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TMI Blog2012 (9) TMI 436X X X X Extracts X X X X X X X X Extracts X X X X ..... jay Bahadur, CIT, DR O R D E R PER A.D. JAIN, JUDICIAL MEMBER: These are appeals filed by the department for Assessment Years 2004-05, 2005-06 and 2007-08 against the orders dated 04.02.2011 passed by the CIT (A)-I, Dehradun. 2. The common ground taken is that the ld. CIT (A) has erred in deleting the additions of ₹ 92,56,83,000 (A.Y. 2004-05), ₹ 1,58,94,64,000/- (A.Y.2005-06) and ₹ 1,87,27,56,000/- (A.Y. 2007-08), made on account of grant received during the year. 3. The assessee Nigam was constituted under the Uttaranchal [U.P. Water Supply and Sewerage Act, 1975 (Adoption and Modification)] Order, 2002. It functions under the provisions of the U.P. Water Supply and Sewerage Act, 1975. It is engaged in dev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. 7. Aggrieved, the department is in appeal. 8. The learned DR, challenging the impugned orders, has contended that the Ld. CIT (A) has erred in deleting the additions rightly made by the Assessing Officer on account of grant received by the assessee during the years; that the Ld. CIT (A) deleted the additions despite himself agreeing that the grants were revenue receipts; and that the Ld. CIT (A) went wrong in holding that the grants did not constitute income of the assessee. 9. The learned counsel of the assessee, on the other hand, has placed strong reliance on the impugned orders. It has been contended, as before the authorities below, that whereas part of the receipt of the assessee was treated by the Assessing Officer to be th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the same has to be allowed as expenditure. In view of this, it is held that the assessee s treatment of the receipt as capital receipt and of the expenditure as capital expenditure is wrong from the point of view of accounting as well as law. To that extent, even the A.O. committed the same error as he accepted part of the assessee s receipt as well as the corresponding expenditure as capital in nature. 1.8 Another error committed by the A.O. was that, while he treated the assessee s receipt (a part of it) as revenue in nature, he did not allow any deduction for the expenditure incurred wholly and exclusively for purposes of earning the same. This is against basic principles of accounting as well as provisions of law. As discussed above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons if the relevant qualifying legal conditions for the same are not met. The Income Tax Act is full of such provisions. One such example is the provision of section 40a (i) according to which deduction for expenses may not be allowed if tax was deductible on the payments but was not deducted. Unless the receipts and expenses are routed through the profit and loss account, such filtering is not possible. In other words, it is not necessary that the assessee s profits and gains from business (purely on account of its receipt and expenditure on account of the work done by it) would be nil, even though arithmetically the two figures are same. 1.10 The issue for determination is whether the A.O. was correct in treating an amount of Rs.85.68 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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