DCIT RG 10(1), MUMBAI V. MAHARASHTRA STATE ELECTRICITY TRANSMISSION CO. LTD, MUMBAI

ITA 419/MUM/2010

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8042 (ITAT-MUMBAI)
• Duration Of Justice: 7 year(s) 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 26-03-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 18-01-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N P SINGH
• Assessee Lawyers: S E DASTUR
• Keywords: Capital asset; Depreciation; Additional evidence; Corroborative evidences; Competent authority; Revised return; Unabsorbed depreciation; Revenue expenditure
• Section: 43B; 139(5); 28

Judgement Text

, , , , INCOME-TAX APPELLATE TRIBUNAL -BBENCH MUMBAI , ,, , , ,, , BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND AMARJIT SINGH,JUDICIAL MEMBER ./I.T.A./419/MUM/2010, / ASSESSMENT YEAR:2006-07 DCIT, RANGE-10(1) ROOM NO.455, AAYAKAR BHAVAN M K ROAD, MUMBAI-400 020 VS. M/S. MAHARASHTRA STATE ELECTRICITY TRANSMISSION CO.LTD. PLOT NO.C-19, E-BLOCK PRAKASHGANGA, ANANT KANEKAR MARG, STATION ROAD, BANDRA (E),MUMBAI-51. PAN:AAECM 2936 N ( /APPELLANT ) ( / RESPONDENT) / REVENUE BY: SHRI N.P. SINGH-CIT-DR /ASSESSEE BY: S/SHRI S.E. DASTUR AND NEERAJ SHETH / DATE OF HEARING: 14/12/2016 / DATE OF PRONOUNCEMENT: 10.03.2017 PER RAJENDRA, AM - CHALLENGING THE ORDER,DATED13.11.2009 OF THE CIT(A) -21,MUMBAI,THE ASSESSING OFFICER(AO) HAS FILED PRESENT APPEAL.ASSESSEE-COMPANY,ENGAGED I N THE BUSINESS OF ELECTRICITY TRANSMIT - SSION,FILED ITS RETURN OF INCOME ON 29.11.2006 DECL ARING NIL INCOME AFTER SET OFF OF BROUGHT FORWARD BUSINESS LOSSES AND UNABSORBED DEPRECIATION .A REVISED RETURN WAS FILED ON 27.10. 2007,DECLARING NIL INCOME AFTER SET OFF OF BROUGHT FORWARD LOSSES.THE AO COMPLETED THE ASSESSMENT U/S.143(3) OF THE ACT, ON 31.12.2008 ,DETERMINING INCOME OF THE ASSESSEE AT RS.538.54 CRORES. BRIEF FACTS: 2. THE MAHARASHTRA STATE ELECTRICITY BOARD (MSEB)WAS E NGAGED IN THE BUSINESS OF GENERATION, TRANSMISSION AND DISTRIBUTION OF POWER FOR THE STAT E OF MAHARASHTRA. THE MSEB W.E.F. 06. 06. 2005 WAS TRIFURCATED INTO THREE COMPANIES VIZ. M.S. E. GENERATION CO. (MSEGC), M.S.E. TRANSMISSION (MSET) AND M.S.E.DISTRIBUTION CO.LTD.( MSEDCL). EACH OF THE NEWLY FORMED COMPANIES TOOK OVER THE ACTIVITY/BUSINESS OF MSEB A S ITS BUSINESS ACTIVITY.THE ASSESSEE COMPANY TOOK OVER TRANSMISSION ACTIVITY OF MSEB . DURING ASSESSMENT PROCEEDINGS,THE AO NOTICED THAT I N THE ORIGINAL AS WELL AS REVISED RETURN, THE TOTAL INCOME, BEFORE SET OFF OF B/F LOSSES HAD BEEN REDUCED FROM RS. 536,22,64,112/- AS PER ORIGINAL RETURN TO RS. 533,57,51,543/- IN THE R EVISED RETURN. A.O WAS OF THE OPINION THAT THE DIFFERENCE OF RS.2,65,12,569/- IN THE TOTAL INC OME, PRIOR TO SET OFF OF LOSSES, AS PER ORIGINAL AND REVISED RETURN, WAS NOT RECONCILED BY THE APPELLANT COMPANY.HE OBSERVED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, SUFFIC IENT OPPORTUNITIES WERE PROVIDED TO THE 419/M/10(06-07) MSETRANSMISSION CO.LTD. 2 ASSESSEE TO EXPLAIN AND SUBSTANTIATE THE CLAIMS MA DE IN THE RETURNS FILED BY THE ASSESSEE,THAT THE ISSUE WAS NOT EXPLAINED NOR WAS ANY PLAUSIBLE RECONCILIATION OF THE DIFFERENCE WAS SUBMITTED.THE AO FURTHER NOTICED THAT THE COMPUTAT ION FORMING PART OF THE RETURN SHOWED THAT THE DEPRECATION CLAIMED HAD BEEN INCREASED AND THE ADDITION ON ACCOUNT OF ADJUSTMENTS U/S. 28 TO 44 HAD BEEN REDUCED IN THE REVISED RETU RN,THAT THE REASONS FOR THE SAME WERE NOT EXPLAINED. 2.1. WITH REGARD TO THE REVISED RETURN THE AO OBSERVED T HAT THE ASSESSEE WAS ENTITLED TO REVISE RETURN U/S. 139(5) OF THE ACT,THAT SUCH REVISION H AD TO BE BASED ON ANY OMISSION OR ANY WRONG STATEMENT DISCOVERED IN SUCH RETURN,THAT ANY WRONG STATEMENT OR OMISSION WAS DISCOVERED BY THE ASSESSEE FOR WHICH THE REVISED RETURN WAS FURNI SHED.HE HELD THAT IN ABSENCE OF ANY MATERIAL EVIDENCE OR DETAILS, THE SAID REDUCTION IN THE TOTAL INCOME WAS IRREGULAR AND UNSUBSTANTIATED.IN THE FACTS AND CIRCUMSTANCES,THE DIFFERENCE OF RS. 2,65,12,569/- IN THE ORIGINAL AND REVISED RETURN WAS ADDED BY THE AO TO THE TOTAL INCOME OF THE ASSESSEE. 2.2. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).DURING APPELLATE PROCEEDIN GS,IT WAS ARGUED THAT THE ASSESSEE ONE OF THE SUCCESSOR COMPANIES TO THE ERSTWHILE MSEB A ND WAS INCORPORATED ON 31-05-2005,THAT THE ORIGINAL RETURN WAS FILED ON 29-11-06, DECLARI NG TOTAL INCOME AT RS. -NIL-, AFTER SETTING OFF OF A SUM OF RS. 536.22 CRORES AGAINST THE B/F LOSES AND UNABSORBED DEPRECATION OF MSEB, AVAILABLE TO THE APPELLANT COMPANY IN TERMS OF SEC TION 72A(4) OF THE ACT,THAT THE ORIGINAL RETURN WAS PREPARED ON THE BASIS OF PROVISIONAL AC COUNTS AND A TAX AUDIT REPORT,DATED 22- 11-2006,THAT SUBSEQUENTLY, A REVISED RETURN OF INCO ME WAS FILED ON 27-10-2007, DECLARING TOTAL INCOME OF RS. -NIL-,AFTER SETTING OFF OF A SU M OF RS. 533.57 CRORES AGAINST THE AVAILABLE B/F LOSSES AND DEPRECATION OF MSEB,THAT THE REVISED RETURN WAS PREPARED ON THE BASIS OF AUDITED ACCOUNTS AND THE REVISED TAX AUDIT REPORT D ATED 04-10-2007,THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO CALLED UPON THE ASSESSEE TO FURNISH DETAILS OF JUSTIFICATION FOR FILING TWO RETURNS, THAT THE ASSESSEE VIDE LETT ER DATED 27-10-08 FURNISHED TO THE AO THE STATEMENT OF ACCOUNTS, STATEMENT SHOWING COMPUTATIO N OF TOTAL INCOME IN RESPECT OF ORIGINAL AS WELL AS REVISED RETURN AND ALSO TAX AUDIT REPORT , DATED 4-10-07,THAT DURING ASSESSMENT PROCEEDINGS NO FURTHER REQUISITION IN RESPECT THER EOF WERE RAISED BY THE AO,THAT HE DID NOT MAKE ANY EFFORT TO EVEN GO THROUGH THOSE BASIC DOCU MENTS FILED BEFORE HIM / AVAILABLE WITH HIM AND INSTEAD PROCEEDED TO MAKE ADDITION OF RS. 2 .65 CRORES,THAT THE ORIGINAL RETURN WAS SUBSTITUTED BY THE REVISED RETURN, THAT VARIOUS DO CUMENTS FILED BY THE APPELLANT HAD BEEN LOST 419/M/10(06-07) MSETRANSMISSION CO.LTD. 3 SIGHT OFF BY THE A.O SUCH AS STATEMENT SHOWING COM PUTATION OF TOTAL INCOME OF THE ORIGINAL AND THE REVISED RETURN, COPY OF ORIGINAL AND REVIS ED RETURN WHICH INCLUDED COMPLETE DETAILS OF UNAUDITED AND AUDITED REVENUE ACCOUNTS AND TAX AUDI T REPORT PREPARED ON THE BASIS THEREOF,THAT THE EXACT RECONCILIATION OF THE DIFFERENCE BETWEEN THE INCOME (PRIOR TO SET OFF OF LOSSES )AS PER THE ORIGINAL AND REVISED RETURN WAS NOT FURNIS HED,THAT COMPLETE FIGURES IN RESPECT THEREOF WERE ON RECORD. 2.2.A. BEFORE THE FAA,THE ASSESSEE EXPLAINED THE RECONCIL IATION/DIFFERENCE BETWEEN THE ORIGINAL AND REVISED RETURN AS UNDER: A.OTHER INCOME: I. COMPENSATION PAID ON ACCIDENTAL DEATH OF AN EMPLOYE E RS.2,50,386/ RECOVERED FROM GOVT. OF MAHARASHTRA. II. INTEREST AND FINANCIAL CHARGES - EXCESS PROVISION M ADE IN RESPECT OF INTEREST ACCRUED AND DUE FOR LOANS - WITHDRAWN - RS. 46,44,1681- (COMPRI SING OF THREE FIGURES OF RS. 280653/-, RS. 1859349/- & RS.25,04,166/- ) III. INTEREST AND FINANCIAL CHARGES CAPITALIZE RS.5,98, 770/- B.OTHER DEBITS - EXPENSES: I. NEGATIVE MATERIAL COST VARIANCES - RS. 1,86,27,663/ - . II. LOSS ON EXCHANGE VARIATION - RS. 1,09,21,726/- III. LOSS ON SETTLEMENT OF CLAIM FOR MATERIAL- RS. 2,84, 537/-. IV. COMPENSATION FOR INJURIES / DEATH AND DAMAGES TO OU TSIDERS - RS. 25,136/-. V. LOSS ON OBSOLESCENCE OF FIXED ASSETS - RS. 28,920/- F.INTANGIBLE ASSETS WRITTEN OFF - RS. 