TMI Blog2023 (2) TMI 1267X X X X Extracts X X X X X X X X Extracts X X X X ..... he file of the AO for adjudication afresh - This ground of appeal preferred by the assessee is allowed for statistical purposes. Correct head of income - Treating interest income on advances paid to staff as income from other sources instead of business income - HELD THAT:- We have heard the rival submissions and perused the relevant material and the judgment of the Odisha High Court in the case of Odisha Power Generation Corporation Ltd. [ 2022 (3) TMI 539 - ORISSA HIGH COURT] . In view of the same, we find it proper to direct the A.O. to consider the issue afresh upon examining the same in regard to the heads of income after considering the facts of each cases. Treating miscellaneous receipts as income from other sources instead of business income - HELD THAT:- As decided in the case of CIT vs. New India Maritime Agencies (P.) Ltd. [ 2001 (6) TMI 27 - MADRAS HIGH COURT] wherein it was held that the company had given the houses owned by it, to its Directors for their residences, it is doing so only in the course of his business. The principle is that if the owner of a property carries on business with a property owned by him, the income from that property must ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellate order mentions very clearly that the assessee had duly filed a letter comprising of all necessary details; division-wise on expenses towards flood related damages. The Revenue does not 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 unrebutted in course of hearing before us. We decide this ground as well against the Revenue. Addition of prior period expenditure - assessee submitted that this addition was deleted by the Ld. CIT(A), as the A.O. has made double addition on the same amount while computing the assessed income - HELD THAT:- D.R. could not controvert to the above submissions of the assessee. Therefore the additions made by the Ld. CIT(A) does not require any interference, hence this Ground is dismissed. Adjustment to book profit u/s. 115JB as prior period expenses and Capital Grants - HELD THAT:- A.R. appearing for the assessee has no objection in setting aside the matter back to the file of the Assessing Officer for fresh adjudication. Thus we set aside this issue to the file of the Ld. Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irmed the additions of Rs.59,16,52,000/- on account of Capital Grants Subsidies and Consumers' Contribution on the ground that the appellant should transfer 15% of the total Grants/subsidies/consumer contribution received during the year as against 10% offered by the appellant. 2.0 The learned Commissioner of Income Tax (Appeals) erred in law and on facts has confirmed the additions of the income shown under the head income from other sources in the Profit loss Account viz., Interest on staff loans and advances and Miscellaneous Receipts amounting to Rs.69,15,000/- and Rs.13,12,40,000/- respectively without considering the nature of each item included under this head. 3.0 The learned Commissioner of Income Tax (Appeals) has confirmed the disallowance of prior period expenses amounting to Rs.98,05,000/- without appreciating the fact that such expenditure crystallized during the year and that the same has never been claimed in earlier years. 4.0 The learned Commissioner of Income Tax (Appeals) erred in law and on facts has dismissed the ground relating to the initiation of penalty proceedings under section 271(1)(c) of the IT Act. 5.0 The learned Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overnment 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 capital assets and by not doing so, extra depreciation @ 15% of grants had been claimed. Since 10% of the grants had already been offered as income by the assessee, in the decision in the case of Dakshin Gujarat Vij Co. Ltd., CIT(A) had directed addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant 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 no where 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 the assessee cannot be reduced from the cost of assets. It was further submitted that the subsidy received under scheme cannot be reduced from the actual cost of the assets by applying the provisions of section 43(1) of the Income Tax Act. The AO did not accept the submission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowance 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. We find that in the instant case, the CIT(A) held that excess depreciation claimed on account of capital grant comes to Rs.18.93 crores being 15% of Rs.176,62,04,718/-, i.e. Rs.26,49,30,708/- minus Rs.17,20,37,655/-, which amounts to Rs.9,28,93,053/-, and 15% of Rs.6427.94 lakhs amounting to Rs.964. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ein the Hon ble High Court held in favour of the assessee as follows: .. 12. The Assessee offered an explanation regarding interest income earned by it, from advances given to its employees as well as provision of electricity and water charges collected from water through its employees and contractors for facilities in the township, receipt from transit hostel, sale of scrap, insurance claim etc. The facilities were given to its employees for better conditions of employment. This was to improve the overall efficiency of the undertaking which is devoted to the single purpose of generation of power. The Court, therefore, has no difficulty in accepting the submission of the Assessee that the interest received on advances and loans given to its employees are receipts in normal course of carrying its business and should be considered as income derived from its essential business activities. Likewise, the late payment by GRIDCO for the electricity supplied, is sought to be made up by GRIDCO by issuing bonds on which the Assessee earns interest. This also therefore, has a direct nexus with the essential business activity of the Assessee. 