2020 (2) TMI 944 - AT - Income Tax

Addition made u/s. 43B in respect of Municipal Tax - HELD THAT - In any case, the assessee was only a collecting agent on behalf of the State and it was the amount which was not collected, which was shown as receivable and also on the other side shown as payable to the State. The liability if any, would arise after the amount is collected and that also of the State. In such circumstances, the provision of section 43B of the Act could not be applied and the amount could not be disallowed in the hands of the assessee. Similar accounting has been carried out by the assessee in its books of accounts from Assessment Year 1999-2000 and no disallowance has been made in any of the year. Hon ble Calcutta High Court in the case of CESC Ltd. vs CIT 2015 (5) TMI 795 - CALCUTTA HIGH COURT has held that where the assessee merely acts as Collecting agent for the State Government and pays the same to the State Government on collection, then, the licencee merely acts as a conduit and the Electricity Duty was not chargeable to the licencee. It was concluded by holding that Electricity Duty not being a sum payable by the assessee as a primary liability by way of tax, duty, cess or fee, then provisions of section 43B of the Act were not attracted to the licencee/assessee in respect of the Electricity Duty collected by it for being passed on to the State Government. Addition on account of cost variance reserve - CIT- A deleted the addition - HELD THAT - On a careful consideration of this issue we are of the considered opinion that inasmuch as there is no dispute in the current year and subsequent year, the rate of tax remained the same and the dispute raised by the Revenue is entirely academic or it may have a minor tax effect. By respectfully following the decision of Hon ble Apex Court in the case of Excel Industries Ltd. 2013 (10) TMI 324 - SUPREME COURT we endorse the view taken by the ld. CIT(A) and hold that this is a revenue neutral transaction. We, therefore, affirm the finding of the ld. CIT(A) on this issue. Addition of provision of surcharge levied but not realized - CIT-A deleted the addition - HELD THAT - CIT(A) followed the binding precedent of Hon ble High Court in own case 2014 (11) TMI 58 - PUNJAB HARYANA HIGH COURT it cannot be said that the finding of the CIT(A) is either erroneous or perverse. We, therefore, find this ground of appeal of Revenue as devoid of merit and the same is liable to be dismissed. Allowability of prior period expenses - As per CIT(A), the claim of assessee on account of Pay anomaly of employee crystallized during the year should have been accepted and he, therefore, granted relief to the assessee - HELD THAT - On a perusal of the record and the order 2019 (12) TMI 1233 - ITAT DELHI or assessment year 2006-07 in assessee s own case, we hold that the Tribunal also endorsed the view taken by ld. CIT(A) in earlier years that the liability crystallized during the year has to be allowed. We do not find anything improper in the approach of the CIT(A) to allow the expenses in respect of which the liability crystallized during the year. Hence, ground No. 3 of Revenue s appeal is dismissed. Loss due to flood, cyclone and fire - Allowable revenue expenses - HELD THAT - On a perusal of the order for assessment year 2006-07 in assessee s own case, we find that a co-ordinate Bench of this Tribunal was of the view that the nature of expenditure is the determining factor and not the nomenclature and having regard to the expenditure, this expenditure needs to be considered as Revenue expenditure. Respectfully following the said view taken in assessee s own case, we dismiss this ground of appeal. TDS u/s 194J - Payment of wheeling SLDC charges - HELD THAT - CIT(A) considered the contentions of the assessee and decided the issue in the light of decision of the Tribunal for assessment year 2006-07 to 2008-09. Revenue does not dispute the fact that this issue has been a recurrent issue for last several years and consistent view has been taken by the Tribunal for assessment year 2008-09 to 2009-10 and as on date, there is no contrary view from the higher forums. We, therefore, while respectfully following the consistent view taken by the Tribunal in assessee s own case under identical circumstances in earlier years, hold that the CIT(A) is right in deleting the addition and the ground of Revenue s appeal has no merits

Summary

Issues Involved:

1. Addition made under Section 43B in respect of Municipal Tax.
2. Deletion of addition on account of cost variance reserve.
3. Deletion of addition on account of provision of surcharge levied but not realized.
4. Deletion of addition on account of prior period expense.
5. Deletion of addition on account of loss due to flood, cyclone, and fire.
6. Deletion of addition on account of payment of wheeling & SLDC charges.

Detailed Analysis:

1. Addition made under Section 43B in respect of Municipal Tax:

The primary issue in the assessee's appeal for A.Y. 2008-09 was the addition made under Section 43B concerning Municipal Tax. The Assessing Officer (AO) observed that statutory liabilities towards Electricity Duty and Municipal Tax were outstanding. The assessee contended that Municipal Tax was collected based on consumer payments and adjusted against electricity bills receivable from the Municipal Committee. The AO, relying on the Gujarat High Court's decision in CIT vs. Ahmedabad Electricity Co. Ltd., disallowed the expenses, stating they were not allowable as they related to a different period. However, the CIT(A) upheld the AO's decision. The assessee argued that Section 43B was inapplicable as no amount of Municipal Tax was debited against business profits. The Tribunal, following a previous decision in the assessee's own case, concluded that disallowance under Section 43B was not sustainable and allowed the assessee's appeal, dismissing the Revenue's ground regarding Electricity Duty.

2. Deletion of addition on account of cost variance reserve:

The Revenue's appeal included the deletion of an addition of ?2,93,40,534/- related to the cost variance reserve. The AO added this credit balance to the income side of the profit and loss account, claiming the cost debited was inflated. The CIT(A) noted that the reserve was adjusted in the next financial year, thus preventing double taxation. The Tribunal, referencing the Supreme Court's decision in CIT vs. Excel Industries Ltd., upheld the CIT(A)'s view, deeming the transaction revenue-neutral and dismissing the Revenue's ground.

3. Deletion of addition on account of provision of surcharge levied but not realized:

Another issue was the deletion of an addition of ?71,47,71,224/- on account of provision for surcharge levied but not realized. The assessee argued that the surcharge was often unpaid by rural consumers, and the Government periodically waived it to reduce debtors. The CIT(A) and High Court had previously ruled in favor of the assessee for earlier years. The Tribunal found no merit in the Revenue's appeal, affirming the CIT(A)'s decision.

4. Deletion of addition on account of prior period expense:

For A.Y. 2011-12, the Revenue challenged the deletion of an addition related to prior period expenses. The assessee had credited a net balance of ?31,36,65,890/- in the profit and loss account after setting off prior period expenses. The CIT(A) accepted that these expenses were crystallized during the year and granted relief. The Tribunal, referencing its earlier decision, upheld the CIT(A)'s approach, dismissing the Revenue's ground.

5. Deletion of addition on account of loss due to flood, cyclone, and fire:

The Revenue also contested the deletion of an addition of ?1,38,97,653/- related to losses due to natural calamities. The assessee argued that these were regular business expenses necessary to maintain electricity supply. The CIT(A), following a previous decision for A.Y. 2006-07, allowed the claim. The Tribunal, agreeing with the CIT(A), dismissed the Revenue's appeal.

6. Deletion of addition on account of payment of wheeling & SLDC charges:

Lastly, the Revenue appealed the deletion of an addition of ?4,83,49,05,000/- for wheeling & SLDC charges. The assessee argued that these payments were not liable for tax deduction at source, supported by Tribunal decisions for earlier years. The CIT(A) and Tribunal, following consistent views from previous years, upheld the deletion, dismissing the Revenue's ground.

Conclusion:

In conclusion, the Tribunal allowed the assessee's appeals and dismissed the Revenue's appeals for both A.Y. 2008-09 and A.Y. 2011-12, affirming the CIT(A)'s decisions on all contested issues. The Tribunal's order was pronounced in the open court on 19th February, 2020.