2,531/- VI. INTEREST CHARGES FOR HVDC PROJECT WRITTEN OFF - RS. 10,08,573/-. VII. ROUNDING OFF - RS. 38/-. ON THE BASIS OF ABOVE RECONCILIATION,THE ASSESSEE A RGUED THAT THERE WAS NO DIFFERENCE BETWEEN RETURNED INCOME AS PER THE ORIGINAL RETURN OF INCOM E AND AS PER THE REVISED RETURN OF INCOME WHICH WAS NOT EXPLAINABLE. AFTER CONSIDERING THE AVAILABLE MATERIAL,THE FAA HE LD THAT THE INCOME OF BOTH THE RETURNS WAS COMPUTED AT RS. -NIL- AFTER ADJUSTING THE ABOVE SA ID DECLARED INCOME AGAINST THE BROUGHT FORWARD UNABSORBED LOSSES /DEPRECIATION OF MSEB,TH AT THE ORIGINAL RETURN WAS FILED ON 29.11.2006,THAT THE ASSESSEE COULD HAVE FILED REVI SED RETURN BY 27.10.2007,THAT THE REVISED RETURN FILED ON 02-08-07 WAS WELL WITHIN TIME,THAT AS PER PROVISIONS OF SECTION 139(5), A PERSON COULN REVISE THE RETURN IF HE WOULD DISCOVE R ANY OMISSION OR ANY WRONG STATEMENT IN THE ORIGINAL RETURN,THAT THERE WAS NO DISPUTE THAT THE ORIGINAL RETURN WAS FILED BY THE ASSESSEE ON THE BASIS OF PROVISIONAL UNAUDITED ACCOUNTS,THA T THE ASSESSEE-COMPANY BEING ONE OF THE 419/M/10(06-07) MSETRANSMISSION CO.LTD. 4 TRIFURCATED COMPANY INHERITED PART OF HUGE / VOLUM INOUS RECORDS / ACCOUNTS / OTHER PROBLEMS OF PARENT COMPANY,THAT THERE WERE VALID REASONS FO R NON-COMPLETION OF APPELLANT'S ACCOUNTS TILL THE DUE DATE OF FILING OF THE RETURN OF INCOME ,THAT IT RECEIVED STATUTORY AUDIT REPORT U/S. 44AB OF THE ACT OF THE AUDITORS ON THE BASIS OF WH ICH THE REVISED RETURN WAS FILED,THAT IT'S INCOME AS PER THE PROVISIONAL UNAUDITED ACCOUNTS W AS AT RS. 536.22 CRORES, WHEREAS INCOME AS PER AUDITED ACCOUNTS WAS AT RS. 533.57 CRORES.T HAT THERE WAS A DIFFERENCE OF RS. 2.65 CRORES,THAT SUCH DIFFERENCE WAS ON ACCOUNT OF MATER IAL CHANGES IN VARIOUS ITEMS OF INCOME AND EXPENDITURE, THAT THE AO HIMSELF,IN PARA 5.2 OF ASSESSMENT ORDER,HAD STATED THAT THE COMPUTATION FORMING PART OF THE E-FILED RETURN SHOW ED THAT THE DEPRECATION CLAIMS HAD BEEN INCREASED AND THE ADDITION ON ACCOUNT OF ADJUSTMENT U/S. 28 TO 44 HAD BEEN REDUCED IN THE REVISED RETURN,THAT SUCH DIFFERENCE IN THE INCOME /EXPENSES CONSTITUTED DISCOVERY OF OMISSION OR WRONG STATEMENT IN THE ORIGINAL RETURN WITHIN T HE MEANING OF SECTION 139(5) OF THE ACT,THAT THERE WAS A VALID AND JUSTIFIED REASON FOR THE APPE LLANT FOR REVISING THE RETURN,THAT THE AO WAS NOT JUSTIFIED IN HOLDING THAT THE ASSESSEE HAD FAIL ED TO PROVE DISCOVERY OF ANY OMISSION OR WRONG STATEMENT IN THE ORIGINAL RETURNTHT ONCE THE VALID REVISED RETURN WAS FILED, THE ORIGINAL RETURN STOOD AS WITHDRAWN,THAT THE AO SHOULD HAVE A SSESSED THE INCOME ON THE BASIS OF REVISED RETURN ONLY. WITH REGARD TO DISALLOWANCE OF THE DIFFERENCE OF RS . 