TMI Blog2020 (10) TMI 1218X X X X Extracts X X X X X X X X Extracts X X X X ..... ch assets - A.O. without appreciation the explanation and observing that in absence of the break up of details of such assets not being furnished has disallowed the claim of depreciation on such assets. In this connection, it is pertinent to state here that during the previous year i.e., relevant to the Asst. Year 2004-05, no disallowances as called for on these assets. Since presently the assessee has explained the particulars of assets and their classification under the head plant and machinery, the assessee company is entitled for depreciation as claimed. Under the circumstances the disallowance on this account are not sustainable on fact and law - Decided in favour of assessee. Addition towards provision for guarantee commission - not an allowable expenditure - CIT(A) held that the claim of guarantee commission is in accordance with the business requirement and as such allowable - HELD THAT:- As per letter No. SG-21/07/3810/F dt. 29.1.2008 relating to the Dy. Accounting General (Commercial) from the Addl. Secretary to the Govt. of Odisha, the guarantee commission could not be reduced since the guarantee amount given by the Government of Odisha has not been reduced. The app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. If it is found that it was given during the construction period for the capital asset construction, the assessee's contention may be accepted. Accordingly, this ground of appeal of assessee is allowed for statistical purposes. - ITA Nos. 115 and 122/CTK/2014 - - - Dated:- 25-2-2020 - C. M. Garg , Member ( J ) And L. P. Sahu , Member ( A ) For the Appellant : Sarita Mishra Kolhe , CIT-DR For the Respondents : Dillip Kumar Mohanty , Adv ORDER Per L. P. Sahu , A M 1. These two appeals have been filed by assessee and Revenue against the order passed by the CIT(A)-I, Bhubaneswar, dated 01.01.2014 for the assessment year 2005-2006. 2. First we shall take up the appeal of Revenue filed in ITA No. 115/CTK/2014, wherein the Revenue has raised the following grounds of appeal:- 1. On the facts and in the circumstances of the case, the Ld. CIT(A) is not justified in law as well as in facts in deleting the addition of ₹ 7,89,47,465/- made by the AO on account of provision for dam maintenance since mere provision is not an allowable expenditure. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) is not justified in l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 52,750/- vii) Excess claim of depreciation : ₹ 1,71,835/- viii) Depreciation claimed on miscellaneous assets : ₹ 8,52,682/- ix) non-disclosure of interest on advances to contractors : ₹ 42,25,000/- x) Excess provision of guarantee commission : ₹ 63,78,096/- 4. Aggrieved by the assessment order, the assessee preferred appeal before the CIT(A) and agitated all the additions made by the AO except the additions made on account of provision for bonus, employees contribution to EPF not paid within due date and excess claim of depreciation. The CIT(A) after considering the submissions of the assessee and findings of AO, deleted the addition made on account of provision for dam maintenance, depreciation claimed on miscellaneous assets and excess provision of guarantee commission and confirmed the additions made on account of provision for leave encashment, non-disclosure of the dues from DOWR as income, prior period expenses and non-disclosure of interest on advances to contractors. 5. Against the additions deleted by the CIT(A), the Revenue is in appeal before the income Tax Appellate Tribunal. 6. Ground No. 1 relates to deletio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntenance, it was kept under provision account for settlement with the government against amounts receivable from the Government. The CIT(A) relying on the decision of this Bench of the Tribunal in assessee's own case in ITA No. 278/CTK/2010, order dated 21.10.2011 allowed the provision for dam maintenance after observing as under:- 4.2 I have considered the submission of the appellant and facts on record. In accordance with the Govt. of Odisha notification, the hydro power projects at Upper Kolab, Rengali and Upper Indravati Projects were transferred to the appellant from the government and Hirakud Power House, Burla and Balimela projects were transferred from OSEB for generation of power. The appellant was required to maintain some projects and shared the cost of maintenance with the government with respect to their utility component. Though the expenditure have been incurred for dam maintenance, it was kept under provision account for settlement with the government against amounts receivable from the government. This practice of accounting has been followed consistently. Though the amount has been debited to the provision account, the same has actually been spent and