Punjab State Electricity Board, Patiala V. ACIT, Patiala

ITA 387/CHANDI/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68536 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 26-08-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 15-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JYOTI KUMARI
• Assessee Lawyers: K P BAJAJ
• Keywords: Depreciation; Business expenditure; Bad and doubtful debts; Revenue expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.387 /CHD/2011 (ASSESSMENT YEAR : 2007-08) PUNJAB STATE ELECTRICITY BOARD, VS. THE A.C.I.T., THE MALL, PATIALA. CIRCLE PATIALA PAN: AABCP7651E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.P.BAJAJ RESPONDENT BY : SMT.JYOTI KUMARI, DR DATE OF HEARING : 26.08.2013 DATE OF PRONOUNCEMENT : 25.09.2013 O R D E R PER SUSHMA CHOWLA, J.M. : THE APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), PATIALA DATED 21.02.2011 RELATING TO ASSESSMENT YEAR 2007-08 AGAINST THE ORD ER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHOR T THE ACT). 2. THE LEARNED A.R. FOR THE ASSESSEE AT THE OUTSET POINTED OUT THAT THE ISSUES IN THE PRESENT APPEAL ARE COVERED BY THE ORD ER OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.1130/CHD/2009 RELATIN G TO ASSESSMENT YEAR 2006-07, ALONG WITH CROSS APPEAL IN ITA NO.112 7/CHD/2009 VIDE ORDER DATED 31.1.2013. 3. THE LEARNED D.R. FOR THE REVENUE PALCED RELIANCE ON THE ORDER OF THE CIT (APPEALS). 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. 2 5. THE GROUND NO.1 RAISED BY THE ASSESSEE IS AS UND ER: 1. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE THE ID. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE ADDITION OF RS. 8,33,621/- MADE ON ACCOUNT OF PROVISION OF BAD & DOUBTFUL DEBT S WHEN SUCH AMOUNT REPRESENTS ACTUAL DEBTS. 6. SIMILAR ISSUE AROSE BEFORE THE TRIBUNAL IN ASSES SEES OWN CASE RELATING TO ASSESSMENT YEAR 2006-07 AND THE TRIBUNA L VIDE PARA 52 AT PAGES 21 AND 22 HELD AS UNDER: 52. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE RECORD. THE PERUSAL OF THE ANNUAL STATEMENT OF ACCOUNT I.E. SCHEDULE 15(A) AT REVERSE OF PAGE 58 OF THE PAPER BOOK REFLECTS TH AT UNDER THE HEAD OTHER DEBTS TOTALING RS.4.43 CRORES, THE ASS ESSEE HAD CLAIMED EXPENDITURE OF BAD AND DOUBTFUL DEBTS WRITTEN OFF/PROVIDED FOR AS PER ACCOUNT CODE 79.4 AT RS.13,37,113 . THE ASSESSEE HAD ALSO MADE A PROVISION FOR DOUBTFUL DEBTS FROM THE C USTOMER UNDER ACCOUNT CODE 23.9 AT RS.25,87,71,432/- DEBITED UNDE R SCHEDULE 26B AT PAGE 66 OF THE PAPER BOOK. WHERE THE ASSESSEE HAD WRITTEN OFF OF BAD DEBTS IN ITS ACCOUNT THE SAID IS ALLOWABLE A S AN EXPENDITURE IN VIEW OF THE PROVISIONS OF SECTION 36(1)(VII) R.W .S. 36(2) OF THE ACT. THE NECESSARY DETAILS AND EVIDENCE IN THIS RE SPECT ARE NOT AVAILABLE ON RECORD AND CONSEQUENTLY WE DIRECT THE ASSESSING OFFICER TO VERIFY THE CLAIM OF THE ASSESSEE AND DEC IDE THE ISSUE IN ACCORDANCE WITH LAW. REASONABLE OPPORTUNITY OF HEA RING SHALL BE AFFORDED TO THE ASSESSEE. THE GROUND NO.5 RAISED B Y THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 7. THE ISSUE ARISING IN THE PRESENT APPEAL IS IDENT ICAL TO THE ISSUE RAISED BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE R ELATING TO ASSESSMENT YEAR 2006-07 AND IN LINE WITH THE ORDER OF THE TRIB UNAL WE SET ASIDE THE PRESENT ISSUE BACK TO THE FILE OF THE ASSESSING OFF ICER TO FOLLOW THE SAID DIRECTIONS AND DECIDE THE ISSUE AFTER AFFORDING REA SONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. THE GROUND NO.1 RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 8. THE GROUND NO.2 RAISED BY THE ASSESSEE IS AS UND ER: 2. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE THE ID. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE ADDITION OF RS. 19,82,248/- MADE ON ACCOUNT OF SUNDRY EXPENSES FOR AMORTIZATION OF INTANGIBLE ASSETS. 3 9. SIMILAR ISSUE AROSE BEFORE THE TRIBUNAL IN ASSES SEES OWN CASE RELATING TO ASSESSMENT YEAR 2006-07 AND THE TRIBUNA L VIDE PARAS 28 AND 29 AT PAGES 10 AND 11 HELD AS UNDER: 28. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE RECORD. THE EXPENDITURE CLAIMED BY THE ASSESSEE UNDER THE HEAD SUNDRY EXPENSES IS ON ACCOUNT OF WRITING OFF OF LEASE MANAGEMENT FEE P AID BY THE ASSESSEE. THE ASSESSEE CLAIMS TO HAVE TAKEN ON LEASE VARIOUS ASSETS FROM YEAR TO YEAR WHERE THE PERIOD OF LEASE WAS FOR 10 YEARS. T HE LEASE MANAGEMENT FEE PAID BY THE ASSESSEE WAS AMORTIZED BY THE ASSES SEE IN ITS BOOKS OF ACCOUNT AND 1/10 TH OF THE EXPENDITURE WAS CLAIMED FROM YEAR TO YEAR. THE COPY OF THE LEASE AGREEMENT IS PLACED AT PAGES 3 TO 22 OF THE PAPER BOOK UNDER WHICH THE ASSESSEE HAD LEASED ENERGY SAV ING DEVICE WHERE THE TOTAL VALUE WAS RS.36.75 CRORES, AGAINST WHICH THE LEASE MANAGEMENT FEE OF RS.36.75 LACS WAS TO BE PAID AS PER AGREEMEN T DATED 29.9.1995. THE ASSESSEE HAD ALSO PLACED ON RECORD THE DETAILS OF SUNDRY EXPENSES DEBITED TO ITS BOOKS OF ACCOUNT AT PAGES 1 AND 2 OF THE PAPER BOOK. THE ASSESSEE HAD DEBITED A SUM OF RS.38,05,913/- ON ACC OUNT OF WRITE OFF OF LEASE MANAGEMENT FEE AND FURTHER A SUM OF RS.5,17,5 48.77 ON ACCOUNT OF FURTHER WRITE OFF OF THE LEASE MANAGEMENT FEE. THE PERUSAL OF THE SAID DETAILS REFLECTS THAT THE LEASE FINANCE ARRANGEMENT S WERE EXECUTED IN THE PRECEDING YEAR/S AND 1/10 TH OF SUCH AMOUNT WAS DEBITED DURING THE YEAR UNDER CONSIDERATION. THE BREAK UP OF THE EXPENDITU RE DEBITED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION WAS AS UNDER: S.NO. LEASE FINANCE LMF RS. AMOUNT OF PERIOD AMOUNT ARRANGEMENT IN LACS LEASE FINANCE RS.IN CR. --------------------------------------------------- ---------------------------------------- 1. 9/96 173.87 58.25 10 YRS. 1738700 2. 3/97 24.93756 24.93756 12 YRS. 207813 3. 3/98 25.00 25.00 10 YRS. 500000 4. 9/98 135.94 135.94 10 YRS. 1359400 ------------ 3805913/- AMOUNT VITH YEAR_____ TOTAL SEVEN YEAR JV NO. & MONTH NOW ADJUSTED 2827954.83 14 OF 3/2000 471325.81 277337.70 15 OF 3/2000 46222.96 ---------------- 517548.77 ---------------- 29. THE PERUSAL OF THE ABOVE SAID REFLECTS THE ASSE SSEE TO HAVE BOOKED THE EXPENDITURE ON ACCOUNT OF LEASE ARRANGEMENTS EN TERED INTO BY THE ASSESSEE IN THE PRECEDING YEARS. SIMILAR EXPENDITU RE WAS BEING CLAIMED FROM YEAR TO YEAR. THE REVENUE WAS FAILED TO CONTR OVERT THE CLAIM OF THE ASSESSEE THAT SIMILAR DEFERRED REVENUE EXPENDITURE HAS BEEN ALLOWED IN THE EARLIER YEARS. THE ASSESSEE HAD CLAIMED EXPEND ITURE OF RS.2.33 CRORES IN ASSESSMENT YEAR 2003-04, RS.1.22 CRORES I N ASSESSMENT YEAR 2004-05 AND RS.1.64 CRORES IN ASSESSMENT YEAR 2005- 06. DURING THE 4 YEAR UNDER CONSIDERATION THE ASSESSEE HAS CLAIMED E XPENDITURE OF RS.43,23,462/-. IN VIEW OF THE NATURE OF THE EXPE NDITURE AND THE FACTS AND CIRCUMSTANCES OF THE CASE WE DIRECT THE ASSESSI NG OFFICER TO ALLOW THE EXPENDITURE OF RS.43,23,462/- DEBITED UNDER THE HEAD SUNDRY EXPENSES BEING IN THE NATURE OF AMORTIZATION OF LE ASE MANAGEMENT FEE. THE GROUND NO.1 RAISED BY THE ASSESSEE IS THUS ALLO WED. 10. THE ISSUE ARISING IN THE PRESENT APPEAL IS IDEN TICAL TO THE ISSUE RAISED BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE R ELATING TO ASSESSMENT YEAR 2006-07 AND FOLLOWING THE SAME PARITY OF REASO NING WE ALLOW THE EXPENDITURE OF RS.19,82,248/- UNDER THE HEAD SUNDRY EXPENSES. THE GROUND NO.2 RAISED BY THE ASSESSEE IS ALLOWED. 11. THE GROUND NO.3 RAISED BY THE ASSESSEE READS AS UNDER: 3. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE THE ID. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE DISALLOWANCE OF RS. 32,01,25,318/- CL AIMED ON ACCOUNT OF PRIOR PERIOD EXPENSES IN ACCORDANCE WITH ESTABLISHED PRAC TICE. 12. SIMILAR ISSUE AROSE BEFORE THE TRIBUNAL IN ASSE SSEES OWN CASE RELATING TO ASSESSMENT YEAR 2006-07 AND THE TRIBUNA L VIDE PARAS 35 TO 40 AT PAGES 13 TO 16 HELD AS UNDER: 35. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE RECORD. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD CL AIMED PRIOR PERIOD EXPENDITURE OF RS.101.63 CRORES, BREAK UP OF WHICH IS AS UNDER: 2 PRIOR PERIOD EXPENSES / LOSSES PURCHASE OF POWER 83.1 27,57,69,624 (51,09,51,620 FUEL RELATED LOSSES & EXPENSES 83.2 30,13,57,621 5,21,64,628 OPERATING EXPENSES 83.3 79,23,898 94,55,006 EMPLOYEE COSTS 83.5 8,65,73,882 12,63,11,590 DEPRECIATION UNPROVIDED IN PREVIOUS YEARS 83.6 34,28,14,102 8,26,64,649 INTEREST & FINANCE CHARGES 83.7 2,05,063 (2,46,96,006) ADMINISTRATIVE EXPENSES 83.820 13,90,237 13,54,85,979 FREIGHT & OTHER PURCHASE RELATED EXPENSES 83.840 2,85,744 (10,68,962) TOTAL 1,01,63,20,171 (13,06,34,736 ) NET PRIOR PERIOD CREDIT /(CHARGES)(1-2) (61,31,52,036) 47,73,85,001 36. THE PERUSAL OF THE ABOVE SAID DETAILS REFLECTS THAT THE EXPENDITURE BOOKED ON ACCOUNT OF PRIOR PERIOD EXPENSES WAS ON A CCOUNT OF PURCHASE OF POWER OF RS.27.59 CRORES, FUEL RELATED LOSSES AN D EXPENSES TOTALING RS.30.13 CRORES, EMPLOYEES COST OF RS.8.65 CRORES AND DEPRECIATION UNPROVIDED IN THE PREVIOUS YEARS OF RS.34.28 CRORES AND OTHERS, TOTALING 5 RS.101.63 CRORES. THE ASSESSEE DURING THE YEAR UN DER CONSIDERATION HAD ALSO REFLECTED INCOME RELATING TO PREVIOUS YEAR , BREAK UP OF WHICH IS AS UNDER: SR. NO. PARTICULARS ACCOUNT CODE THIS YEAR 2005-2006 PREVIOUS YEAR 2004-2005 RS. RS. 1 INCOME RELATINQ TO PREVIOUS YEAR. FUEL RELATED GAINS 65.1 0 0 SALE OF POWER 65.2 6,07,09,044 12,11,95,707 INTEREST ON FDR'S 65.4 0 0 EXCESS PROV. FOR INCOME TAX 65.5 0 0 EXCESS PROV. FOR DEPRECIATION 65.6 20,76,20,563 \ / 17,93,34,791 EXCESS PROV FOR INTEREST & FINANCE CHARGES 65.7 18,412 33,17,976 OTHER EXCESS PROVISIONS 65.8 1,59,52,590 29,69,290 OTHER INCOMES 65.9 11,88,67,526 3,99,32,501 SUB TOTAL 40,31,68,135 34,67,50,265 37. THE CLAIM OF THE ASSESSEE VIS-A-VIS DEPRECIATIO N UNPROVIDED IN THE PREVIOUS YEARS IS ALLOWABLE IN THE HANDS OF THE ASS ESSEE IN CASE THE ASSESSEE IS ABLE TO ESTABLISH ITS CLAIM OF HAVING N OT PROVIDED THE DEPRECIATION IN THE EARLIER YEARS. THE ASSESSEE HA D ALSO MADE EXCESS PROVISION FOR DEPRECIATION AT RS.20.76 CRORES WHICH WAS INCLUDED AS INCOME OF THE ASSESSEE. THE ASSESSING OFFICER IS D IRECTED TO VERIFY THE CLAIM OF THE ASSESSEE AND IF FOUND CORRECT THE SAID EXPENDITURE UNDER THE HEAD PRIOR PERIOD EXPENSES/LOSSES TOTALING RS.34. 28 CRORES IS TO BE ALLOWED IN THE HANDS OF THE ASSESSEE. 38. IN RESPECT OF THE BALANCE EXPENDITURE BOOKED BY THE ASSESSEE UNDER THE HEAD PRIOR PERIOD EXPENSES, THE CLAIM OF THE ASSESSEE WAS THAT SIMILAR EXPENSES WERE BEING BOOKED AND ALLOWED IN T HE HANDS OF THE ASSESSEE ON ACCOUNT OF PRIOR PERIOD EXPENSES. THE LAW RELATING TO ALLOWABILITY OF PRIOR PERIOD EXPENSES HAS BEEN DELI BERATED UPON BY VARIOUS COURTS AND HON'BLE GUJARAT HIGH COURT IN SA URASHTRA CEMENT AND CHEMICAL INDUSTRIES LTD. V. CIT (1995) [213 ITR 523 (GUJ)] IT WAS HELD THAT MERELY BECAUSE AN EXPENSE RELATED TO A TR ANSACTION OF AN EARLIER YEAR DOES NOT BECOME A LIABILITY PAYABLE IN THE EARLIER YEAR UNLESS IT CAN BE SAID THAT THE LIABILITY WAS DETERM INED AND CRYSTALLIZED IN THE YEAR IN QUESTION. IN ADDL. CIT V. FARASOL LTD . (1987) 163 ITR 364 (RAJ), THE HON'BLE HIGH COURT HELD THAT THE ASSESSEE ENTERED INTO A CONTRACT WITH OIL AND NATURAL GAS COMMISSION IN FEB RUARY, 1964. THE OPERATION STARTED IN DECEMBER, 1964. THE ASSESSEE CLAIMED DEDUCTION OF EXPENSES FOR THE PERIOD SEPTEMBER 10, 1964 TO DECEM BER 31,1965 AFTER THE COMMUNICATION OF APPROVAL IN THE ASSESSMENT YEA R 1966-67. THE HIGH COURT HELD THAT THE EXPENDITURE INCURRED IN EA RLIER YEARS CAN BE ALLOWED AS A DEDUCTION IN THE ASSESSMENT YEAR 1966- 67 AS IT CRYSTALLIZED ONLY WHEN APPROVAL WAS RECEIVED . 39. THE HON'BLE DELHI HIGH COURT IN CIT VS. EXXON M OBIL LUBRICANTS P. LTD. (SUPRA) HELD THAT THE LIABILITY TO PAY AROS E AND CRYSTALLIZED ON THE SIGNING OF THE AGREEMENT, THOUGH IT RELATED TO THE PERIOD PRIOR TO THE PREVIOUS IN WHICH THE AGREEMENT WAS SIGNED. IT WAS FURTHER HELD BY THE 6 HON'BLE HIGH COURT THAT WHERE THE ASSESSEE HAD SHOW N PRIOR PERIOD INCOME WHICH WAS NOT EXCLUDED WHILE WORKING OUT CUR RENT YEARS TAXABLE INCOME, THEN THERE WAS NO REASON TO DISALLOW ONLY P ART OF THE PRIOR PERIOD ADJUSTMENT I.E. PRIOR PERIOD EXPENDITURE. 40. NOW COMING TO THE FACTS OF THE PRESENT CASE BEF ORE US, ADMITTEDLY, THE INCOME RELATING TO PRIOR PERIOD TOTALING RS.40. 31 CRORES HAS BEEN INCLUDED AS INCOME IN THE HANDS OF THE ASSESSEE AND PRIOR PERIOD EXPENSES TOTALING RS.101.63 CRORES HAS BEEN DISALLO WED BY THE AUTHORITIES BELOW, WHICH INCLUDES DEPRECIATION UNPR OVIDED IN THE PREVIOUS YEARS TOTALING RS.34.28 CRORES. THE SAID ISSUE HAS ALREADY BEEN SET ASIDE TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION. HOWEVER, IN RESPECT OF THE EXPENDITURE ON ACCOUNT OF PURCHAS E OF POWER THE ISSUE NEEDS VERIFICATION. IN CASE THE SAID LIABILITY AR OSE DURING THE YEAR ITSELF THOUGH RELATABLE TO THE EARLIER YEAR, THE SA ME IS ALLOWABLE IN THE HANDS OF THE ASSESSEE. SIMILARLY, THE CLAIM OF FUE L RELATED LOSSES AND EXPENSES TOTALING RS.30.14 CRORES IS ALLOWABLE IN T HE HANDS OF THE ASSESSEE IN CASE THE LIABILITY TO PAY THE SAME AROS E DURING THE YEAR UNDER CONSIDERATION. SIMILAR IS THE CASE OF EMPLOY EES COST TOTALING RS.8.66 CRORES. THE ASSESSEE HAS FAILED TO FURNISH COMPLETE DETAILS IN RESPECT THEREOF AND IN ALL FAIRNESS, WE REMIT THE I SSUE BACK TO THE FILE OF THE ASSESSING OFFICER TO VERIFY THE SAID CLAIM OF T HE ASSESSEE AND IF FOUND TO BE CORRECT, THE SAID EXPENDITURE IS ALLOWA BLE IN THE HANDS OF THE ASSESSEE, ON THE SAME PARITY OF REASONING UNDER WHI CH PRIOR PERIOD INCOME HAS BEEN INCLUDED IN THE HANDS OF THE ASSESS EE. THUS GROUND NO.2 RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTI CAL PURPOSES. 13. THE ISSUE ARISING IN THE PRESENT APPEAL IS IDEN TICAL TO THE ISSUE RAISED BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE R ELATING TO ASSESSMENT YEAR 2006-07 AND FOLLOWING THE SAME PARITY OF REASO NING, WE SET ASIDE THE PRESENT ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER TO VERIFY THE CLAIM OF THE ASSESSEE AND DECIDE THE SAME IN LINE W ITH OUR DIRECTIONS. THE GROUND NO.3 RAISED BY THE ASSESSEE IS ALLOWED F OR STATISTICAL PURPOSES. 14. THE GROUND NO.4 RAISED BY THE ASSESSEE IS AS UN DER: 4. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE THE ID. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE DISALLOWANCE OF RS. 4,91,65,541/- ON ACCOUNT OF DEFERRED COST. 15. THE LEARNED A.R. FOR THE ASSESSEE POINTED OUT T HAT SIMILAR ISSUE AROSE BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE RELATING TO ASSESSMENT YEAR 2006-07 AND THE TRIBUNAL VIDE PARA 41 AT PAGE 16 HA D ALLOWED THE CLAIM OF THE ASSESSEE. THE TRIBUNAL IN ASSESSMENT YEAR 2 006-07 HAD CONSIDERED THE EXPENDITURE OF RS.2,93,114/- BEING I NCURRED BY THE 7 ASSESSEE ON SURVEY AND FEASIBILITY STUDY OF PROJECT S AND HAD ALLOWED THE SAID CLAIM. THE RELEVANT PARA READS AS UNDER: 41. THE GROUND NO.3 RAISED BY THE ASSESSEE IS ON A CCOUNT OF DISALLOWANCE OF RS.2,93,114/- ON ACCOUNT OF DEFERRE D COST. THE AFORESAID EXPENDITURE OF 2,93,114/- WAS INCURRED BY THE ASSESSEE ON ACCOUNT OF SURVEY AND FEASIBILITY STUDY OF PROJECTS . THE SAID EXPENDITURE WAS DISALLOWED IN THE HANDS OF THE ASSESSEE. WE FI ND NO MERIT IN THE SAID DISALLOWANCE OF RS.2,93,114/- AS ADMITTEDLY TH E EXPENDITURE WAS INCURRED ON SURVEY AND FEASIBILITY STUDY OF PROJECT S OBTAINED BY THE ASSESSEE WHICH RELATE TO SUCH PROJECTS, WHICH WERE ULTIMATELY NOT SANCTIONED. THE SAID REPORT BEING OBTAINED DURING THE COURSE OF RUNNING OF THE BUSINESS BY THE ASSESSEE BOARD IS AN ALLOWAB LE BUSINESS EXPENDITURE. THUS GROUND NO.3 RAISED BY THE ASSESS EE IS ALLOWED. 16. HOWEVER, THE PERUSAL OF THE ASSESSMENT ORDER PA SSED BY THE ASSESSING OFFICER REFLECTS THAT THE EXPENDITURE BOO KED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION UNDER THE HEAD DEFERRED COST WAS IN THE NATURE OF COMPENSATION FOR PREMATURE LICENCEES AND PRELIMINARY EXPENSES ON ACCOUNT OF SURVEY AND FEASIBILITY OF PR OJECTS WHICH HAD NOT BEEN SANCTIONED. THE OBSERVATIONS OF THE ASSESSING OFFICER ARE IN PARAS 8.1 TO 8.3 AND THEREAFTER UNDER PARA 9.1 OF THE ASS ESSMENT ORDER. 17. THE CIT (APPEALS) VIDE PARA 9.2 NOTED THE PROCE EDINGS BEFORE THE ASSESSING OFFICER AND THE SAID PARA READS AS UNDER: 9.2 BEFORE ME, THE COUNSEL FOR THE APPELLANT HAS ST ATED THAT VARIOUS PROJECTS ARE TAKEN UP BY THE BOARD AT VARIOUS BRANCHES ALL OVER STATE OF PUNJAB. EXPENDITURE WAS INCURRED ON SURVEY AND FEASIBILITY OF SUCH PROJECTS. IN CASE THE PROJECT WAS THROUGH, THE EXPENDITURE WAS CAPITALIZED, HOWEVER, THE EXPENDITURE IN RESPECT OF THE PROJECTS WHICH ARE ABANDONED WAS WRITTEN OFF AS MISCELLANEOUS LOSES AND WRITE OFFS AND SUNDRY EXPEN SES WERE CHARGED TO THE PROFIT AND LOSS ACCOUNT UNDER THE HEAD 'OTHER DEBITS'. DURING THE C OURSE OF ASSESSMENT PROCEEDINGS THE APPELLANT WAS REQUIRED TO EXPLAIN THE NATURE OF SUC H DEBITS. VIDE EXPLANATION DATED 18.12.2009 IT WAS EXPLAINED THAT THE SAME WAS AMORT IZATION OF THE EXPENDITURE ON ACCOUNT OF PREMATURE PRELIMINARY EXPENSES. THE EXPENDITURE HAD BEEN BOOKED AS PER ACCOUNTING POLICIES NOTIFIED BY THE CENTRAL GOVERNMENT VIDE SCHEDULE-23 , THE ACCOUNT CODE GIVEN AS 17 IN THE ANNUAL ACCOUNT RULES, 1985. SINCE THE EXPENDITURE WAS WRITTEN OFF ACCORDING TO THE GUIDELINES PRESCRIBED BY THE GOVERNMENT, NO DISALLOWANCE SHOUL D HAVE BEEN MADE. 8 18. THE SUBMISSIONS OF THE ASSESSEE WERE FORWARDED TO THE ASSESSING OFFICER WHO IN HIS REMAND REPORT SUBMITTED AS UNDER : 9.3 THE A.O. IN HIS REMAND REPORT HAS SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE APPELLANT FAILED TO FURNISH ANY DOC UMENTARY EVIDENCE IN SUPPORT OF ITS CLAIM. THE APPELLANT HAD ONLY RELIED UPON THE ACCOU NTING POLICIES NOTIFIED BY THE GOVT. THE APPELLANT HAD FAILED TO SUBSTANTIATE THAT THE IMPUG NED PROJECTS AND SURVEYS WERE COMMENCED IN ORDER TO GENERATE, TRANSMIT OR DISTRIBUTE THE ELECT RICITY AND THEY WERE NOT FEASIBLE. THEY HAD BEEN ABANDONED AND THE EXPENSES INCURRED THERETO WE RE DEBITED TO THE P&L ACCOUNT AS DEFERRED COST. THE APPELLANT HAD FAILED TO DISCHARGE ITS ONU S AS TO THE CLAIM OF EXPENDITURE AS REVENUE EXPENDITURE. 19. THE CIT (APPEALS) ACCORDINGLY DISALLOWED THE CL AIM OF THE ASSESSEE IN RELATION TO THE EXPENDITURE ON ACCOUNT OF AMORTIZATION OF INTANGIBLE ASSETS AND WRITING OFF OF DEFERRED REVEN UE EXPENDITURE, BECAUSE OF THE FAILURE OF THE ASSESSEE TO INTIMATE HOW THE AMOUNT WAS WRITTEN OFF. THE LEARNED A.R. FOR THE ASSESSEE HAD FAILED TO MEET THE ABOVE SAID OBSERVATIONS OF BOTH THE ASSESSING OFFIC ER AND THE CIT (APPEALS) AND HAD MERELY RELIED UPON THE ORDER OF T HE TRIBUNAL WHICH WAS ONLY IN RESPECT OF THE EXPENDITURE INCURRED ON SURVEY AND FEASIBILITY STUDY OF PROJECTS. HOWEVER, THE EXPENDITURE IN THE PRESENT CASE IS IN RELATION TO THE AMORTIZATION OF INTANGIBLE ASSETS A ND WRITING OFF OF THE DEFERRED REVENUE EXPENDITURE, WHICH ADMITTEDLY WAS INCURRED IN THE EARLIER YEARS. IN THE ABSENCE OF THE REQUISITE DET AILS IT CAN NOT SAID THAT THE ISSUE IS COVERED BY THE EARLIER ORDER OF THE TR IBUNAL. HOWEVER, IN THE INTEREST OF JUSTICE WE REMIT THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER WHO SHALL ADJUDICATE THE ISSUE DE-NOVO IN A CCORDANCE WITH LAW AFTER AFFORDING REASONABLE OPPORTUNITY OF HEARING T O THE ASSESSEE. THE ASSESSEE IS DIRECTED TO FURNISH COMPLETE DETAILS BE FORE THE ASSESSING OFFICER IN RESPECT OF THE SAID EXPENDITURE. THE GR OUND NO.4 RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 9 20. THE GROUND NO.5 RAISED BY THE ASSESSEE READS AS UNDER: 5. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE THE ID. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE DISALLOWANCE OF RS. 3,53,79,00,000/- ON A/C OF OBSERVATIONS MADE BY AN AUDITOR. 