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TMI Blog2023 (2) TMI 1267X X X X Extracts X X X X X X X X Extracts X X X X ..... e-Return of Income declaring a loss under normal provisions of the Act at Rs. 23,92,39,617/- and book profit at Rs. 32,51,65,720/-. The case was selected for scrutiny and assessment order u/s. 143(3) was passed on 08.12.2016 determining the total income at Nil and books profit was assessed at Rs. 93,64,27,720/. The A.O. made the following additions/disallowances in the assessment order as follows: 1 Disallowance of Guarantee fees Rs. 66,56,000/- 2 Addition of Extraordinary items Rs. 16,29,000/- 3 Addition on account Capital Grant Rs.59,16,52,000/- 4 Prior Period expenditure Rs.98,05,000/- 5 Prior Period Income Rs. 98,05,000/- 3. Aggrieved against the same, the assessee filed an appeal before Ld. CIT(A) who is partly allowed the assessee appeal. 4. Aggrieved against the appellate order, both Assessee and Revenue are in appeal before us raising the following Grounds of Appeal. 4.1. The Grounds of Appeal are raised by the Assessee in ITA No. 553/Ahd/2020 are as follows: 1.0 The learned Commissioner of Income Tax (Appeals) erred in law and on facts has confirmed the additions of Rs.59,16,52,000/- on account of Capital Grants & Subsidies and Consumers' Contribut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtionate amount of grant relevant to different asset. The relevant observation of the Coordinate Bench is as follows: "13. The Learned AO finalized the issue by making an addition of Rs.24,17,88,400/- which was, in turn, confirmed by the Learned CIT(A) and added to the total income of the assessee. While confirming the addition, the Learned CIT(A) observed as follows: "6.3 I have considered the submissions. It has been accepted by the appellant that the grants were for capital purpose and for capital projects specified by the Government. In Schedule-3 of the printed balance sheet as on 31.3.2009, it is clearly mentioned that grants were towards cost of capital assets. Appellant's contention that the grants were not actually for meeting cost of assets is therefore not at all tenable. After insertion of Explanation 10 below section 43(1) by the Finance (No.2) Act, 1998 w.e.f. 1.4.1999, decisions relied upon by the appellant in the case of P. 3. Chemicals etc. are no longer applicable and cost of assets met directly or indirectly by the Central Government or State Government in the form of subsidy or grant or reimbursement (by whatever name called) is not to be included in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred government grants, subsidies, contribution at Rs.7305.70 lakhs as on 1.4.2007 and the assessee had shown Rs.15941.67 lakhs at the end of the year i.e. as on 31.3.2008. On show cause by the AO to explain the treatment in accounts of the subsidy, grants the assessee stated that during the year capital grant received from Government of Gujarat and other. The assessee submitted that in order to improve various functions associated with the generation, transmission and distribution of electricity, and also because the PSUs connected with power section were making consistent losses, the Government decided to introduce reforms in the direction of State PSUs. Accordingly, under the provision of Gujarat Electricity Industrial (Reorgnisation & Regulation) Act, 2000, the erstwhile GEB was split into seven companies, for the purpose of financial restructuring plan, and the approval was accorded to provide some financial/capital support to GUVNL. The grant was given in terms of the power reforms for the overall development of the power sector. Such grant was not granted to actually meet the cost of assets. Further, the grant was given to the holding company, GUVNL and then it was allocate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,718/-. As these grants were towards cost of capital assets, 15% of the same should have been reduced from the depreciation claimed on account of making adjustment in the 'actual cost' of assts as per Explanation 10 below section 43(1). Since the assessee has already offered for tax, 10% of the opening balance of grants plus grants received during the year under these three heads of Schedule-3 grants, such amount offered for tax was to be reduced from the excess depreciation to be disallowed at the rate of 15% of Rs.176,62,04,718/- i.e. Rs.26,49,30,708/-. The net disallowance on this count worked out Rs.26,49,30,708/- minus Rs.17,20,37,655/-, the amount already offered for taxation i.e. Rs.9,28,93,053/-. Since no portion of grant of Rs.6427.94 lakhs being capital grant for capital support appearing in Schedule-2 of the balance sheet as on 31.3.2008 was offered as income nor it was reduced from the cost of assets, 15% of the same i.e. Rs.964.191 lakh needed to be disallowed as excess depreciation claimed in respect of the same. The total disallowance towards excess depreciation, therefore, worked out to Rs.9.289 crores plus Rs.9.641 crores i.e. Rs.18.93 crores. Thus, instead of net ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence, this ground of appeal preferred by the assessee is allowed for statistical purposes." 