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TMI Blog2013 (10) TMI 1238X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue. - Income Tax Reference No. 191 of 1989 - - - Dated:- 25-10-2013 - Hon'ble Sunil Ambwani And Hon'ble Surya Prakash Kesarwani,JJ. ORDER (Delivered by Hon. Surya Prakash Kesarwani, J.) 1. This Income Tax Reference under section 256 of the Income Tax Act, 1961 relating to the assessment year 1977-78, arises out of the order of the Income Tax Appellate Tribunal dated 21.12.1987 passed in I.T.A. Nos.1911 and 1961 (Alld.) of 1984. On an application by C.I.T., the Income Tax Appellate Tribunal, Allahabad Bench, Allahabad has referred the following questions of law for opinion of this Court. R.A. No.114(Alld.) of 1988 "Whether on the facts and in the circumstances of the case, the Tribunal was, in law, justified in deleting the addition of Rs.51,00,961/-out of the claim of Rs.123 lakhs under the head "expenses for transmission" ? R.A. No.115(Alld) of 1988 1] Whether on the facts and in the circumstances of the case, the Tribunal was, in law, justified in allowing Rs.40,25,052/- claimed by the assessee as written off amount for intangible assets ? 3] Whether on the facts and in the circumstances of the case, the Tribunal was, in law, justified in allowing Rs.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have considered the facts of the case and the materials available. We find that there is force in the submissions made on behalf of the assessee. It is not the case of the Revenue that the expenditure was not verifiable nor vouched for, infact, it has been pointed out by the assessee that the accounts were audited not only by the Departmental Auditors but also by the Accountant General. That apart, even if the expenditure was considered as capital, then to that extent, the assessing officer would have to consider while allowing the depreciation. In this view of the matter, we are of the opinion that the disallowance was wrongly maintained by the C.I.T.(A). The addition is deleted." 5. The I.T.A.T. considered the entire materials available on record and found that the case of the Revenue is not that the expenditure are not verifiable or are not vouched. The accounts of the assessee were audited not only by the departmental auditors, but also by the Accountant General. The assessing officer, while disallowing the expenses on the apprehension of it being of capital nature has not pointed out as to which entry of expenditure is of capital nature. In the assessment order the assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts and evidences on record and thereafter in paragraph 4.2 he recorded the findings as under : "I have considered these contentions and find substantial merit in the same. As far as the redemption is concerned, though it is found that the bonds had been issued for the period ranging from 10 to 12 years and normally the write off should also have been spread over to an equal amount of period. I find that under section 69 of the Electricity (Supply) Act,1948, the Board is supposed to keep the accounts in such forms as may be prescribed by the State Government in consultation with the Controller Auditor General of India. It was in pursuance of these directions from the Government and the C A G that the appellate as well as other electricity boards of the country are writing off the amounts of redemption uniformly over a period of five years. That similar procedure had been followed over a long period of time right up to assessment year 1975-76 and had been allowed by the department. And in any case, except that variation in the amount, part of allowance will create accounting problem in subsequent years, no material benefit will accrue to the department or any loss to the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loan by the electricity board and depicted in the accounts as loans against fictitious assets. The assessing officer estimated a sum of Rs.23 lacs being interest relatable to the aforesaid loans and disallowed the same. In the appeal filed before the C.I.T. (Appeals ), the assessee submitted that it was wrong representation of facts in the account. Infact the assets were taken over from the private companies for the purposes of the business and were used. The loans in question represented the compensation for the said assets by the State Government to the private companies which were treated as loans by the Board in respect of the assets and therefore, the interest thereon was for the purpose of business and is an allowable expenditure. The plea was accepted by the C.I.T. (Appeals), who considered the entire facts and evidences and thereafter recorded the findings in para-7.2 of this order as under : "7.2- I have considered these contentions and find them to be justified. The sums paid by the State Government at the time of acquisition of private sector electricity undertakings had been converted by the State Government into loans to the Board with a stipulation to charge of inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord and observed in para 8 and para 8.2 as under : Para-8 :- "In the next ground it is submitted that the I.A.C. (A) was not justified in capitalizing expenditure on establishments and general charges in respect of combined construction and maintenance units at 22/1/2% of the expenses as against 12/1/2% capitalized by the appellant. It is submitted that the Board undertook study in the year 1968 when this percentage was found reasonable and ever since it was being followed in its accounts. The department had accepted this percentage without any dispute. That similar method is being followed by other electricity boards in the country and a letter is being produced to show that in the case of Kerala State Electricity Board, this percentage had been adopted at 10/1/2%, in the case of West Bengal Electricity Board at 10%, in the case of Andhra Pradesh Electricity Board it was being adopted at 7/1/2%. These accounts were duly audited and approved by the C A.G. of India. Since it is not possible to work out the percentage year after year, the findings of the working group in the year 1968 is being uniformly adopted for all the subsequent years. The I.A.C.(A) has increased this perc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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