awa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear i.e., relevant to the Asst. Year 2004-05, no disallowances as called for on these assets. Considering the above submissions of the assessee and the miscellaneous assets shown by the assessee during the year, has allowed depreciation of 25% as claimed by the assessee after having following observations:- 8. Ground No. 6 relates to disallowance of claim of depreciation amounting to ₹ 8,52,682/- in respect of miscellaneous assets. The assessee did not furnish the break-up of details of miscellaneous assets for the amount of ₹ 14,30,009/- for which the AO disallowed the claim of depreciation @25% on such assets. In the written submission made, the appellant has stated as under: Depreciation on miscellaneous assets The assessee in schedule-5 of its Profit Loss Account and Balance Sheet under the head fixed assets and depreciation, claims depreciation on various heads under the Companies Act, 1956. However, while computing the total income basing on the tax audit report as annexed at Annexure-3, schedule of depreciation as per Rule-5 of the I.T. Rules, 1962 claims depreciation. In the particulars of assets subject to depreciation the items claim of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , we uphold the same and dismiss this ground of appeal of the Revenue. 12. Now, coming to the third ground which relates to deletion of addition made by the AO towards provision for guarantee commission, ld. DR before us relied on the order of AO and submitted that the assessee could not explain the excess claim of guarantee commission during the course of assessment proceedings, therefore, the AO has rightly disallowed the same. However, the CIT(A) without considering the auditor's report. Accordingly, ld. DR submitted the order of the AO deserves to be restored. 13. On the other hand, ld. AR relied on the order of CIT(A) and submitted that while undertaking the capital expenditure and acquisition of capital assets, the different units of the assessee company has been financed by Power Finance Corporation backed up by the Government of Orissa Guarantee. The guarantee provided by the State Government are subject to guarantee commission to be paid by the assessee company. It was also contended by the ld. AR that the State Government vide letter No. SG-21/073810/F dated 29.01.08, in Finance Department on the subject of outstanding dues towards the Government of Orissa Guara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l before us. Accordingly, we uphold the findings recorded by the CIT(A) in this regard and dismiss this ground of appeal raised by the Revenue. 15. Thus, appeal of the revenue i.e. ITA No. 115/CTK/2014 is dismissed. 16. Now, we shall take up the appeal of assessee in ITA No. 122/CTK/2014, wherein the assessee has raised the following grounds:- 1. For that the order of assessment as well as the order of the 1st Appellate Authority has neither been based on the facts and circumstances of the case nor on points of law. 2. For that disallowance of ₹ 1,18,36,524/- under the head provision for leave Encashment and adding the same to the income returned is not sustainable on fact and law and therefore liable to be deleted. 3. For that addition of ₹ 3,98,00,000/- i.e., the dues from DOWR on the basis of the Auditors report 85 adding the same to the income is not sustainable on fact and law and therefore liable to be deleted. 4. For that disallowance and addition of prior period expenses of ₹ 4,18,89,745/- under the head prior period expenses are not sustainable on fact and law in view of the fact that the expenditure included hereinabove did reall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Exide Industries Ltd. Vs. Union of India, [2007] 292 ITR 470, the Hon'ble Calcutta High Court has struck down the provisions of Section 43B(f) of the Act as being arbitrary and unconscionable. Thereafter the Hon'ble Apex Court in case of Exide Industries Ltd. in SLP (Civil) 22889 of 2008 has stayed the operation of the judgment of Hon'ble Calcutta High Court. Considering the above position, the Tribunal on the similar issue in case of Ernst and Young P. Ltd. (supra) has restored the matter to the file of AO for fresh adjudication after having observations as under:- 15. At the outset, learned counsel for the assessee Shri R.N. Bajoria, senior advocate stated that the assessee-company has added a sum of ₹ 1,54,71,071 on account of provision for leave encashment. According to him, this amount was added back in the computation of income filed with original return of income in pursuance to section 43B(f) of the Act. He further stated that the hon'ble Calcutta High Court in the case of Exide Industries Ltd. v. Union of India [2007] 292 ITR 470/164 Taxman 9 stuck down the provisions of section 43B(f) of the Act as being arbitrary and ultra vires. Learned cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peals, order dated 27.04.2018 relying on its earlier order has restored the disputed issue to the file of AO. The observations of the Tribunal in this regard are as under:- 31. We have heard rival submissions and perused the material on record. We found that the similar issue has been decided by the Tribunal in assessee's own case for the assessment years 2007-08 2008-2009 in ITA No. 343 392/CTK/2015, order dated 23.04.2018, wherein the Tribunal has observed as under:- 28. We have heard rival submissions and perused the material on record. The assessee has made the provision for leave encashment and the provision was not added back in the computation of income. As the ld. AR submitted that the above issue is covered by the order of the coordinate bench of the Tribunal in the case of Baitarani Gramya Bank in ITA Nos. 318 319/CTK/2013 for assessment years 2008-09 2009-10, wherein the Tribunal held as under:- 19.1 The DR also agreed with the submission of ld. AR of the assessee. In the circumstances of the case, we set aside the order of the CIT(A) and remit the matter to the file of the Assessing officer to re-adjudicate the issue in the light of the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R that these expenses were never claimed earlier in absence of ascertainment of correct liability, therefore, the same may kindly be allowed. 24. On the other hand, ld. DR relied on the orders of authorities below. 25. After hearing both the sides and perusing the entire material available on record, we find that we have already decided this very similar issue in case of OMC Ltd. in ITA No. 177/CTK/2013, order dated 20.09.2017, wherein the Tribunal has decided the issue in the following manner:- 8. On the second disputed issue of prior period expenditure the ld. AR submitted that assessee has complete information on the claim and prayed for an opportunity to submit. On the query from the bench to the ld. AR to explain with reasons for non-filing details before the AO, the AR's explanations are not convincing. We find the prior period expenditure claim was dealt by the coordinate bench of this Tribunal in assessee's own case in ITA No. 551/CTK/2012, order dated 18.12.2012 at para 9.1 page 9 where the Tribunal has dealt on the each issue of prior period expenses which reads as under:- 9.1. On the second issue being prior period expenses, we find the contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, no evidence was furnished that the same accrued during the year; (v) Raising expenses-₹ 12,02,510/-: These expenses mostly consist of raising of mineral ore at Dubna mines for 1998-99, 1999-2000, 200001 and 2001-02, also includes over burden cutting in 2001 and in respect of agreements/activities done in, 2001-02. Accordingly, provisions should have been made in 'Those years in respect of these expenses. In any case, no/evidence was furnished that the same accrued during the year. (vi) Rent, rates taxes - ₹ 4,58,432/-: In fact, these are rent paid for private plots taken on lease by OMC. As per details filed, the rent was finalized by the Managing Director of the assessee on 16.12.2006. Thus, the provision should have been made in the financial year 2006-07. In any case, no evidence was furnished that the same accrued during the year. (vii) R M to machinery - ₹ 23,02,201/-: The work by M/s. Mcnall Bharat is in response to work order of the assessee dated 31.10.2002 and the bills were raised by this concern on the assessee on 09.12.2004, 24.10.2006, 05.09.2000 and 05.09.2003. Accordingly, provision should have been made in the relevant fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear and the assessee should be provided adequate opportunity of hearing and shall cooperate in submitting the information. Accordingly, This ground of appeal for i.e. A.Y. 2010-2011 2011-2012 is allowed for statistical purposes. Following the above observations of the Tribunal, we also restore this issue to the file of AO for examination of genuineness and crystallization of the expenses in the financial year under consideration. Needless to say the assessee shall be given reasonable opportunity of hearing. Ground No. 3 is allowed for statistical purposes. Ground No. 4 : Non-disclosure of interest on advance to contractor : ₹ 4,225,000/- 26. On perusal of the assessment order, we found that the AO during the course of assessment proceeding noted that the interest of ₹ 42,25,000/- was accrued on the advance of ₹ 2.27 crores given to the contractors. Ld. AR of the assessee during the course of hearing submitted that since the advance was given to contractor for capital construction by the assessee, therefore, the same deserves to be allowed. In view of the above, we restore the issue to the file of AO and direct the AO to examine the nature of advanc ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
