ACIT, CHENNAI V. Lanco Tanjore Power Company Limited, CHENNAI

ITA 2782/CHNY/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 6245 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2022
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 26-09-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Set aside
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92

Judgement Text

आयकर अपीलीय अिधकरण ‘ए’ ायपीठ चे ई म । IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI माननीय +ी महावीर िसंह, उपा12 एवं माननीय +ी मनोज कु मार अ6वाल ,लेखा सद9 के सम2। BEFORE HON’BLE SHRI MAHAVIR SINGH, VICE PRESIDENT AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकर अपील सं./ ITA No.2782/Chny/2019 (िनधाBरण वषB / Assessment Year: 2012-13) ACIT, Corporate Circle-4(1), Chennai. बनाम / V s. M/s. Lanco Tanjore Power Company Ltd. No.25, G.N. Chetty Road, T. Nagar, Chennai – 600 017. थायी लेखा सं./जीआइ आर सं./P AN /GI R No . AAC C A- 4 2 9 7 - N (अ पीलाथ /Appellant) : ( थ / Respondent) अपीलाथ की ओरसे/ Assessee by : Shri R. Vijayaraghavan (Advocate) – Ld. AR थ की ओरसे/Revenue by : Shri ARV Sreenivasan (Addl. CIT) –Ld. DR सुनवाई की तारीख/Date of Hearing : 04-08-2022 घोषणा की तारीख /Date of Pronouncement : 17-08-2022 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by Revenue for Assessment Year (AY) 2012-13 arises out of the order of Learned Commissioner of Income Tax (Appeals)-8, Chennai [CIT(A)] dated 10.07.2019 in the matter of assessment framed by Ld. Assessing Officer [AO] u/s.143(3) of the Act on 20.03.2015. The grounds taken by the Revenue are as under: 1. The order of the Ld.CIT(A) is contrary to law and facts of the case. 2. The Learned CIT(A) erred in deleting the addition made towards provision for operations and maintenance to the tune of Rs.2.66 Crores. 2.1 The Learned CIT(A) failed to appreciate that provision made by the assessee has to be treated as adhoc and excessive in nature without reference to the actuals. ITA No.2782 /Chny/2019 - 2 - 2.2 The Learned CIT(A) failed to appreciate that liability provided by the assessee are not time bound expenses during a particular year. 2.3 The Learned CIT(A) failed to appreciate that from the analysis of provisions made during the year in which forms part of the assessment order, no expenditure was incurred in respect of certain items and provisions were made. 2.4 The Learned CIT(A) ought to have considered that the quantum of payments whether periodical or variable with respect to the Actual performance are determined in the agreement and there was no reason given on the part of the assessee to make such provision. 3. The Learned CIT(A) erred in holding that the Hon'ble ITAT, Chennai Bench has decided the issue in favour of the assessee for A.Y.2009-10 and thereby erred in deleting the addition made towards provision for operations and maintenance to the tune of Rs.2.66 Crores . 3.1 The Learned CIT(A) failed to consider that the Hon'ble ITAT, Chennai Bench in its order dated 24/09/2012 in ITA No.1322/Mds/2012 for the A.Y.2009-10 in assessee's own case had remitted the matter back to the file of the Assessing Officer. As is evident, the revenue is aggrieved by relief granted in the impugned order qua provision for operations and maintenance for Rs.266 Lacs. 2. The Ld. Sr. DR, at the outset, submitted that the Tribunal order has wrongly been applied in the impugned order and addition has wrongly been deleted. The Ld. Sr. DR placed on record Tribunal order for AY 2009-10 passed in ITA No.1322/Mds/2012 order dated 24.09.2012 to support the same. The Ld. AR, on the other hand, supported the impugned order but could not controvert the fact that the matter was restored back to the file of Ld. AO in earlier years. After perusal of case records, our adjudication would be as under. 3. During assessment proceedings, Ld. AO disallowed provision for operations and maintenance for Rs.266 Lacs since no such expenses was incurred during the year. Upon further appeal, the Ld. CIT(A) allowed the issue by noting that the assessee was maintaining a regular and verifiable system of provision for operations and maintenance. This issue was decided in assessee’s favor by the ITA No.2782 /Chny/2019 - 3 - Tribunal for A.Y 2009-10. Accordingly, Ld. A.O was directed to allow the provisions. Aggrieved, the revenue is in further appeal before us. 4. We find that relying upon Tribunal order for AY 2009-10, this issue was adjudicated by Tribunal for AY 2008-09 in ITA No.312/Mds/2013 dated 21.08.2013 as under: - 17. We have perused the orders and heard the rival submissions. It is not disputed that assessee was having two contracts with M/s GE Inc. USA. One was for long term maintenance of its main plant, second was for supply of spare parts for preventive maintenance and break down. As per the A.O., the provision made by the assessee for clearing the liability as per these agreements, was purely on an ad hoc basis and not based on any scientific work out. The A.O. in paras 7.6 and 7.7 of his order has clearly given why he considered the provision to be ad hoc. These paras are reproduced hereunder:- “7.6 Under these circumstances, provisions made by the assessee has to be treated as adhoc and excessive in nature without reference to the actuals. The said inference is furthered strengthened by a data presented in the following table: Particulars Opening Balance Current year provision Current year payments Closing Balance Escalation payable 47,09,987 7474322.64 Nil 12184309.64 Incentive payable 1,49,92,486 9281486.19 2452730.00 21821242.19 Adder Provision (10768436) 35693144.88 Nil 24924708.88 Adder LTSA duty provision 35616842 19312695.50 Nil 54929537.50 Adder duty paid (39117657) Nil 9582766.00 (48700423.00) LTMA MOB Advance (3503399) 334359.00 Nil (3169040.00) LTMA/LTSA Qtrly Provisions 65252 32526710.80 32595670.00 (3707.20) Total 1995075.00 104622719.00 44631166.00 61986.628 7.7 The assessee has also given break up for provisions made for the relevant previous years which is extracted as under: LTMA and LTSA provision vs. payment status for the various financial years from 200607 to 2010-11 Financial year Opening Balance Provision made Amount utilised Closing balance 2006-07 2069061933068186Nil53758805 2007-08 53758805484008708511850017041175 2008-09 170411751046227195967726661986628 2009-10 61986628806603637763969865007293 2010-11 650072938431384313196997417351162 As against this, claim of the assessee is that provisions were made exactly in accordance with agreements, based on actual factored fire hours of gas turbine ITA No.2782 /Chny/2019 - 4 - and average factored cost. Without doubt, the amounts whether claimed as provision or outstanding, if worked out strictly in accordance with agreements, has to be allowed. This is because assessee is legally bound to pay to M/s GE Inc. USA the amounts due to it as per the agreements. Actual date of payment is irrelevant. Though assessee has argued that the provisioning done by it was in accordance with such agreements, the table extracted above, does not substantiate such contention. We are, therefore, of the opinion that the matter requires re-visit by the A.O. We set aside the orders of authorities below and remit the issue back to Assessing Officer for verifying the provisioning done by assessee vis-à-vis the agreements entered with M/s GE Inc. USA. If it is strictly in accordance with agreements, the amount shown as provision has to be allowed. Amounts in excess of what is payable as per the agreements, can be disallowed. 18. In the result, we set aside the orders of authorities below on this aspect and remit the issue back to the file of A.O. for consideration afresh, in accordance with law. It could thus be seen that the matter was restored back to the file of Ld. AO for certain verifications which Ld. CIT(A) has not directed in this year. Therefore, respectfully following the earlier orders of Tribunal, we remit the issue back to the file of Ld. AO on similar lines. 5. The appeal stand allowed for statistical purposes. Order pronounced on 17 th August, 2022. Sd/- (MAHAVIR SINGH) उपा12 /VICE PRESIDENT Sd/- (MANOJ KUMAR AGGARWAL) लेखा सद9 / ACCOUNTANT MEMBER चे,ई / Chennai; िदनांक / Dated : 17-08-2022 EDN/- आदेश की Xितिलिप अ 6ेिषत/Copy of the Order forwarded to : 1. अपीलाथ /Appellant 2. यथ /Respondent 3. आयकर आयु (अपील)/CIT(A) 4. आयकर आयु /CIT 5. िवभागीय ितिनिध/DR 6. गाड फाईल/GF