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TMI Blog2021 (7) TMI 1181X X X X Extracts X X X X X X X X Extracts X X X X ..... Disallowance of prior period expenses - disallowance made on the ground that the expenses under various heads as noted in the assessment order pertained to earlier years and the assessee which is following system of accounting ought to have made provision for expenses in those respective years for eligibility of claim - HELD THAT:- As submitted that the majority of expenditure out of prior period expenses on account of excess provision written back. The explanation appears obscure in the absence of proper details. We simultaneously note that assessee is a State Government Undertaking and its accounts are subjected to review by CAG and therefore it cannot be postulated that there was any deliberateness in not furnishing relevant details be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal in ITA No. 2788/Ahd/2015 concerning A.Y. 2008-09. ITA No. 2788/Ahd/2015-AY-2008-09 (Revenue's appeal) 3. The ground of appeal raised by the Revenue reads as under:- 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(Appeals) erred in deleting the addition of ₹ 151.81 lakhs made on account of disallowance of claim of guarantee fees paid to Government of Gujarat. The disallowance was made by disallowing the claim as revenue expenditure as it is of enduring nature in the assessee's business and hence capital in nature. 4. When the matter was called for hearing, the learned counsel for the assessee pointed out that identical issue towards disallowance of guarantee fees paid to Gove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... institutions, GOG guaranteed to the public and the financial institutions that in case of failure on the part of GEB to redeem the bonds and other financial instruments, the same would be made good by the Government of Gujarat, In lieu of this, commission @ 1% of the outstanding value of unsecured loans was charged from the assessee. No capital expenditure was involved. Hence the addition of ₹ 8,39,04,550/- may be deleted. 5.2. I have considered the submissions of the ld. A.R. and the facts of the case. The issue relating to whether an item of expenditure lies in the capital or the revenue field has exercised the courts in numerous cases. From an analysis of such cases a few guiding principles/tests can be identified. One of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant case, the loan has been guaranteed by the Government of Gujarat. Hence, quite apart from the other sound reasons for treating the expenditure as revenue, it would be unrealistic to say that the appellant company could derive any undue advantage or collateral benefit by making such payment to the GOG. In view of the totality of the circumstances, I am of the opinion that the A.O. was not justified in treating the payment of guarantee commission (₹ 8,39,04,550/-) as capital in nature. The addition is directed to be deleted. 5.1.5. Besides, the Hon'ble Supreme Court of India in its decision in the case of Sivakami Mills Ltd. 95 Taxmann 73 (SC) has held that guarantee commission paid to the bank to secure the due payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he excess provision written back which was already offered as income in earlier years and has been taxed twice by disallowing during the year. 9. When the matter was called for hearing, the learned counsel for the assessee adverted our contention to the decision rendered by the Tribunal in Gujarat Urja Vikas Nigam Ltd. vs. ACIT ITA No. 996/Ahd/2011 order dated 31.05.2017 and submitted that the prior period expenses claimed is without any tax advantage and revenue neutral in nature. 10. The learned DR for the Revenue, on the other hand, relied upon the observations made in assessment order and the first appellate order. 11. We have carefully considered the rival submissions and perused the orders of the authorities as well the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... necessary and expedient in accordance with law. The A.O. shall bear in mind the ratio laid down by the Hon'ble Gujarat High Court in the case of Pr. CIT vs. Adani Enterprises Ltd. Tax Appeal No. 573 of 2016 judgment dated 20.07.2016 while adjudicating the issue. Needless to say, reasonable opportunity shall be provided to the assessee while adjudicating the issue. Hence, all the contentions of the assessee are kept open. The issue raised in its ground of appeal is thus set aside to the file of A.O. in terms of directions noted above. As a result, the ground of assessee's appeal is allowed for statistical purposes. 12. In the result, appeal of the assessee is allowed for statistical purposes. 13. In the combined result, appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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