2.65 CRORES IN ORIGINAL AND REVISED RETURN, THE FAA HELD THAT DURING APPELLATE PROCEEDINGS, THE APPELLANT FILED COPIES OF ORIGINAL RETURN AS WELL AS REVISED RETURNS,AND EXACT DETAILS OF DI FFERENCE / RECONCILIATION BETWEEN THE ORIGINAL AND REVISED RETURN,THAT DURING ASSESSMENT PROCEEDI NGS, NO SPECIFIC QUESTION WAS RAISED BY THE AO FOR EXPLAINING THE DIFFERENCE.IN RESPECT OF ITE MS OF INCOME, THAT WAS OFFERED BY THE ASSESSEE IN REVISED RETURN,THE FAA OBSERVED THAT SA ME NEEDED NO COMMENTS.HE FURTHER OBSERVED THAT THE ITEM OF MATERIAL COST VARIANCE A T RS. 1,86,27,663/- WAS WRONGLY TRANSFERRED TO RESERVE ACCOUNT,THAT AFTER POINTING OUT BY AUDIT ORS THE SAME WAS CORRECTLY TRANSFERRED TO MATERIAL COST VARIANCE,THAT THE SECOND MAJOR ITEM I .E. LOSS ON EXCHANGE VARIATION OF RS. 1,09, 21,7261- WAS ALSO ALLOWABLE,THAT CLAIM OF LOSS ON SETTLEMENT OF CLAIM FOR MARTIAL OF RS. 2, 84,537/- WAS ALSO MADE IN ORIGINAL UNAUDITED ACCOU NTS AND THAT SAME WAS AN ALLOWABLE ITEM,THAT THE LAST MAJOR ITEM OF RECONCILIATION WAS INTEREST CHARGES FOR HVDC PROJECT WRITTEN OFF,THAT IT WAS A GENUINE ERROR WHICH WAS MADE IN T HE UNAUDITED ACCOUNTS AND HAD BEEN CORRECTED WHEN IT WAS POINTED OUT BY THE AUDITORS, THAT THE OTHER ITEM OF RECONCILIATION WERE OF MINOR AMOUNT,THAT ALL THE ITEMS FORMING PART OF RECONCILIATION WERE OF ALLOWABLE NATURE. FINALLY,HE HELD THAT ORIGINAL RETURN WAS REVISED FO R VALID REASONS,THAT THE AO WAS NOT JUSTIFIED 419/M/10(06-07) MSETRANSMISSION CO.LTD. 5 IN MAKING ADDITION OF RS. 2,65,12,569/-HOLDING THAT THE DIFFERENCE BETWEEN ORIGINAL AND REVISED RETURN WAS NOT EXPLAINED. 3. FIRST GROUND OF APPEAL IS ABOUT ADMITTING THE ADDIT IONAL EVIDENCES IN VIOLATION OF RULE 46A OF THE INCOME TAX RULES,1962 (RULES). AS STATED EAR LIER,DURING THE APPELLATE PROCEEDINGS,THE ASSESSEE HAD FURNISHED STATEMENT GIVING THEREIN A R ECONCILIATION OF THE TOTAL INCOME AS PER ORIGINAL AND REVISED RETURN.SINCE THIS STATEMENT WA S NOT CALLED UPON BY AO,THE SAME CONSTITUTED ADDITIONAL EVIDENCE IN TERMS OF RULE 46 A OF THE I.T.RULES.THE ASSESSEE REQUESTED FOR ADMISSION OF ADDITIONAL EVIDENCE. IT WAS ARGUED BEFORE THE FAA THAT