2022 (10) TMI 39 - HC - Income Tax

Deduction u/s 43B - additional charges and interest payable to the A.P. State Electricity Board for the delayed payment of consumption charges - whether it does not fall within the purview of fee and hence it is deductable as expenditure notwithstanding non-remittance of the same before the date stipulated U/s.43B ? - HELD THAT - This issue is squarely covered by a decision of this Court reported in CIT v. Andhra Ferro Alloys (P) Ltd. 2013 (2) TMI 530 - ANDHRA PRADESH HIGH COURT . In the said decision, a Division Bench of this Court had examined the contours of Section 43B and held that non-payment of such disputed electricity charges to the APSEB cannot be termed as fees and that the Revenue has to give deduction to the said amount. Tribunal while allowing the Appeal held that the electricity charges partake the nature of statutory liability and accordingly will have to be allowed as deduction irrespective of whether or not the same has been paid and notwithstanding that the assessee has disputed any liability to pay any part of such charges. Section 43B of the Act does not speak about the electricity charges. Nowhere it is mentioned in the Section or proviso to it that unpaid electricity charges are not deductable. Revenue cannot interpret the provisions of Section 43B of the Act in its favour, since the provisions of Section do not incorporate the electricity charges - such electricity charges are in the nature of statutory liability and the Revenue has to allow them as deduction irrespective of whether or not the same has been paid and notwithstanding that the assessee has disputed any liability to pay any part of such charges. Assessee entitled to grant of deduction of the expenditure not having been recorded in the books of accounts much less claimed as a deduction in the return under the I.T. Act - HELD THAT - As the issue was settled by the Supreme Court in National Thermal Power Company Limited v. Commissioner of Income Tax 1996 (12) TMI 7 - SUPREME COURT which was explained by the Supreme Court in Goetze (India) Ltd. V. Commissioner of Income Tax 2006 (3) TMI 75 - SUPREME COURT . This issue cropped up again before the Supreme Court in Wipro Finance Limited v. CIT 2022 (4) TMI 694 - SUPREME COURT wherein it has been clarified that there is no bar for an assessee to set up a fresh claim before the Tribunal though such a bar may operate against the revenue.

Summary

Issues Involved:
1. Interpretation of Section 43B of the Income Tax Act, 1961 regarding the deductibility of additional charges and interest paid to the State Electricity Board.
2. Entitlement of the assessee to claim deduction for expenditure not recorded in the books of accounts or claimed in the income tax return.

Analysis:

Issue 1:
The first issue revolves around the interpretation of Section 43B of the Income Tax Act concerning the deductibility of additional charges and interest paid to the State Electricity Board. The Tribunal allowed the deduction, considering the charges as a statutory liability, even if not paid within the stipulated period. The appellant challenged this decision, arguing that the charges should have been covered under Section 43B and thus not deductible due to nonpayment within the specified timeframe. However, the High Court, relying on the decision in CIT v. Andhra Ferro Alloys (P) Ltd., held that the unpaid electricity charges were not considered as 'fees' under the Act. The Court emphasized that Section 43B does not explicitly mention electricity charges and concluded that such charges are in the nature of statutory liability, warranting deduction regardless of payment status or any disputes over the liability. Therefore, the Court ruled in favor of the assessee, dismissing the appeal.

Issue 2:
The second issue pertains to the entitlement of the assessee to claim a deduction for expenditure that was neither recorded in the books of accounts nor claimed in the income tax return. The Supreme Court's decisions in National Thermal Power Company Limited v. CIT and subsequent cases clarified that there is no prohibition for an assessee to raise a fresh claim before the Tribunal, despite any potential restrictions on the revenue. The High Court, considering the precedent set by the Supreme Court, ruled that the assessee is entitled to the deduction, even if not previously recorded or claimed, as long as the claim is legitimate. Consequently, the Court dismissed the appeal, ruling in favor of the assessee and against the revenue.

In conclusion, the High Court upheld the decisions of the Tribunal and ruled in favor of the assessee on both issues, emphasizing the statutory liability nature of the electricity charges and the entitlement of the assessee to legitimate deductions, even if not previously recorded or claimed.