DCIT, Varanasi V. M/s Poorvanchal Vidyut Vitaran Niga, Ltd., Varanasi

ITA 272/ALLD/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2137 (ITAT-ALLAHABAD)
• Duration Of Justice: 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-05-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 06-08-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JAGDISH
• Assessee Lawyers: ARVIND SHUKLA; O P SHUKLA
• Keywords: Depreciation; Bad and doubtful debts; Commercial expediency
• Section: 43B; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ALLAHABAD BENCH, ALLAHABAD BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NOS.228, 229/A/2011 & 272/A/2012 ASSESSMENT YEARS: 2007-08, 2008-09 & 2009-10 ASSTT. COMMISSIONER OF INCOME TAX, VS. M/S. POORV ANCHAL VIDYUT VITRAN CIRCLE-2, VARANASI. NIGAM LIMITED, BHIKHARIPUR, DLW, VARANASI. (PAN: AADCP 4092 M) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI JAGDISH, CIT (D.R.) RESPONDENT BY : SHRI ARVIND SHUKLA & SHRI O.P. SHUKLA, ADVOCATES DATE OF HEARING : 16.04.2013 DATE OF PRONOUNCEMENT : 01.05.2013 ORDER PER A.L. GEHLOT, ACCOUNTANT MEMBER: THESE ARE THREE APPEALS FILED BY THE ASSESSEE AGAIN ST THREE DIFFERENT ORDERS, DATED 30.09.2011, 30.09.2011 & 18.05.2012 PASSED BY THE LD. CIT(A), VARANASI FOR THE ASSESSMENT YEARS 2007-08, 2008-09 & 2009-10 RES PECTIVELY. 2 ITA NO.228, 229/A/11 & 272/A/2012 A.YS. 2007-08 TO 2009-10 2. ALL THESE APPEALS ARE PERTAINING TO ONE ASSESSEE . THE GROUNDS RAISED ARE COMMON AND ON IDENTICAL SET OF FACTS. THEREFORE, F OR THE SAKE OF CONVENIENCE, ALL THESE THREE APPEALS ARE DECIDED BY THIS COMMON ORDE R. ITA NO.228/A/2011 FOR A.Y. 2007-08 3. THE FIRST EFFECTIVE GROUND RAISED IS IN RESPECT OF DELETION OF ADDITION OF RS.14,43,84,206/- ON ACCOUNT OF PROVISION FOR BAD A ND DOUBTFUL DEBT. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A SUBSIDIARY COMPANY OF UTTAR PRADESH POWER CORPORATION LIMITED (UPPCL). T HE ASSESSEE COMPANY IS ENGAGED IN THE DISTRIBUTION OF ELECTRICITY, CONSTRU CTION LINES AND PROVIDING SERVICES TO THE CONSUMERS. DURING THE ASSESSMENT PROCEEDING S, THE A.O. NOTICED THAT THE ASSESSEE CLAIMED PROVISION FOR BAD AND DOUBTFUL DEB TS FOR AMOUNT OF RS.14,43,84,206/-. THE A.O. AFTER CONSIDERING THE ASSESSEES SUBMISSION OBSERVED THAT PROVISIONS OF SECTION 36(1)(VII) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) HAS NOT BEEN SATISFIED AND IT IS ONLY PROVISION MADE IN THE BOOKS OF ACCOUNT AND HENCE NOT ALLOWABLE. THE A.O. MADE ADD ITION OF RS.14,43,84,206/-. 3 ITA NO.228, 229/A/11 & 272/A/2012 A.YS. 2007-08 TO 2009-10 5. THE CIT(A) DELETED THE ADDITION AS UNDER :- (PAR AGRAPH NO.6, PAGE NOS.11 & 12) 6. AS REGARD, DISALLOWANCE OF BAD & DOUBTFUL DEBTS OF RS.14,43,84,206/-, I HAVE GONE THROUGH THE FACTS OF THE CASE, ASSESSMENT ORDER FRAMED BY THE ASSESSING OFFICER AN D SUBMISSIONS OF THE APPELLANT PUT FORTH DURING THE COURSE OF HEARIN G. THE APPELLANT HAS MADE PROVISION FOR BAD & DOUBTFUL DEBTS RS.14,4 3,84,206/- AGAINST REVENUE FOR SALE OF POWER @ 5% ON INCREMENT AL BASIS. THIS PROVISIONS HAS BEEN MADE AS PER THE GUIDE LINE OF U .P. GOVERNMENT AND CREDITED IN THE ACCOUNT CODE NO.23.9 EACH AND E VERY YEAR AND DEBITED ACCOUNT CODE 79.460. I CONSIDERED THE SUBMI SSION OF THE ASSESSEE THAT WRITTEN OFF BAD AND DOUBTFUL DEBTS IS ALLOWABLE AS PER PROVISION OF SECTION 36(1)(VII) ANY BAD DEBTS OR PA RT THEREOF WHICH IS WRITTEN BY AS RECOVERABLE IN THE ACCOUNTS OF THE AS SESSEE IT SHOULD BE ALLOWED. RELIANCE PLACED IN THE ASSESSEE CASE FOR A .Y. 2004-05 BY THE ORDER OF THE ASSESSING OFFICER WHICH IS PLACED ON R ECORD THE ASSESSING OFFICER HAS ALLOWED THE SAME HENCE THE DISALLOWANCE OF BAD & DOUBTFUL DEBTS RS.14,43,84,206/-IS HEREBY STAND DEL ETED. 6. THE LD. REPRESENTATIVES OF THE PARTIES RELIED U PON THE ORDERS OF REVENUE AUTHORITIES WHICH ARE IN FAVOUR OF THEM. 7. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PAR TIES AND RECORDS PERUSED. THE A.O. DISALLOWED THE SAID AMOUNT ON THE GROUND T HAT THE ASSESSEE DID NOT COMPLY WITH THE CONDITIONS LAID DOWN IN SECTION 36( 1)(VII) OF THE ACT. THE CIT(A) DELETED THE ADDITION ON THE GROUND THAT ON IDENTICA L SET OF FACTS THE A.O. HIMSELF ALLOWED THE CLAIM OF THE ASSESSEE. THE CIT(A) ALLO WED THE CLAIM OF THE ASSESSEE ON THE BASIS OF METHOD OF ACCOUNTING FOLLOWING BY T HE ASSESSEE. THE TOTAL 4 ITA NO.228, 229/A/11 & 272/A/2012 A.YS. 2007-08 TO 2009-10 PROVISION WAS RS.22527679672/- WHEREAS ACTUAL BAD D EBT WAS RS.14,43,84,206/-. ON PERUSAL OF RECORDS, WE NOTICE THAT THE CIT(A) HA S DECIDED THE ISSUE WITHOUT RECORDING THE FACT THAT THE BAD DEBT AMOUNT IN FACT WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE IN ACCORDANCE WITH SEC TION 36(1)(VII) OF THE ACT. THIS ASPECT IS SUBJECT TO VERIFICATION. CERTAIN PRINCIP LES HAVE BEEN LAID DOWN AND THE ISSUE HAS BEEN SETTLED BY THE HONBLE APEX COURT IN THE CASE OF TRF LIMITED VS. CIT, 323 ITR 397 (SC). THE FACTS OF THE CASE UNDER CONSIDERATION REQUIRED TO BE PUT ON RECORD ACCORDINGLY. WE, THEREFORE, SEND BAC K THIS ISSUE TO THE FILE OF CIT(A) WITH THE DIRECTION TO DECIDE THE ISSUE AFRESH IN AC CORDANCE WITH LAW AFTER RECORDING THE RELEVANT AND COMPLETE FACTS AND AFTER PROVIDING REASONABLE OPPORTUNITY OF HEARING TO BOTH THE SIDES. 8. THE SECOND GROUND IS IN RESPECT OF PRIOR PERIOD EXPENDITURE AMOUNTING TO RS.1,02,59,311/- (CIT(A) HAS WRONGLY TAKEN AT RS.1, 20,59,311/-). DURING THE ASSESSMENT PROCEEDINGS THE A.O. NOTICED THAT THE AS SESSEE HAS CLAIMED PRIOR PERIOD EXPENDITURE IN P&L ACCOUNT. THE A.O. MADE ADDITION AS EXPENDITURES WERE NOT RELATED TO THE YEAR UNDER CONSIDERATION. THE CIT(A ) DELETED THE SAID ADDITION AS UNDER :- (PARAGRAPH NO.7, PAGE NO.12) 7. AS REGARD, THE ADDITION UNDER THE HEAD PRIOR PE RIOD EXPENSES OF RS.1,20,59,311/- I HAVE GONE THROUGH THE FACTS OF T HE CASE, ASSESSMENT ORDER FRAMED BY THE ASSESSING OFFICER AND SUBMISSIO NS OF THE 5 ITA NO.228, 229/A/11 & 272/A/2012 A.YS. 2007-08 TO 2009-10 APPELLANT PUT FORTH DURING THE COURSE OF HEARING. T HE ASSESSEE WERE INCURRED THE SAID EXPENSES FOR EMPLOYEES COST ADMIN ISTRATION DURING THE COURSE OF INCORPORATION OF COMPANY AND IT SHOUL D BE ALLOWED U/S 35D OF THE INCOME TAX ACT, 1961. I HAVE CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE AND RELIANCE ON THE ORDER OF ASSESSING OFFICER FOR A.Y. 2004-05 AND THE EXPENSES CLAIM BY THE ASSESSEE RS.1,20,59,311/- IS HEREBY DELETED. 9. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PAR TIES AND RECORDS PERUSED. THE A.O. DISALLOWED EXPENDITURES ON THE GROUND THAT THESE ARE PRIOR PERIOD EXPENSES. HOWEVER, THE CIT(A) DELETED THE SAID ADD ITION ACCEPTING THE ASSESSEES CONTENTION THAT THESE EXPENSES WERE ALLOWABLE UNDER SECTION 35D OF THE ACT AND THE ASSESSEE HAS CLAIMED ONLY 1/5 TH OF THE EXPENDITURE WHICH IS IN ACCORDANCE WITH SECTION 35D OF THE ACT. WHETHER THE CLAIM OF THE A SSESSEE IS 1/5 TH IN ACCORDANCE WITH SECTION 35D OR THE EXPENSES PERTAIN TO EARLIER YEARS. THE ORDER OF CIT(A) IS NOT A SPEAKING ORDER. ALLOWABILITY OF CLAIM UNDER SECTION 35D OF THE ACT HAS NOT BEEN EXAMINED BY THE CIT(A). FURTHER, THE FACTS AR E NOT CLEAR, THEREFORE, WE SEND BACK THIS ISSUE TO THE FILE OF CIT(A) WITH THE DIRE CTION TO DECIDE THE ISSUE AFRESH AFTER PROVIDING REASONABLE OPPORTUNITY OF HEARING T O BOTH THE SIDES. 10. THE THIRD GROUND IS IN RESPECT OF ADDITION OF R S.18,11,180/- BEING SALARY PAYMENT TO EMPLOYEES TO MAINTAIN RECORDS OF EMPLOYE ES TRUST. DURING THE ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT THE A SSESSEE CLAIMED THE EXPENSES 6 ITA NO.228, 229/A/11 & 272/A/2012 A.YS. 2007-08 TO 2009-10 WHICH RELATES TO MAINTAINING ACCOUNT FOR EMPLOYEES FOR THEIR PF/GRATUITY/TRUST RELATED TO THE COMPANY FOR WHICH A SEPARATE TRUST I S MADE. THE A.O. DISALLOWED THE EXPENDITURE WITH THE OBSERVATION THAT SINCE SEPARAT E TRUST HAS ALREADY BEEN MADE TO TAKE CARE OF THE EMPLOYEES BENEFITS, THEREFORE, AN Y EXPENDITURE INCURRED TOWARDS THE TRUST CANNOT BE SAID TO BE ALLOWABLE IN THE HAN DS OF THE ASSESSEE COMPANY. 11. THE CIT(A) DELETED THE SAID ADDITION AS UNDER : - (PARAGRAPH NO.8, PAGE NO.12) 8. AS REGARD, THE ADDITION UNDER THE HEAD SALARY P AID TO EMPLOYEES FOR MAINTAIN RECORD OF THE TRUST FOR THE ASSESSEES COMPANY EMPLOYEES OF RS.18,11,180/-, I HAVE GONE THROUGH THE FACTS OF THE CASE, ASSESSMENT ORDER FRAMED BY THE ASSESSING OFFICER AN D SUBMISSIONS OF THE APPELLANT POUT FORTH DURING THE COURSE OF HEARI NG. THE TRUST IS CREATED BY THE U.P. GOVERNMENT TO BENEFITS OF EMPLO YEES OF THE COMPANY AS WELL AS UPPCL. THE ASSESSEES COMPANY HA S TRANSFERRED GRATUITY, PF AND OTHER BENEFITS TO THE TRUST AND AS SESSEES COMPANY HAS DEPUTED ITS EMPLOYEE TO MAINTAINS SUCH RECORDS. SALARY OF THE SAID EMPLOYEES HAS GIVEN BY THE ASSESSEES COMPANY AND S AID EMPLOYEE IS THE EMPLOYEE OF THE ASSESSEES COMPANY NOT FOR THE TRUST. IN VIEW OF THE ABOVE FACTUAL POSITION, THE DISALLO WANCE MADE ON ABOVE MENTIONED HEAD OF RS.18,11,180/- IS HEREBY DE LETED. 12. THE SUBMISSION OF THE ASSESSEE WAS THAT AFTER T HE U.P. GOVERNMENT HAS CREATED THE TRUST TO EMPLOYEES TO THE BENEFITS OF U PPCL AS WELL AS DISCOM, GRATUITY AND OTHER BENEFITS LIKE PF OF THE EMPLOYEE HAS BEEN TRANSFERRED TO THE TRUST AND THE ASSESSEE HAS DEPUTED ITS EMPLOYEES TO MAINT AIN RECORDS OF THE EMPLOYEES OF 7 ITA NO.228, 229/A/11 & 272/A/2012 A.YS. 2007-08 TO 2009-10 THE COMPANY AND INCURRED SUCH EXPENDITURE. THE EXP ENDITURES WERE PERTAINING TO EMPLOYEES OF THE ASSESSEE COMPANY AND NOT THE EMPLO YEES OF THE SEPARATE TRUST. 13. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PA RTIES AND RECORDS PERUSED. THE ADMITTED FACTS OF THE CASE ARE THAT THE EXPENDI TURES WERE INCURRED ON ACCOUNT OF SALARY AND OTHERS PERTAINING TO EMPLOYEES OF THE ASSESSEE COMPANY. THE EMPLOYEES OF THE ASSESSEE COMPANY WERE WORKING ON D EPUTATION TO MAINTAIN RECORD OF THE EMPLOYEES GRATUITY, PROVIDENT FUND AND OTHE R ACCOUNT OF THE TRUST. IN ORDER TO CONSTITUTE EXPENDITURE MENTIONED UNDER SECTION 3 7(1) OF THE ACT, ONE OF THE IMPORTANT CONDITION TO BE SATISFIED IS THAT EXPENDI TURE INCURRED SHOULD BE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ASSESSEES BUSIN ESS. AS STATED ABOVE THAT IN THE CASE UNDER CONSIDERATION THE ADMITTED FACTS ARE THA T THE EXPENDITURES INCURRED PERTAINED TO THE MAINTENANCE OF RECORD OF EMPLOYEES GRATUITY AND OTHER BENEFITS LIKE PF ETC. THE EMPLOYEES OF THE ASSESSEE COMPANY HAS BEEN DEPUTED FOR DISCHARGING THIS DUTY AFTER U.P. GOVERNMENT HAS CRA TED THE TRUST FOR THE EMPLOYEES. IN THE LIGHT OF THE FACT THAT THERE IS NO DISPUTE T HAT THE EXPENDITURES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ASSESSEE S BUSINESS AND IN ACCORDANCE WITH COMMERCIAL EXPEDIENCY, WE THEREFORE, ARE OF TH E VIEW THAT THE CIT(A) HAS RIGHTLY DELETED THE ADDITION. ORDER OF THE CIT(A) IS CONFIRMED ON THE ISSUE. 8 ITA NO.228, 229/A/11 & 272/A/2012 A.YS. 2007-08 TO 2009-10 14. THE FOURTH GROUND IS PERTAINING TO DISALLOWANCE OF RS.69,55,61,698/- OUT OF DEPRECIATION. DURING THE ASSESSMENT PROCEEDINGS TH E A.O. NOTICED THAT THE ASSESSEE HAS CLAIMED DEPRECIATION TO THE TUNE OF RS .87,01,38,609/- OUT OF WHICH RS.17,45,76,911/- HAS BEEN CLAIMED FOR THE ASSETS A CQUIRED AFTER THE TRANSFER SCHEME AS MENTIONED IN THE DEPRECATION SCHEDULE ALO NG WITH TAX AUDIT REPORT. ACCORDINGLY, THE BALANCE OF RS.69,55,61,698/- HAS B EEN CLAIMED AS DEPRECIATION ON THE BALANCE ASSETS ACQUIRED ON TRANSFER SCHEME 2003 . THE A.O. NOTICED THAT DEPRECIATION ON THE ASSETS TRANSFERRED UNDER THE SC HEME IS NOT YET FINALIZED ON THE FACT THAT THE ACTUAL ASSETS ARE NOT IDENTIFIABLE AN D NOT BEING USED AS WELL AS THEIR FULL TITLE HAVE NOT BEEN TRANSFERRED TO THE ASSESSEE. B EFORE THE A.O. IT WAS SUBMITTED BY THE ASSESSEE THAT ON IDENTICAL SET OF FACTS, THE DI SALLOWANCE WAS MADE IN A.Y. 2005- 06. IN A.Y. 2005-06, THE CLAIM OF THE ASSESSEE WAS ALLOWED. THE A.O. NOTICED THE ASSESSEES SUBMISSION AT PAGE NO.6 AS UNDER :- IT IS HEREBY SUBMITTED THAT THE ASSESSEES COMPANY WAS CLAIMED DEPRECIATION ON ASSETS TRANSFERRED UNDER TH E TRANSFER SCHEME 2003 VALUE OF RS.85,19,34,122/- WHICH WAS ADDED BY THE LD. AO BUT THE ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER WAS DULY DELETED BY THE COMMISSIONER OF INCOME TAX (A) VIDE ORDER DA TED 12.03.2007 AND HONBLE ITAT, ALLAHABAD HAS ALREADY DISMISSED T HE DEPARTMENTAL APPEAL AND CONFIRMED THE ADDITION DELETED BY THE LD . CIT, VARANASI, VIDE ITA NO. 237(ALLD)/207 A.Y.2004-05 DATED 20.11. 2008. IT IS HEREBY MENTIONED THAT THE LD. AO HAD MADE DISALLOWA NCE OF DEPRECIATION FOR A.Y. 2005-06 ON THE SAME GROUND BU T THE AFORESAID ADDITION HAS ALREADY BEEN DELETED BY THE COMMISSION ER OF INCOME TAX (A), VARANASI, DATED 19.03.2009 VIDE ORDER NO. 09/A CIT/RANGE- 2/VNS/2007-08 WHICH HAS DULY BEEN HELD BY THE HONB LE ITAT, 9 ITA NO.228, 229/A/11 & 272/A/2012 A.YS. 2007-08 TO 2009-10 ALLAHABAD VIDE ITA NO. 99/ALLD/2009 DATED 04.09.200 9. WHICH COPY HAS ORDER HAS ALREADY BEEN FURNISHED BEFORE YOUR HO NOUR. 15. THE A.O. MADE THE DISALLOWANCE ON THE GROUND TH AT THE DEPARTMENT HAS NOT ACCEPTED THE DECISION OF THE I.T.A.T. AND APPEAL HA S BEEN FIELD BEFORE THE HONBLE HIGH COURT. IN THE LIGHT OF THE FACT, THE A.O. MAD E DISALLOWANCE. 16. THE CIT(A) DELETED THE SAID ADDITION AS UNDER : - (PARAGRAPH NO.11, PAGE NOS.13 & 14) 11. AS REGARD, THE ADDITION UNDER THE HEAD DEPRECI ATION OF RS.69,55,61,698/-, I HAVE GONE THROUGH THE FACTS OF THE CASE, ASSESSMENT ORDER FRAMED BY THE ASSESSING OFFICER AN D SUBMISSIONS OF THE APPELLANT PUT FORTH DURING THE COURSE OF HEARIN G. DURING THE COURSE OF APPELLATE PROCEEDINGS COUNSEL FOR THE APP ELLANT SUBMITTED THAT THE SAID DISALLOWANCES OF DEPRECIATION IN THE AY 2004-05 AND 2005-06 HAS ALREADY BEEN DELETED BY THE CIT(A), VAR ANASI VIDE ORDER DATED 12.03.2007 AND 19.03.2009. AND ALSO THE SAID ORDER HAS BEEN CONFIRMED BY THE HONBLE INCOME TAX APPELLATE TRIBU NAL ALLAHABAD FOR BOTH THE YEARS VIDE ORDER NO.ITA NO.237/(ALLD.) /2007 DATED 20.11.2008 AND ITA NO.99/(ALLD.)/2009 DATED 04.09.2 009. I HAVE CONSIDERED THE FACTS OF THE CASE AND ALSO GONE THRO UGH THE RELEVANT APPELLATE ORDER. IN THIS CASE, THE BASIS ON WHICH THE DISALLOWANCE HAS BEEN MADE BY THE ASSESSING OFFICER IS NOT IN EXISTE NCE AS THE SAID ADDITION HAS BEEN DELETED BY THE CIT(A) VIDE HIS AB OVE REFERRED ORDER AND THE DEPARTMENTAL APPEAL ON THIS ISSUE HAS BEEN DISMISSED BY THE HONBLE ITAT, ALLAHABAD AS REFERRED ORDER WITH THE FOLLOWING COMMENTS :- IN VIEW OF THE ORDER PASSED BY LD. CIT U/S 263 OF THE INCOME TAX ACT, 1961 AT THIS STAGE REVENUE WOULD NO T HAVE ANY GRIEVANCE IN THE MATTER BECAUSE ONCE THE ASSESSMENT ORDER ITSELF IS CANCELLED, THERE IS NO PURPOSE IN CONSIDE RING THE 10 ITA NO.228, 229/A/11 & 272/A/2012 A.YS. 2007-08 TO 2009-10 DEPARTMENTAL APPEAL ON MERITS. WITHOUT PREJUDICE T O THE RIGHTS OF THE ASSESSEE IN CHALLENGING THE ORDER U/S 263 OF THE INCOME TAX ACT, 1961, WE ARE OF THE OPINION THAT THE PRESE NT DEPARTMENTAL APPEAL HAS BECOME INFRUCTUOUS. IN VIE W OF THE ORDER PASSED U/S 263 OF THE INCOME TAX ACT, 1961 EV EN OTHERWISE, ON GOING THROUGH THE APPELLATE ORDER, WE FIND NO MERITS IN THE DEPARTMENTAL APPEAL. HENCE, THE DEPA RTMENTAL APPEAL IS DISMISSED. THE ASSESSING OFFICER HAS MADE THE ADDITION RELYING ON THE ORDER OF EARLIER YEARS, WHEREAS THE ADDITION MADE I N EARLIER YEARS HAS BEEN DELETED BY THE CIT(A) AND ORDER OF CIT(A) HAS BEEN CONFIRMED BY THE HONBLE ITAT, ALLAHABAD. THUS THERE IS NO BASIS ON WHICH THIS ADDITION CAN STAND. THUS LOOKING TO THIS FACTS THE ADDITION MADE BY THE AO OF RS.69,55,61,698/- ON ACCOUNT OF NON ALLOW ANCE OF DEPRECIATION, IS HEREBY DELETED. 17. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PA RTIES AND RECORDS PERUSED. WE FIND THAT THE CIT(A) HAS FOLLOWED THE ORDER OF I .T.A.T. IN EARLIER YEARS 2004-05 AND 2005-06 AS PER DETAILED MENTIONED BY THE CIT(A) IN HIS ORDER. IN THE LIGHT OF THE FACT, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A). ORDER OF CIT(A) IS CONFIRMED ON THE ISSUE. 18. THE FIFTH GROUND IS IN RESPECT OF DELETION OF A DDITION OF RS.16,37,269/- AND RS.4,46,32,848/- ON ACCOUNT OF MISCELLANEOUS EXPEND ITURE AND REPAIR & MAINTENANCE. DURING THE ASSESSMENT PROCEEDINGS, TH E A.O. NOTICED THAT THE ASSESSEE HAS CLAIMED MISCELLANEOUS EXPENDITURE TO T HE TUNE OF RS.3,27,45,223/-. THE A.O. FOUND THAT THE EXPENDITURES ARE NOT VERIFI ABLE. THEREFORE, HE DISALLOWED 11 ITA NO.228, 229/A/11 & 272/A/2012 A.YS. 2007-08 TO 2009-10 5% OUT OF THE SAID AMOUNT OF WHICH CALCULATION COME S TO RS.16,37,269/-. SIMILARLY THE A.O. DISALLOWED 5% OUT OF REPAIRS & MAINTENANCE OF WHICH CALCULATION COMES TO RS.4,46,32,848/- 19. THE CIT(A) HAS DELETED THE ADDITION AS UNDER :- (PARAGRAPH NO.12, PAGE NOS.14 & 15) 12. AS REGARD, THE ADDITION MADE UNDER THE HEAD RE PAIR & MAINTENANCE OF RS.4,46,32,848/-, I HAVE GONE THROUG H THE FACTS OF THE CASE, ASSESSMENT ORDER FRAMED BY THE ASSESSING OFFI CER AND SUBMISSIONS OF THE APPELLANT PUT FORTH DURING THE C OURSE OF HEARING. THE DISALLOWANCE HAS BEEN MADE BY THE ASSESSING OFF ICER ON GROUND OF FULL JUSTIFICATION OF THIS IS NOT AVAILABLE. I AM UNABLE TO UPHOLD THESE DISALLOWANCES ON THIS GROUND BECAUSE PRIMA-FACIE TH ERE IS NO PROVISION IN THE ACT FOR DISALLOWANCE ON THE GROUND OF FULL JUSTIFICATION OF THIS IS NOT AVAILABLE REGARDING GENUINENESS. TH ERE IS NO FINDING BY THE ASSESSING OFFICER THAT EXPENDITURE WAS NOT INCU RRED FOR THE PURPOSE OF BUSINESS. THE ASSESSING OFFICER HAS CAL LED FOR THE VARIOUS DETAILS WHICH WAS PRODUCED BEFORE HIM. IN ABSENCE OF ANY EXERCISE BY THE ASSESSING OFFICER IN IDENTIFYING SUCH NON GENUI NE EXPENSES AND ESTABLISHING THE FACTS, THE DISALLOWANCE BASED ON E STIMATE CAN NOT BE SUSTAINED. APART FROM THE FACTS THAT THE CASE CLEA RLY GETS HIT BY THE DECISION IN THE CASE OF M/S. CHANDRA CONFECTIONERY P. LTD. REPORTED IN 2003(2) MTC 1022,WHEREIN IT HAS BEEN HELD BY THE HO NBLE ITAT BENCH, LUCKNOW THAT SUCH ADHOC DISALLOWANCES, WITHO UT ASSIGNING ANY REASONS AND WITHOUT POINTING OUT ANY DEFECT, AR E UNJUSTIFIABLE. IT IS WORTH MENTIONING THAT THE ASSESSEE IS A PUBLIC S ECTOR COMPANY OF GOVERNMENT OF U.P. AND ADD-HOC DISALLOWANCE OF THIS NATURE OR NOT CALLED FOR AND ALSO IN THE ASSESSEES OWN CASE FOR A.Y. 2004-05 THE SAME NATURE OF ADDITION HAS ALREADY DELETED BY CIT( A), VARANASI VIDE ORDER DATED 12.03.2007. IN VIEW OF ABOVE FACTUAL POSITION, THE DISALLOWANCE S MENTIONED IN ABOVE IS HEREBY DELETED. 12 ITA NO.228, 229/A/11 & 272/A/2012 A.YS. 2007-08 TO 2009-10 20. THE CIT(A) HAS ALSO DELETED ON SAME REASON THE ADDITION OF RS.16,37,269/- VIDE PARAGRAPH NO.10, PAGE NO.13 OF CIT(A)S ORDER WHICH IS AS UNDER :- 10. AS REGARD, THE ADDITION MADE UNDER THE HEAD MI SCELLANEOUS EXPENSES OF RS.16,37,269/-, I HAVE GONE THROUGH THE FACTS OF THE CASE, ASSESSMENT ORDER FRAMED BY THE ASSESSING OFFICER AN D SUBMISSIONS OF THE APPELLANT PUT FORTH DURING THE COURSE OF HEARIN G. THE DISALLOWANCE HAS BEEN MADE BY THE ASSESSING OFFICER ON GROUND OF FULL JUSTIFICATION OF THIS IS NOT AVAILABLE. I AM UNABLE TO UPHOLD THE SE DISALLOWANCES ON THIS GROUND BECAUSE PRIMA-FACIE THERE IS NO PROVISI ON IN THE ACT FOR DISALLOWANCE ON THE GROUND OF FULL JUSTIFICATION OF THIS IS NOT AVAILABLE REGARDING GENUINENESS. THERE IS NO FINDING BY THE A SSESSING OFFICER THAT EXPENDITURE WAS NOT INCURRED FOR THE PURPOSE O F BUSINESS. THE ASSESSING OFFICER HAS CALLED FOR THE VARIOUS DETAIL S WHICH WAS PRODUCED BEFORE HIM. IN ABSENCE OF ANY EXERCISE BY THE ASSESSING OFFICER IN IDENTIFYING SUCH NON GENUINE EXPENSES AN D ESTABLISHING THE FACTS, THE DISALLOWANCE BASED ON ESTIMATE CANNOT BE SUSTAINED. A PART FROM THE FACTS THAT THE CASE CLEARLY GET SHIT BY TH E DECISION IN THE CASE OF M/S CHANDA CONFECTIONARY P. LTD. REPORTED IN 2003(2 ) MTC 1022, WHEREIN IT HAS BEEN HELD BY THE HONBLE ITAT BENCH, LUCKNOW THAT SUCH AD-HOC DISALLOWANCES, WITHOUT ASSIGNING A NY REASONS AND WITHOUT POINTING OUT ANY DEFECT, ARE UNJUSTIFIABLE. IT IS WORTH MENTIONING THAT THE ASSESSEE IS A PUBLIC SECTOR COM PANY OF GOVERNMENT OF U.P. AND ADD-HOCK DISALLOWANCE OF THI S NATURE OR NOT CALLED FOR AND ALSO IN THE ASSESSEES OWN CASE FOR A.Y. 2004-05 THE SAME NATURE OF ADDITION HAS ALREADY DELETED BY CIT( A), VARANASI VIDE ORDER DATED 12.03.2007. IN VIEW OF ABOVE FACTUAL POSITION, THE DISALLOWANCE S MENTIONED IN ABOVE IS HEREBY DELETED. 21. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PA RTIES AND RECORDS PERUSED. WE FIND THAT WHILE DELETING THE ADDITION THE CIT(A) HAS FOLLOWED THE ORDER OF I.T.A.T.. LUCKNOW BENCH IN THE CASE OF M/S. CHANDRA CONFECTIONARY PVT. LTD. 13 ITA NO.228, 229/A/11 & 272/A/2012 A.YS. 2007-08 TO 2009-10 (SUPRA) AND ORDER OF CIT(A) FOP THE A.Y. 2004-05, O RDER DATED 12.03.3007. IN THE LIGHT OF THE FACT, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A). ORDER OF CIT(A) IS CONFIRMED ON THE ISSUE. 21.1 IN THE RESULT, ITA NO.228/A/2011 IS PARTLY ALL OWED FOR STATISTICAL PURPOSE. ITA NO.229/A/2011 FOR A.Y. 2008-09 22. THE FIRST EFFECTIVE GROUND IS IN RESPECT OF DIS ALLOWANCE OF RS.22,51,93,495/- OUT OF THE INTEREST EXPENDITURE. DURING THE ASSESS MENT PROCEEDINGS, THE A.O. NOTICED THAT THE ASSESSEE HAS CLAIMED INTEREST EXPE NDITURE OF RS.58,38,11,563/- TOWARDS THE FINANCIAL INSTITUTION RURAL ELECTRIFICA TION CORPORATION LIMITED, OUT OF WHICH AN AMOUNT OF RS.22,51,93,495/- HAS BEEN SHOWN AS OUTSTANDING AS ON 31.03.2008. THE A.O. INVOKED SECTION 43B OF THE AC T AND MADE ADDITION ON THE GROUND THAT THE ASSESSEE HAS FAILED TO FURNISH PROO F OF PAYMENT MADE BEFORE FURNISHING OF RETURN OF INCOME. THE CIT(A) DELETED THE ADDITION AS UNDER :- (PARAGRAPH NO.11, PAGE NOS.14 & 15) 11. AS REGARD, THE ADDITION MADE UNDER THE HEAD IN TEREST PAYMENT TO FINANCIAL INSTITUTIONS U/S 43B OF THE INCOME TAX ACT, 1961 OF RS.22,51,93,495/-, I HAVE GONE THROUGH THE FACTS OF THE CASE, ASSESSMENT ORDER FRAMED BY THE ASSESSING OFFICER AN D SUBMISSIONS OF THE APPELLANT PUT FORTH DURING THE COURSE OF HEARIN G. THE ASSESSEE WAS 14 ITA NO.228, 229/A/11 & 272/A/2012 A.YS. 2007-08 TO 2009-10 TAKEN LOAN FROM RURAL ELECTRIFICATION CORPORATION L TD. AND INTEREST WAS ACCRUED RS.22,51,93,495/-. ASSESSEE HAS MADE SU BMISSION BEFORE US THAT THE INTEREST AMOUNT PAYABLE TO REC LTD. HA S TRANSFERRD TO UPPCL AND THE SAID AMOUNT IS ADJUSTED FROM THE SUBS IDY RELEASED BY THE U.P. GOVERNMENT AND THE SAID AMOUNT HAS ADJUSTE D UPTO 30.05.2008 WHICH IS BEFORE FILING OF RETURN OF INCO ME. I FIND FORCE IN THE SUBMISSION OF THE ASSESSEE, CONSIDERING FACTS A ND CIRCUMSTANCES OF THE CASE ADDITION MADE ON ABOVE MENTIONED ACCOUNT O F RS.22,51,93,495/- HEREBY STAND DELETED. 23. THE LD. DEPARTMENTAL REPREHENSIVE SUBMITTED THA T SUCH ADJUSTMENT IS NOT AMOUNT TO PAYMENT IN ACCORDANCE WITH SECTION 43B OF THE ACT. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDER O F CIT VS. LOTUS ROOFINGS (P) LTD., 63 DTR 254 (247 CTR (MAD) 458). 24. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PA RTIES AND RECORDS PERUSED. THE ISSUE TO BE EXAMINED IN THIS CASE WHETHER ADJUS TMENT OF INTEREST IS PAYABLE AGAINST SUBSIDY RECEIVED FROM U.P. STATE GOVERNMENT WOULD AMOUNT TO PAYMENT IN ACCORDANCE WITH SECTION 43B OF THE ACT. IN THIS RE GARD, WE WOULD LIKE TO REFER JUDGEMENT OF HONBLE RAJASTHAN HIGH COURT IN THE CA SE OF CIT VS. RAVINDRA PLATINUM (P) LTD., 302 ITR 229 (RAJ) WHEREIN IT HAS BEEN HELD THAT SALES TAX DEFERMENT SCHEME OF 1987 FRAMED UNDER SECTION 7(2B) OF RAJASTAN SALES TAX ACT, 1954, CLEARLY SATISFIES THE REQUIREMENT OF CIRCULAR NO.674 DATED 29.12.1993 AND THE AMENDMENT MADE IN THE DEFERMENT SCHEME IS CLARIFICA TORY IN NATURE, AND THEREFORE, 15 ITA NO.228, 229/A/11 & 272/A/2012 A.YS. 2007-08 TO 2009-10 AMOUNT OF SALES TAX CONVERTED INTO LOAN HAS TO BE T REATED AS PAID FOR THE PURPOSE OF SECTION 43B OF THE ACT. THE LD. DEPARTMENTAL R EPRESENTATIVE RELIED UPON A JUDGEMENT OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. LOTUS ROOFINGS (P) LTD. (SUPRA) BUT THERE ARE CONTRARY JUDGEMENTS ALSO. SINCE THERE ARE DIFFERENT VIEWS OF HIGH COURTS, UNDER THE CIRCUMSTANCES AND A FTER APPLYING RULE THAT THE JUDGEMENT WHICH IS IN FAVOUR OF THE ASSESSEE IS TO FOLLOW. THEREFORE, WE RELY ON THE JUDGEMENT OF HONBLE RAJASTHAN HIGH COURT. SIM ILAR VIEW IS TAKEN BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. S HREE TALAL TALUKA SAHKARI KHAND UDYOG MANDI LIMITED, 178 CTR (GUJ) 89. IN T HE LIGHT OF ABOVE DISCUSSION, IF WE CONSIDER THE FACTS OF THE CASE UN DER CONSIDERATION, WE NOTICE THAT THE CIT(A) HAS DELETED THE ADDITION ACCEPTING THE A SSESSEES CONTENTION THAT INTEREST PAYABLE WAS ADJUSTED AGAINST AMOUNT FROM R E SUBSIDY WHICH WAS RELEASED BY THE U.P. GOVERNMENT. THE U.P. GOVERNMENT HAS RE LEASED THE RE SUBSIDY OF RS.44,41,00,000/- AND THE SAID AMOUNT OF INTEREST R S.22,51,93,495/- WERE ADJUSTED AGAINST RE SUBSIDY. THE REVENUE DID NOT DISPUTE AB OUT THE FACT, THEREFORE, IN THE LIGHT OF ABOVE DISCUSSION AND IN THE LIGHT OF DECIS IONS CITED ABOVE, WE FIND THAT THE CIT(A) HAS RIGHTLY DELETED THE ADDITION. 25. THE SECOND GROUND IS IN RESPECT OF ADDITION ON ACCOUNT OF DISALLOWANCE OUT OF VARIOUS EXPENSES RS.55,54,087/-, RS.4,77,24,356/ - AND RS.12,17,841/- OUT OF 16 ITA NO.228, 229/A/11 & 272/A/2012 A.YS. 2007-08 TO 2009-10 MISCELLANEOUS EXPENSES, REPAIR AND MAINTENANCE AND PRINTING AND STATIONERY. THE LD. REPRESENTATIVES OF THE PARTIES SUBMITTED THAT T HIS ISSUE IS SIMILAR TO GROUND NO.5 OF A.Y. 2007-08 WHICH HAS BEEN DECIDED IN PARA NO.2 1 OF THIS ORDER. FOLLOWING THE SAID DISCUSSION, WE CONFIRM THE ORDER OF CIT(A). 26. THE THIRD GROUND IS IN RESPECT OF DISALLOWANCE OF RS.1,47,11,91,680/- OUT OF DEPRECIATION. THE LD. REPRESENTATIVES OF THE PARTI ES SUBMITTED THAT THIS ISSUE IS ALSO SIMILAR TO GROUND NO.4 OF A.Y. 2007-08 WHICH HAS BE EN DECIDED AFTER DETAILED DISCUSSION IN PARA NO.17 OF THIS ORDER. FOLLOWING THE SAID DISCUSSION, ORDER OF THE CIT(A) IS CONFIRMED ON THE ISSUE. 26.1 IN THE RESULT, ITA NO.229/A/2011 IS DISMISSED. ITA NO.272/A/2012 - A.Y. 2009-10 27. THE FIRST GROUND IS PERTAINING TO RS.1,47,11,91 ,680/- ON ACCOUNT OF DEPRECATION. THIS ISSUE IS ALSO COVERED BY GROUND NO.4 OF A.Y. 2007-08 AND GROUND NO.3 OF A.Y. 2008-09. THIS GROUND HAS BEEN DECIDED IN A.Y. 2007-08 IN PARA NO.17 OF THIS ORDER. FOLLOWING THE SAID DISCU SSION, ORDER OF CIT(A) IS CONFIRMED. 17 ITA NO.228, 229/A/11 & 272/A/2012 A.YS. 2007-08 TO 2009-10 28. THE SECOND GROUND IS IN RESPECT OF DISALLOWANCE OF FOLLOWING EXPENSES :- MISCELLANEOUS EXPENSES - RS.79,07,174/- REPAIRS AND MAINTENANCE - RS.5,30,71,704/- PRINTING AND STATIONERY - RS.1,59,04,703/- 29. THIS ISSUE IS ALSO COVERED VIDE GROUND NO.5 IN A.Y. 2007-08 WHICH HAS BEEN DECIDED IN PARA NO.21OF THIS ORDER. FOLLOWING THE SAID DISCUSSION, ORDER OF CIT(A) IS CONFIRMED ON THE ISSUE. 30. THE THIRD GROUND IS IN RESPECT OF ADDITION OF R S.6,99,28,512/- UNDER SECTION 43B OF THE ACT. THIS GROUND IS SIMILAR TO GROUND N O.1 IN A.Y. 2008-09 WHICH HAS BEEN DECIDED IN PARA NO.24 OF THIS ORDER. FOLLOWIN G THE SAID DISCUSSION, THE ORDER OF CIT(A) IS CONFIRMED ON THE ISSUE. 31. THE FOURTH GROUND IS IN RESPECT OF RS.12,19,547 ./- ON ACCOUNT OF DISALLOWANCE OF TDS. THE CIT(A) DECIDED THE ISSUE AS UNDER :- (PARAGRAPH NO.11, PAGE NO.17) AS REGARD, THE ADDITION MADE UNDER THE HEAD NON DE DUCTION OF TDS ON INSTALLATION COMMISSION AND ERECTION OF RS.12,19,54 7/-, I HAVE GONE THROUGH THE FACTS OF THE CASE, ASSESSMENT ORDER FRAMED BY THE A SSESSING OFFICER AND SUBMISSIONS OF THE APPELLANT POUT FORTH DURING THE COURSE OF HEARING. THAT THE APPELLANTS COMPANY HAS DEBITED A SUM OF RS.1,06,14 ,34,070/- UNDER THE HEAD REPAIR & MAINTENANCE OF PLANT & MACHINERY, BUILDING , LINE CABLES NETWORKS (INSTALLATION, COMMISSIONING, AND ERECTION) AND HAS DEDUCTED TDS ON EACH 18 ITA NO.228, 229/A/11 & 272/A/2012 A.YS. 2007-08 TO 2009-10 PAYMENT. THE ASSESSEES COMPANY HAS DEDUCTED TDS ON SUCH PAYMENT RS.2,76,10,738.94 AND DEPOSITED RS.2,63,91,191.40 A ND BALANCE UPTO 31.03.2009 AND BALANCE AMOUNT OF RS.12,19,547.54 HA S BEEN DEPOSITED IN THE MONTH OF APRIL 2009 WHICH DETAILS AS UNDER :- S.NO. PARTICULARS AMOUNT DATE OF DEPOSITED 1. GORAKHPUR 131991.00 24.04.2009 2. AZAMGARH 159318.00 40452.00 301053.54 500823.54 30.04.2009 06.04.2009 14.05.2009 3. ALLAHABAD ZONE 415225.00 04.04.2009 4. VARANASI ZONE 109554.00 12410.00 45748.00 171508.00 30.04.2009 30.04.2009 07.04.2009 IN VIEW OF ABOVE FACTUAL POSITION THE APPELLANT COM PANY HAS ALREADY SUBMITTED DETAILS OF DEPOSIT OF AFORESAID TDS BUT, THE ASSESSING OFFICER WITHOUT CONSIDERED THE SAID CASE HAD DISALLOWED THE SAME. HENCE THE ADDITION MADE ON SAID COUNT IS HEREBY DELETED AND A SSESSING OFFICER IS DIRECTED TO ALLOW THE CLAIM MADE BY THE ASSESSEE AF TER VERIFICATION OF TAX CHALLAN. 19 ITA NO.228, 229/A/11 & 272/A/2012 A.YS. 2007-08 TO 2009-10 32. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PA RTIES AND RECORDS PERUSED. SINCE THE AMOUNT HAS BEEN DEPOSITED AND THE CIT(A) DIRECTED THE A.O. TO VERIFY THE DATE OF PAYMENT AND CHALLAN, IN THE LIGHT OF TH E FACT, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A). ORDER OF THE CIT (A) IS CONFIRMED.. 33. THE FIFTH GROUND IS IN RESPECT OF RS.71,75,671/ - ON ACCOUNT OF PRIOR PERIOD EXPENSES. THIS GROUND IS SIMILAR TO GROUND NO.2 IN A.Y. 2007-08 WHICH HAS BEEN DECIDED IN PARAGRAPH NO.9 OF THIS ORDER. FOLLOWING THE SAID DISCUSSION, WE SEND BACK THE ISSUE TO THE FILE OF CIT(A) WITH IDENTICAL DIRECTIONS. 33.1 IN THE RESULT, ITA NO.272/A/2012 IS PARTLY ALL OWED FOR STATISTICAL PURPOSES. 34. IN THE RESULT, ITA NO.228/A/2011 FOR A.Y. 2007- 08 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES, ITA NO.229/A/2011 FOR A.Y. 20 08-09 IS DISMISSED & ITA NO.272/A/2012 FOR A.Y. 2009-10 IS PARTLY ALLOWED FO R STATISTICAL PURPOSES. (ORDER PRONOUNCED IN THE OPEN COURT) SD/- SD/- (BHAVNESH SAINI) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER PBN/* 20 ITA NO.228, 229/A/11 & 272/A/2012 A.YS. 2007-08 TO 2009-10 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT (APPEALS) CONCERNED 4. CIT CONCERNED 5. D.R., ITAT, ALLAHABAD BENCH, ALLAHABAD 6. GUARD FILE. BY ORDER ASSISTANT REGISTRAR INCOME-TAX APPELLATE T RIBUNAL, ALLAHABAD TRUE COPY