THERE WAS NO DIFF ERENCE BETWEEN THE RETURNED INCOME AS PER THE ORIGINAL RETURN OF INCOME AND AS PER THE RE VISED RETURN OF INCOME.THE FAA FORWARDED THE ADDITIONAL EVIDENCES TO THE AO AS PER THE PROVI SIONS OF RULE 46A OF THE RULES AND DIRECTED HIM TO FURNISH COMMENTS ON THE EVIDENCES P RODUCED BY THE ASSESSEE.VIDE HIS LETTER,DATED 21/08/2009, THE AO OBJECTED ADMISSION OF ADDITIONAL EVIDENCES ON THE GROUND THE ASSESSEE WAS GIVEN ADEQUATE OPPORTUNITY TO EXPLAIN THE DISCREPANCIES IN THE REVISED AND THE ORIGINAL RETURN OF INCOME,THAT IT SHOULD HAVE FURNI SH THE RECONCILIATION STATEMENT ALONG WITH THE NECESSARY SUPPORTING EVIDENCES DURING THE COURS E OF ASSESSMENT PROCEEDINGS.VIDE ITS REPLY DATED 09/11/2009, THE ASSESSEE FURNISHED COMM ENTS ON THE REMAND REPORT OF THE AO. AFTER CONSIDERING THE AVAILABLE MATERIAL,THE FAA HE LD THAT THE ASSESSEE HAD FILED THE DETAILS OF DIFFERENCE/RECONCILIATION BETWEEN THE ORIGINAL AND THE REVISED RETURNS, THAT DURING THE ASSESSMENT PROCEEDINGS THE AO HAD NOT RAISED ANY SP ECIFIC QUESTION ABOUT THE DIFFERENCE IN THE ORIGINAL AND THE REVISED RETURNS, THAT THE AO H AD NOT DIRECTED THE ASSESSEE TO FILE RECONCILIATION, THAT THE ARGUMENT ADVANCED BY THE A O THAT DURING ASSESSMENT PROCEEDINGS PROPER AND ILLEGITIMATE OF BUDGETARY WAS AFFORDED T O THE ASSESSEE WAS NOT CORRECT, THAT THE CASE OF THE ASSESSEE WAS COVERED BY CLAUSE (C) AND CLAUSE (D) OF THE RULE 46A OF THE RULES. 3.1. DURING THE COURSE OF HEARING BEFORE US,THE DEPARTME NTAL REPRESENTATIVE (DR) STATED THAT MATTER COULD BE DECIDED ON MERITS.THE AUTHORISED RE PRESENTATIVE (AR) STATED THAT AT THE TIME OF FILING OF ORIGINAL RETURN AUDITED ACCOUNTS WERE NOT AVAILABLE, THAT LATER ON REVISED RETURN WAS FILED, THAT THE AO DID NOT RAISE ANY SPECIFIC Q UERY IN THAT REGARD, THAT HE MADE AN ADDITION OF RS. 2.65 CRORES TO THE INCOME OF THE ASSESSEE ON ACCOUNT OF DIFFERENCE BETWEEN THE TWO RETURNS, THAT THE ASSESSEE FILED A RECONCILIATION S TATEMENT BEFORE THE FAA, THAT A REMAND REPORT WAS CALLED FROM THE AO AND THE ISSUE WAS DECIDED AC CORDINGLY. 419/M/10(06-07) MSETRANSMISSION CO.LTD. 6 3.2 .WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL BEFORE US.WE FIND THAT THE ASSESSEE HAD FILED A REVISED RETURN AFTER RECEIVING AUDITED ACCOUNTS FROM THE COMPETENT AUTHORITY, THAT THE AO HAD MADE CERTAIN ADDITION TO THE TOTAL INCOME OF THE ASSESSEE AS HE WAS OF THE OPINION THAT THERE WAS DIFFERENCE BETWEEN TH E ORIGINAL AND THE REVISED RETURN, THAT THE ASSESSEE HAD FILED A RECONCILIATION STATEMENT DURIN G THE APPELLATE PROCEEDINGS, THAT THE AO WAS GIVEN AN OPPORTUNITY TO OFFER HIS COMMENTS ABOU T THE ADDITIONAL EVIDENCES. AS PER THE PROVISIONS OF RULE 46A, THE FAA IS SUPPOSED TO AFFO RD A REASONABLE OPPORTUNITY OF HEARING TO THE AO IF HE ADMITS ADDITIONAL EVIDENCES. UNDER CLA USE (D), HE CAN SUO-MOTU ADMIT ADDITIONAL EVIDENCES.HE HAS INVOKED THE PROVISIONS OF CLAUSES C AND D OF THE RULE. ONCE THE AO WAS GIVEN A CHANCE TO REBUT THE EVIDENCES PRODUCED BY T HE ASSESSEE, THERE WAS NO JUSTIFICATION FOR RAISING THE GROUND OF ADMITTING ADDITIONAL EVIDENCE S BY HIM. AS THE FAA HAS FOLLOWED THE PROCEDURE HAS LAID DOWN BY LAW, SO, WE DISMISS THE FIRST GROUND,RAISED BY THE AO. 4. SECOND GROUND OF APPEAL IS ABOUT ALLOWING RELIEF IN RESPECT OF CLAIM OF REVERSAL OF EXCESS INTEREST CAPITALISED,AMOUNTING TO RS. 5.89 LAKHS.DU RING THE APPELLATE PROCEEDINGS,THE ASSESSEE PRODUCED ADDITIONAL EVIDENCES BEFORE THE FAA,AS STA TED EARLIER. IN THE WRITTEN SUBMISSIONS THE ASSESSEE EXPLAINED THE REASONS FOR DIFFERENCE B ETWEEN THE ORIGINAL AND THE REVISED RETURN. IT WAS STATED THAT UNDER THE HEAD OTHER INCOME INTE REST AND FINANCIAL CHARGES AMOUNTING TO RS. 5,98,700/- WERE WRONGLY CAPITALISED,THAT IN THE AUD ITED ACCOUNT INTEREST CHARGES WERE RIGHTLY CLAIMED AS REVENUE EXPENDITURE. AS THE CLAIM MADE B Y THE ASSESSEE WAS IN FORM OF ADDITIONAL EVIDENCE, THE FAA FORWARDED THE RECONCILIATION STAT EMENT TO THE AO FOR HIS COMMENTS. IN HIS REPLY, THE AO OBJECTED TO ADMISSION OF ADDITIONAL E VIDENCES, BUT, DID NOT OFFER ANY COMMENT ABOUT THE AMOUNTS SHOWN IN THE STATEMENT UNDER THE HEADS OTHER INCOME AND OTHER DEBITS EXPENSES. THE FAA AFTER CONSIDERING THE AVAILABL E MATERIAL, HELD THAT THE CLAIM MADE BY THE ASSESSEE WAS AS PER RULE. 4.1 .DURING THE COURSE OF HEARING BEFORE US,THE DR STAT ED THAT ASSESSEE ITSELF HAD CAPITALISED THE DISPUTED AMOUNT IN THE ORIGINAL RETURN. THE AR CONTENDED THAT THE ORIGINAL RETURN WAS BASED ON UNAUDITED ACCOUNTS,THAT THE AUDITORS POINT ED OUT AMOUNT IN QUESTION WAS EXPENDI - TURE OF REVENUE NATURE, THAT INTEREST WAS NOT PAID FOR ANY CAPITAL ASSET, THAT THE FAA HAD RIGHTLY ALLOWED THE CLAIM. 