2015 (1) TMI 926 - HC - Income Tax

Addition made u/s. 43B on account of deferred electricity duty - ITAT deleted addition - Held that - We are in complete agreement with the concurrent findings arrived at by the Tribunal and CIT(A) and do not see any reason for interference. It is true that the State Government has issued the notification with a view to alleviate the adverse effect caused to industrial units under Deferment Scheme due to operation of Section 43B of the Act. The very object of the scheme is to give a subsidy to such units failing which the very scheme shall be frustrated. Therefore, considering the decisions cited by the learned advocates for both the sides and considering the materials on record, we are of the view that the authorities below have rightly concluded that the disallowance cannot be sustained and the same is rightly deleted. - Decided in favour of assessee.

Summary

Issues:
Interpretation of Section 43B of the Income Tax Act, 1961 regarding deferred electricity duty.

Analysis:
The High Court of Gujarat considered the appeal challenging the order of the Income Tax Appellate Tribunal regarding the disallowance of deferred electricity duty under Section 43B of the Income Tax Act, 1961. The Assessing Officer disallowed the deferred electricity duty on the basis that it falls under Section 43B and should be allowed only on actual payment basis. However, the CIT (Appeals) allowed the claim and deleted the disallowance. The Tribunal, upon appeal by the revenue, upheld the order of the CIT (Appeals), leading to the current Tax Appeal.

The revenue contended that the deferred electricity duty claimed as expenses was rightly disallowed under Section 43B, citing a circular and a previous court decision. On the other hand, the respondent argued that the impugned order was passed in accordance with the law and referred to previous court decisions supporting their stance. The Tribunal observed that the Gujarat Government had introduced a scheme to alleviate the adverse effects on industrial units due to Section 43B, converting the amount into an unsecured loan, and concluded that the disallowance did not fall under Section 43B.

The High Court concurred with the findings of the Tribunal and CIT (Appeals), stating that the State Government's notification aimed to provide a subsidy to industrial units affected by Section 43B. The Court held that the disallowance of deferred electricity duty could not be sustained and was rightly deleted. Consequently, the Court upheld the Tribunal's decision, confirming the deletion of the addition of &8377; 12,26,746 under Section 43B. The appeal by the revenue was dismissed, ruling in favor of the assessee.