Andhra Pradesh Power Generation Corporation Limited, Vijayawada V. The ACIT, Circle-3(1), Vijayawada

ITA 168/VIZ/2020

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 2630 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 07-04-2021
• Assessment Year: 2015-2016
• Appeal Filed On: 12-08-2020
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHRID.K.SONOWAL
• Keywords: Revision of order; Business expenditure; TDS; Set aside
• Section: 263; 143(3); 37(1); 201; 13; 20

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM (THROUGH WEB - BASED VIDEO CONFERENCING PLATFORM) , . . , BEFORE SHRI N.K.CHOUDHRY, HONBLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH, HONBLE ACCOUNTANT MEMBER ./ I.T. A.NO. 1 6 8 /VIZ/20 20 ( / A SSESSMENT Y EAR : 20 1 5 - 16 ) ANDHRA PRADESH POWER GENERATION CORPORATION LTD. VIJAYAWADA [PAN : AA CCA2734 J ] VS. ASST.COMMISSIONER OF INCOME TAX CIRCLE - 3(1) VIJAYAWADA ( / APPELLANT) ( / RESPONDENT) / ASSESSEE BY : SHRI M.CHANDRAMOULESWARA RAO, AR /REVENUE BY : SHRI D.K.SONOWAL, CIT(DR) / DATE OF HEARING : 1 7 . 0 6 .202 1 / DATE OF PRONOUNCEMENT : 25 .06 . 202 1 / O R D E R P ER BENCH : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE PR. COMMISSIONER OF INCOME TAX ( PR.CIT ), VIJAYAWADA DATED 2 5 .0 6 .2020 FOR THE ASSESSMENT YEAR (A.Y.) 201 5 - 16 . 2. ALL THE GROUNDS OF APPEAL ARE RELATED TO THE VALIDITY OF ORDER PASSED BY THE LD. PR.CIT U/S 263 OF THE INCOME TAX ACT , 1961 (IN SHORT ACT) . IN T HIS CASE, FOR THE A.Y.2015 - 16, ASSESSMENT WAS TAKEN UP FOR SCRUTINY AND THE 2 ITA NO.1 6 8 /VIZ/20 20 , A.Y.20 12 - 13 A NDHRA PRADESH POWER GENERATION CO - OP LTD., VIJAYAWADA ASSESSMENT WAS COMPLETED U/S 143(3) ON TOTAL INCOME OF RS.765,36,27,612/ - AND THE TAXABLE INCOME RESULTED IN NIL AFTER SET OFF OF BROUGHT FORWARD LOSSES TO THE EXTENT OF TOTAL INCO ME. SUBSEQUENTLY, THE LD.PR.CIT HAS TAKEN THE CASE FOR REVISION U/S 263 FOR ASSESSEES CLAIM WITH REGARD TO RS. 37,46,74,242/ - PAID IN RESPECT OF ROYALTY TO THE STATE GOVERNMENT WHICH IS NOT ALLOWABLE DEDUCTION AS PER SECTION 40(1)(IIB) OF THE ACT AND THE C LAIM OF RS.1,01,65,521/ - TOWARDS CORPORATE SOCIAL RESPONSIBILITY, WHICH IS ALSO NOT AN ALLOWABLE DEDUCTION AS PER EXPLANATION 2 OF SECTION 37(1) OF THE ACT. ACCORDINGLY, THE LD.PR.CIT ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE CALLING FOR EXPLANATION OF THE ASSESSEE AS TO WHY THE ASSESSMENT SHOULD NOT BE REVISED U/S 263 OF THE ACT? IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESSEE FILED EXPLANATION S TATING THAT IT WAS A MISTAKE ON THE PART OF THE ASSESSEE TO CLAIM THE EXPENDITURE UNDER THE HEAD ROYALTY TO OTHERS INSTEAD OF WATER CHARGES. THE ASSESSEE FURTHER STATED THAT THE APGENCO PURCHASED WATER AS A COMMODITY FROM THE GOVERNMENT OF ANDHRA PRADESH AND FURTHER SUBMITTED THAT THE STATE GOVERNMENT DOES NOT COLLECT ROYALTY ON INTERSTATE RIVER WATER. WATER CHARGES W ERE PAID FOR CONSUMPTION USE AND NON - CONSUMPTION USE AS PER THE RATES FIXED BY THE GOVERNMENT OF A.P. AS PER G.O.MS NO.39 DATED 02.04.2002. THUS, SUBMITTED THAT THE ANDHRA PRADESH WATER RESOURCES DEVELOPMENT CORPORATION IS 3 ITA NO.1 6 8 /VIZ/20 20 , A.Y.20 12 - 13 A NDHRA PRADESH POWER GENERATION CO - OP LTD., VIJAYAWADA AUTHORIZED BY A SEPARATE NOTIFICATION TO LEVY AND COLLECT INDUSTRIAL WATER RATES AND THE APGENCO PAY S THE CHARGES TOWARDS THE COST OF WATER TO THE GOVERNMENT ON BEHALF OF THE CORPORATION TO ENABLE TO MAKE CROSS ADJUSTMENTS . THEREFORE, SUBMITTED THAT APGENCO DID NOT PAY THE ROYA LTY AND WHAT WAS CLAIMED IN THE RETURN OF INCOME WAS WATER CHARGES PAID TO THE GOVERNMENT OF ANDHRA PRADESH, HENCE ARGUED THAT SECTION 40(1)(IIB) HAS NO APPLICATION. 2.1. SIMILARLY IN RESPECT OF CORPORATE SOCIAL RESPONSIBILITY, THE ASSESSEE SUBMITTED THE DETAILED REPLY STATING THAT THE ASSESSEE HA D INCURRED THE CORPORATE SOCIAL RESPONSIBILITY EXPENDITURE WHICH WAS BUSINESS EXPENDITURE IN RTPP STAGE - 1 (O&M) AS AMOUNTS WERE SPENT UNDER NTR SUJALA PATHAKAM FOR PROVIDING DRINKING WATER TO THE SURROUNDING VILLAGES, THEREFORE, ARGUED THAT THERE IS NO ERROR IN THE ASSESSMENT ORDER PASSED U/S 143, HENCE REQUESTED TO DROP T HE PROCEEDINGS. AFTER HAVING HEARD THE SUBMISSIONS OF THE ASSESSEE, THE LD.PR.CIT OBSERVED THAT THE ASSESSEE HAS CLAIMED THE EXPENDITURE UNDER ROYALTY TO OTHERS AND UNDER THE CORPORATE SOCIAL RESPONSIBILITY IN THE RETURN OF INCOME AND THE AO NEITHER VERIF IED THE ISSUES NOR BROUGHT THE INFORMATION ON RECORDS. THEREFORE, VIEWED THAT THE ASSESSMENT ORDER PASSED BY THE AO WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE, HENCE, SET ASIDE THE ASSESSMENT WITH A DIRECTION TO 4 ITA NO.1 6 8 /VIZ/20 20 , A.Y.20 12 - 13 A NDHRA PRADESH POWER GENERATION CO - OP LTD., VIJAYAWADA REEXAMINE THE ISSUES AND C OMPLETE THE ASSESSMENT DENOVO IN ACCORDANCE WITH LAW AND ESTABLISHED PROCEDURES. 3. AGAINST THE ORDER OF THE LD.PR.CIT, THE ASSESSEE IS IN APPEAL BEFORE US. DURING THE APPEAL HEARING, ASSAILING THE CONTENTION THAT THERE WAS NO ROYALTY PAYMENT TO THE STATE GOVERNMENT, LD.AR VEHEMENTLY ARGUED THAT THE ASSESSEE HAS NOT PAID THE ROYALTY, BUT PAID THE INDUSTRIAL WATER CHARGES AND MADE THE PAYMENT FOR PURCHASE OF WATER AS PER THE RATES PRESCRIBED BY THE STATE GOVERNMENT IN G.O.MS NO.39 AND THE SAME WAS RECORDED IN ANNUAL GENERAL REPORT AND ALSO NOTES ON ACCOUNTS, THEREFORE, ARGUED THAT SINCE , THE ENTIRE MATERIAL WAS PLACED BEFORE THE PR.CIT, THE LD.PR.CIT OUGHT TO HAVE VERIFIED THE SAME AND DROPPED THE PROCEEDINGS. HE FURTHER STATED THAT THE MENTION OF ROYALTY PA YMENT IS A MISTAKE AND SUBSEQUENTLY RECTIFIED THE SAID MISTAKE IN THE I NCOME TAX RETURNS FILED FOR THE A.Y.2017 - 18 ONWARDS. WITH REGARD TO CORPORATE SOCIAL RESPONSIBILITY, THE LD.AR SUBMITTED THAT THE EXPENDITURE WAS BUSINESS EXPENDITURE, HENCE, ARGUED TH AT THERE IS NO CASE FOR REVISION U/S 263, HENCE REQUESTED TO QUASH THE ORDER PASSED U/S 263 BY PR.CIT, VIJAYAWADA. 