21. SIMILAR ISSUE AROSE BEFORE THE TRIBUNAL IN ASSE SSEES OWN CASE RELATING TO ASSESSMENT YEAR 2006-07 AND THE TRIBUNA L VIDE PARA 49 AT PAGE 20 HELD AS UNDER: WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED TH E RECORD. THE AUDITORS IN THEIR ANNUAL STATEMENT OF ACCOUNTS OBS ERVED DISCREPANCIES IN THE ACCOUNTS MAINTAINED BY THE ASSESSEE. THE AU DITORS IN THE ANNUAL STATEMENT OF ACCOUNT HAD PREPARED A STATEMENT SHOWI NG THE IMPACT OF COMMENTS ON ACCOUNTS AS PER ANNEXURE-C ANNEXED AT R EVERSE OF PAGE 33 OF THE PAPER BOOK. THE COMMENTS OF THE AUDITORS AD VICE ARE AT PAGES 33 TO REVERSE OF PAGE 34 OF THE PAPER BOOK. ADMITTEDL Y, THE ASSESSEE IS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING AND C ERTAIN EXPENSES HAVE NOT BEEN BOOKED THOUGH RELATABLE TO THE YEAR UNDER CONSIDERATION. SIMILARLY, THE INCOME ARISING IN THE PERIOD UNDER C ONSIDERATION ON CERTAIN ACCOUNTS WAS NOT BOOKED BY THE ASSESSEE CLA IMING THAT IT WAS FOLLOWING THE CASH SYSTEM OF ACCOUNTING IN RESPECT THEREOF. THE ASSESSEE IS TO ACCOUNT FOR THE RECEIPTS AND EXPENDITURE WHIC H ARE RELATABLE TO THE PREVIOUS YEAR WHILE PREPARING ITS ACCOUNTS FOR THE YEAR UNDER CONSIDERATION. THE CLAIM OF THE ASSESSEE IS THAT I N THE UNDER-STATEMENT OF SURPLUS WORKED OUT BY THE AUDITORS OF RS.53.56 C RORES THE FIGURE OF THE EARLIER YEARS ARE ALSO INCLUDED AS SIMILAR STATEMEN T WAS BEING PREPARED FROM YEAR TO YEAR. DURING THE COURSE OF HEARING IT WAS PUT TO BOTH THE AUTHORIZED REPRESENTATIVES THAT THE SAID FACT NEEDS VERIFICATION AND BOTH THE AUTHORIZED REPRESENTATIVES FAIRLY AGREED FOR TH E VERIFICATION EXERCISE TO BE CARRIED BY THE ASSESSING OFFICER. IN THE TO TALITY OF THE FACTS AND CIRCUMSTANCES WE REMIT THIS ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER TO VERIFY THE CLAIM OF THE ASSESSEE AND WHE REIN THE FIGURES OF THE EARLIER YEARS, IF INCLUDED IN THE SAID STATEMENT UN DER ANY OF THE HEADS OF INCOME/EXPENDITURE, THE SAME IS TO BE IGNORED IN OR DER TO COMPUTE THE SURPLUS WHICH IS TO BE INCLUDED IN THE HANDS OF THE ASSESSEE IN LINE WITH THE OBSERVATIONS OF THE AUDITORS WHILE PREPARING TH E ACCOUNTS OF THE ASSESSEE. THE GROUND NO.4 RAISED BY THE ASSESSEE I S ALLOWED FOR STATISTICAL PURPOSES. 22. THE ISSUE ARISING IN THE PRESENT APPEAL IS IDEN TICAL TO THE ISSUE RAISED BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE R ELATING TO ASSESSMENT YEAR 2006-07 AND IN LINE WITH THE ORDER OF THE TRIB UNAL WE SET ASIDE THE 10 PRESENT ISSUE BACK TO THE FILE OF THE ASSESSING OFF ICER TO DECIDE THE SAME IN LINE WITH OUR DIRECTIONS. THE GROUND NO.5 RAISE D BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 23. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 25 TH DAY OF SEPTEMBER, 2013. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 25 TH SEPTEMBER, 2013 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH