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TMI Blog2019 (12) TMI 1233X X X X Extracts X X X X X X X X Extracts X X X X ..... he State. Once the amount had been debited to the P L Account of the assessee, then the provision of section 43B of the Act were not attracted. 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 payab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e P L A/c was ₹ 8,79,015/-. Secondly, due to power purchase of prior period, the sum involved was ₹ 1.64 crores which was paid because there was difference in quantity as recorded by DHBVN and HPGCL from the total purchase 2227 crores. The reconciliation error amounts to only 0.07%, which is acceptable, when the quantity purchased is so high. The assessee had shown this Contingent liability in its balance sheet and since the liabilities crystallized during the year under consideration, the said prior period expenses was allowable in the year under appeal. Further, expenditure booked by the assessee was arrear paid of ₹ 7,15,062/-, interest of ₹ 20,160/- and refund of ₹ 1,61,915/-. All these amounts as per the findings of CIT(A) crystallized during the year. The Revenue has failed to controvert the findings of the CIT(A) in this regard; upholding the same, we dismiss Ground of appeal No.2 raised by the Revenue. Expenditure booked on loss of sale of assets - case of the AO was that no such loss could be debited to the P L A/c - HELD THAT:- The explanation of the assessee on the other hand was that the aforesaid losses were on account of flood, cyclo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, the loss if any, is required to be reduced from the WDV of the assets instead of debiting it to the P L account. 3. The grounds of appeal raised by the assessee are as under:- That on the facts and in the circumstances of the case and in law the learned CIT(A) erred in confirming the following actions of the Assessing Officer- (i) initiating proceedings u/s 148 of the Income-tax Act, 1961 and passing order u/s 143(3)/l 48 of the Act; (ii) Confirming disallowance on account of outstanding Municipal Tax liability in a sum of ₹ 11,62,98,617/- by invoking provisions of section 43B of the Act. Both the actions of the AO being arbitrary, erroneous and untenable, it is prayed that the same must be quashed. 4. The cross appeal filed by the assessee and the Revenue were heard together and are being disposed of by this consolidated order for the sake of convenience. 5. First, we shall take up the appeal of the assessee. The first issue raised by the assessee is against the reassessment proceedings initiated u/s 147/148 of the Act. The second issue wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maintenance. However, this plea of the assessee was also not accepted and hence the addition. The next item which was recorded as reasons for reopening the assessment was the liabilities of ₹ 11.62 crores which was debited under the head Municipal Taxes and other liabilities. The AO noted that the aforesaid amount was not deposited and hence was required to be disallowed u/s 43B of the Act. 8. The CIT(A) accepted the explanation of the assessee and deleted the addition on account of prior period expenses of ₹ 5.88 crores, prior period expenditure of ₹ 7.66 cores and loss on sale of fixed assets of ₹ 48,70,125/-. However, the addition on account of Municipal Taxes and other liabilities totaling ₹ 11.62 crores has been upheld in the hands of the assessee. 9. Both the assessee and the Revenue are in appeal against the respective portion of the order of the CIT(A). 10. The Ld. AR for the assessee took us through the reasons recorded for reopening the assessment, copy of which was filed during the course of hearing and pointed out that this was the case wherein the reasons were recorded after the period of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He stressed that before the CIT(A) and even before us, strong reliance is placed on the decision of the Hon ble Calcutta High Court in the case of CESC Ltd. vs CIT, Kolkata, (2015) 125 DTR 41; (2015) 235 Taxman 6(Cal.) and also placed reliance on another decision of Kerala High Court in the case of Kerala State Electricity Board vs DCIT (2011-ITS-69-HC-Kerl). He stressed that from assessment year 1999-2000, no addition on this account was made. 12. The Ld. DR for the Revenue, on the other hand, stressed that grounds against reopening of assessment was not raised before the CIT(A). The Ld. DR for the Revenue has placed reliance on the order of the Assessing Officer/CIT(A). 13. The Ld. AR for the assessee in reply stated that this ground was taken as part of original ground of appeal before the Tribunal but yes it was additional ground which may be admitted for adjudication. 14. We have heard rival contention and perused the record. The first issue which is raised in the present appeal is against invoking of jurisdictional u/s 147 of the Act. We find that the issue against the re-opening of assessment u/s 147 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 crores. The relevant facts of the issue are that the Governor of Haryana had notified that the committee shall impose tax on the consumption of electricity @ 5 paise for every unit of electricity consumed by any person within the limits of the municipality in the State of Haryana. The said tax had to be collected by Haryana Vidyut Prasaran Nigam Ltd. (in short HVPNL ) and paid as an electricity duty payable to the State Government under the Punjab Electricity (Duty) Act, 1958. Similar practice was adopted in case of municipal taxes by the Municipal Committee/Council while paying their dues on account of consumption of electricity to the Nigam as per Government of Haryana circular dated 16.05.2000. The Assessing Officer did not accept the plea of the assessee and held that since the said amount of municipal taxes collected by it, have not been deposited before the due date of filing of return of income, the same is liable to be disallowed u/s 43B of the Act. The CIT(A) has upheld the order of the Assessing Officer in this regard. The question which arises is whether the same is to be allowed as deduction in the hands of the assessee or not. The case of the assessee is that it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of fixed assets. The Revenue is aggrieved that where the fixed assets were capital in nature, the said expenditure could not be allowed in the hands of the assessee. 20. In the facts and circumstances of the case, the assessee pointed out before the Assessing Officer that it was not prior period expenditure but the amount related to non-existing fixed assets which were written off in the year under consideration. It was explained that during the division of HVPNL into two units events were as under:- Sir, during the division of HVPNL into two units named DHBVNL and UHBVNL, HVPNL has transferred fixed assets to DHBVNL amounting to ₹ 709.90 crores through opening balance sheet along with accumulated depreciation thereon up to 30.06.1999. Out of the same, constructed assets amounting to ₹ 10.82 crores found included in the above referred figures without details in the Fixed assets Register (FAR). The matter was taken up with the HVPNL for transfer back of these amounts of assets without details. They did not agree and instead insisted on to adjust the same internally. Thereupon physical verificati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of prior period expenses. The case of the Assessing Officer was that where the assessee was following Mercantile System of accounting, no such expenditure on account of prior period expenditure could be allowed in the hands of the assessee. The case of the assessee before us is two-fold. First of all, it is claimed from the details of the prior period expenses totaling to ₹ 7.66 crores which is placed at page 61 of the paper book, that the sum of ₹ 7.66 crores includes the provision of ₹ 5.88 crores which was separately added by the Assessing Officer. We have in the above paras already upheld the order of the CIT(A) in deleting the addition of ₹ 5.88 crores. We further hold that once an addition was made under the head provision of prior period expenses of fixed assets, no further addition could be made under the garb of prior period expenses. This addition is double addition, which is not allowable. Now coming to the balance expenditure which is claimed by the assessee; the CIT(A) vide para 19 of page 10 of appellate order has duly considered the totality of the facts. The first fact is that as against the prior period expenses of ₹ 7.66 crores, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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