5.2. Respectfully following the decision taken by the Coordinate Bench of this Tribunal, we find it fit and proper to remand the issue to the file of the Ld. AO for re-adjudication of the same and to pass orders upon verification of the proportionate amount of grant relating to different assets and to pass orders accordingly. This ground of appeal preferred by the assessee is allowed for statistical purposes. 6. Ground no. 2(a): Treating interest income of Rs. 69,15,000/- on advances paid to staff as "income from other sources" instead of "business income". 6.1. The Ld. Counsel fairly submitted that identical issue has been decided against the assessee by the Co-ordinate Bench in the case of Gujarat Transmission Corporation in ITA No. 652/Ahd/2013 for the Assessment Year 2009-10. However the Hon'ble Odisha High Court in the case of Odisha Power Generation Corporation Ltd. vs. ACIT, Circle-2(2) in ITA No. 1 of 2015 and Ors., wherein the Hon'ble High Court held in favour of the assessee as follows: " ..... 12. The Assessee offered an explanation regarding interest income earned by it, fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icle Expenses from Other than Staff (This income is received from contractors or outsiders where freight or transport charges is to be boned by contractors) 6,34,000 Cash Discount (This income is for payment made within stipulated time as per accepted tender terms or order terms) 3,79,000 Sale of Tender Forms 61,83,000 Income from Supervision Charges on Sale of Stores 1,000 Income from Supervision Charges on Execution of job/Deposit works 26,67,000 Registration Fees from Suppliers, Contractors 7,96,000 Penalties Recovered from Suppliers/ contractors 7,87,48,000 Penalties Recovered from Employees 19,000 Insurance Premium recovered for House building Advance Loan 1,10,000 Receipt under Right to information (RT) Act, 2005 8,000 Other Miscellaneous Receipts (This income is from other than above all account heads, major amount consists amount in respect of unclaimed security deposit, Earnest Money Deposit and Miscellaneous Deposits from Suppliers or Contractors which is un-disputed and lying pending for more than three years, and which, as per policy of management, not payable, is considered as income. This policy is disclosed at Note No. 1 (4)(v)(d) on page no. 25 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, the finding of the Tribunal that the income from the property could not be assessed separately as income from house property and included in the assessee's total income, was correct." 9.1. Further the Hon'ble Delhi High Court in the case of Triveni Engg. & Industries Ltd., 343 ITR 245 wherein the "loss on account of non-recovery of loan given to employees was treated as loss incidental to business activity, then the interest on such loan falls within the purview of business activity only not "income from other sources". 9.2. In the light of the above, we find it fit to remand this issue to the file of the Assessing Officer for verification of the facts with proper materials and allow the claim in accordance with law. 9.3. In the result, this ground raised by the Assessee is partly allowed. 10. Ground no. 3: Disallowance of prior period expenses of Rs. 98,05,000/-. The Ld. Counsel submitted that this issue has been set aside to the file of the ld. A.O. in assessee's own case which is not disputed by the Ld. D.R. 11. We have heard both the parties and perused the materials available on record. We find that the Co-ordinate Bench on identical issue following ITA No. 996/Ahd/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter to the file of the Assessing Officer for fresh consideration by giving proper opportunity to the assessee. 11.2. Thus this ground raised by the Assessee is allowed for statistical purposes. 12. Ground No. 4 is Initiation of penalty u/s. 271(1)(c) and Ground no. 6 is general ground which are not pressed by the assessee. 12.1. Hence both the grounds no. 4 & 6 raised by the assessee are dismissed as not pressed. 13. Ground no. 5 is charging of interest u/s. 234B, 234C and 234D of the Act which were consequential in nature the same is also not pressed by the assessee and therefore no separate adjudication is required on this ground. ITA No. 554/Ahd/2020 (Assessee's appeal for A.Y. 2014-15) 14. Ground no. 1 is identical ground has already been considered by us in ITA No. 553/Ahd/2020 for Assessment Year 2013-14 in Paragraph 5 of this order. As similar issue is being involved herein the issue are set aside to the Ld. Assessing Officer for fresh consideration. 15. Ground No. 2(a) is identical ground has already been considered by us in ITA No. 553/Ahd/2020 for Assessment Year 2013-14 in Paragraphs 6 & 7 of this order. As similar issue is being involved herein the issue a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessment Year 2013-14 in Paragraph 12 of this order. The same are dismissed as not pressed. 25. Ground no. 5 is identical ground has already been considered by us in ITA No. 553/Ahd/2020 for Assessment Year 2013-14 in Paragraph 13 of this order. Charging of interest u/s. 234B, 234C and 234D are consequential in nature, therefore no separate adjudication is required on this ground. ITA No. 568/Ahd/2020 (Revenue's appeal for A.Y. 2013-14) 26. The Grounds of appeal raised by the Revenue are as follows: i. Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the addition of Rs.16,29,000/- made under the head 'extraordinary items' being losses due to flood, cyclone, fire etc., ignoring the facts that in AY 2008-09 in assessee's own case ld. CIT(A) allowed the appeal of the assessee as AO called for the details with regard to such extraordinary items and the assessee produced the such details before the AO, whereas in- the year under consideration the assessee failed to produce the such details with regard to such extraordinary items, ii. Whether on the facts and in the circumstances of the case and in law, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y items amounting to Rs.1,24,28,000/-. Assessing Officer disallowed loss on account of flood, cyclone, fire etc. of Rs.124.28 lakh claimed under the head "Extra-ordinary items" on the ground that appellant had not submitted details such as nature of loss, how it was quantified etc. 6.1 In appeal, submissions as under were made:- ''Ground No.5: Disallowance out of Extra-ordinary items. The learned Assessing Officer has disallowed Extra-ordinary Items amounting to Rs.1,24,28,000/- without any cogent reasons whatsoever. During the course of assessment proceedings, the learned Assessing Officer had called for the information relating to Extraordinary items vide item No.29 of the notice dated 18-08-2010 issued under section 14291) of the I T Act. The learned Assessing Officer had asked to give details and justification for allowability of the expenses. In response to the same, complete details of the expenses were filed vide letter No. DGVCL/GM(F&A)/10/15523 dated 15-12-2010. It was explained at the time of assessment proceedings that this expenditure has been incurred on account of expenses incurred for rehabilitation and repairs works undertaken due to floods/cyclo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the entire expenditure is incurred out of business expediency is of revenue nature and is fully allowable. It is only the accounting treatment that the said expenditure is shown as extra-ordinary items. The appellant, therefore, prays that the .disallowances made on this count may be deleted. The appellant also invites your honour's kind attention to the fact that the similar issue has been decided favourably by the Hon'ble Commissioner (Appeals) in the case of Gujarat Energy Transmission Corp. Ltd., a sister concern of the appellant company, for the Asst. Year 2006-07 and 2007- 08. The copy of the CIT(A)'s order passed for the Asst, Year 2006-07 is enclosed in Annexure-III." 6.2. I have considered facts of the case and appellant's submissions. Similar issue was considered by my learned predecessor CIT(A)-I, Baroda in case of Gujarat Energy Transmission Corporation Ltd., sister concern of the appellant in CAB-I/333/08-09 through order dated 30.3.2010 for A.Y.2006-07 deciding the issue in favour of the concerned assessee. In appellant's case also, the expenditure incurred was less than the subsidy received from the Government on account of floods and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 618/Ahd/2018 for the Assessment Year 2011-12 vide common order dated 22.07.2022 as follows: "..... 57. Having heard to the facts and circumstances of the case we find it fit and proper to remit the issue to the file of the Ld. AO to adjudicating the issue taking into consideration the Capital Grant and subsidies and consumers contribution made by the assessee and pass orders in accordance with law upon granting a reasonable opportunity of being heard to the assessee. This ground of appeal preferred by the Revenue is allowed for statistical purposes." 30.2. The Ld. A.R. appearing for the assessee has no objection in setting aside the matter back to the file of the Assessing Officer for fresh adjudication. Thus we set aside this issue to the file of the Ld. Assessing Officer and pass orders in accordance with law by giving proper opportunity to the assessee. 30.3. Thus this grounds of appeal raised by the Revenue are allowed for statistical purposes. 31. In the result, the appeal filed by the Revenue is partly allowed. ITA No. 569 & 570/Ahd/2020 (Revenue's appeal for A.Ys. 2014-15 & 2015-16) 32. Ground no. 1 is identical ground has also been decided by us in ITA No. 568/ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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