6.2. The Ld. Counsel further submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Penalties Recovered from Employees 19,000 Insurance Premium recovered for House building Advance Loan 1,10,000 Receipt under Right to information (RT) Act, 2005 8,000 Other Miscellaneous Receipts (This income is from other than above all account heads, major amount consists amount in respect of unclaimed security deposit, Earnest Money Deposit and Miscellaneous Deposits from Suppliers or Contractors which is un-disputed and lying pending for more than three years, and which, as per policy of management, not payable, is considered as income. This policy is disclosed at Note No. 1 (4)(v)(d) on page no. 25 to 10th Annual Report, 2012-13. 4,12,73,000 Total 13,12,40,000 8.2. The assessee claimed that the above income has been arisen in the ordinary course of business and is exclusively attributable to the activities of the business. Therefore the above incidental income received from such activities should be considered as business income only. It is for this reason in the computation of total income un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness activity, then the interest on such loan falls within the purview of business activity only not income from other sources . 9.2. In the light of the above, we find it fit to remand this issue to the file of the Assessing Officer for verification of the facts with proper materials and allow the claim in accordance with law. 9.3. In the result, this ground raised by the Assessee is partly allowed. 10. Ground no. 3: Disallowance of prior period expenses of Rs. 98,05,000/-. The Ld. Counsel submitted that this issue has been set aside to the file of the ld. A.O. in assessee s own case which is not disputed by the Ld. D.R. 11. We have heard both the parties and perused the materials available on record. We find that the Co-ordinate Bench on identical issue following ITA No. 996/Ahd/2011 and ITA No. 2858/Ahd/2015, on identical issue disposed of the ground by remitting the same to the file of the Ld. A.O. by adjudicating the issue afresh as follows: 6. We have carefully heard the rival submissions and perused the orders of the authorities as well the case-laws referred. The assessee is aggrieved by the disallowance of prior period expenses of Rs.53.53crores as pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee are dismissed as not pressed. 13. Ground no. 5 is charging of interest u/s. 234B, 234C and 234D of the Act which were consequential in nature the same is also not pressed by the assessee and therefore no separate adjudication is required on this ground. ITA No. 554/Ahd/2020 (Assessee s appeal for A.Y. 2014-15) 14. Ground no. 1 is identical ground has already been considered by us in ITA No. 553/Ahd/2020 for Assessment Year 2013-14 in Paragraph 5 of this order. As similar issue is being involved herein the issue are set aside to the Ld. Assessing Officer for fresh consideration. 15. Ground No. 2(a) is identical ground has already been considered by us in ITA No. 553/Ahd/2020 for Assessment Year 2013-14 in Paragraphs 6 7 of this order. As similar issue is being involved herein the issue are set aside to the Ld. Assessing Officer for fresh consideration. 16. Ground No. 2(b) is identical ground has already been considered by us in ITA No. 553/Ahd/2020 for Assessment Year 2013-14 in Paragraphs 8 9 of this order. As similar issue is being involved herein the issue are set aside to the Ld. Assessing Officer for fresh consideration. 17. Ground no. 3 is id ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion is required on this ground. ITA No. 568/Ahd/2020 (Revenue s appeal for A.Y. 2013-14) 26. The Grounds of appeal raised by the Revenue are as follows: i. Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the addition of Rs.16,29,000/- made under the head 'extraordinary items' being losses due to flood, cyclone, fire etc., ignoring the facts that in AY 2008-09 in assessee's own case ld. CIT(A) allowed the appeal of the assessee as AO called for the details with regard to such extraordinary items and the assessee produced the such details before the AO, whereas in- the year under consideration the assessee failed to produce the such details with regard to such extraordinary items, ii. Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the addition made on account of prior period income. iii. Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the addition/adjustments made to the Book Profit computed u/s 115JB of the IT Act on account of Prior Period expenses. iv. Whether o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under were made:- ''Ground No.5: Disallowance out of Extra-ordinary items. The 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 14291) of the I T 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is submitted that the entire expenditure is incurred out of business 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 ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench in assessee s own case in ITA No. 618/Ahd/2018 for the Assessment Year 2011-12 vide common order dated 22.07.2022 as follows: .. 57. Having heard to the facts and circumstances of the case 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 . 30.2. The Ld. A.R. appearing for the assessee has no objection in setting aside the matter back to the file of the Assessing Officer for fresh adjudication. Thus we set aside this issue to the file of the Ld. Assessing Officer and pass orders in accordance with law by giving proper opportunity to the assessee. 30.3. Thus this grounds of appeal raised by the Revenue are allowed for statistical purposes. 31. In the result, the appeal filed by the Revenue is partly allowed. ITA No. 569 570/Ahd/2020 (Revenue s appeal for A.Ys. 2014-15 2015-16) 32. Ground no. 1 is identical ..... X X X X Extracts X X X X X X X X Extracts X X X X
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