TMI Blog2021 (1) TMI 959X X X X Extracts X X X X X X X X Extracts X X X X ..... ractor fulfills the conditions of annual availability of power plant in terms of the factors given under the said contract. Assessee has established that a business liability has definitely arisen in the accounting year which is year to year basis. The assessee is following the mercantile system of accounting which is not disputed by the revenue. Therefore, the liability is ascertained liability and is allowable u/s 37(1) of the Act which was not taken cognizance by the Assessing Officer as well as the CIT(A). - Decided in favour of assessee. - ITA No. 6548/DEL/2016 ITA No. 2952/DEL/2019 - - - Dated:- 25-1-2021 - SHRI R. K. PANDA , ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE , JUDICIAL MEMBER Appellant by : Sh. Ved Jain, CA Sh. Akshit Goel, CA Respondent by : Smt. Sushma Singh, CIT, DR ORDER PER SUCHITRA KAMBLE, JM These two appeals are filed by the assessee and the Revenue against the order dated 30/11/2016 31/01/2019 passed by CIT(A)-7, New Delhi for Assessment Year 2012-13 2013-14 respectively. 2. The grounds of appeal are as under:- ITA No. 6548/DEL/2016 (A.Y. 2012-13 Assessee s appeal) 1. On the facts and circumstances of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s adjusted against the brought forward losses and depreciation. Further, the assessee company declared book profit u/s 115JB at ₹ 13,61,73,81,701/-. Order u/s 143(3) was passed on 29.03.2015 assessing the income at ₹ 12,15,07,27,240/- after additions/disallowances of ₹ 1,11,48,304/- u/s 41(1) on account of cessation of trading liability, ₹ 68,22,800/- on account of HQ Expenses, ₹ 12,99,68,406/- on account of bonus paid to GE International Ltd. and ₹ 1,79,43,00,000/- u/s 36(1) (iii) on account of interest attributed to work in progress. 4. Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee. 5. As regards to addition of ₹ 12,99,68,406/- on account of bonus payable to General Electric International Ltd., the Ld. AR submitted that the assessee is a public sector undertaking having NTPC and GAIL as its major shareholder and is engaged in the business of generation of power and the accounts of the assessee, being a public sector undertaking, have been audited by CAG. During the year the assessee has debited an expenditure on account of bonus payable to e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 hours in a calendar leap year. The methodology for calculation of availability of plant under different scenario is explained in CSA-Exhibit A B. The Ld. AR submitted that during the year under consideration, the contractor has ensured the 90% availability of the power plant to the assessee. Accordingly, the assessee booked an expenditure of ₹ 12,99,68,406/- on account of bonus payable to the contractor. The Ld. AR submitted that as regards, the payment of the bonus, there is an option given to the contracting parties in the CSA. The relevant provisions of the contract in this regard are as follows: In case owner is not entitled to an availability bonus for the term of an AGP from the purchaser of the facility s power, the contractor agrees that the owner may choose to either pay in cash to the contractor the bonus amount due or credit the bonus amount as an offset against any future amount due from the contractor to the owner under this agreement. In case owner is entitled to an availability bonus for the term of an AGP from the purchaser of the facility's power, the owner shall be, through Letter of Credit or prior to the expiry of 30 days from the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'ble Supreme Court in case of Bharat Earth Movers Vs. CIT (2000) 245 ITR 428 (SC). The Ld. AR also relied upon the following decisions:- (a) CIT vs. Oberon Edifices Estates (P) Ltd. (ITA No. 163/2016 dated 05.09.2019) (Ker. HC). (b) Housing And Urban Development Corporation Ltd vs. Addl. CIT (ITA 541/2019 dated 06.02.2020) (Del HC) (c) Pr.CIT vs. NHPC Limited (ITA No. 256 of 2015 dated 21.03.2018) (P H HC). The Ld. AR further submitted that there is no uncertainty about the incurrence of the expenditure The assessee becomes liable to pay the bonus to the contractor as soon as the contractor fulfills the conditions of annual availability of power plant in terms of the factors given under the said contract. Further, the manner of computing and payment is also mentioned in the same contract. Thus, in the case on hand the liability is an ascertained liability and therefore the expenditure is allowable u/s 37(1) as incurred wholly and exclusively for the purpose of business. Further, the same cannot be disallowed while computing the book profits u/s 115J B of the Act. In the light of the above submissions and Judicial pronouncements, the Ld. AR submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 2, the Ld. DR submitted that the CIT(A) erred in law and facts in giving relief to the assessee of ₹ 65,25,165/- on account of HQ expenses merely relying upon the order of his predecessor for A.Y. 2012-13 while failing to appreciate the merit of the addition and especially not appreciating the facts brought on record vide the remand report submitted by the Assessing Officer during the appellate proceedings. 9. The Ld. AR relied upon the order of the CIT(A). 10. We have heard both the parties and perused all the relevant material available on record. From the perusal of records, we find that the facts as emerge from the Assessment Order for A.Y 2013-14 are identical to that of earlier assessment year that is of A.Y. 2012-13 and no new finding or facts brought on record by the Assessing Officer. In A.Y 2012-13, the then CIT(A) has allowed both these issues in favour of the assessee. The submissions of the Ld. AR that the revenue has accepted the order of the CIT(A) and the revenue did not prefer any appeal was not controverted by the Ld. DR. Since, the CIT(A) while deleting the addition has followed the order of the preceding year and the relief granted by the CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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