TMI Blog2021 (7) TMI 490X X X X Extracts X X X X X X X X Extracts X X X X ..... t pertained to the year under consideration i.e A.Y. 2008-09, therefore, the same were rightly claimed as deduction. Accordingly, in the backdrop of our aforesaid deliberations, we are of the considered view that no infirmity arises from the order of the CIT(A) to the extent he had vacated the disallowance of the HVDC expenses, viz. Insurance charges and lease rentals - Decided against revenue. Disallowance of stamp duty and service fee - CIT-A deleted the addition - HELD THAT:- Stamp Duty expenses and Service fees expenses having been incurred by the assessee in the normal course of its business, which had not resulted to creation of any capital asset of an enduring nature, thus were allowable as a deduction u/s 37(1) of the Act. Our aforesaid view is fortified by the judgment of the Hon ble Supreme Court in the case of India Cements Ltd. [ 1965 (12) TMI 22 - SUPREME COURT] wherein it has been held by the Hon ble Apex Court that the stamp duty, registration fees, lawyers fees etc. paid for obtaining a loan is allowable as a business expenditure. - Decided against revenue. Disallowance of freight expenditure - CIT-A deleted the addition - HELD THAT:- We concur with the vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer, being freight on capital equipments, without appreciating the fact that freight on capital item is capital expenses and also assessee's reliance on ESAAR 1985 to support its claim was fully irrelevant. 5. On the facts and in the ci rcumstances of the case as well as in law, the Ld.CIT(A) erred in deleting the addition of disallowance of write back of an amount of ₹ 5.87 crores, the amount being disallowed as capital expenditure in AY 2007-08 while arriving at total income without appreciating the fact that the addition were made by the Assessing Office on the basis of comments of CAG in the statement of accounts of the assessee for AY 2007-08. 6. The appellant prays that the order of CIT(A) on the above ground be set aside and that of the assessing officer be restored. 7. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary. 2. Briefly stated, the assessee company which is engaged in the business of electricity transmission in the State of Maharashtra had e-filed its return of income for A.Y 2008-09 on 29.09.2008, declaring an income of ₹ 415,88,96,270/- after claiming set-off of unabsorbed de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uent year i.e in the period relevant to A.Y. 2008- 09. It was noticed by the CIT(A), that the aforesaid disallowance made by the A.O in A.Y. 2007-08 was on appeal vacated by his predecessor, subject to a direction, that the said expenses would be allowed in the subsequent year in which appropriate correction entries were passed by the assessee i.e the year under consideration, viz. A.Y 2008-09. Observing, that the A.O while framing the assessment for the year under consideration i.e A.Y. 2008-09 had failed to give effect to the directions of the CIT(A) and not allowed the deduction of the aforesaid amount of ₹ 5,87,29,000/- while computing the assessee s income for the said year, therefore, he directed the AO to allow the necessary relief to the assessee. 5. The revenue being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. The ld. Authorised Representative (for short A.R ) for the assessee at the very outset of the hearing submitted that majority of the issues involved in the present appeal were covered by the order of the Tribunal in the assessee s own case for the preceding years. In order to drive home his aforesaid claim the ld. A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erving, that the liability of ₹ 15.30 crore represented an unexplained credit that was neither in existence nor payable, the same was added by him under Sec. 68 of the Act. On appeal, it was observed by the CIT(A) that the assessee was one of the successor companies to the erstwhile MSEB and was formed in the previous year relevant to the A.Y 2006-07 on the demerger/unbundling of the said MSEB. It was observed by the CIT(A), that as claimed by the assessee, and rightly so, on the demerger/unbundling of MSEB, both its assets and liabilities, to the extent the same pertained and were specifically allocable to the transmission undertaking were transferred to the assessee. It was observed by the CIT(A) that some of the liabilities of the erstwhile MSEB that were transferred /allocated to the assessee were not discharged and were accordingly being reflected in its accounts as outstanding, and the liability of ₹ 15.30 crore was one of such outstanding liability. It was further observed by the CIT(A), that the interest accrued liability of ₹ 15.30 crore was on account of transfer of certain liabilities on unbundling/demerger of erstwhile MSEB and was appearing in the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sputed. In support of its claim of liabilities (on which interest accrued during the year) pertaining to the earlier years* the appellant has filed copies of balance sheets of the concerned year and has also explained that similar objection was raised by CAG in the F.Y.2Q06-07 pertaining to A.Y.2007-08 which is reproduced as under: A/c code 46.7 - Accrued/unclaimed amount relating to borrowings - ₹ 53.96 crores Appellant's reply to the CAG objection Interest accrued is shown as ₹ 15.35 crores for which neither corresponding loan, bonds exists in the account nor relevant record are available for verification (HO WM), hence the correctness of the amount is not verifiable This is as per the opening balance, as per the transfer scheme received from erstwhile MSEB. The relevant details pertaining to this case being sought from MSEDCL soon and based on the response further action will be taken. Thus, there is force in appellant's argument that there were no unexplained credit and unexplained liabilities. The interest of ₹ 15.30 crores accrued during the year o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee in terms of the unbundling scheme pursuant to which the transmission undertaking of MSEB was transferred to the assessee. In support of the aforesaid factual position that HVDC project was not a new one and was an existing project since last many years, the assessee placed on record supporting documentary evidence, viz. copy of the lease agreement dated 21.05.1997; and copy of the office notes dated 28.04.1999 