4. ON THE OTHER HAND, THE LD.DR VEHEMENTLY SUPPORTED THE ORDER OF THE LD.PR.CIT AND ARGUED THAT THE LD.PR.CIT HAS RIGHTLY TAKEN UP THE CASE FOR REVISION AND REQUESTED TO UPHOLD THE ORDER OF THE LD.PR.CIT. 5 ITA NO.1 6 8 /VIZ/20 20 , A.Y.20 12 - 13 A NDHRA PRADESH POWER GENERATION CO - OP LTD., VIJAYAWADA 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. IN THE INSTANT CASE THERE IS NO DISPUTE THAT AS PER THE RETURN OF INCOME FILED, THE ASSESSEE MADE THE CLAIM UNDER ROYALTY PAYMENT TO OTHERS. SIMILARLY, EXPENDITURE WAS ALSO CLAIMED UNDER CORPORATE SOCIAL RESPONSIBILITY. ROYALTY PAYMENT TO OTHERS WAS STATED TO BE IN RESPECT OF INDUSTRIAL WATER PURCHASED BY THE ASSESSEE FROM THE STATE GOVERNMENT AND CORPORATE RESPON SIBILITY WAS STATED TO BE RELATED TO THE SPECIFIC SCHEME FORMULATED BY THE STATE GOVERNMENT FOR NTR SUJALA PATHAKAM PROVIDING 20 LTRS OF WATER TO SURROUNDING AREAS, THUS, CLAIMED THE SAME AS BUSINESS EXPENDITURE . T HE CLAIM OF THE ASSESSEE IN RESPECT OF PU RCHASE OF WATER FROM THE STATE GOVERNMENT NEEDS TO BE VERIFIED IN THE LIGHT OF THE CLAIM MADE IN THE RETURN OF INCOME AND THE ACTUAL EXPENDITURE INCURRED . SIMILARLY, IN THE EXPLANATION, THE ASSESSEE STATED THAT ANDHRA PRADESH WATER RESOURCES DEVELOPMENT C ORPORATION WAS AUTHORIZED TO PASS RESOLUTION AUTHORIZING THE ANDHRA PRADESH INDUSTRIAL INFRASTRUCTURE CORPORATION TO LEVY AND COLLECT THE INDUSTRIAL WATER RATES AS FIXED BY THE GOVERNMENT FROM TIME TO TIME. WHETHER THE SUPPLY OF WATER BY THE AP INDUSTRIAL INFRASTRUCTURE CORPORATION IS ON CONTRACT BASIS OR OUTRIGHT SALE BASIS ALSO NEEDS VERIFICATION TO ASCERTAIN THE TDS IF ANY. ONLY AFTER PROPER VERIFICATION OF THE COMPLETE DETAILS, THE NATURE OF EXPENDITURE AND ITS 6 ITA NO.1 6 8 /VIZ/20 20 , A.Y.20 12 - 13 A NDHRA PRADESH POWER GENERATION CO - OP LTD., VIJAYAWADA ALLOWABILITY IS TO BE DECIDED WHETHER IT IS FOR PURCHASE OF WATER OR ROYALTY PAYMENT OR SUPPLY OF WATER ON CONTRACT BASIS. 5.1. SIMILARLY, IN RESPECT OF THE PAYMENT MADE ON ACCOUNT OF CORPORATE SOCIAL RESPONSIBILITY, THERE IS NO DISPUTE THAT THE ASSESSEE MADE THE CLAIM UNDER CORPORATE SOCIAL RESPONSIBILITY AND THE AO HAS NEITHER COLLECTED ANY INFORMATION NOR VERIFIED THE GENUINENES S OF THE EXPENDITURE AS OBSERVED BY THE LD.PR.CIT. WHETHER THE EXPENDITURE INCURRED WAS RELATED TO CORPORATE SOCIAL RESPONSIBILITY OR THE BUSINESS EXPENDITURE AND THE GENUINENESS AND CORRECTNESS OF THE EXPENDITURE ALSO REQUIRED TO BE VERIFIED. SINCE TH E AO FAILED TO VERIFY THE ABOVE ISSUES, THE ASSESSMENT ORDER PASSED BY THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND WE HOLD THAT THE LD.PR.CIT RIGHTLY TAKEN UP THE CASE FOR REVISION U/S 263 AND THE SAME IS UPHELD. THE APPEAL OF T HE ASSESSEE IS DISMISSED. 6 . IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH JUNE , 2021. SD/ - SD/ - ( ) ( . . ) (N.K.CHOUDHRY) (D.S.SUNDER SINGH) / JUDICIAL MEMBER / ACCOUNTANT MEMBER DATED : 25 .0 6 .2021 L.RAMA, SPS 7 ITA NO.1 6 8 /VIZ/20 20 , A.Y.20 12 - 13 A NDHRA PRADESH POWER GENERATION CO - OP LTD., VIJAYAWADA / COPY OF THE ORDER FORWARDED TO : - 1 . / THE ASSESSEE - ANDHRA PRADESH POWER GENERATION CORPORATION LTD. , C/O M.CHANDRA MOULESWARA RAO, CHARTERED ACCOUNTANT, C - 3,SKYLARK APARTMENTS, NEAR SKYLINE THEATRE, BASHEERBAGH, HYDERABAD. 2 . / THE REVENUE ASST.COMMISSIONER OF INCOME TAX, CIRCLE - 3(1), VIJAYAWADA 3. THE PR.COMMISSIONER OF INCOME TAX , VI JAYAWADA 4 . , , / DR, ITAT, VISAKHAPATNAM 5 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM