TMI Blog2018 (8) TMI 1130X X X X Extracts X X X X X X X X Extracts X X X X ..... Jacinta Zimik Vashai, CIT DR ORDER Per Mahavir Singh, JM These two appeals by the assessee are arising out of the different orders of Commissioner of Income Tax (Appeals)-21, Mumbai, [in short CIT(A)] in appeal Nos. CIT(A)-21/Rationalization/(A)-22/A-1(1) 1(2)/ ACIT-10(1)/2017-18 dated 29.12.2017. The Assessments were framed by the Addl. Commissioner of Income Tax, Circle-10(1), Mumbai (in short Addl. CIT/ AO) for the assessment years 2007-08 2009-10 vide orders dated 30.12.2009 28.12.2011 under section 143(3) of the Income Tax Act, 1961(hereinafter the Act ). The penalties were levied by ACIT 10(1) DCIT10(1), Mumbai for AY 2007-08 and 2009-10 vide orders dated 31.03.2012 30.03.2014 under section 271(1)(c) of the Act. 2. The only common issue in these appeals of assessee is against the order of CIT(A) confirming the levy of penalty by the AO under section 271(1)(c) of the Act. For this assessee has raised identically worded grounds and issues and facts are also exactly identical in both the years. In AY 2007-08, the AO has levied the penalty on the disallowance of expenditure claimed by assessee under the following heads: - Repairs and maintenance of & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT(A) upheld the disallowance on the ground that the assessee itself had admitted that the repairs and maintenance expenses of Rs. .12,66,486/- were not allowable since the deduction to the extent were already claimed by assessee under the head income from house property. Further, the assessee claim deduction on account of depreciation at ₹ 2,51,46,050/- was not allowable which the assessee itself had suo- moto disallowed in the return of income. Another item of disallowance was Interest financial expenses of ₹ 404,88,60,303/-. The assessee utilized the borrowed funds for the purpose of capital infusion and therefore, this interest expenditure was a capital expenditure, which was beyond the purview of claim of deduction under section 36(1)(iii) of the Act. The interest expenditure claimed by the assessee was having direct nexus with the investment in three subsidiary companies, in which investment would yield exempt income to the assessee. Therefore, the above said interest expenditure was disallowable u/s.14A(1) of the Act being the direct interest expenditure incurred for the purposes of earning exempt income. 5. Further, the learned Counsel for the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies. The remaining assets of MSEB once used by all the other three undertakings were transferred to the assessee. Similarly, liabilities of MSEB to the extent they pertained to or were directly relatable to a particular undertaking were transferred to the said undertaking and the residual liabilities were transferred to the assessee. Thus, as a result, the State Government loans and interest accrued thereon were transferred to the assessee. It was submitted, since such interest liability is wholly and exclusively for the purpose of assessee s business, it was claimed as a deduction under section 36(1)(iii). 9. The learned Authorised Representative submitted, in the transfer scheme as per which assessee company was formed, the Government has reserved the right to come up with modification / alteration to the scheme. It was submitted, clause (9) of the said scheme, inter alia, laid down that the scheme would be provisional for a period of one year from the date of its notification. Further, by virtue of Government of Maharashtra letter no.Reform 2006/C.R.- STI/NRG 3 dated 2nd June 2006, the period of one year was extended beyond 5th June 2006 and untill final orders by the Gover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )(iii). He further submitted, the scheme of transfer under which the assets and liabilities were transferred to the assessee is provisional, hence, the amendment made to the said scheme by notification on 31st March 2016, should not be taken into account and disallowance should be confirmed. 11. We have heard the rival contentions and perused the material available on record. Undisputedly, as per the scheme of transfer, formulated on demerger of MSEB a part of the assets and liabilities of MSEB, including the loan liability arising out of State Government loan was transferred to the assessee company. However, on 31st March 2016, the Government of Maharashtra in its Industries, Energy and Labour Department issued a notification amending the Maharashtra Electricity Reform Transfer Scheme, 2005 and as per clause (10B) of the said notification, the liabilities of the erstwhile MSEB were taken over by the State Government from 5th June 2005. Thus, as could be seen, as per above notification dated 31st March 2016, the loan liabilities of erstwhile MSEB which was transferred to the assessee under the transfer scheme of 2005, was taken over by the State Government with retrospective e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opening balances of assets and liabilities as on 06.06.2005 have been incorporated in the accounts pursuant to the provisional Transfer scheme for restructuring of erstwhile Maharashtra State Electricity Board, notified vide Govt. Notification No. Reform 1005/CR 90611(1) NRG-5, dated 4 June 2005, notified by the Government of Maharashtra (GOM) and thereafter as approved by the Board, the said scheme being provisional and the balances of assets liabilities are subject to change on notification of final transfer scheme by Govt. of Maharashtra. Any effect arising out of the finalization of transfer scheme shall be incorporated in the year, the finalization takes place and the accounts for the period 2005-2006 shall not be affected. Allocation of opening balances as on 06.06.2005 into five restructured entities namely Maharashtra State Power Generation Company Ltd. (MSPGCL), Maharashtra State Electricity Transmission Company Ltd. (MSETCL), Maharashtra State Electricity Distribution Company Ltd. (MSEDCL), MSEB Holding Company Ltd. (MSEBHCL) and MESS (residual Board) has been arrived at on the basis of audited balances of erstwhile MSEB as on 05.06.2005 The allocation of these balances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction was claimed by the assessee was also taken over by the GOM from the date on which they were originally sought to be transferred to the assessee in terms of the Transfer Scheme. Accordingly, the interest and finance charges on the said loans claimed as an expenditure in the earlier years from 06 June 2005 to 31 March 2015 were written back by the assessee in its books of accounts for the year ended 31 March 2016. Even, during the course of the assessment proceedings for the Assessment Year 2014-15, a detailed note disclosing the above facts was also submitted to the Assessing Officer and the claim for deduction of interest made in terms of the return of income for that year was withdrawn. Considering the facts and submissions the Assessing Officer passed an Order dated 26 December 2016 for the assessment year 2014-15 accepting the assessee s explanation and the withdrawal of the claim for interest debited to its Profit and Loss for the year. 10. Subsequently, when the quantum appeal for the year tiled by the assessee before the ITAT, which came up for hearing and in view of the fact that the loan liability for which the assessee was claiming the interest expenditure was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/- as depreciation on the premises, which it owned and were let out during the year under consideration. However, while computing the income for the purpose of computation of tax assessee has suo moto disallowed the depreciation and the CIT(A) after looking at the relevant documents accepted that the depreciation was suo moto disallowed and no further disallowance in this respect thereof was called for. 13. In view of the above facts and circumstances of the case we find that the Tribunal in quantum order dated 21.04.2017 has categorically recorded finding of fact at Para 11 that, However, on 31st March 2016, the Government of Maharashtra in its Industries, Energy and Labour Department issued a notification amending the Maharashtra Electricity Reform Transfer Scheme, 2005 and as per clause (10B) of the said notification, the liabilities of the erstwhile MSEB were taken over by the State Government from 5th June 2005. Thus, as could be seen, as per above notification dated 31st March 2016, the loan liabilities of erstwhile MSEB which was transferred to the assessee under the transfer scheme of 2005, was taken over by the State Government with retrospective effect from June, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : - 15. The assessee has filed an affidavit dated 14th September, 2012 in which it is stated that the assessee is engaged in Multidisciplinary Management Consulting Services and in the relevant year it employed around 1,000 employees. It has a separate accounts department which maintains day to day accounts, payrolls etc. It is stated in the affidavit that perhaps there was some confusion because the person preparing the return was unaware of the fact that the services of some employees had been taken over upon acquisition of a business, but they were not members of an approved gratuity fund unlike other employees of the assessee. Under these circumstances, the tax return was finalized and filled in by a named person who was not a Chartered Accountant and was a common resource. 16. It is further stated in the affidavit that the return was signed by a director of the assessee who proceeded on the basis that the return was correctly drawn up and so did not notice the discrepancy between the Tax Audit Report and the return of income. 17. Having heard learned counsel for the parties, we are of the view that the facts of the case are rather peculiar and somewhat unique. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s allowable was given in the statement of accounts and in the return of income. 16. We also find that the Hon ble supreme court in the case of CIT vs. Reliance Petroproducts Pvt. Ltd (2010) 322 ITR 158 (SC), held that the term inaccurate particulars of income means the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. We find that honorable Supreme Court in Para 7 9 considered the issue as under: - 7 However, the learned Counsel for revenue suggested that by making incorrect claim for the expenditure on interest, the assessee has furnished inaccurate particulars of the income. As per Law Lexicon, the meaning of the word particular is a detail or details (in plural sense); the details of a claim, or the separate items of an account. Therefore, the word particulars used in the section 271(1)(c) would embrace the meaning of the details of the claim made. It is an admitted position in the present case that no information given in the Return was found to be incorrect or inaccurate. It is not as if any statement made or any detail supplied was found to be factually incorrect. Hence, at least, prima faci ..... X X X X Extracts X X X X X X X X Extracts X X X X
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