M/S. M.P.POLICE HOUSING CORPORATON LTD., Bhopal V. THE ACIT 2(1), Bhopal

ITA 260/IND/2015

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 4145 (ITAT-INDORE)
• Duration Of Justice: 3 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 04-10-2018
• Assessment Year: 2011-2012
• Appeal Filed On: 17-04-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: LALCHAND
• Keywords: Audit objection; Principle of natural justice; Diversion of income; Source of fund; Bad and doubtful debts; Assessment record; Provision of bad debts; Revenue expenditure; Reassessment proceedings
• Section: 143(3); 37

Judgement Text

[ITA NOS.383/IND/2013, 259 & 260/IND/2015, 269&449/ IND/2016 & 125/IND/2017] [M.P. POLICE HOUSING CORPORATION LTD., BHOPAL] , , IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.383/IND/2013 ASSESSMENT YEAR: 2008-09 ITA NO.259&260/IND/2015 ASSESSMENT YEARS: 2010-11&2011-12 ITA NO.449/IND/2016 ASSESSMENT YEAR: 2012-13 ITA NO.125/IND/2017 ASSESSMENT YEAR: 2013-14 M.P. POLICE HOUSING CORPORATION LTD., NEAR POLICE RADIO HEADQUARTERS BHADBHADA ROAD BHOPAL-462 003 (APPELLANT) / VS. ACIT - 2(1), BHOPAL (MP) (REVENUE ) P.A. NO. AACCM2221L [ITA NOS.383/IND/2013, 259 & 260/IND/2015, 269&449/ IND/2016 & 125/IND/2017] [M.P. POLICE HOUSING CORPORATION LTD., BHOPAL] 2 ITA NO.269/IND/2016 ASSESSMENT YEAR: 2008-09 ACIT - 2(1), BHOPAL (MP) (REVENUE ) / VS. M.P. POLICE HOUSING CORPORATION LTD., NEAR POLICE RADIO HEADQUARTERS BHADBHADA ROAD BHOPAL-462 003 (APPELLANT) APPELLANT BY SHRI SUMIT NEMA, SR. ADV. & SHRI GAGAN TIWARI, ADV. RESPONDENT BY SHRI LAL CHAND, DR DATE OF HEARING: 04.10.2018 DATE OF PRONOUNCEMENT: 11.10.2018 / O R D E R PER KUL BHARAT, J.M: THIS BUNCH OF 6 APPEALS, FIVE BY ASSESSEE AND ONE BY REVENUE ARE PERTAINING TO THE ASSESSMENT YEARS 2008-09 , 2010-11, 2011-12, 2012-13 & 2013-14. FIRST WE TAKE UP THE CROSS APPEALS BY THE ASSESSEE AND REVENUE PERTAININ G TO THE ASSESSMENT YEAR 2008-09. [ITA NOS.383/IND/2013, 259 & 260/IND/2015, 269&449/ IND/2016 & 125/IND/2017] [M.P. POLICE HOUSING CORPORATION LTD., BHOPAL] 3 ITA NO.383/IND/2013 (A.Y. 2008-09): 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE FINDINGS OF LEARNED CIT(A) ARE BAD AND OPPOSED TO FACTS, EQUITY AND LAW AND ARE, THEREFORE, UNSUSTAINABLE IN LAW. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED A.O. ERRED IN MAKING A SCRUTINY ASSESSM ENT U/S 143(3) OF THE ACT. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED A.O. ERRED IN DISALLOWING EXPENSES OF R S.1,91,56,000/- ON ACCOUNT OF PAYMENT OF HUDCO LOANS. 4. THAT ON THE FACTS AND IN THE CIRCUMSTNACES OF THE C ASE AND IN LAW, THE LEARNED A.O. ERRED IN DISALLOWING EXPENSES OF R S.60,00,000/- ON ACCOUNT OF PROVISION INTEREST OF SRF FUNDS PROVIDED BY THE GOVERNMENT OF MP. 5. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED A.O. ERRED IN DISALLOWING BAD DEBT WRIT TEN OFF AMOUNTING RS.30,76,000/- AS NON-RECOVERABLE FROM THE CONTRACT ORS. 6. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED A.O. ERRED IN DISALLOWING PROVISION FOR POLICE WELFARE & COMMUNITY HALLS AMOUNTING TO RS.4,00,00,000/- AS RE QUIRED IN ACCORDANCE WITH MAIN OBJECT OF THE APPELLANT. 7. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED A.O. ERRED IN DISALLOWING PROVISION OF COST OVER RUN EXPENDITURE RS.1,77,70,000/- AS AND ABOVE OF TECHNI CAL SANCTION MADE BY THE GOVERNMENT. 8. THAT ON THE FACTS AND IN THE CIRCUMSTNACES OF THE C ASE AND IN LAW, LEARNED A.O. ERRED IN DISALLOWING CONTINGENCY EXPEN SES CHARGED ON WORK AMOUNTING OF RS.60,99,888/- WITHOUT CONSIDERIN G THE GENUINELY OF THE EXPENSES. 9. ANY OTHER GROUND THAT MAY BE DEEMED NECESSARY AT TH E TIME OF HEARING AS THE ASSESSEE CRAVES ITS RIGHT TO ADD, AM END, OR ALTER ANY OF THE GROUNDS OF APPEAL ON OR BEFORE3 THE ACTUAL H EARING OF THE CASE. [ITA NOS.383/IND/2013, 259 & 260/IND/2015, 269&449/ IND/2016 & 125/IND/2017] [M.P. POLICE HOUSING CORPORATION LTD., BHOPAL] 4 3. THE FACTS GIVING RISE TO THIS APPEAL ARE THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT WAS FRAMED U/S 143(3) OF THE INCOME TAX AC T, 1961 (HEREINAFTER CALLED AS THE ACT) VIDE ORDER DATED 27.12.2010. THE A.O. WHILE FRAMING THE ASSESSMENT OBSERVED THAT THE ASSESSEE CORPORATION HAD DEBITED PROVISION FOR EXPENSES IN PROFIT & LOSS ACCOUNT NAMEL Y LOAN AMOUNTING TO RS.1,91,56,000/-, PROVISION OF INTEREST ON SRF FUND AMOUNTING TO RS.60,00,000/-, PROVISION OF B AD DEBTS FOR RS.30,76,000/-, PROVISION OF POLICE WELFAR E COMMUNITY HALL OF RS.4 CRORES, PROVISION FOR COST OV ER RUN AMOUNTING TO RS.1,77,70,000/- AND PROVISION FOR CONTINGENCY EXPENSES AMOUNTING TO RS.60,99,888/-. A FTER CONSIDERING THE REPLY OF THE ASSESSEE, THE A.O. DISAL LOWED THIS PROVISION AND ADDED BACK TO THE INCOME OF THE ASSESSEE. [ITA NOS.383/IND/2013, 259 & 260/IND/2015, 269&449/ IND/2016 & 125/IND/2017] [M.P. POLICE HOUSING CORPORATION LTD., BHOPAL] 5 4. AGGRIEVED BY THIS, THE ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A), WHO AFTER CONSIDERING THE SUBMISS IONS, DISMISSED THE APPEAL. NOW THE ASSESSEE IS IN APPEAL BEF ORE THIS TRIBUNAL. 5. AT THE TIME OF HEARING, LD. COUNSEL FOR THE ASSESS EE SUBMITTED THAT HE DOES NOT WISH TO PRESS GROUND NOS. 1 & 2, ACCORDINGLY GROUND NOS.1 & 2 ARE DISMISSED. 6. GROUND NO.3 IS AGAINST DISALLOWING EXPENSES OF RS.1,91,56,000/- ON ACCOUNT OF PAYMENT OF HUDCO LOANS . LD. SENIOR COUNSEL FOR THE ASSESSEE SUBMITTED THAT AS THE ASSESSEE HAS MADE PROVISION FOR HUDCO LOANS OF RS.1,91,00,000/-, HE REITERATED THE SUBMISSIONS AS MAD E BEFORE THE LD. CIT(A). IT IS CONTENDED THAT ASSESSEE HAD TAKEN A LOAN OF RS.261.00 LAKHS AGAINST THE GUARANTEE OF GOVERNMENT OF M.P. FOR THE PURPOSE OF CONSTRUCTION OF HOUSES AND BUILDINGS FOR THE POLICE PERSONNEL OF THE [ITA NOS.383/IND/2013, 259 & 260/IND/2015, 269&449/ IND/2016 & 125/IND/2017] [M.P. POLICE HOUSING CORPORATION LTD., BHOPAL] 6 GOVERNMENT OF MADHYA PRADESH AS PER MEMORANDUM OF UNDERSTANDING WITH THE GOVERNMENT. THE CORPORATION H AD TAKEN LOANS FROM HUDCO IN THE PREVIOUS FINANCIAL YEARS AND GOVERNMENT HAD TO PAY INTEREST ON LOAN AFTER POSSESSION OF SCHEME OR PROJECTS FOR WHOM THE FUNDS WERE OBTAINED. IN THE YEAR 2008-09, HUDCO INFORMED THE ASSESSEE CORPORATION THAT THE LIABILITY OF OUTSTANDING L OAN WAS RS.261.00 LAKHS AND CORPORATION HAD TO PAY THIS. I T WAS CONTENDED THAT THE GOVERNMENT OF M.P. DIRECTED TH E CORPORATION TO PAY THE SAME. LD. COUNSEL FOR THE ASSE SSEE SUBMITTED THAT BY THIS DIRECTION OF THE GOVERNMENT, THE ASSESSEE CORPORATION SUFFERED LOSS AS THE LIABILITY, W HICH WAS REQUIRED TO BE DISCHARGED BY THE GOVERNMENT FASTENE D UPON THE ASSESSEE CORPORATION. LD. COUNSEL SUBMITTED THAT UNDER THESE FACTS, THE A.O. OUGHT TO HAVE ALLOWED THE EXPENSES. LD. COUNSEL FOR THE ASSESSEE SUBMITTED TH AT EVEN IF IT IS ASSUMED THAT IT WAS THE LIABILITY OF THE ASSESSEE [ITA NOS.383/IND/2013, 259 & 260/IND/2015, 269&449/ IND/2016 & 125/IND/2017] [M.P. POLICE HOUSING CORPORATION LTD., BHOPAL] 7 AND IN THAT EVENT, THE EXPENDITURE RELATED TO THIS YEAR DESERVES TO BE ALLOWED. HE SUBMITTED THAT FOR THIS P URPOSE, THE MATTER CAN BE REMITTED TO THE A.O. LD. COUNSEL F OR THE ASSESSEE HAS TAKEN US THROUGH THE CORRESPONDENCE BETWEEN THE GOVERNMENT OF INDIA AND THE STATE GOVERNMENT. LD. COUNSEL SUBMITTED THAT THE PROVISIO N WAS FOR PAYMENT OF THE LOAN AMOUNT. 7. ON THE CONTRARY, LD. D.R. OPPOSED THE SUBMISSIONS AND SUPPORTED THE ORDER OF THE LD. CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE FIRST SUBMISSION OF TH E ASSESSEE IS THAT LOAN WAS PAYABLE BY GOVERNMENT OF MADHYA PRADESH AND THE ASSESSEE WAS FORCED TO REPAY THE LOAN, WHICH RESULTED INTO LOSS TO THE ASSESSEE CORPOR ATION. HENCE, SUCH LIABILITY IS A DEDUCTIBLE EXPENDITURE. W E FIND [ITA NOS.383/IND/2013, 259 & 260/IND/2015, 269&449/ IND/2016 & 125/IND/2017] [M.P. POLICE HOUSING CORPORATION LTD., BHOPAL] 8 THAT THE LD. CIT(A) HAS DECIDED THIS ISSUE IN PARA 5.4 OF HIS ORDER AS UNDER: 5.4 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE APPELLANT AND FACTS OF THE CASE. AS MENTIONED ABOVE, THE APPELLANT IS A GOVER NMENT CORPORATION AND THE STATE GOVERNMENT OF MADHYA PRADESH IS A MAJOR SHARE HOLDER OF THE CORPORATION. THE APPELLANT IS ENGAGED IN THE CONSTRUCTION OF RES IDENTIAL HOUSES AND ADMINISTRATIVE BUILDINGS FOR POLICE DEPARTMENT ON B EHALF OF THE MADHYA PRADESH. FUNDS FOR CONSTRUCTION OF HOUSES AND OTHER BUILDING S ARE PROVIDED BY THE GOVT. OF MP. THUS, WHEN ANY LOAN IS RAISED FROM THE FINANCIA L INSTITUTIONS FOR DIFFERENT PROJECTS, THE STATE GOVERNMENT PROVIDES A GUARANTEE FOR REPAYMENT OF LOAN AS WELL AS INTEREST THEREON. AT THE TIME OF RECEIPT OF FUND, IT IS CREDITED AS ADVANCE RECEIVED FOR THE SPECIFIC WORK 1 PROJECT AND CLASSI FIED AS CURRENT LIABILITY. AS AND WHEN ANY PROJECT UNDER THE PARTICULAR SCHEME IS HAN DED OVER, THE ACCOUNTS ARE DEBITED BY THE TOTAL COST AND SUPERVISION CHARGES O F THE PROJECT HANDED OVER. SUPERVISION INCOME IS RECOGNIZED AT 12 % OF THE TOT AL CONSTRUCTION WORK DONE BY THE CORPORATION. IT MAY BE NOTED THAT ANY LOAN TAKE N FROM THE FINANCIAL CORPORATION ALONGWITH THE INTEREST IS THE LIABILITY OF THE STATE GOVERNMENT AND NOT OF THE APPELLANT CORPORATION. NOW IN THIS CASE, THE RE WAS AN OUTSTANDING BALANCE OF RS.261 LACS ON ACCOUNT OF LOANS TAKEN FROM HUDCO WHICH WAS TO BE PAID BY THE STATE GOVERNMENT. BUT THE STATE GOVERNMENT ASK ED THE APPELLANT TO PAY FROM ITS OWN INCOME. THE APPELLANT HAD MADE PAYMENT OF RS.1,91,56,000/- ON 29.9.2008 I.E. IN F.Y. 2008-09 RELEVANT TO SUBSEQUE NT ASSESSMENT YEAR 2009-10 AS A FULL SETTLEMENT OF THE OUTSTANDING LOAN AND INTER EST OF HUDCO REQUESTING TO HUDCO NOT TO CHANGE INTEREST ON INTEREST AND FOR TH AT THE APPELLANT MADE A PROVISION IN ITS BOOKS OF ACCOUNT ON 31.03.2008 I.E . IN F.Y. 2007-08 RELEVANT TO A.Y. 2008-09. CONSIDERING THESE FACTS, IT IS CLEAR THAT THE APPELLANT HAD MADE ONLY A PROVISION OF RS.L,91,56,000/- IN ITS BOOKS OF ACC OUNT ON 3 1. 0 3.2008 FOR PAYMENT OF LIABILITY OF THE STATE GOVERNMENT OF M.P . AS STATED IN THE SUBMISSION OF THE APPELLANT THAT THIS AMOUNT WAS TO BE PAID OU T OF INCOME OF THE CORPORATION, THUS, IT IS AN APPLICATION OF INCOME AND NOT A DEDU CTIBLE EXPENDITURE. FURTHER, IT IS PERTINENT TO NOTE THAT THE AMOUNT WAS PAID IN SUBSE QUENT ASSESSMENT YEAR ON 29.09.2008 AND THERE WAS NO QUESTION OF ANY ALLOWAN CE OF DEDUCTION IN THE YEAR UNDER CONSIDERATION. THE PAYMENT WAS ALSO FOR THE L OAN AND, THUS, NOT IN REVENUE ACCOUNT. ACCORDINGLY, THE AO WAS JUSTIFIED IN MAKIN G DISALLOWANCE OF PROVISION OF HUDCO LOAN OF RS.1 ,91 ,56,000/. HENCE, THE ADDITI ON OF RS.L ,91,56,000/- IS CONFIRMED. [ITA NOS.383/IND/2013, 259 & 260/IND/2015, 269&449/ IND/2016 & 125/IND/2017] [M.P. POLICE HOUSING CORPORATION LTD., BHOPAL] 9 9. HOWEVER, DURING THE COURSE OF HEARING, IT IS STATE D THAT ASSESSEE HAD MADE PAYMENT OF INTEREST IN SUBSEQUENT YEARS. THIS FACT IS NOT CONTROVERTED BY THE REVENUE. WE THEREFORE, SET ASIDE THE ORDER OF LD. CIT(A) AND RES TORE THE ISSUE TO A.O. FOR VERIFICATION OF PAYMENT OF INTERES T. THE A.O. WOULD ALSO TO COMPUTE THE INTEREST RELATED TO TH E FINANCIAL YEAR UNDER APPEAL. THE A.O. WOULD ALLOW THE INTEREST PAID BY THE ASSESSEE ON THE LOAN AMOUNT RELATED TO THE YEAR UNDER APPEAL. 10. GROUND NO.4 IS AGAINST ADDITION ON ACCOUNT OF DISALLOWANCE OF EXPENSES OF RS.60 LAKHS IN RESPECT OF PROVISION FOR INTEREST ON SRF FUNDS PROVIDED BY THE GOVERNMENT OF M.P. LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS AS MADE BEFORE THE LD. CI T(A). HE CONTENDED THAT THE ASSESSEE CORPORATION WAS TO BE WOUND UP. SUBSEQUENTLY, IT WAS DECIDED TO NOT TO GO FOR WINDING UP. HOWEVER, DURING THIS PERIOD, THE GOVER NMENT [ITA NOS.383/IND/2013, 259 & 260/IND/2015, 269&449/ IND/2016 & 125/IND/2017] [M.P. POLICE HOUSING CORPORATION LTD., BHOPAL] 10 OF M.P. HAD RELEASED AN AMOUNT OF RS.3.15 CRORES TOWARD S THE EXPENDITURE ON VOLUNTARY RETIREMENT. OUT OF THE TOTAL AMOUNT, RS.1.55 CRORES WAS UTILISED AND BALANCE AMOUNT WAS REFUNDED TO THE GOVERNMENT OF M.P. THE ASSESSEE CORPORATION HAD MADE A PROVISION OF INTEREST ON THIS FUND. HE SUBMITTED THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION. 11. ON THE CONTRARY, LD. D.R. SUPPORTED THE ORDER O F THE LD. CIT(A). 12. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDER S OF THE AUTHORITIES BELOW. THE LD. CIT(A) HAS DECIDE D THIS ISSUE IN PARA 6.4 BY OBSERVING AS UNDER: 6.4 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF T HE APPELLANT AND FACTS OF THE CASE. AS MENTIONED HEREIN ABOVE, THE APPELLANT CORP ORATION WAS ESTABLISHED FOR CONSTRUCTION OF RESIDENTIAL HOUSES AND ADMINISTRATI VE BUILDINGS FOR POLICE DEPARTMENT ON BEHALF OF THE GOVT. OF M.P. THE STATE GOVERNMENT, THE PROMOTER AND THE MAJOR SHAREHOLDER OF THE CORPORATION, HAD A PPROVED TO LIQUIDATE THE CORPORATION VIDE ITS LETTER DATED 04.10.2000. THE G OVT. OF M.P. HAD RELEASED AN AMOUNT OF RS.315 LACS TOWARDS THE EXPENDITURE ON VO LUNTARY RETIREMENT AND OTHER [ITA NOS.383/IND/2013, 259 & 260/IND/2015, 269&449/ IND/2016 & 125/IND/2017] [M.P. POLICE HOUSING CORPORATION LTD., BHOPAL] 11 WINDING UP COSTS OF THE CORPORATI'ON IN 2000. IT WA S ALSO STATED WHILE RELEASING THE FUNDS OF RS.315 LACS FROM STATE RENEWAL FUNDS ( SRF) THAT THE AMOUNT SO RELEASED WOULD FROM PART OF OVERALL PACKAGE FOR CLO SURE OF THE CORPORATION ENTAILING ABOLITION OF ALL THE POSTS IN THE CORPORA TION. OUT OF THE TOTAL AMOUNT RELEASED FROM SRF, RS.L,55,00,0001- WERE UTILIZED F OR THE RETIREMENT OF 67 EMPLOYEES VOLUNTARILY OUT OF 215 EMPLOYEES WHO WERE ON THE ROLLS OF THE CORPORATION AT THE TIME OF INTRODUCTION OF VRS SCHE ME OF THE GOVT. OF M.P. THE BALANCE AMOUNT OF RS, RS.L ,60,00,000/- WAS REFUNDE D TO THE GOVERNMENT OF M.P. BECAUSE THE DECISION OF LIQUIDATING THE CORPORATION WAS SUBSEQUENTLY REVIEWED ON FEBRUARY, 2004 THAT THE CORPORATION IS TO CONTINUE. THE AMOUNT' OF RS.L,55,00,0001- UTILIZED FOR VRS WAS SHOWN AS SECU RED LOAN IN THE BOOKS OF THE APPELLANT AS LOAN FROM SRF FUNDS. IT MAY BE NOTED T HAT THERE WAS NO STIPULATION OR CONDITION OF CHARGING INTEREST ON THE AMOUNT WHI CH WAS UTILIZED BY THE CORPORATION ON VOLUNTARY RETIREMENT OF ITS EMPLOYEE S AS PER VRS SCHEME OF THE GOVERNMENT OF M.P. THUS, THERE WAS NO LIABILITY OF INTEREST PER SE ON THE AMOUNTS RELEASED BY THE STATE GOVERNMENT FROM SRF. FURTHER , THE APPELLANT HAD NEVER MADE A PROVISION OF INTEREST SINCE F.Y. 2000-01 WHE N THE FUND WAS RECEIVED. THE APPELLANT HAD NOT FURNISHED ANY EVIDENCE THAT INTER EST WAS TO CHARGED ON THE AMOUNT OF RS.1,55,00,000/- UTILISED BY THE CORPORAT ION AS PER VRS SCHEME OF THE GOVERNMENT. THE LETTER STATED TO BE WRITTEN BY TH E STATE GOVERNMENT IN 2004 IS NOT PRODUCED. EVEN IF, IT IS CONSIDERED THAT THE LE TTER WAS RECEIVED FROM THE GOVERNMENT IN 2004, THE APPELLANT HAD NOT MADE ANY SUCH PROVISION OF INTEREST IN EARLIER YEARS. THERE IS NO SCIENTIFIC BASIS FOR MAK ING A REASONABLE PROVISION OF INTEREST OF ON THE FUND FROM SRF OF RS.1,55,00,000/ -. THE APPELLANT HAD MADE A PROVISION OF INTEREST OF RS.60,00,000/- WHICH WORKS OUT TO AROUND 38.71 %. THUS, IT CANNOT BE SAID TO BE LIABILITY ACCRUED FOR ONE Y EAR. THE APPELLANT ALSO NOT FURNISHED ANY EVIDENCE FOR PAYMENT OF SUCH INTEREST TO THE STATE GOVERNMENT ON SRF FUND. THEREFORE, THE AO WAS JUSTIFIED IN DISALL OWING THE PROVISION OF RS.60,00,000/- ON ACCOUNT OF INTEREST ON SRF FUNDS AS DEDUCTION FOR A.Y.2008- 09. HENCE, THE DISALLOWANCE OF RS.60,00,000/- MADE BY THE AO IS CONFIRMED. 13. THE CONTENTION OF THE ASSESSEE IS THAT THE PROVISION IS ALLOWABLE DEDUCTION. WE ARE OF THE VIEW THAT THE PROVISION WOULD BE ALLOWABLE IF THE SAME IS ON A REASONABLE AND SCIENTIFIC BASIS. HOWEVER, CONSIDERING TOTALITY OF THE FACTS, WE RESTORE THIS ISSUE TO THE A .O. TO [ITA NOS.383/IND/2013, 259 & 260/IND/2015, 269&449/ IND/2016 & 125/IND/2017] [M.P. POLICE HOUSING CORPORATION LTD., BHOPAL] 12 VERIFY WHETHER THE ASSESSEE HAD PAID ANY INTEREST IN SUBSEQUENT YEARS ON THIS AMOUNT AND DECIDE ACCORDINGLY. 14. GROUND NO.5 IS AGAINST CONFIRMATION OF ADDITION O F RS.30,76,000/- BAD DEBT WRITTEN OFF. LD. COUNSEL FO R THE ASSESSEE REITERATED THE SUBMISSIONS AS MADE BEFORE THE LD. CIT(A) AND SUBMITTED THAT THE LD. CIT(A) WAS NOT JUST IFIED IN CONFIRMING THE ADDITION. HE SUBMITTED THAT THIS AM OUNT RELATED TO SOME OLD OUTSTANDING ADVANCES AND DEBTORS SHOWN UNDER THE LOANS AND ADVANCES SCHEDULE 5 OF THE FINAL ACCOUNTS. ON THE BASIS OF THE OBSERVATION OF THE COMPTROLLER AND AUDITOR GENERAL, THE ASSESSEE HAD WRITT EN OFF, HENCE, ALLOWABLE DEDUCTION. 15. LD. D.R. OPPOSED THESE SUBMISSIONS AND SUPPORTED THE ORDER OF THE LD. CIT(A). HE FURTHER SUBMITTED THAT THESE WERE NOT THE ACTUAL BAD DEBTS. ME RE PROVISION OF DEBTS ARE NOT ALLOWABLE. [ITA NOS.383/IND/2013, 259 & 260/IND/2015, 269&449/ IND/2016 & 125/IND/2017] [M.P. POLICE HOUSING CORPORATION LTD., BHOPAL] 13 16. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. LD. CIT(A) HAS DECIDED THI S ISSUE IN PARA 7.4 OF HIS ORDER AS UNDER: 7.4 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF T HE APPELLANT AND FACTS OF THE CASE. THE APPELLANT HAD MADE A PROVISION OF RSJO,76 ,000/- DURING THE YEAR BY GIVING A NOTE IN THE FINAL ACCOUNT THAT 'WITH A VIE W TO CONSIDERING OLD OUTSTANDING RECOVERY OF VARIOUS CONTRACTORS, THE CORPORATION HA S MADE A PROVISION OF RS.30,76,000/- DURING THE YEAR'. THE APPELLANT HAD NEITHER FURNISHED DETAILS OF PARTY WISE LOANS AND ADVANCES FOR WHICH PROVISION W AS MADE CONSIDERING THE OLD OUTSTANDING RECOVERY DURING ASSESSMENT PROCEEDINGS NOR DURING APPELLATE PROCEEDINGS. THE APPELLANT HAD ALSO NOT WRITTEN OFF THESE AMOUNTS IN ITS BOOKS OF ACCOUNT AS NO EVIDENCE WAS FURNISHED BEFORE THE AO OR DURING APPELLATE PROCEEDINGS TO SHOW THAT ACCOUNTS OF THE DEBTORS WE RE ACTUALLY WRITTEN OFF. IT MAY BE NOTED THAT AS PER EXPLANATION TO SECTION 36( 1 ) (VII), PROVISION FOR BAD DEBTS MADE IN THE ACCOUNTS OF THE ASSESSEE IS NOT AN ALLO WABLE DEDUCTION. THE EXPLANATION READS AS UNDER: EXPLANATION FOR THE PURPOSES OF HIS CLAUSE, ANY BAD DEBT OR PART THEREOF WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNT S OF THE ASSESSEE SHALL NOT INCLUDE ANY PROVISION FOR BAD AND DOUBTFUL DEBTS MA DE IN THE ACCOUNTS OF THE ASSESSEE. IN VIEW OF THE ABOVE, IN MY OPINION, THE A.O. WAS JUSTIFIED IN DISALLOWING THE PROVISION OF BAD DEBTS OF RS.30,76,000/-. HENCE, T HE DISALLOWANCE OF RS.30,76,000/- ON ACCOUNT OF PROVISION FOR BAD DEBT S IS CONFIRMED. 17. AFTER CONSIDERING THE TOTALITY OF THE FACTS, WE SET ASIDE THE ORDER OF LD. CIT(A) AND RESTORE THE ISSUE T O THE A.O. TO VERIFY WHETHER THE ASSESSEE HAD ACTUALLY WRITT EN OFF THE BAD DEBTS AND DECIDE THE ISSUE AFRESH. [ITA NOS.383/IND/2013, 259 & 260/IND/2015, 269&449/ IND/2016 & 125/IND/2017] [M.P. POLICE HOUSING CORPORATION LTD., BHOPAL] 14 18. GROUND NO.6 IS AGAINST CONFIRMING THE ADDITION OF RS.4 CRORES IN RESPECT OF PROVISION FOR POLICE WELF ARE COMMUNITY HALL. LD. SENIOR COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS AS MADE BEFORE THE LD. CI T(A). IT IS CONTENDED THAT THE ASSESSEE CORPORATION HAD MADE A CONTRACT WITH THE GOVERNMENT OF M.P. TO INCUR EXPEND ITURE IN RESPECT OF POLICE WELFARE SCHEMES FOR THE BENEFIT OF POLICE PERSONNEL ON BEHALF OF THE GOVERNMENT OF M.P. THE B OARD OF DIRECTORS OF THE APPELLANT CORPORATION HAD MADE A SCHEME IN ITS MEETING FOR CONSTRUCTING COMMUNITY HAL L FOR THE USE OF POLICE PERSONNEL FROM ITS OWN EARNING LIK E INTEREST AND INCOME FROM SUPERVISION. THE COMMUNITY HALL SO CONSTRUCTED WOULD BE TRANSFERRED TO THE GOVERNMEN T OF M.P., HENCE, THE ASSET CONSTRUCTED BY THE CORPORATION WOULD BE REVENUE EXPENDITURE AND ALLOWABLE U/S 37 OF THE ACT. [ITA NOS.383/IND/2013, 259 & 260/IND/2015, 269&449/ IND/2016 & 125/IND/2017] [M.P. POLICE HOUSING CORPORATION LTD., BHOPAL] 15 19. ON THE CONTRARY, THE LD. D.R. SUPPORTED THE ORD ER OF THE LD. CIT(A). 20. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. LD. CIT(A) HAS DECIDED THI S ISSUE IN PARA 8.4 OF HIS ORDER AS UNDER: I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE APPELLANT AND FACTS OF THE CASE. IT MAY BE PERTINENT TO NOTE THAT, AS SUBMITTED BY T HE APPELLANT DURING ASSESSMENT PROCEEDINGS, IT WAS DECIDED IN THE MEETING OF BOARD OF DIRECTORS HELD ON 09.05.2008 TO CONSTRUCT COMMUNITY HALLS FOR THE USE OF POLICE PERSONNEL FROM ITS OWN EARNINGS. ACCORDINGLY, A PROVISION OF RS4 CRORE S WAS MADE ON ACCOUNT OF POLICE COMMUNITY HALLS. FIRST, THE DECISION TO CONS TRUCT COMMUNITY HALLS FOR POLICE PERSONNEL WAS TAKEN IN A BOARD MEETING HELD ON 09.0 5.2008 I.E. AFTER THE PREVIOUS YEAR ENDING ON 31.3.2008 RELEVANT TO A.Y. 2008-09 U NDER CONSIDERATION AND, THEREFORE, NO EVENT HAD OCCURRED DURING THE PREVIOU S YEAR RELEVANT TO A.Y. 2008- 09 UNDER CONSIDERATION TO SHOW THAT ANY LIABILITY H AD ACCRUED OR ASCERTAINED DURING THE YEAR UNDER CONSIDERATION. SECOND, THE A PPELLANT ITSELF SUBMITTED THAT THE CONSTRUCTION OF THE COMMUNITY HALLS WOULD BE MA DE OUT OF ITS OWN EARNINGS. THUS, IT IS AN APPLICATION OF INCOME AS PER THE DIS CRETION OF THE MANAGEMENT OF THE CORPORATION AND IT WAS NOT AN ACCRUED LIABILITY WHO LLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE CORPORATION. NO ACTUAL E XPENDITURE WAS INCURRED DURING THE YEAR UNDER CONSIDERATION. THE, BUSINESS OF THE CORPORATION IS TO CONSTRUCT HOUSES AND ADMINISTRATIVE BUILDINGS FOR P OLICE DEPARTMENT ON BEHALF OF THE GOVT. OF M.P. AND THE APPELLANT TAKES SUPERVISI ON CHARGES @ 12 % OF THE TOTAL CONSTRUCTION COST INCURRED ON THE PROJECT/SCHEME. T HUS, THE PROVISION MADE IN THE ACCOUNTS FOR THE YEAR ENDED 31.03.2008 OF RS4 CRORE S FOR COMMUNITY HALLS WAS NOT AN ALLOWABLE DEDUCTION IN A.Y. 2008-09 AND AO W AS JUSTIFIED IN MAKING THE SAID DISALLOWANCE. HENCE, THE DISALLOWANCE OF PROVI SION OF RS4 CRORES OF POLICE COMMUNITY HALLS IS CONFIRMED. [ITA NOS.383/IND/2013, 259 & 260/IND/2015, 269&449/ IND/2016 & 125/IND/2017] [M.P. POLICE HOUSING CORPORATION LTD., BHOPAL] 16 21. WE FIND THAT THE LD. CIT(A) HAS GIVEN FINDING ON FACT THAT THE DECISION RELATE TO EARLIER YEAR. HOWEVER , WE ARE OF THE VIEW THAT THE EARLIER DECISION TAKEN IN EARLI ER YEAR AND THE WORK EXECUTED IN ANOTHER YEAR WOULD BE SUFFIC IENT TO ALLOW EXPENDITURE IN THE YEAR WHEN IT WAS ACTUALLY INCURRED. WE THEREFORE RESTORE THIS ISSUE TO THE AS SESSING OFFICER TO VERIFY WHETHER ANY EXPENDITURE WAS INCURRE D IN THE NATURE OF REVENUE EXPENDITURE AND DECIDE ACCORDING LY. 22. GROUND NO.7 IS AGAINST CONFIRMING THE PROVISION O F COST OR RUN EXPENDITURE AMOUNTING TO RS.1,77,70,000/ -. LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIO NS AS MADE BEFORE THE LD. CIT(A). IT WAS STATED THAT CORPORAT ION IS AN AGENCY OF THE GOVERNMENT OF M.P. EXECUTING THE WORK ON BEHALF OF THE CENTRAL & STATE GOVERNMENTS. THE GOVERNMENT IS SOLE FINANCIER OF THE FUND TO THE APPEL LANT CORPORATION FOR THE PURPOSE OF CONSTRUCTION OF HOUSE S AND POLICE STATIONS WITHIN THE STATE UNDER VARIOUS SCHEMES . IT [ITA NOS.383/IND/2013, 259 & 260/IND/2015, 269&449/ IND/2016 & 125/IND/2017] [M.P. POLICE HOUSING CORPORATION LTD., BHOPAL] 17 IS CONTENDED THAT AS PER NORMAL PRACTICE, THE GOVERNMEN T GIVES TECHNICAL SANCTIONS QUALIFYING THE AMOUNT OF EXPENDITURE IN RESPECT OF SUCH SCHEMES. ON THE BASI S OF SUCH TECHNICAL APPROVAL, THE PROJECT IS ALLOWED FOR EXECUTION OF THE SCHEME. GENERAL TIME FOR EXECUTION OF SCHEME/PROJECT IS 4 TO 5 YEARS. DUE TO CHANGE IN THE PRICE OF CEMENT, STEEL, ETC., THE ACTUAL CONSTRUCTION COST IS MORE THAN THE TECHNICAL APPROVAL. HENCE, THE ASSESSEE MADE A PROVISION FOR SUCH ESCALATION IN COST. THE DIFFERENC E BETWEEN TECHNICAL APPROVAL AND ESCALATION COST IS TREATE D AS LOSS TO THE CORPORATION. 23. LD. D.R. OPPOSED THE SUBMISSIONS AND SUPPORTED THE ORDER OF THE LD. CIT(A). 24. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS [ITA NOS.383/IND/2013, 259 & 260/IND/2015, 269&449/ IND/2016 & 125/IND/2017] [M.P. POLICE HOUSING CORPORATION LTD., BHOPAL] 18 OF THE AUTHORITIES BELOW. WE FIND THAT THE LD. CIT(A ) HAS DECIDED THIS ISSUE VIDE PARA 9.4 OF HIS ORDER AS UNDE R: I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE A PPELLANT AND FACTS OF THE CASE. FROM THE CORRESPONDENCE FILED BY THE APPELLANT ALON GWITH ITS SUBMISSION, IT IS NOTICED THAT THE APPELLANT CORPORATION HAD DECIDED TO MAKE SUCH A PROVISION FOR COST OVER RUN ON 15.07.2008 AS MENTIONED IN THE LET TER DATED 15.07.2008 ADDRESSED TO ADDITIONAL CHIEF SECRETARY, MADHYA PRA DESH ADMINISTRATION, HOME DEPARTMENT MINISTRY. THUS, THE DECISION TO MAKE THE PROVISION OF RS.1,77,70,0001- FOR COST OVER RUN WAS TAKEN AFTER THE END OF PREVIOUS YEAR RELEVANT TO A.Y. 2008-09 UNDER CONSIDERATION AND IT CANNOT BE SAID THAT ANY LIABILITY HAD OCCURRED DURING THE RELEVANT PREVIOUS YEAR. IT IS ALSO NOTICED THAT THIS COST OVER RUN WAS CALCULATED FOR A NUMBER OF S CHEMES WHICH WERE UNDERTAKEN IN EARLIER YEARS STARTING FROM 2000-01 AND, HENCE, IT CANNOT BE SAID THAT THE TOTAL AMOUNT OF RS.1,77,70,000/- RELATED TO THE A.Y. 2008 -09 UNDER CONSIDERATION. IT WAS ALSO NOTICED FROM THE LEDGER ACCOUNTS THAT THIS PROVISION WAS NOT AN ASCERTAINED LIABILITY BECAUSE IN THE SUBSEQUENT PER IOD THIS WAS REDUCED TO RS.95,01,857/- AS ON MARCH, 2009. MOREOVER, IT MAY BE PERTINENT TO NOTE THAT AS PER MOU OF THE CORPORATION WITH GOVT. OF M.P., ALL THE COSTS INCURRED ON ANY PROJECT WOULD BE BORNE BY THE STATE GOVT. AND THE A PPELLANT CORPORATION WOULD BE ELIGIBLE FOR SUPERVISION CHARGES OF 12 % ON THE TOT AL COST OF THE PROJECT. HENCE, THE COST OVER RUN COULD NOT BE THE LIABILITY OF THE APPELLANT. THEREFORE, THE AO WAS JUSTIFIED IN DISALLOWING THE SAID PROVISION, WHICH WAS NOT RELATED TO THE YEAR UNDER CONSIDERATION AND WAS NOT LIABILITY OF THE APPELLAN T. THUS, THE DISALLOWANCE OF PROVISION OF COST OVER RUN OF RS.I,77,70,0001- IS C ONFIRMED. 25. WE FIND THAT THE LD. CIT(A) DISALLOWED THIS PROVISION ON THE GROUND THAT IT DOES NOT RELATE TO T HE YEAR UNDER APPEAL. CONSIDERING THE TOTALITY OF THE FACTS, W E DEEM IT PROPER AND RESTORE THIS ISSUE TO THE FILE OF THE A.O. TO VERIFY WHETHER ANY EXPENDITURE RELATED TO THIS YEAR WAS [ITA NOS.383/IND/2013, 259 & 260/IND/2015, 269&449/ IND/2016 & 125/IND/2017] [M.P. POLICE HOUSING CORPORATION LTD., BHOPAL] 19 INCURRED IN THE NATURE OF ESCALATION OF COST AND DECIDE ACCORDINGLY. 26. GROUND NO.8 IS AGAINST CONFIRMING THE DISALLOWANCE OF CONTINGENCY EXPENSES OF RS.16,99,888/ -. LD. SENIOR COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS AS MADE BEFORE THE LD. CIT(A). LD. COU NSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE CORPORATIO N AS PER THE INSTRUCTION OF GOVERNMENT OF M.P. INCURRE D CERTAIN EXPENSES IN RELATION TO THE CONSTRUCTION OF V ARIOUS SCHEMES. DURING THE YEAR UNDER APPEAL, THE GOVERNMENT OF M.P. CONSTRUCTED THE ASSESSEE CORPORATION TO BEAR T HE EXPENSES RELATED TO CONTINGENCY CHARGES. IT WAS STATED THAT THE EXPENSES WERE ACTUALLY INCURRED BY THE APPELLANT CORPORATION FOR THE PURPOSE OF EXECUTION OF WORK AND SCHEMES AND THUS ALLOWABLE EXPENDITURE [ITA NOS.383/IND/2013, 259 & 260/IND/2015, 269&449/ IND/2016 & 125/IND/2017] [M.P. POLICE HOUSING CORPORATION LTD., BHOPAL] 20 27. LD. D.R. OPPOSED THESE SUBMISSIONS AND SUPPORTED THE ORDER OF THE LD. CIT(A). 28. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. LD. CIT(A) HAS DECIDED THI S ISSUE VIDE PARA 10.4 OF HIS ORDER AS UNDER: 10.4 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE APPELLANT AND FACTS OF THE CASE. IT MAY BE NOTED THAT AS ADMITTED BY THE A PPELLANT, THE CORPORATION IS ENGAGED IN CONSTRUCTION OF RESIDENTIAL HOUSES AND A DMINISTRATIVE BUILDINGS FOR POLICE PERSONNEL ON BEHALF OF GOVT. OF M.P. AS PER MOU BETWEEN THE APPELLANT CORPORATION AND THE GOVERNMENT, ALL THE EXPENDITURE INCURRED ON THE SCHEME OR PROJECT OF CONSTRUCTION POLICE DEPARTMENT WAS TO BE BORNE BY THE STATE GOVT. AND THE APPELLANT CORPORATION IS ENTITLED TO SUPERVISIO N INCOME @ 12% OF TOTAL CONSTRUCTION COST. THUS, ALL THE EXPENDITURE INCUR RED ON THE CONSTRUCTION WORK DONE BY THE CORPORATION IS TO BE BORNE BY THE GOVER NMENT. ACCORDINGLY, THE APPELLANT WHEN INCURRING THE CONTINGENT EXPENDITURE INCURRED FOR ANY WORK UNDERTAKEN BY THE CORPORATION WERE DEBITED UNDER TH E PROJECT AND REIMBURSED BY THE STATE GOVT. THE APPELLANT HAD NOT MADE ANY SUC H PROVISION FOR CONTINGENCY EXPENDITURE IN EARLIER YEARS IN ITS BOOKS OF ACCOUN T. THERE IS NO CHANGE IN THE MOU BETWEEN THE APPELLANT AND GOVERNMENT OF M.P. TH E APPELLANT CORPORATION ON ITS OWN DECIDED TO MAKE A PROVISION FOR CONTINGE NCY EXPENDITURE IN ITS BOOKS OF ACCOUNT AND DEBITED TO THE P & L A/C. THEREFORE, TH IS WAS NOT AN EXPENDITURE PERTAINING TO THE APPELLANT BUT IT WAS INCURRED ON BEHALF OF THE STATE GOVT. RECOVERABLE FROM THE GOVERNMENT AND, HENCE, CANNOT BE CHARGED AS A DEDUCTION FROM THE INCOME OF THE APPELLANT OF SUPERVISION CHA RGES. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE OPINION THAT AO WAS JUSTIFIED IN DISALLOWING THE PROVISIONS FOR CONTINGENCY EXPENDIT URE OF RS.60,99,888/- AND, THEREFORE, THE DISALLOWANCE MADE BY THE AO OF RS.60 ,99,888/- IS CONFIRMED. [ITA NOS.383/IND/2013, 259 & 260/IND/2015, 269&449/ IND/2016 & 125/IND/2017] [M.P. POLICE HOUSING CORPORATION LTD., BHOPAL] 21 29. LD. CIT(A) DISALLOWED THIS CLAIM ON THE GROUND THAT IN EARLIER YEAR, NO SUCH CORPORATION WAS MADE FOR CONTINGENCY EXPENSES. AS STATED BY THE ASSESSEE THAT THIS EXPENDITURE WAS EARLIER BORNE BY THE GOVERNMENT OF M .P. AND THE GOVERNMENT OF M.P. DIRECTED THE ASSESSEE CORPORATION TO BEAR THIS EXPENDITURE. IT IS CONTENDE D THAT THIS EXPENDITURE RELATE TO EXECUTION OF WORK. WE ARE OF THE VIEW THAT ANY EXPENDITURE RELATED TO EXECUTION OF WORK AS CARRIED OUT BY THE ASSESSEE WOULD BE ALLOWABLE EXPENDITURE. HOWEVER, THIS FACT IS REQUIRED TO BE VE RIFIED WHETHER SUCH EXPENDITURE MADE FOR THE EXECUTION OF W ORK? WE THEREFORE, RESTORE THIS ISSUE TO THE FILE OF THE A.O. TO DECIDE IT AFRESH. 30. GROUND NO.9 IS GENERAL IN NATURE AND NEEDS NO SEPARATE ADJUDICATION. [ITA NOS.383/IND/2013, 259 & 260/IND/2015, 269&449/ IND/2016 & 125/IND/2017] [M.P. POLICE HOUSING CORPORATION LTD., BHOPAL] 22 31. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA 269/IND/2016 (A.Y. 2008-09): 32. THIS CROSS APPEAL BY THE REVENUE IS RAISED A SOLITARY GROUND, WHICH READS AS UNDER: DELETING THE ADDITION OF RS.50,01,000/- MADE BY A. O. ON ACCOUNT OF PROVISION OF GRATUITY FUND? FACTS RELATED TO THIS APPEAL ARE THAT CASE OF THE ASSESSEE WAS REOPENED BY THE REVENUE AND AN ORDER U/S 143(3) R.W.S. 147 OF THE ACT WAS FRAMED ON 31.3.2016. WHILE FRAMING THE ASSESSMENT, THE A.O. MADE ADDITION ON ACCOUNT OF DISALLOWANCE OF PROVISION FOR GRATUITY OF RS.50,01,000/-. 33. AGGRIEVED AGAINST THIS, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO AFTER CONSIDERING TH E SUBMISSIONS ALLOWED THE CLAIM OF THE ASSESSEE. [ITA NOS.383/IND/2013, 259 & 260/IND/2015, 269&449/ IND/2016 & 125/IND/2017] [M.P. POLICE HOUSING CORPORATION LTD., BHOPAL] 23 34. LD. D.R. SUPPORTED THE ORDER OF THE A.O. 35. ON THE CONTRARY, LD. COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF THE LD. CIT(A) AND SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE AND THE LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION. 13. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LD. CIT(A ) HAS DECIDED THIS ISSUE IN PARA 5 OF THE ORDER BY OBSERVIN G AS UNDER: 5. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT ON FACTS AS WELL AS LAW AND AM IN AGREEMENT WITH THE SAME. THE EXPENDITURE CLAIMED IS NOT ADVERSELY HIT EITHER BY SECTION 40A(7) OR BY SECTIO N 43B. I HAVE ALSO NOTED THAT WHILE PASSING THE ASSESSMENT ORDER, THE ASSESSING O FFICER HAD NOT ACCEPTED THE CONTENTION OF THE APPELLANT AS IT WAS STATED THAT T HE ASSESSEE HAD NOT FURNISHED ANY DOCUMENTARY EVIDENCES REGARDING THE ALLOWABILIT Y OF DEDUCTION FOR LIC GRATUITY PAYMENT. IN HIS SUBMISSIONS DURING APPEAL THE APPELLANT HAS SUBMITTED THAT THIS PROVISION OF GRATUITY AMOUNTING TO RS.50, 01,000/- HAD BEEN MADE ON THE BASIS OF VALUATION DONE BY LIC WHICH WAS AN APP ROVED AGENCY MAINTAINING APPROVED GRATUITY FUND ON BEHALF OF THE APPELLANT C ORPORATION. LIC HAD GIVEN VALUATION OF GRATUITY FUND AND HAD SHOWN SHORTFALL OF VALUE IN RESPECT OF GRATUITY LIABILITY DURING THE YEAR UNDER CONSIDERATION. THE APPELLANT HAD MADE A PROVISION OF RS.50,01,000/- IN THE YEAR ENDED ON 31 .03.2008 AND HAD MADE PAYMENT TO LIC DATED 29.9.2008. ACCORDING TO THE A PPELLANT, COPY OF THE SAME LETTER ALONG WITH COPY OF LEDGER HAD BEEN SUBMITTED TO THE A.O. DURING THE TIME OF [ITA NOS.383/IND/2013, 259 & 260/IND/2015, 269&449/ IND/2016 & 125/IND/2017] [M.P. POLICE HOUSING CORPORATION LTD., BHOPAL] 24 ASSESSMENT PROCEEDINGS. HOWEVER, THE A.O. HAD NOT CONSIDERED THE REPLY OF THE APPELLANT. 6. DURING THE APPEAL PROCEEDINGS THE ASSESSMENT REC ORDS OF THE APPELLANT WERE CALLED FOR FROM THE A.O. IT IS SEEN FROM THE ASSESSMENT RECORDS THAT DURING THE COURSE OF REASSESSMENT PROCEEDINGS, THE APPELLA NT HAD FILED LETTER TO THE A.O. ON 19.3.2014 IN WHICH IT HAD BEEN CLEARLY MENTIONED THAT THIS AMOUNT OF RS.50,01,000/- WAS PAID TO LIC ON ACCOUNT OF GRATUI TY ON 29.9.2008 BEFORE THE DUE DATE OF FILING THE RETURN. IN SUPPORT OF THIS, THE APPELLANT HAD GIVEN THE COPY OF THE LEDGER ACCOUNT AND THE FINAL ACCOUNT. THERE FORE, THE APPELLANT HAD REQUESTED THE A.O. TO CONSIDER THE DEDUCTION AS IT HAD BEEN ACTUALLY PAID BEFORE THE DUE DATE OF RETURN AS PER THE PROVISIONS OF SEC TION 43B. 7. THUS, LOOKING TO THE FACTS OF THE CASE, IT IS SE EN THAT THE APPELLANT CORPORATION HAD MADE PAYMENT OF THE AMOUNT OF RS.50 ,01,000/- TO LIC INDIA ON 29.9.2008 BEFORE THE DUE DATE OF FILING OF RETURN. THEREFORE, AS PER THE PROVISIONS OF SECTION 43B, THIS DEDUCTION IS NOT DISALLOWABLE AND, THEREFORE, THIS GROUND OF APPEAL IS ALLOWED. 36. FROM THE ABOVE ORDER, IT IS CLEAR THAT LD. CIT(A) HAS GIVEN FINDING ON FACTS THAT THE AMOUNT WAS PAID TO L IC ON ACCOUNT OF GRATUITY ON 29.9.2008 BEFORE THE DUE DAT E OF FILING OF THE RETURN. THIS FACT IS NOT CONTROVERTE D BY THE REVENUE, THEREFORE, WE DO NOT SEE ANY REASON TO INTER FERE WITH THE FINDING OF THE LD. CIT(A) AND THE SAME HEREB Y AFFIRMED AND THE APPEAL IS DISMISSED. [ITA NOS.383/IND/2013, 259 & 260/IND/2015, 269&449/ IND/2016 & 125/IND/2017] [M.P. POLICE HOUSING CORPORATION LTD., BHOPAL] 25 ITA 259/IND/2015 (A.Y. 2010-11): 37. THESE APPEALS BY THE ASSESSEE ARE FILED AFTER DELAY OF 6 DAYS. AN APPLICATION SEEKING CONDONATION IS FILE D. AN AFFIDAVIT BY SHRI P.K. TRIPATHI, FINANCIAL ADVISOR & CHI EF ACCOUNTS OFFICER IS PLACED ON RECORD. KEEPING IN VI EW OF THE SUBMISSION MADE IN THE AFFIDAVIT, DELAY OF 6 DAYS IS CONDONED. APPEALS ARE TAKEN UP FOR HEARING. THE ASSESS EE HAS RAISED FOLLOWING GROUNDS OF APPEAL IN ITA NO.259/IND/2015: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE FINDINGS OF LEARNED CIT(A) ARE BAD AND OPPOSED TO FACTS, EQUITY AND LAW AND ARE, THEREFORE, UNSUSTAINABLE IN LAW. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED A.O. ERRED IN MAKING A SCRUTINY ASSESSM ENT U/S 143(3) OF THE ACT. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED A.O. ERRED IN MAKING ADDITION OF RS.20, 16,62,336/- ON ACCOUNT OF UNDISCLOSED INCOME. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED A.O. ERRED IN MAKING ADDITION MERELY ON THE ENTRIES SHOWN IN THE FORM 26AS. 5. ANY OTHER GROUND THAT MAY BE DEEMED NECESSARY AT TH E TIME OF HEARING AS THE ASSESSEE CRAVES ITS RIGHT TO ADD, AM END, OR ALTER ANY OF THE GROUNDS OF APPEAL ON OR BEFORE THE ACTUAL HE ARING OF THE CASE. [ITA NOS.383/IND/2013, 259 & 260/IND/2015, 269&449/ IND/2016 & 125/IND/2017] [M.P. POLICE HOUSING CORPORATION LTD., BHOPAL] 26 38. AT THE TIME OF HEARING, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT HE DOES NOT WISH TO PRESS GRO UND NOS.1 & 2. APROPOS TO GROUND NO.3, LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS AS MADE IN THE WR ITTEN SUBMISSIONS MADE BEFORE THE LD. CIT(A). FOR THE SAKE OF CLARITY, THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) ARE REPRODUCED AS UNDER: 1. GROUND NO _ 1: ARE GENERA1 & CONSEQUENTIAL IN N ATURE HENCE NOT BE PRESSED. 2. AS PER GROUND NO -2&3, THE LD. AO HAS CHARGED T HE INTEREST ON ADVANCES AS INCOME OF THE ASSESSEE. HOWEVER, THE CONTENTION OF THE ASSESS EE THAT IT IS A GOVERNMENT CORPORATION WORKING AS A CONSTRUCTION AGENCY ON BEHALF OF GOVER NMENT. THEREFORE THE INTEREST ACCRUED UNDER THE ADVANCES OF SAID SCHEME IS AN INCOME OF GOVERNM ENT, AND ADDITIONS MADE BY LD. AO ARE UNJUSTIFIED AND NOT TENABLE. ALSO LD AO WAS UNJUSTIFIED TO CALCULATE INTEREST AC CRUED ON FRD/TDR AS PER THE FORM 26AS, AN STATEMENTS FILED BY BANKERS A PROOF OF THE TDS STATEMENT DEDUCTED. SUBMISSION OF ASSESSEE: THE MP POLICE HOUSING CORPORATION LIMITED IS A CORP ORATION SETUP BY THE GOVERNMENT OF MADHYA PRADESH, WITH THE OBJECT OF DEVELOPING AND C ONSTRUCTING RESIDENTIAL AND ADMINISTRATIVE BUILDINGS, POLICE STATION AND OTHER GOVERNMENT OFFI CES FOR THE DEPARTMENT OF MP POLICE & GOVERNMENT OF INDIA. THE GOVERNMENT OF MP & CENTRAL GOVERNMENT PROVIDING FUNDS TO THE CORPORATION UNDER THE VARIOUS SCHEMES OF POLICE FOR CE MODERNIZATION. THE CORPORATION IS CHARGING A FIXED PERCENTAGE OF THE SUPERVISION CHAR GES AS INCOME FOR MEETING OUT ITS ESTABLISHMENT EXPENSES. THEREFORE THE FUND RAISED B Y THE CORPORATION: IS BELONGING TO THE GOVERNMENT OF MP & CENTRAL GOVERNMENT. TO KEEP SAFE CUSTODY OF THE FUNDS OF THE GOVERNMENT, THE APPELLANT CORPORATION MANAGES FUNDS IN VARIOUS BANKS AS SHORT TERM DEPOSITS OR SAVING /CURRENT ACCOUNT. IT WAS THE REPEATED OBJECTION OF THE C&AG (REVENUE AUDIT), THAT THE CORPORATION IS INCREASING ITS BY TAKING INTEREST INCOME IN THE PROFIT & LOSS ACCOUNT. THEREFORE, CONSIDERING THE AUDIT OBJECTIONS OF C&A G, THE GOVE RNMENT OF INDIA (MINISTRY OF HOME AFFAIRS) [ITA NOS.383/IND/2013, 259 & 260/IND/2015, 269&449/ IND/2016 & 125/IND/2017] [M.P. POLICE HOUSING CORPORATION LTD., BHOPAL] 27 VIDES ITS ORDER NO. VL-21011/11/2009-PM-1 DATED 23. 03.2010, IT WAS DIRECTED THAT THE CORPORATION SHOULD KEEP MPF FUND IN SHORT TERM DEPO SIT OR CURRENT ACCOUNT/SAVING ACCOUNTS AND INTEREST ACCRUED IF ANY SHOULD BE USED FOR THE FURTHERANCE OF THE OBJECTIVE OF THE SCHEME. THE STATE GOVERNMENT VIDES ITS ORDER NO. F-3-29/08/B-3/ 2 DATED 30.8.2010 HAS DIRECTED THE APPELLANT CORPORATION THAT THE INTEREST INCOME SHOULD NOT BE SHOWN AS THE PROFIT OF THE CORPORATION; HOWEVER IT SHOULD BE BOOKED AS 'INTEREST ACCRUED UN DER THE SCHEME FUNDS' EITHER STATE FUND OR CENTRAL GOVERNMENT FUNDS. BEING A GOVERNMENT ORGANI SATION THE APPELLANT CORPORATION IS BOUND TO FOLLOW THE INSTRUCTIONS OF GOVERNMENT AND MADE THEIR ACCOUNTING POLICIES CHANGED IN ACCORDANCE WITH THE INSTRUCTION OR ORDERS THE COPY OF ORDER IS BEING SUBMITTED IN OUR PREVIOUS REPLY. THE BOD MEETING HELD BY THE CORPORATION AND CHANGED THEIR ACCOUNTING POLICIES REFERRED IN THE SCHEDULE-10 OF THE FINAL ACCOUNT PARA 11(C), THE CO PY OF AUDITED FINAL ACCOUNTS ALONG WITH NOTES TO ACCOUNTS HAVE BEEN SUBMITTED. 2 AS AGAINST THE SAME CONTENTION, LD. AO HAS OPINED THAT TBE ASSESSEE IS CONSISTENTLY SHOWING INTEREST INCOME AS TAXABLE INCOME TILL THE A Y 20 09-10. ALSO HE HAS CONTENDED THAT THE ORDER OF GOI & GOVT. OF M.P. DATED 23.3.2010 HAS NOT DIRE CTED THE ASSESSEE ABOUT THE TREATMENT OF INTEREST INCOME. IN ACCORDANCE WITH THE DIRECTION G IVEN BY STATE GOVERNMENT THE FUND FOR POLICE FORCE MODERNIZATION SCHEME SHALL NOT HE TREATED AS INCOME OF THE CORPORATION, HOWEVER IT IS LIABILITY AND IT SHALL BE SHOWN SEPARATELY UNDER TH E SPECIFIED HEAD OF LIABILITY KNOWN AS INTEREST ACCRUED ON FUND FOR WORK. ALSO THE CORPORATION DO ES NOT HAVE ANY POWER TO USE THE SAME INTEREST. HOWEVER, THE EMPOWERED COMMITTEE OF THE G OVERNMENT OF M.P. SHALL MONITOR THE FUND AND PROVIDE THE INSTRUCTIONS AND DIRECTIONS OF ITS USES. THE LD. AO HAS WRONGLY INTERCEPTED THE ORDER OF GOI THAT THE INTEREST SHOULD BE USED FOR C ONSTRUCTION OF BUILDING AND SHOULD BE KEPT IN SEPARATE HEAD. THE ASSESSEE IS AN AUTONOMOUS CORPOR ATION HAVING OWN CAPITAL AND SOURCES OF INCOME. THE ENTIRE MANAGEMENT AND CONTROL OF THE AF FAIRS OF THE CORPORATION IS VESTED UNDER BOARD OF DIRECTORS (BOD). BUT THE BOD OF THE CORP ORATION IS NOT EMPOWERED TO USE OR APPLY THE INTEREST FUNDS KEPT AS ABOVE. IT IS A GENERAL PRINCIPLE OF ACCOUNTING THAT THE INCOME SHALL BE IN POSSESSION OF THE ASSESSEE. A PERSON IS OWNER OF THE INCOME IF IT HAS POWER TO UTILIZE THE SAME. IN OUR CASE, THE APPELLANT CORPORATION OR ITS BOARD DOES NOT HAVE ANY POWER OR POSSESSION OF THE SAME INCOME; THEY ARE WORKING AS DEPOSITORY OF GOVE RNMENT MONEY. THEREFORE, INTEREST ACCRUED/EAMED ON GOVERNMENT MONEY SHALL BE DEEMED A S INCOME OF GOVERNMENT. ALSO THE EARNED INTEREST SHALL BE UTILIZED BY THE EMPOWERED COMMITTEE OF GOVT. OF MP, FOR THE PURPOSE OF THE PARTICULAR SCHEME. THEREFORE THE INTEREST RECEI VED BY THE CORPORATION IS A DIVERSION OF INCOME BY AN OVERRIDING TITLE. THE ACTUAL OWNER OF THE INCOME IS GOVERNMENT AND HENCE IT WILL BE TREATED AS DIVERSION OF INCOME OF GOVERNMENT BY OVERRIDING TITLE. BY THE ORDER NO. F-3- 29/08/B-3/2 DATED 30/08/2010 THE GOVERNMENT IS OWNE R OF THE SOURCES OF INCOME; THEREFORE INCOME ARISEN FROM THAT SOURCE SHALL BE TREATED AS INCOME OF GOVERNMENT. WHERE BY AN OBLIGATION INCOME IS DIVERTED BEFORE IT REACHES THE ASSESSEE, IT IS NOT TAXABLE, BUT WHERE THE INCOME IS REQUIRED 10 BE APPLIED TO DISCH ARGE AN OBLIGATION AFTER SUCH INCOME REACHES THE ASSESSEE, THE SAME CONSEQUENCE, IN LAW, DOES NO T FOLLOW. THE SECOND PAYMENT IS MERELY AN OBLIGATION TO PAY ANOTHER PORTION OF ONE'S INCOME, WHICH HAS BEEN RECEIVED AND IS SINCE APPLIED. THE FIRST IS THE CASE IN WHICH THE INCOME NEVER REA CHES THE ASSESSEE, WHO EVEN IF HE WERE TO [ITA NOS.383/IND/2013, 259 & 260/IND/2015, 269&449/ IND/2016 & 125/IND/2017] [M.P. POLICE HOUSING CORPORATION LTD., BHOPAL] 28 COLLECT IT, DOES SO, NOT AS PART OF HIS INCOME, BUT FOR AND ON BEHALF OF THE PERSON TO WHOM IT IS PAYABLE-CIT V. SITALDAS (1961) 41 ITR 367 (SC) IN OUR OPINION, THE TRUE TEST IS WHETHER THE AMOUNT SOUGHT TO BE DEDUCTED, IN TRUTH, NEVER REACHED THE ASSESSEE AS HIS INCOME. OBLIGATIONS, NO DOUBT, THERE ARE ILL EVERY CASE, BUT IT IS THE NATURE OF THE OBLIGATION WHICH IS THE DECISIVE FACT. THERE IS A DIFFERENCE BETWEEN AN AMOUNT WHICH A PERSON IS OBLIGED TO APPLY OUT OF HIS INCOME AND AN AMOUNT WHICH BY THE NATURE OF THE OBLIGATION, CANNOT BE SAID TO BE A PART OF THE INCOME OF THE ASSESSEE. WHERE BY THE OBLIGATION INCOME IS DIVERTED BEFORE IT REACHES THE ASSESSEE, IT IS DEDUCTIBLE; B UT WHERE THE INCOME IS REQUIRED TO BE APPLIED TO DISCHARGE (1/1 OBLIGATION AFTER THE INCOME REACHES THE ASSESSEE, THE SAME CONSEQUENCE, IN /(/H', DOES NOT FOLLOW. IT IS THE FIRST KIND OF PAYMENT WH ICH CAN TRULY BE EXCUSED AND NOT THE SECOND. THE SECOND PAYMENT IS MERELY AN OBLIGATION TO PAY A NOTHER (/ PORTION OF ONE'S OWN INCOME, WHICH HAS BEEN RECEIVED AND IS SINCE APPLIED. THE F IRST IS A CASE WHERE INCOME NEVER REACHES THE ASSESSEE, WHO EVEN IF HE WERE [0 COLLECT IT DOES SO , NOT AS PART OF HIS INCOME, BUT FOR AND ON BEHALF OF THE PERSON TO WHOM IT IS PAYABLE ... ' AS PER THE ORDER OF GOL/STATE GOVT. OF MP, IT IS A LEGAL COMPULSION OF THE CORPORATION SHOULD BE NOT CHARGED INTEREST ACCRUED ON THE FUNDS RECEIVED UNDER PFMS AS PROFIT OF THE CORPORATION. ONCE A COMPONENT IS NOT A PROFIT PART OF THE CORPOR ATION, IT IS NOT FAIR AND JUSTIFIED TO TAKE IT AS INCOME IN THE COMPUTATION AND PAY THE TAX BY USING OWN CAPITAL. SUPPOSE, IF CORPORATION WILL PAY TAX IN RESPECT OF INTEREST ACCRUED ON PFMS FUND S, WHICH IS NO MORE PART OF SURPLUS OR CORPUS OF THE CORPORATION, THEN THE TAX SHOULD HAVE TO BE PAID AS A REDUCTION OF CAPITAL. THE INCOME TAX LAW IS ONLY PERMIT TO COLLECT THE TAX IF THERE IS A N INCOME. IF THERE IS NO INCOME, THE INCOME TAX CANNOT BE LEVIED. THEREFORE, THE INTEREST ON THE UN SECURED LOANS AND ADVANCES PROVIDED BY THE GOVERNMENT SHALL NOT BE TAKEN/DEEMED AS INCOME OF T HE CORPORATION, BUT IT IS AN INCOME OF GOVERNMENT AND CORPORATION SHOULD KEPT THE MONEY UN DER ITS CUSTODY AS A TRUSTEE. THE CORPORATION IS STILL SHOWING THE SAME ACCRUED INTER EST INCOME AS LIABILITIES AS PER ATTACHED SCHEDULE - 10 OF THE FINAL ACCOUNTS SUBMITTED IN TH E FINAL ACCOUNT. DIVERSION OF INCOME BY OVERRIDING TITLE - THE ASSES SEE MAY BE TRUSTEE OF THAT GOVERNMENT FUND BUT IT CANNOT APPLY THE FUND AS PER HIS OWN WILL. T HE INTEREST IF ANY EARNED ON THIS FUND IS ALSO TO BE CREDITED TO THAT FUND - IT IS THEREFORE CLEAR TH AT FUNDS STAND DIVERTED AT THE SOURCE AND THEREFORE THIS CANNOT BE CONSIDERED AS AN APPROPRIATION OF IN COME BUT IT IS EXPENDITURE. 3. AS PER THE ACCOUNTING NOTES REFERRED IN THE AUDI TED ACCOUNTS AND DUALLY APPROVED BY THE C&AG, THE APPELLANT CORPORATION HAS FRAMED THE POLI CY AS UNDER; 'THE FUNDS PROVIDED BY THE CENTRAL & STALE GOVT. WI TH THE CORPORATION ARE ADVANCES ON DEPOSIT BASIS. AS PER THE INSTRUCTIONS RECEIVED BY THE GOVT ., ANY ACCRUAL TO THE FUNDS PLACES ON THE DEPOSITS OF THE CORPORATION IS TO BE TREATED AS ADD ITIONS TO THE FUNDS /DEPOSITS BY THE GOVT., AND IS TO BE APPROPRIATED AS PER THE INSTRUCTIONS OF TH E GOVERNMENT. THE INTEREST EARNED IF ANY IS NOT TO BE TREATED AS PROFIT OF THE CORPORATION. THE INT EREST ON THE FUNDS HAS THUS BEEN CLUBBED ACCORDINGLY. ' THEREFORE, INTEREST INCOMES OF THE FUNDS OR DEPOSIT S PROVIDED BY THE GOVERNMENT ARE CAPITALIZED [ITA NOS.383/IND/2013, 259 & 260/IND/2015, 269&449/ IND/2016 & 125/IND/2017] [M.P. POLICE HOUSING CORPORATION LTD., BHOPAL] 29 WITH THE GOVERNMENT FUNDS AND HENCE IT IS A CAPITAL RECEIVED. THERE IS A CLEAR UNDERSTANDING BETWEEN CORPORATION AS CONTRACTOR AND GOVERNMENT TH AT THE INTEREST ACCRUED ON PFMS FUNDS SHOULD NOT BE UTILIZED BY THE CORPORATION AND HENCE IT WOULD NOT FORM PART OF PROFIT. THEREFORE PAYING THE TAX ON NOTIONAL PROFIT IS GROSSLY UNJUST IFIED AND AGAINST THE PRINCIPLE OF TAX LAWS. 4. THE CORPORATION HAS ACCOUNTED FOR AN INTEREST AM OUNTING RS. 14, 62, 93,361/DURING THE YEAR UNDER CONSIDERATION, WHICH HAS BEEN SHOWN IN THE AU DITED BOOKS OF ACCOUNTS AS 'INTEREST ACCRUED ON FUND FOR WORK' UNDER LIABILITY SIDE OF THE BALAN CE SHEET OF THE CORPORATION. THE ASSESSEE IS MAINTAINING ITS BOOKS OF ACCOUNTS ON ACCRUED BASIS. THE ACCRUED INTEREST ON FDRJTDR HAS BEEN WORKED OUT AS RS. 14, 62, 93,3611- IN ACCORDANCE WI TH THE CALCULATION OF MANAGEMENT AND BOOKS OF ACCOUNTS ARE PREPARED ACCORDINGLY POSTED IN THE CORRESPONDING LEDGER ACCOUNT. THE LD. AO HAS PICKED THE FORM NO-26AS AND TAKEN INTEREST INCO ME OF RS. 20, 16,62,336/-. THE FORM 26AS IS A FORM OF TAX DEDUCTION AT SOURCE BY WHICH A TAX PAYER CAN VIEW AND VERIFY ITS TAX CREDIT AVAILABLE EM THE RECORDS. THE FORM26AS IS NOT BOOKS OF ACCOUNT AND THE SANCTITY OF A GOVERNMENT RECORDS AUDITED BY CAG OFFICE CANNOT BE DENIED ON THE GROUND OF FORM -26AS. THE LD. AO WAS TO REJECT THE CALCULATION PLACED BY THE MANAGEMENT AND TAKEN FORM -26AS AS BASIC EVIDENCE OF INTEREST TO BE ACCOUNTED IN THE B OOKS. THREE ARE CERTAIN BASIS REASONS BY WHICH THE INTEREST ACCRUED AND ACTUAL INTEREST CREDITED I S NOT TALLIED AS UNDER; 1. THE BANK ARE CHARGING INTEREST ON QUARTERLY BASI S, HOWEVER THE ACCRUAL OF INTEREST MADE BY CORPORATION IS BASED ON DAY BASIS. 2. SOME BANKS ARE NORMALLY CHARGING INTEREST ON PAY MENT BASIS, THOUGH THE INTEREST HAS ALREADY ACCRUED IN THE PREVIOUS FY. 3. SOME BANKS ARE FAILED TO DEDUCT TDS ON INTEREST LOWER THAN THE SPECIFIED LIMIT. 4. SOME OTHER PRACTICAL REASONS MAY BE TO DIFFERENT IATE THE ACTUAL CREDIT OF INTEREST AND ACCRUAL OF INTEREST. THE LD. AO HAS PASSED TWO ASSESSMENT ORDERS ON THE SAME DATE PERTAINING TO THE AY _ 2010-11 & 2011-12 DATED 14/02/2013 AND ASSUMPTION OF CALCUL ATION OF INTEREST WERE TWO DIFFERENT METHODS. IN THE YEAR 2010-11, LD. AO HAS TAKEN INTE REST INCOME FROM FORM 26AS AND REJECTED THE INTEREST SHOWN IN THE AUDITED BOOKS OF THE CORP ORATION. HOWEVER, IN THE AY- 2011-12, THE LD. AO HAS ACCEPTED THE CALCULATION OF INTEREST ACC RUED ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS OF THE CORPORATION , AND REJECTED THE INTEREST FIGU RE SHOWN IN THE FORM 26AS OF THE INCOME TAX DEPARTMENT. THE YEARWISE BREAK UP OF INTEREST IN T HE BOOKS AND 26AS IS AS UNDER: ASSESSMENT YEAR INTEREST AS PER BOOKS OF ACCOUNT INTEREST TAKEN IN FORM 26AS OF ITD INTEREST TAKEN BY LD. A.O. AS INCOME FROM OTHER SOURCES 2010-11 1,462.93 2,016.60 2,016.60 2011-12 1,319.56 544.57 1319.56 IT SHOWS THAT THE LD. AO WAS BIASED IN HIS APPROACH AND COULD NOT ADOPTED UNIFORMITY IN ITS [ITA NOS.383/IND/2013, 259 & 260/IND/2015, 269&449/ IND/2016 & 125/IND/2017] [M.P. POLICE HOUSING CORPORATION LTD., BHOPAL] 30 ASSESSMENT ORDER MADE IN SAME DATE FOR TWO DIFFEREN T PERIODS. THE HONORABLE SUPREME COURT IN THE CASE OF 'CIT VS SIMONS CARVES LTD. (1976) 105ITR212 9SC) HELD THAT 'THE TAXING AUTHORITY ARE HAVING QUA SI-JUDICIOL POWERS AND IN DOING SO THEY MUST ACT IN AFAIR AND NOR A PARTISAN MANNER. ' IN THE CASE OF 'INDO RE MALVA UNITED MILLS LTD. VS STATE OF MP' (1966) 60 ITR 41 (SC), HONORABLE SC WAS OPINED THAT 'WHERE ASSESSEE HAS PR ODUCED ALL HIS RECORDS, IT IS NOT OPEN TO THE AO TO PICK AND CHOOSE THOSE WHICH ORE MORE FAVORABL E TO THE REVENUE, WITHOUT CONSIDERING THE EXPLANATIONS OF THE ASSESSEE WITH REGARDS TO DISCRE PANCIES IN OTHERS'. ALSO IN CASE OF PRINCIPLE OF NATURAL JUSTICE HONORA BLE COURT WAS HELD THAT 'THE PRINCIPLES OF NATURAL JUSTICE ARE APPLICABLE TO ASSESSMENT PROCEE DINGS AND THE ASSESSEE SHOULD HOVE KNOWLEDGE OF MATERIAL THAT IS PROPOSED TO BE USED AGAINST HIM , IN ORDER TO ENABLE HIM TO REBUT IT. THUS WHERE 40 MAKE ADDITIONS TOWARD INCOME FROM UNDISCLOSED SO URCE, WITHOUT FURNISHING ASSESSEE COPIES OF THE STATEMENTS OF THE WITNESSES OR EVEN WITHOUT GIV ING THE NAME OF WITNESSES AND WITHOUT PERMITTING THE ASSESSEE TO INSPECT THE RECORDS, IT WAS HELD THAT THE ASSUMPTION WAS VITIATED, SINCE IT VIOLATED THE PRINCIPLE OF NATURAL JUSTICE' GARGI DIN JWALA PRASAD YS CIT (1974) 96ITR 97(ALL.) IN SUPPORT OF THIS FINDING, THE ASSESSEE HAS DRAWN OUR ATTENTION TO A DECISION OF THIS COURT IN GODHRA ELEC!RICITY CO. LTD. V. CIT [1997] 225 ITR 7 46, WHERE THE COURT, INTER ALIA, EXAMINED THE CASH SYSTEM AND THE MERCANTILE SYSTEM OF ACCOUNTING IN THE CONTEXT OF HYPOTHETICAL INCOME. THE COMPUTATION OF INCOME IS MADE IN ACCORDANCE WITH TH E METHOD OF ACCOUNTING BY THE ASSESSEE. 39. PER CONTRA, LD. D.R. OPPOSED THE SUBMISSIONS AND SUPPORTED THE ORDER OF THE LD. CIT(A). 40. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE CONTENTION OF THE ASSE SSEE IS THAT THE ASSESSEE CORPORATION HAD ACCOUNTED FOR INTERE ST AMOUNTING TO RS.14,62,93,361/- DURING THE YEAR UNDER [ITA NOS.383/IND/2013, 259 & 260/IND/2015, 269&449/ IND/2016 & 125/IND/2017] [M.P. POLICE HOUSING CORPORATION LTD., BHOPAL] 31 APPEAL, WHICH HAS BEEN SHOWN AND AUDITED IN BOOKS OF ACCOUNTS AS INTEREST ACCRUED ON FUND FOR WORK UNDER T HE LIABILITY SIDE OF THE BALANCE SHEET OF THE CORPORATION. THE ASSESSEE IS MAINTAINING ITS BOOKS OF ACCOUNTS ON ACCRU AL BASIS. THE ACCRUED INTEREST ON FDR/TDR HAS BEEN WORK ED OUT AT RS.14,62,93,361/-. THE A.O. HAD PICKED UP FO RM NO.26AS AND ADOPTED THE INTEREST OF RS.20,16,62,336/ -. IT WAS FURTHER STATED THAT THE A.O. ADOPTED THE DIFFEREN T INTEREST FOR TWO DIFFERENT YEARS. IT IS STATED THAT THE ASSESSEE IS AN AUTONOMOUS CORPORATION HAVING OWN CAPITAL AND SOURCES OF INCOME. ENTIRE MANAGEMENT AND CONTROL O F THE AFFAIRS OF THE CORPORATION IS VESTED UNDER THE BOAR D OF DIRECTORS BUT THE BOARD OF DIRECTORS OF THE CORPORATI ON IS NOT EMPOWERED TO USE OR APPLY THE INTEREST FUNDS. I T IS FURTHER STATED THAT A PERSON IS OWNER OF INCOME. IT H AS POWER TO UTILISE THE SAME. IN THE CASE UNDER APPEAL, T HE BOARD OF DIRECTORS HAS NO POWER OR POSSESSION OF THE [ITA NOS.383/IND/2013, 259 & 260/IND/2015, 269&449/ IND/2016 & 125/IND/2017] [M.P. POLICE HOUSING CORPORATION LTD., BHOPAL] 32 INCOME. THEY ARE WORKING AS DEPOSITORY OF GOVERNMENT MONEY. THEREFORE, INTEREST ACCRUED/EARNED ON GOVERNM ENT MONEY SHALL BE DEEMED AS INCOME OF THE GOVERNMENT. T HE INTEREST SO EARNED WOULD BE UTILISED BY THE EMPOWERE D COMMITTEE OF GOVERNMENT OF M.P. FOR THE PURPOSE OF PARTICULAR SCHEME. THEREFORE, THE INTEREST RECEIVED BY THE CORPORATION IS A DIVERSION OF INCOME BY AN OVER RIDING TITLE. 41. ON THE CONTRARY, LD. D.R. OPPOSED THE SUBMISSION S. HE SUBMITTED THAT INCOME IS REQUIRED TO BE ASSESSED DIRECTLY AS PER THE PROVISIONS OF THE ACT. HE SUBMI TTED THAT PRINCIPLE OF OVER RIDING TITLE WOULD NOT BE APPLICAB LE IN THE FACTS OF THE PRESENT CASE. IN THE REJOINDER, LD. COU NSEL FOR THE ASSESSEE SUBMITTED THAT UNDER THE IDENTICAL FACTS, THE HON'BLE GUJARAT HIGH COURT HAS ACCEPTED THE PRINCIPLE OF OVER RIDING TITLE IN THE CASE OF GUJARAT POWER CORPORAT ION LTD. VS. ITO (2012) 25 TAXMANN.COM 14 (GUJ.). LD. COUNSEL FOR THE ASSESSEE FURTHER PLACED RELIANCE ON TH E [ITA NOS.383/IND/2013, 259 & 260/IND/2015, 269&449/ IND/2016 & 125/IND/2017] [M.P. POLICE HOUSING CORPORATION LTD., BHOPAL] 33 JUDGEMENT OF THE HON'BLE SUPREME COURT IN THE CASE O F CIT VS. SITALDAS TIRATHDAS (1961) 41 ITR 367. THE RELIANCE IS ALSO PLACED ON THE DECISION OF THE HON'BLE GUJARAT HIGH COURT RENDERED IN THE CASE OF GUJARAT MUNICIPAL FINANCE BOARD VS. DCIT 221 ITR 317. LD. COUNSEL FOR THE ASSE SSEE FURTHER PLACED RELIANCE ON THE JUDGEMENT OF THE HON'B LE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SAR INFRACON PRIVATE LTD. (2014) 42 TAXMANN.COM 405 (GUJARAT) 42. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE CONTENTION OF THE ASSE SSEE IS THAT INTEREST EARNED ON FIXED DEPOSITS CANNOT BE TAXED AS THE SAME IS THE INCOME OF GOVERNMENT OF MADHYA PRADES H. AS PER THE LETTER DATED 23.3.2010, INTEREST ACCRUED O N THE GRANT-IN-AID SHALL BE USED FOR THE FURTHERANCE OF THE OBJECTIVES WHICH WOULD BE APPROVED BY THE STATE LEVEL EMPOWERED COMMITTEE. LD. COUNSEL FOR THE ASSESSEE H AS [ITA NOS.383/IND/2013, 259 & 260/IND/2015, 269&449/ IND/2016 & 125/IND/2017] [M.P. POLICE HOUSING CORPORATION LTD., BHOPAL] 34 ALSO TAKEN US THROUGH THE LETTER DATED 30.8.2010 TO BUTTRESS THE CONTENTION THAT THE ASSESSEE HAD NO AUTH ORITY TO UTILISE THE INCOME AND ALSO HAS NO CONTROL OVER THE SAME AS THE ASSESSEE WAS REQUIRED TO SPEND THE SAME AS PER THE DIRECTION OF GOVERNMENT OF MADHYA PRADESH. WE FIND T HAT THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. SIT ALDAS TIRATHDAS (SUPRA), HAS DECIDED THE CASE AGAINST THE ASSESSEE. HOWEVER, THE HON'BLE COURT HAS TAKEN NOTE O F THE JUDGEMENT OF THE HON'BLE SUPREME COURT IN THE CASE O F CIT VS. D.R. NAIK (1939) 7 ITR 362. THE HON'BLE COURT OBSERVED AS UNDER: THE ASSESSEE WAS THE SOLE SURVIVING MEMBER OF A HIN DU UNDIVIDED FAMILY. THERE WAS A DECREE OF COURT BY W HICH THE ASSESSEE WAS ENTITLED TO RECEIVE PROPERTIES AS A RE SIDUARY LEGATEE, SUBJECT, HOWEVER, TO CERTAIN PAYMENTS OF MAINTENANC E TO WIDOWS. THE WIDOWS CONTINUED TO BE MEMBERS OF THE FAMILY. IT WAS HELD THAT THOUGH SECTION 9 OF THE INCOME-TAX ACT DID NOT APPLY, THE ASSESSEES ASSESSABLE INCOME WAS ONLY THE BALANCE L EFT AFTER PAYMENT OF THE MAINTENANCE CHARGES. IT APPEARS FRO M THE FACTS OF THE CASE, HOWEVER, THAT THERE WAS A CHARGE FOR THE MAINTEANCE UPON THE PROPERTIES OF THE ASSESSEE. THIS CASE ALSO BRI NGS OUT CORRECTLY THE PRINCIPLES LAID DOWN BY THE JUDICIAL COMMITTEE THAT IF THERE BY AN OVER RIDING OBLIGATION WHICH CREATES A CHARGE AN D DIVERTS THE INCOME TO SOME ONE ELSE, A DEDUCTION CAN BE MADE OF THE AMOUNTS SO PAID. [ITA NOS.383/IND/2013, 259 & 260/IND/2015, 269&449/ IND/2016 & 125/IND/2017] [M.P. POLICE HOUSING CORPORATION LTD., BHOPAL] 35 43. FURTHER, RELIANCE IS PLACED ON THE JUDGEMENT OF T HE HON'BLE GUJARAT HIGH COURT IN THE CASE OF GUJARAT POWER CORPORATION LIMITED VS. ITO. IN THAT CASE, THE HON'BL E COURT HAS RECORDED THE FACTS OF THE CASE IN PARA NOS.4 T O 6 OF THE JUDGEMENT AND DECIDED THE ISSUE VIDE PARA NOS.2 5 TO 27, WHICH ARE REPRODUCED AS UNDER: 4. THE ASSESSEE COMPANY IS PROMOTED BY THE GOVERNME NT OF GUJARAT AND THE GUJARAT ELECTRICITY BOARD WITH A N OBJECT TO AUGMENT POWER GENERATING CAPACITY IN THE STATE OF G UJARAT BY ATTRACTING PRIVATE SECTOR PARTNERS OR ITS OWN. THE GOVERNMENT OF GUJARAT HAD SANCTIONED AMOUNTS OF RS.1 CRORE AND 4 CRORES TOWARDES EQUITY SHARE CAPITAL OF THE ASSESSEE COMPA NY. SUCH AMOUNTS WERE TRANSFERRED TO THE ASSESSEE COMPANY FO R ALLOTMENT OF SHARES. SUCH AMOUNTS WERE SHOWN IN THE BALANCE SHE ET OF THE ASSESSEE COMPANY AS AMOUNTS RECEIVED FROM PROMOTERS TO BE ADJUSTED TOWARDS SHARE CAPITAL IN DUE COURSE. HOWE VER, THE ASSESSEE COMPANY COULD NOT COMMENCE THE WORK FOR WH ICH IT WAS INCORPORATED. IN THE MEANTIME, THE AMOUNT RECEIVED AS CONTRIBUTION TOWARDS SHARE CAPITAL WAS DEPOSITED IN SCHEDULE BANKS IN SHORT TERM DEPOSITS. FROM SUCH SHORT TERM DEPOSITS, THE ASSESSEE COMPANY EARNED THE INTEREST OF RS.53.92 CR ORES DURING THE YEAR 1991-92. 5. THE ASSESSEE COMPANY CONTENDED THAT SINCE SUCH AMOUNT OF INTEREST WAS RECEIVED FROM THE CONTRIBUTI ONS BY THE GOVERNMENT TOWARDS SHARE CAPITAL WHICH REMAINED IN THE CORPORATION IN TRUST, THE INCOME DID NOT BELONG TO THE ASSESSEE. 6. THE ASSESSING OFFICER, HOWEVER, OBJECTED TO SUC H TREATMENT OF THE INTEREST BY THE ASSESSEE COMPANY A ND CALLED UPON THE ASSESSEE TO JUSTIFY THE SAME. BEFORE THE ASSES SING OFFICER, THE ASSESSEE CONTENDED THAT THE FUNDS PROVIDED BY THE G OVERNMENT TO THE CORPORATION WHO FOR THE PURPOSE OF ALLOTMENT OF THE SHARES. SINCE THE SHARES COULD NOT BE ALLOTTED, THE SURPLUS FUNDS WERE PARKED IN [ITA NOS.383/IND/2013, 259 & 260/IND/2015, 269&449/ IND/2016 & 125/IND/2017] [M.P. POLICE HOUSING CORPORATION LTD., BHOPAL] 36 FIXED DEPOSITS WITH SCHEDULE BANKS. INTEREST OF RS .53.92 LAKHS RECEIVED ON SUCH FIXED DEPOSITS BELONGED TO THE GOV ERNMENT AND THE SAME HAS, ACCORDINGLY, BEEN CREDITED TO THE GOVERNM ENT OF GUJARAT. THE ASSESSEE REFERRED TO A LETTER DATED 17.9.1992 R ECEIVED FROM THE GOVERNMENT OF GUJARAT IN WHICH IT WAS RECORDED THAT , IT WAS CONSIDERED FAIR BY BOTH THE SIDES THAT THE INTEREST INCOME BEING GENERATED BY THE USE OF THESE FUNDS BY THE CORPORAT ION SHOULD BELONG TO AND BE RECEIVED ON BEHALF OF THE GOVERNME NT OF GUJARAT.. 44. IN THE PRESENT CASE, THE ASSESSEE HAS BEEN DISCLOS ING SUCH INCOME EARLIER TILL THE ASSESSMENT YEAR 2009-10. IT IS [ITA NOS.383/IND/2013, 259 & 260/IND/2015, 269&449/ IND/2016 & 125/IND/2017] [M.P. POLICE HOUSING CORPORATION LTD., BHOPAL] 37 THE CASE OF THE ASSESSEE THAT IN THE LIGHT OF THE LETT ERS OF THE GOVERNMENT OF MADHYA PRADESH INTEREST INCOME WAS ACCRUED ON THE FIXED DEPOSITS CANNOT BE SAID TO BE THE INCOME OF THE ASSESSEE, MORE PARTICULARLY, IN THE LIGH T OF THE JUDGEMENT OF THE HON'BLE GUJARAT HIGH COURT. THE RE IS NO DISPUTE WITH REGARD TO THE FACT THAT AS PER THE TERM S OF THE LETTERS DATED 23.3.2010 & 30.8.2010, THE ASSESSEE IS REQUIRED TO SPEND INTEREST INCOME AS PER THE DIRECTIO N OF THE GOVERNMENT OF MADHYA PRADESH. THE REVENUE HAS NOT PLACED ANY CONTRARY BINDING PRECEDENT, THEREFORE, RESPECTFULLY FOLLOWING THE JUDGEMENT OF THE HON'BLE GUJARAT HIGH COURT, WE DIRECT THE A.O. TO DELETE THE ADDITIO N. ITA 260/IND/2015 (A.Y. 2011-12): 45. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL IN ITA NO.260/IND/2015: [ITA NOS.383/IND/2013, 259 & 260/IND/2015, 269&449/ IND/2016 & 125/IND/2017] [M.P. POLICE HOUSING CORPORATION LTD., BHOPAL] 38 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE FINDINGS OF LEARNED CIT(A) ARE BAD AND OPPOSED TO FACTS, EQUITY AND LAW AND ARE, THEREFORE, UNSUSTAINABLE IN LAW. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED A.O. ERRED IN MAKING A SCRUTINY ASSESSM ENT U/S 143(3) OF THE ACT. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED A.O. ERRED IN MAKING ADDITION OF RS.13, 19,55,660/- ON ACCOUNT OF UNDISCLOSED INCOME. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED A.O. ERRED IN MAKING ADDITION MERELY ON THE ENTRIES SHOWN IN THE FORM 26AS. 5. ANY OTHER GROUND THAT MAY BE DEEMED NECESSARY AT TH E TIME OF HEARING AS THE ASSESSEE CRAVES ITS RIGHT TO ADD, AM END, OR ALTER ANY OF THE GROUNDS OF APPEAL ON OR BEFORE THE ACTUAL HE ARING OF THE CASE. 46. AT THE TIME OF HEARING, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT HE DOES NOT WISH TO PRESS GRO UND NOS.1 & 2. IN GROUND NO.3, THE FACTS AND WRITTEN SUBMISSIONS ARE IDENTICAL AS WERE IN ITA NO.259/IND/20 15 WHICH WERE REPRODUCED ABOVE. 47. PER CONTRA, LD. D.R. OPPOSED THE SUBMISSIONS AND SUPPORTED THE ORDER OF THE LD. CIT(A). 48. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS [ITA NOS.383/IND/2013, 259 & 260/IND/2015, 269&449/ IND/2016 & 125/IND/2017] [M.P. POLICE HOUSING CORPORATION LTD., BHOPAL] 39 OF THE AUTHORITIES BELOW. THE FACTS ARE IDENTICAL AS W ERE IN ITA NO.259/IND/2015. FOR THE SAME REASON THIS APPEAL I S DISPOSED OF ACCORDINGLY. ITA NO.449/IND/2016 (A.Y. 2012-13): 49. THIS APPEAL BY THE ASSESSEE IS FILED AFTER DELAY O F 43 DAYS. AN APPLICATION SEEKING CONDONATION IS FILED . AN AFFIDAVIT BY SHRI P.K. TRIPATHI, FINANCIAL ADVISOR & CHI EF ACCOUNTS OFFICER IS PLACED ON RECORD. KEEPING IN VI EW OF THE SUBMISSION MADE IN THE AFFIDAVIT, DELAY OF 43 DAY S IS CONDONED. APPEAL IS TAKEN UP FOR HEARING. THE ASSESSE E HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE FINDINGS OF LEARNED CIT(A) ARE BAD AND OPPOSED TO FACTS, EQUITY AND LAW AND ARE, THEREFORE, UNSUSTAINABLE IN LAW. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED A.O. ERRED IN MAKING A SCRUTINY ASSESSM ENT U/S 143(3) OF THE ACT. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED A.O. ERRED IN MAKING ADDITION OF RS.5,5 6,68,762/- ON ACCOUNT OF UNDISCLOSED INTEREST INCOME. [ITA NOS.383/IND/2013, 259 & 260/IND/2015, 269&449/ IND/2016 & 125/IND/2017] [M.P. POLICE HOUSING CORPORATION LTD., BHOPAL] 40 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED A.O. ERRED IN MAKING ADDITION MERELY ON THE ENTRIES SHOWN IN THE FORM 26AS. 5. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED A.O. ERRED IN MAKING ADDITION OF RS.8,7 6,665/- ON ACCOUNT OF PRIOR PERIOD ITEMS DEBITED IN THE PROFIT & LOSS ACCOUNT. 6. ANY OTHER GROUND THAT MAY BE DEEMED NECESSARY AT TH E TIME OF HEARING AS THE ASSESSEE CRAVES ITS RIGHT TO ADD, AM END, OR ALTER ANY OF THE GROUNDS OF APPEAL ON OR BEFORE THE ACTUAL HE ARING OF THE CASE. 50. GROUND NOS.1 & 2 ARE NOT PRESSED. GROUND NOS.3 & 4 ARE IDENTICAL AS WERE ADJUDICATED IN ITA NO.259/IND/2015, HENCE THE SAME FINDINGS MAY BE ADOPTED FOR THESE GROUNDS. GROUND NO.6 IS GENERAL IN NATURE. 51. GROUND NO.5 IS AGAINST CONFIRMING RS.8,76,665/- MADE ON ACCOUNT OF PRIOR PERIOD ITEMS DEBITED IN THE P&L ACCOUNT. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT AUTHORITIES BELOW WERE NOT JUSTIFIED IN MAKING THE ADD ITION. 52. ON THE CONTRARY, LD. D.R. SUPPORTED THE ORDER O F THE AUTHORITIES BELOW AND SUBMITTED THAT THERE IS NO [ITA NOS.383/IND/2013, 259 & 260/IND/2015, 269&449/ IND/2016 & 125/IND/2017] [M.P. POLICE HOUSING CORPORATION LTD., BHOPAL] 41 EVIDENCE ON RECORD SUGGESTING THAT THE PRIOR PERIOD EXPENSES WERE CRYSTALISED DURING THE YEAR UNDER APPEAL. 53. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE ARE IN AGREEMENT TO THE AUTHORITIES BELOW THAT THE ASSESSEE HAS NOT PLACED ANY MATERIAL ON RECORD SUGGESTING THAT PRIOR PERIOD EXPENS ES WERE CRYSTALISED DURING THE YEAR UNDER APPEAL. THIS GROUND OF THE APPEAL IS DISMISSED. 54. APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO.125/IND/2017 (A.Y. 2013-14): 55. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE FINDINGS OF LEARNED CIT(A) ARE BAD AND OPPOSED TO FACTS, EQUITY AND LAW AND ARE, THEREFORE, UNSUSTAINABLE IN LAW. [ITA NOS.383/IND/2013, 259 & 260/IND/2015, 269&449/ IND/2016 & 125/IND/2017] [M.P. POLICE HOUSING CORPORATION LTD., BHOPAL] 42 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED A.O. ERRED IN MAKING A SCRUTINY ASSESSM ENT U/S 143(3) OF THE ACT. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED A.O. ERRED IN MAKING ADDITION OF RS.11, 98,15,966/- ON ACCOUNT OF UNDISCLOSED INTEREST INCOME. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED A.O. ERRED IN MAKING ADDITION MERELY ON THE ENTRIES SHOWN IN THE FORM 26AS. 5. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED A.O. ERRED IN MAKING ADDITION OF RS.1,1 5,460/- ON ACCOUNT OF PRIOR PERIOD ITEMS DEBITED IN THE PROFIT & LOSS ACCOUNT. 6. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED A.O. ERRED IN MAKING ADDITION OF RS.86, 26,906/- ON ACCOUNT OF CONSTRUCTION OF COMMUNITY CENTRE. 7. ANY OTHER GROUND THAT MAY BE DEEMED NECESSARY AT TH E TIME OF HEARING AS THE ASSESSEE CRAVES ITS RIGHT TO ADD, AM END, OR ALTER ANY OF THE GROUNDS OF APPEAL ON OR BEFORE THE ACTUAL HE ARING OF THE CASE. 56. GROUND NO.1 & 2 ARE NOT PRESSED. GROUND NOS.3 & 4 ARE IDENTICAL AS WERE ADJUDICATED IN ITA NO.259/IND/2015, HENCE THE SAME FINDINGS MAY BE ADOPTED FOR THESE GROUNDS. GROUND NO.5 IS SAME AS IN ITA NO.449/IND/2016 AND THE SAME FINDINGS MAY BE ADOPTED FOR THIS GROUND ALSO. GROUND NO.7 IS GENERAL IN NATUR E. [ITA NOS.383/IND/2013, 259 & 260/IND/2015, 269&449/ IND/2016 & 125/IND/2017] [M.P. POLICE HOUSING CORPORATION LTD., BHOPAL] 43 57. APROPOS TO GROUND NO.6, LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS AS MADE BEFORE THE LD. CIT(A). LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CONSTRUCTION EXPENSES WERE FOR THE WELFARE OF THE EMPLOYEES AND IS ALLOWABLE DEDUCTION U/S 37 OF THE AC T. 58. ON THE CONTRARY, LD. D.R. OPPOSED THE SUBMISSIONS AND SUBMITTED THAT THERE IS NOTHING ON R ECORD SUGGESTING THAT THE COMMUNITY HALL WAS EXCLUSIVELY USE D BY THE EMPLOYEES OF THE ASSESSEE. 59. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. SECTION 37 OF THE ACT ALLO WS CERTAIN EXPENDITURE. FOR THE SAKE OF CLARIFY, SECTION 37 OF THE ACT IS REPRODUCED AS UNDER: ANY EXPENDITURE (NOT BEING EXPENDITURE OF THE NATU RE DESCRIBED IN SECTIONS 30 TO 36 AND NOT BEING IN THE NATURE OF CA PITAL EXPENDITURE OR PERSONAL EXPENSES OF THE ASSESSEE), LAID OUT OR EXPENDED WHOLLY [ITA NOS.383/IND/2013, 259 & 260/IND/2015, 269&449/ IND/2016 & 125/IND/2017] [M.P. POLICE HOUSING CORPORATION LTD., BHOPAL] 44 AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS OR PROFESSION SHALL BE ALLOWED AS COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. 60. FROM THE ABOVE, IT IS CLEAR THAT THE ASSESSEE IS REQUIRED TO DEMONSTRATE THAT THE EXPENDITURE HAS BEEN INCURRED EXCLUSIVELY FOR THE BUSINESS OF THE ASSESSE E. NO EVIDENCE IN THIS REGARD IS FURNISHED BY THE ASSESSEE CORPORATION, THEREFORE, WE DO NOT SEE ANY INFIRMITY I N THE ORDER OF THE A.O. THIS GROUND OF THE ASSESSEES APPE AL IS DISMISSED. 61. THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 62. IN THE RESULT, ITA NO.383/IND/2013 FILED BY TH E ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND C ROSS APPEAL OF THE REVENUE IN ITA NO.269/IND/2016 IS DISMISSED. THE OTHER APPEALS OF THE ASSESSEE IS ITA [ITA NOS.383/IND/2013, 259 & 260/IND/2015, 269&449/ IND/2016 & 125/IND/2017] [M.P. POLICE HOUSING CORPORATION LTD., BHOPAL] 45 NOS.259 & 260/IND/2015, 449/IND/2016 AND 125/IND/2017 ARE PARTLY ALLOWED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 11 . 10.2018. SD/- (MANISH BORAD) SD/- (KUL BHARAT) A CCOUNTANT MEMBER JUDICIALMEMBER INDORE; DATED : 11/10/2018 VG/SPS COPY TO: ASSESSEE/AO/PR. CIT/ CIT (A)/ITAT (DR)/GUAR D FILE. BY ORDER SR. PRIVATE SECRETARY, INDORE