9911796707
TMI Blog2017 (3) TMI 1667X X X X Extracts X X X X X X X X Extracts X X X X ..... AA, and offering of no comments by the AO in the report about the various items of income/ expenditure - since the claim of the assessee is supported by the audited accounts - expenditure under both the heads are allowed - Decided in favor of assessee. Loss on pursuance of fixed assets and intangible assets - Held that:- We find that the assessee itself had stated that amount in question was not allowable. Therefore, in our opinion,the FAA was not justified in allowing the claim. Reversing his order, we decide ground number five in favour of the AO. Whether the cost of insuring the project has to be capitalised in the books of account? - Held that:- the expenses incurred by the assessee were for running the project - FAA had disallowed 50% of the expenditure incurred under the head insurance expenses - thus there is no contention with AO that project was a new project and the expenses were to be capitalized - ground raised by AO is dismissed - Decided in favor of assessee. Addition in respect of the electricity duty - Held that:- Payment made by the assessee was on account of inspection charges, that same was allowable as revenue expenditure, that the same was outside the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see,that the issue was not explained nor was any plausible reconciliation of the difference was submitted.The AO further noticed that the computation forming part of the return showed that the deprecation claimed had been increased and the addition on account of adjustments u/s. 28 to 44 had been reduced in the revised return,that the reasons for the same were not explained. 2.1.With regard to the revised return the AO observed that the assessee was entitled to revise return u/s. 139(5) of the Act,that such revision had to be based on any omission or any wrong statement discovered in such return,that any wrong statement or omission was discovered by the assessee for which the revised return was furnished.He held that in absence of any material evidence or details, the said reduction in the total income was irregular and unsubstantiated.In the facts and circumstances,the difference of ₹ 2,65,12,569/- in the original and revised return was added by the AO to the total income of the assessee. 2.2.Aggrieved by the order of the AO,the assessee preferred an appeal before the First Appellate Authority(FAA).During appellate proceedings,it was argued that the assessee one of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued and due for loans - withdrawn - ₹ 46,44,1681- (comprising of three figures of ₹ 280653/-, ₹ 1859349/- ₹ 25,04,166/- ) iii.Interest and financial charges capitalize Rs.5,98,770/- B.Other debits - Expenses: i.Negative material cost variances - ₹ 1,86,27,663/- . ii.Loss on exchange variation - ₹ 1,09,21,726/- iii.Loss on settlement of claim for material- ₹ 2,84,537/-. iv.Compensation for injuries / death and damages to outsiders - ₹ 25,136/-. v.Loss on obsolescence of fixed assets - ₹ 28,920/- f.Intangible assets written off - ₹ 2,531/- vi.Interest charges for HVDC project written off - ₹ 10,08,573/-. vii.Rounding off - ₹ 38/-. On the basis of above reconciliation,the assessee argued that there was no difference between returned income as per the original return of income and as per the revised return of income which was not explainable. After considering the available material,the FAA held that the income of both the returns was computed at Rs. -NIL- after adjusting the above said declared income against the brought forward unabsorbed losses /depreciation of MSEB,that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or explaining the difference.In respect of items of income, that was offered by the assessee in revised return,the FAA observed that same needed no comments.He further observed that the item of material cost variance at ₹ 1,86,27,663/- was wrongly transferred to reserve account,that after pointing out by Auditors the same was correctly transferred to material cost variance,that the second major item i.e. loss on exchange variation of ₹ 1,09, 21,7261- was also allowable,that claim of loss on settlement of claim for martial of ₹ 2, 84,537/- was also made in original unaudited accounts and that same was an allowable item,that the last major item of reconciliation was interest charges for HVDC project written off,that it was a genuine error which was made in the unaudited accounts and had been corrected when it was pointed out by the auditors,that the other item of reconciliation were of minor amount,that all the items forming part of reconciliation were of allowable nature. Finally,he held that original return was revised for valid reasons,that the AO was not justified in making addition of ₹ 2,65,12,569/-holding that the difference between original and revised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on account of difference between the two returns, that the assessee filed a reconciliation statement before the FAA, that a remand report was called from the AO and the issue was decided accordingly. 3.2.We have heard the rival submissions and perused the material before us.We find that the assessee had filed a revised return after receiving audited accounts from the competent authority, that the AO had made certain addition to the total income of the assessee as he was of the opinion that there was difference between the original and the revised return, that the assessee had filed a reconciliation statement during the appellate proceedings, that the AO was given an opportunity to offer his comments about the additional evidences. As per the provisions of Rule 46A, the FAA is supposed to afford a reasonable opportunity of hearing to the AO if he admits additional evidences. Under clause (d), he can suo-motu admit additional evidences.He has invoked the provisions of clauses c and d of the Rule. Once the AO was given a chance to rebut the evidences produced by the assessee, there was no justification for raising the ground of admitting additional evidences by him. As the FAA ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amounts and claimed the same as expenditure incurred during the year under consideration. As the claim made by the assessee was part of the additional evidences produced by it before the FAA,so, he called for report from the AO.In his report, the AO did not offer any comment about the said expenses. As the expenditure was certified by the auditor,so, the FAA allowed the same. 5.1.Before us,the DR advanced the same arguments that were argued for last ground of appeal.The AR supported the order of the FAA. We have already discussed the issues of furnishing of additional evidences,calling for remand report by the FAA, offering of no comments by the AO in the report about the various items of income/expenditure. As the claim of the assessee is supported by the audited accounts, therefore, there is no justification in not allowing the expenditure under both the heads. We decide third ground of appeal against the AO. 6.Writing off of claim pertaining to a theft in the year 1995, as the subject matter of next ground of appeal. The erstwhile company i.e. MSEB had suffered a loss of ₹ 2.84 lakhs on account of loss on settlement of claims.The facts and circumstances of the said e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he scheme of unbundling, that the assessee were transferred from BHEL to MSEB on 13/11/1998, that the expenditure of ₹ 89.44 lakhs pertain to the insurance charges for the project for the period 01/10/2005 to 30/09/2006. During the appellate proceedings, the assessee filed a copy of these agreement dated 21/05/ 1997 and office notes dated 28/04/1999 and 25/05/1999 to substantiate the claim that as HDVC project was not a new one and was existing since last for many years. It was stated that these documents were not submitted before the AO is he did not call for the same. The assessee also filed copies of Journal vouchers evidencing the payment of lease rentals and taxes for the project. It was stated that all the documents should be admitted as additional evidences. The FAA forwarded the documents to the AO and directed to file a remand report. In his report the AO stated that assessee had not furnished any evidence regarding payment of ₹ 89.44 lakhs, 95.80 lakhs and ₹ 3.83 lakhs under the heads insurance expenditure, please rentals and taxes/charges respectively,that 50% of the insurance charges pertained to subsequent assessment year. After considering the ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the assessment proceedings it was brought to the notice of the AO that the amount in question did not consist electricity duty and that same were inspection charges. The FAA,after considering the available material, held that payment made by the assessee was on account of inspection charges, that same was allowable as revenue expenditure, that the same was outside the purview of section 43B of the Act. Finally, he deleted the addition made by the AO. 9.2.Before us, the DR stated that no evidence was produced before the AO. The AR supported the order of the FAA. 9.3.We find that the charges paid by the assessee were inspection -charges (page 183 of the paper book).The assessee had paid the inspection charges to the electrical Department, Government of Maharashtra. Therefore, in our opinion, same could not be treated as duty and hence provisions of section 43B cannot be invoked.Confirming the order of the FAA, we decide ninth ground against the AO. 10.Last ground of appeal is about allowing the claim of set off of brought forward losses/ unabsorbed depreciation. During the assessment proceedings, the AO rejected the claim of the assessee of setting off of brought forw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for which the onus was on itself. (v) The eligibility of the assessee company to claim set off and carry forward of the brought forward losses of M/ s.MSEB is not established. (vi) The information relating to the trifurcation of carried forward assessed loss was also not given. (vii) The assessment order for the AY 2006-07 has been passed in the case of M/ s MSEB. The total income is computed at NIL after set-off of brought forward losses/ unabsorbed depreciation to the extent of income available i.e. ₹ 838,65,23, 1291 -. However, neither any details of balance loss allowed to be carried forward nor any chart of apportionment of the said loss to the trifurcated entities are mentioned therein. 15. The issue was contested by the assessee company before Ld. CIT(A) and Ld.CIT(A) al lowed the claim of the assessee by passing speaking order and the relevant di scus s ion was made by the Ld. CIT(A) in para 15.1 to 15.3 on page 29 to 34 of the appel late order. The relevant operative para of the Ld. CIT(A) is reproduced below for ready reference: 15.3 (i) pg-13 .... scan attach 15.3(i) To conclude, it is held that the demerger of MSEB and trifurcation into three ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
