RSRTC on behalf of the assessee company, the latter has submitted the details of TDS deducted and deposited. The ld CIT(A) has returned a finding that "No cash payment in contravention of Section 40A(3) by the appellant has been brought on record by the AO." During the course of hearing, the ld DR has not brought on record anything which controverts such findings. Therefore, where no finding has been given by the Assessing officer in terms of any specific violation of provisions of section 40A(3) read with Rule 6DD, we donot see any infirmity in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liability has crystallized during the year or not. Only where it is held that the interest liability has crystallized during the year, the interest expense can be claimed and thereafter, the question of applicability of section 43B arises for consideration. The provisions of section 43B are not in the nature of enabling provisions but are in the nature of disabiling provisions in the sense that firstly, it needs to be determined that the expense should pertain to the relevant financial year in respect of which the assessee has incurred the liability and thereafter, unless such liability is discharged by actual payment, such liability cannot be allowed but will not be allowed in the year of actual payment. In the instant case, the assessee company has not established that the liability towards the interest has crystallized during the year, hence, we donot see any infirmity in the findings of the ld CIT(A) and the same is hereby confirmed. In the result, the sole ground taken by the assessee in its cross-objection is dismissed. In the result, appeal of the Revenue is partly allowed for statistical purposes and cross objection of the assessee is dismissed. Order pronounced in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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