and 25.05.1999. It was further submitted by the assessee that the insurance charges in question pertained to HVDC Terminal Station situated at Chandrapur and HVDC RS O M Circle situated at Padghe, and the said charges were by no means in the nature of a capital expenditure. Also, copy of the journal voucher evidencing the payment of lease rentals of ₹ 27,34,250/- was filed in the course of the assessment proceedings. It was further submitted before the A.O that a similar issue had came up in the assessee s case for A.Y. 2006-07, and the same had been decided in the assessee s favour by the CIT(A). However, the A.O was not persuaded to subscribe to the aforesaid submission of the assessee. Holding a conviction that the aforesaid expenditure in question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which were paid in A.Y.2007-08) had been claimed now in the year under consideration. Similarly the insurance expenses and lease rentals were paid during the year for the period 01.10.2007 to 30.09.2008. However, in the accounts, the expenditure pertaining to the period pertaining to the year under consideration were only claimed including the expenses which were paid in immediately preceding year. The appellant has explained the same as under: Padghe Circle Particulars Ref. JV No. DR. CR. Paid in Advance in 2006-07 now reversed in apr.07 2285707 1 Payment of premium 16744 2 Paid in AY 2008-09 (50% booked in the FY2008-09) 2288150 3 Refund of excess premium paid 605418 4 Total 4590601 605418 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w take up the grievance of the revenue that the CIT(A) had erred in deleting the disallowance of stamp duty and service fee aggregating to ₹ 92,83,326/- that was made by the A.O, on the ground, that the same being an expenditure pertaining to a loan taken for acquisition of fixed asset was thus required to be capitalised. As is discernible from the assessment order, it was observed by the A.O that the assessee had inter alia claimed deduction of stamp duty expenditure of ₹ 85,18,230/-; and service fee of ₹ 7,62,056/-. On being queried as to why the aforesaid expenditure may not be disallowed as the same was incurred in the capital field, it was submitted by the assessee that as the payment of stamp duty was w.r.t hypothecation of assets that were offered as security for availing of various loans by the assessee company from REC/PFC, the same, thus, was allowable as a revenue expenditure. Insofar the expenditure that was incurred towards service fees of ₹ 7,62,056/- was concerned, it was submitted by the assessee that the same comprised of the payments that were made towards service fee to Bank of India in respect of loans take from Credit Suisee Switzerland ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ans taken for acquisition of fixed assets from REC/PFC, which were to be capitalized. However, in its submission before A.O, the appellant never claimed that the loans were taken for acquisition of fixed assets. The appellant explained to the A.O. that the said expenses were routine expenses incurred during the course of business and were allowable u/s.37(1) of the Act since no capital asset had been created by incurring such expenditure. In the facts and circumstances the A.O. incorrectly disallowed the expenditure incorrectly [relating the said expenditure with the acquisition of capital asset. Incidentally this issue was also there in A.Y.2006-07 wherein the said expenses were allowed by the undersigned by holding that the expenses e incurred for availing various loans and service fee for trusteeship for [MSEB bonds. It was also held in appeal order of A.Y.2006-07 that the said expenses were business expenses which did not create capital asset of enduring nature. We have deliberated at length on the issue in question and are persuaded to subscribe to the view taken by the CIT(A) that the aforesaid expenses, viz. Stamp Duty expenses: ₹ 85,18,270/-; and Service fees exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed by the CIT(A), that the assessee had in the course of the appellate proceedings placed on record documentary evidence which revealed that the freight expenses in question were incurred for transportation/shifting of an existing capital assest i.e transformer (Nasik Circle), and not for transportation of any new capital asset purchased by the assessee. It was, thus, observed by the CIT(A) that as the freight expenses were incurred by the assessee on transportation of an existing capital asset i.e for the purpose of shifting it for repairs, the same, was thus allowable as a business/revenue expenditure. Accordingly, on the basis of his aforesaid deliberations the CIT(A) vacated the disallowance of freight expenses of ₹ 10,62,493/- that was made by the A.O, observing as under: 6.3 I have considered the facts of the case. The A.O. disallowed the appellant's claim of freight expenses of Rs,10,62,493/- holding that the same were incurred on transportation of capital equipments. Probably the A.O. thought that the freight expenses were pertaining to the transportation of new capital equipments and therefore, should form part of cost of those new capital equipment. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reating the same as a capital expenditure, despite the fact that specific directions to the said effect were given by the CIT(A) while disposing off the assessee s appeal for A.Y 2007-08. It was submitted by the assessee that during the A.Y. 2007-08 the assessee had inter alia incurred expenses aggregating to ₹ 5,87,29,000/- which were claimed as a revenue expenditure, as under : i. Expenditure on renovation modernization of ₹ 3,88,00,000/-. ii. Expenditure on transformer rewinding of ₹ 1,43,00,000/- iii. Expenditure on replacement of earth wire on Chandrapur Padghe Line of ₹ 56,29,000/-. However, the A.O on the basis of the comments of the CAG to the Statement of Accounts of the assessee for the said year, had while framing the assessment u/s 143(3), vide his order dated 29.12.2009 for the said preceding year i.e A.Y 2007-08 disallowed the aforesaid expense by treating them as having been incurred in the capital field. The aforesaid additions were made in spite of the fact that the necessary rectification entries were passed in the subsequent year i.e in the year ended 31st March, 2008 relevant to A.Y. 2008- 09. On appeal, the CIT(A) c ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
