TMI Blog2022 (7) TMI 1498X X X X Extracts X X X X X X X X Extracts X X X X ..... rdinate Bench [ 2015 (9) TMI 1731 - ITAT AHMEDABAD] which has been perused by us and since the facts are identical we find substances in assessee's submissions which has not been able to be controverted by the Ld. D.R. too. Hence, this ground of appeal is allowed in assessee's favour by deleting the addition made by the Revenue. Income recognition on government grant subsidy - Addition of 15% of Capital Grants as against 10% offered by assessee - HELD THAT:- We find that on the identical issue as submitted by the Ld. A.R. for A.Y. 2009-10 the Coordinate Bench has been pleased to set-aside the issue to the file of the Ld. AO for adjudication afresh for verifying the proportionate amount of grant relevant to different asset - Thus we find it fit and proper to remand the issue to the file of the Ld. AO for re-adjudication of the same and to pass orders upon verification of the proportionate amount of grant relating to different assets and to pass orders accordingly. This ground of appeal preferred by the assessee is allowed for statistical purposes. Correct head of income - Confirming income as other income instead of business income interest on loans to staff - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot produce on record copy of the above stated letter so as to dispel the above said specific findings. The CIT(A) further relies on an identical order dealing with the very claim. The same has also gone un-rebutted in course of hearing before us. We decide this ground as well against the Revenue. MAT computation - addition/adjustment made to the Book Profit computed u/s 115JB on account of Capital Grants claimed - HELD THAT:- We find it fit and proper to remit the issue to the file of the Ld. AO to adjudicating the issue taking into consideration the Capital Grant and subsidies and consumers contribution made by the assessee and pass orders in accordance with law upon granting a reasonable opportunity of being heard to the assessee. This ground of appeal preferred by the Revenue is allowed for statistical purposes. - SMT. ANNAPURNA GUPTA , ACCOUNTANT MEMBER And Ms. MADHUMITA ROY , JUDICIAL MEMBER Appellant by : Shri M. K. Patel , Advocate Respondent by : Shri A. P. Singh , CIT DR ORDER Per Madhumita Roy , JM The bunch of appeals preferred by the assessee and the Revenue are directed against the separate orders dated 17.07.2015, 21.08.2015 passed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of penalty proceedings under section 271(1)(c) of the Income Tax Act, 1961 for the alleged concealment and/or furnishing of inaccurate particulars of income. 7.0 The appellant craves leave to add to, alter, delete or modify any of the grounds of appeal either before or at the time of hearing of this appeal. 3. Ground No. 1:-This ground relates to disallowance of deferred revenue expenses. 4. It is found from the documents that the assessee has written off Rs. 41.16 lakhs as deferred revenue expenditure during the year under consideration but the same has not been added back to the total income. In order to justify such claim the assessee submitted that such expenses has been written off during the Financial Year 2009-10 i.e. A.Y. 2010-11 and the same is the 20% amount of preliminary and preoperative expenses incurred by the company up to the Financial Year 2004-05 the details whereof is appearing at Page 4 of the Assessment Order. On the basis of the concept of deferment of revenue expenditure under the Act, the said has been disallowed by the Ld. AO which was further been confirmed by the First Appellate Authority. 5. We have heard the rival submissions made b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 381.36 lakhs, Rs. 263.63 lakhs are waiver of consumer dues consisting of principal and delay payment charges leviable from consumers. The said amount has already been booked as income in earlier years. Since the provision for Bad doubtful debts being made by the company in respective years (say, Rs. 3700 lakh in FY 2010-11 Rs. 6253 lakhs in FY 2009-10) are disallowed while filing of return of income of respective assessment year, hence, the actual expenditure booked during the year for waiver of consumer dues during the year of Rs. 263.63 lakhs (principal amount of Rs. 60 lakhs + delay payment charges Rs. 203 lakhs) should not be added back to income. Further the amount of Rs. 44 lakhs expenditure booked towards compensation paid to the outsiders for injury, death/damage due to fatal/non-fatal incidents/accidents occurred during the year. This apart the loss on account of shortage in material etc., it is submitted that these losses are on account of loss of materials through pilferage, shortage of material in transit, shortage arising on physical verification, obsolescence of materials/stores, loss in sale of scrap etc. It is, therefore, submitted that the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceipt of consumers' contribution Capital Grants in nature and hence cannot be considered as Income. The consumers' contribution Grants are towards cost of Capital Assets and Capital in nature and hence the same cannot be considered as Revenue Income. The above referred capital receipt is one of the sources of financing capital expenditure and hence the same can not be treated as Revenue Income. The receipts of consumers' contribution Grants towards cost of capital Asset for specific schemes/projects are capital in nature and hence the same can not be considered as Revenue Income. The consumers' contribution and capital grants are one of the sources of financing capital expenditure and is a capita receipt and hence the same can not be treated as Revenue Income. It is submitted that the Grants allocated to the company are certainly for various schemes to be implemented by the company. Such grants are accounted based on the decision on the holding company viz. GUVNL, which is ultimately controlled guided by the Government of Gujarat. Relying upon the ratio set in the earlier Assessment Year the Ld. AO computed 15% out of the total grant in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of Explanation 10 below section 43(1) by the Finance (No. 2) Act, 1998 w.e.f. 1.4.1999, decisions relied upon by the appellant in the case of P.3. Chemicals etc. are no longer applicable and cost of assets met directly or indirectly by the Central Government or State Government in the form of subsidy or grant or reimbursement (by whatever name called) is not to be included in the actual cost of asset to the assessee. Accordingly, depreciation is to be allowed only after making necessary adjustment in written down value / actual cost of block of assets in accordance with Explanation 10 below section 43(1). In the case of Dakshin Gujarat Vij Co. Ltd. for A.Y. 2006-07 referred to by the Assessing Officer, CIT(A) distinguished the treatment to be meted out to revenue grants and capital grants and held that revenue grants are to be taxed in entirety in the year of receipt and capital grant towards assets are to be reduced from actual cost of assets as per Explanation 10 below section 43(1). In the case of Dakshin Gujarat Vij Co. Ltd., after noting that grants were only towards cost of capital assets, CIT(A) had held that such grants ought to have been reduced from the cost of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s split into seven companies, for the purpose of financial restructuring plan, and the approval was accorded to provide some financial/capital support to GUVNL. The grant was given in terms of the power reforms for the overall development of the power sector. Such grant was not granted to actually meet the cost of assets. Further, the grant was given to the holding company, GUVNL and then it was allocated to the assessee company, one of the subsidiary companies. The assessee was not entitled to an amount beyond a certain limit, even if it is spent large amount on purchase of fixed assets. Further, the grant was not with reference to any particular fixed assets. It was further submitted that the resolution sanctioning the grant nowhere indicated that the grant was meant to offset the cost of the capital assets purchased by the company. Reliance was placed on the decision of the Hon'ble Supreme Court in the case of CIT. Vs. P.J. Chemicals Ltd., 121 CTR 201, wherein the decision of the Gujarat High Court in the case of CIT. Grace Paper Industries P. Ltd., 83 CTR 1, which was affirmed by the Hon'ble Supreme Court by observing that the amount of subsidies and grants received by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing capital grant for capital support appearing in Schedule-2 of the balance sheet as on 31.3.2008 was offered as income nor it was reduced from the cost of assets, 15% of the same i.e. Rs. 964.191 lakh needed to be disallowed as excess depreciation claimed in respect of the same. The total disallowance towards excess depreciation, therefore, worked out to Rs. 9.289 crores plus Rs. 9.641 crores i.e. Rs. 18.93 crores. Thus, instead of net addition of Rs. 30,97,61,800/- made by the AO, addition of Rs. 18.93 crore was directed to be made on this count. 18. Before us, the AR of the assessee argued that uniform rate of 15% cannot be applied for making disallowance. He submitted that the grant should be apportioned according to the value of the asset given in the balance sheet. He argued that the rate of depreciation on land was zero percent, building was 5% and the plant machinery was 15%, and hence, the disallowance at the uniform rate at 15% is not justified. 19. On the other hand, the DR argued and submitted that the order of the CIT(A) was correct, and he after appreciating the entire facts had reduced the disallowance from Rs. 30.97 crores to Rs. 18.93 crores. 20. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld. Counsel appearing for the assessee with all his fairness submitted before us that the identical issue has been decided against the assessee by the Coordinate Bench in the case of Gujarat Transmission Corn. in ITA No. 652/Ahd/2013 for A.Y. 2009-10. On this aspect he has drawn our attention to Page 63 of the Paper Book filed before us. However, by and under the order passed by the Hon'ble Orissa High Court in the case of Odisha Power Generation Corporation Ltd. vs. ACIT, Circle-2(2), Bhubaneswar Ors. in ITA Nos. 1, 2, 3 of 2015 and ITA Nos. 24 25 of 2009 the issue has been decided otherwise. A copy of the same has also been submitted before us by the Ld. Counsel appearing for the assessee. 19. On the other hand, the Ld. D.R. relied upon the order passed by the authorities below. 20. We have heard the rival submissions made by the respective parties, and we have also perused the relevant materials available on record and also gone through the order passed by the Hon'ble Orissa High Court in the case of Odisha Power Generation Corporation Ltd. (supra). It appears that the Hon'ble Orissa High Court while dealing with the issue the Court was pleased to observ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance of prior period expenses of Rs. 53.53 crores as per Ground No. 4 of its appeal. The disallowance has been made on the ground that the expenses under various heads as noted in the assessment order pertained to earlier years and the assessee which is following system of accounting should have made provision for expenses in those respective years and claimed them as deduction. We have gone through the break-up of the expenses as noted in para-8 of the assessment order and observe that certain expenses declared under the head 'other adjustments Rs. 30.75 crores'; 'other charges Rs. 79.34 lakhs'; 'depreciation under provided Rs. 7.86 crores' etc. are ostensibly vague and does not/indicate the nature of claim with sufficient particularity obscure. We simultaneously note that assessee is a Slate Government Undertaking and its accounts are subjected to review by CAG and therefore it cannot be postulated that there was any deliberateness in not furnishing relevant, details before the revenue authorities. The bona fides of the Assessee is also augmented by the facts that the Assessee has reported staggering carry forward losses in its returned income. Thu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in ITA No. 2858/Ahd/2015 for A.Y. 2010-11 as Ground No. 3 therein. In the absence of any changed circumstances the same shall apply mutatis mutandis. 33. Ground No. 2:-Identical ground has already been decided by us in ITA No. 2858/Ahd/2015 for A.Y. 2010-11 as Ground No. 4 therein. In the absence of any changed circumstances the same shall apply mutatis mutandis. 34. Ground No. 3:-Identical ground has already been decided by us in ITA No. 2858/Ahd/2015 for A.Y. 2010-11 as Ground No. 5 therein. In the absence of any changed circumstances the same shall apply mutatis mutandis. 35. Ground No. 4:-During the course of assessment proceeding the assessee was directed to submit computation of brought forward business and depreciation loss. The assessee submitted the following revised calculation of brought forward business and depreciation loss which is reproduced as under: SR. NO A.Y. Nature of Loss/Allowance Amount as returned (in Rupees) Amount as Assessed (in Rupees) Remarks 1 2005-06 Less Business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,239,054,293 2,842,288,103 36. According to the Ld. AO such claimed made by the assessee is higher business loss as compared to the business loss ascertained during the earlier assessment and therefore, the business loss claimed by the assessee has been restricted to 55,17,99,482/-. Though, the same was challenged before the First Appellate Authority by the assessee no deliberation has been made by the Ld. CIT(A). In that view of the matter the Ld. Counsel submitted before us for remitting the issue to the file of the Ld. AO to decide the same in terms of the giving effect to the appellate orders of the earlier years. 37. On the other hand, the Ld. DR relies upon the order passed by the authorities below. 38. We find that the Ld. CIT(A) has not decided the issue of carry forward loss and depreciation of earlier years, hence we find it fit and proper to remit to the issue to the file of the Ld. AO to decide the same on the basis of the giving effect of appellate orders in respect of the earlier years of the assessee. This ground of appeal raised by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the assessee in identical fact situation, the order of the CIT(A) on the issue cannot be faulted. 5. The Ld. Departmental Representative for the Revenue, on the other hand, placed reliance upon the order of the AO without any specific rebuttal. 6. We have carefully considered the rival submissions and also perused the orders of the AO and CIT(A). 6.1 The CIT(A) has disposed off the issue in favour of the assessee as under: 5.1.4. I have considered the appellant's submission and the AO's observations. The guarantee fee paid by the appellant to the GOG is for the purposes of obtaining loan. Similar issue in the case of sister concern of the appellant namely M/s. Gujarat Energy Transmission Corporation Ltd. has been decided by my predecessor in Appeal No. CAB-I/333/08-09 vide order dated 30.03.2010 as follows: 5.1. In appeal, the arguments taken at the assessment stage were reiterated. It was further pointed out that the assessee company was one of the seven resulting companies out of the demerger of the erstwhile GEB. In the past, GEB had issued bonds and other financial instruments for raising funds from the public and from financial instituti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be unrealistic to say that the appellant company could derive any undue advantage or collateral benefit by making such payment to the GOG. In view of the totality of the circumstances, I am of the opinion that the AO was not justified in treating the payment of guarantee commission (Rs. 8,39,04,550/-) as capital in nature. The addition is directed to be deleted. 5.1.5. Besides, the Hon'ble Supreme Court of India in its decision in the case of Sivakami Mills Ltd. 95 Taxmann 73 (SC) has held that guarantee commission paid to the bank to secure the due payment of the installments of loans taken for the purchase of machinery from foreign country on deferred payment basis was revenue expenditure and was allowable as such. Following this decisions as well as the decision in the case of Gujarat Energy Transmission Corporation Ltd.(supra), this ground of appeal is allowed and disallowance made by the AO is directed to be deleted. 6.2 The issue has already been subjected to judicial consideration in The DCIT vs. Gujarat Energy Transmission Corporation Ltd. ITA No. 633/Ahd/2013 concerning A.Y. 2009-10 order dated 05.09.2019 and thus is no longer res integra. In parity with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned Assessing Officer has disallowed Extra-ordinary Items amounting to Rs. 1,24,28,000/- without any cogent reasons whatsoever. During the course of assessment proceedings, the learned Assessing Officer had called for the information relating to Extraordinary items vide item No. 29 of the notice dated 18-08-2010 issued under section 142(1) of the IT Act. The learned Assessing Officer had asked to give details and justification for allowability of the expenses. In response to the same, complete details of the expenses were filed vide letter No. DGVCL/GM(F A)/10/15523 dated 15-12-2010. It was explained at the time of assessment proceedings that this expenditure has been incurred on account of expenses incurred for rehabilitation and repairs works undertaken due to floods/cyclones at various Divisions of the Company. The division-wise breakup of the expenditure of 124.28 lakhs as submitted before the learned Assessing Officer is enclosed herewith. It is clarified that due to unforeseen cyclone and flood in F.Y. 2007-08, the distribution network in and around particularly Surat area was affected adversely and hence, the company had to incur expenditure towards restor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness expediency is of revenue nature and is fully allowable. It is only the accounting treatment that the said expenditure is shown as extra-ordinary items. The appellant, therefore, prays that the disallowances made on this count may be deleted. The appellant also invites your honour's kind attention to the fact that the similar issue has been decided favourably by the Hon'ble Commissioner (Appeals) in the case of Gujarat Energy Transmission Corp. Ltd., a sister concern of the appellant company, for the Asst. Year 2006-07 and 2007-08. The copy of the CIT(A)'s order passed for the Asst, Year 2006-07 is enclosed in Annexure-III. 6.2. I have considered facts of the case and appellant's submissions. Similar issue was considered by my learned predecessor CIT(A)-I, Baroda in case of Gujarat Energy Transmission Corporation Ltd., sister concern of the appellant in CAB-I/333/08-09 through order dated 30.3.2010 for A.Y. 2006-07 deciding the issue in favour of the concerned assessee. In appellant's case also, the expenditure incurred was less than the subsidy received from the Government on account of floods and the excess was offered for taxation. Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assed by his predecessor, the Ld. CIT(A) hold that the said addition cannot be made to the Book Profit as this item has not been mentioned in any of the Clauses of the Explanation to Section 115JB of the Act. He, therefore, directed the Ld. AO to delete such addition. 53. At the time of hearing of the matter the Ld. DR relied upon the order passed by the authorities below. 54. At the time of hearing of the instant appeal the Ld. Counsel appearing for the assessee submitted before us that the issue may be directed to be decided by the Ld. AO. 55. We have heard the rival submissions made by the respective parties, and we have also perused the relevant materials available on record. 56. We find that the Ld. CIT(A) while dealing this ground for assessee's own case observed as follows: 10.1. During the course of the appellate proceedings, the appellant's AR has stated as follows in his submission regarding this disallowance: Ground No. 7: Adjustments while computing book profits under section 115JB of the IT Act 1.0 The learned Assessing Officer has enhanced the Book Profit computed under section 115JB of the Income Tax Act, 1961 by making adjustments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. Otherwise, the disallowance u/s. 14A would be material in computation of the normal process of income while the second item interest on investment in bonds stands already included in the book profit. As far as the prior period expenses are concerned, there is no such mention in the explanation. The assessment order on the other hand is silent as to under which category it is being included for the matter to be further analyzed. Therefore, as the matter stands, none of the three items can be added for computation of book profit. 11. At the time of hearing before us, the Ld. D.R. could not pointed out how the view taken by the Learned Commissioner of Income Tax(Appeals) is not acceptable. We are, therefore, inclined to uphold the order of the Learned Commissioner of Income Tax(Appeals). Thus, ground Nos. 4, 5 and 6 of the Revenue's appeal are rejected. 1.3 In view of the above, the appellant submits that the facts in the above case are exactly identical to the appellant's case. The copy of the judgment is enclosed for immediate reference. Accordingly the above judgment of the jurisdictional Tribunal is squarely applicable to the appellant's case. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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