4.2 .WE FIND THAT IN THE ORIGINAL RETURN THE ASSESSEE H AD CAPITALISED THE INTEREST AND FINANCIAL CHARGES, THAT IN THE REVISED RETURN THE EXPENDITURE WAS CLAIMED UNDER THE HEAD REVENUE EXPENDITURE,THAT THE AO HAD NOT COMMENTED UPON THE CLAIM MADE BY THE ASSESSEE WHILE FILING THE REMAND REPORT,THAT HE HAD NOT BROUGHT ANY EVIDE NCE ON RECORD TO PROVE THAT EXPENDITURE 419/M/10(06-07) MSETRANSMISSION CO.LTD. 7 WAS OF CAPITAL NATURE.IN THE CIRCUMSTANCES, WE ARE OF THE OPINION THAT THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL OR FACTUAL INFIRMITY . CONFIRMING HIS ORDER, WE DISMISS SECOND GROUND OF APPEAL. 5 .NEXT GROUND IS ABOUT ALLOWING THE CLAIM REGARDING MATERIAL COST VARIANCE (RS.1.86 CRORES) AND EXCHANGE RATE VARIANCE(RS.1.09CRORES)IN THE REV ISED RETURN. IN ITS RECONCILIATION STATEMENT THE ASSESSEE, UNDER THE HEAD OTHER DEBITS -EXPENSES MENTIONED THE ABOVE REFERRED TO AMOUNTS AND CLAIMED THE SAME AS EXPENDITURE INCURRED DURING THE YEAR UNDER CONSIDERATION. AS THE CLAIM MADE BY THE ASSESSEE WAS PART OF THE ADDITION AL EVIDENCES PRODUCED BY IT BEFORE THE FAA,SO, HE CALLED FOR REPORT FROM THE AO.IN HIS REP ORT, THE AO DID NOT OFFER ANY COMMENT ABOUT THE SAID EXPENSES. AS THE EXPENDITURE WAS CER TIFIED BY THE AUDITOR,SO, THE FAA ALLOWED THE SAME. 5.1. BEFORE US,THE DR ADVANCED THE SAME ARGUMENTS THAT W ERE ARGUED FOR LAST GROUND OF APPEAL.THE AR SUPPORTED THE ORDER OF THE FAA. WE HA VE ALREADY DISCUSSED THE ISSUES OF FURNISHING OF ADDITIONAL EVIDENCES,CALLING FOR REMA ND REPORT BY THE FAA, OFFERING OF NO COMMENTS BY THE AO IN THE REPORT ABOUT THE VARIOUS ITEMS OF INCOME/EXPENDITURE. AS THE CLAIM OF THE ASSESSEE IS SUPPORTED BY THE AUDITED A CCOUNTS, THEREFORE, THERE IS NO JUSTIFICATION IN NOT ALLOWING THE EXPENDITURE UNDER BOTH THE HEAD S. WE DECIDE THIRD GROUND OF APPEAL AGAINST THE AO. 6 .WRITING OFF OF CLAIM PERTAINING TO A THEFT IN THE YEAR 1995, AS THE SUBJECT MATTER OF NEXT GROUND OF APPEAL. THE ERSTWHILE COMPANY I.E. MSEB H AD SUFFERED A LOSS OF RS.2.84 LAKHS ON ACCOUNT OF LOSS ON SETTLEMENT OF CLAIMS.THE FACTS A ND CIRCUMSTANCES OF THE SAID EXPENDITURE ARE SAME AS THE EARLIER TO EXPENSES, MENTIONED IN T HE EARLIER PARAGRAPHS. 6.1. FOLLOWING OUR ORDER,WE HOLD THAT FAA WAS JUSTIFIED IN ALLOWING THE EXPENDITURE AS PER THE RECONCILIATION STATEMENT FILED,AS THE AMOUNT IN QUESTION WAS ACTUALLY WRITTEN OFF IN THE BOOKS OF ACCOUNTS.GROUND NUMBER FOUR IS DECIDED AGA INST THE AO. 7 .NEXT GROUND IS ABOUT ALLOWING THE CLAIM REGARDING LOSS ON PURSUANCE OF FIXED ASSETS AND INTANGIBLE ASSETS AMOUNTING TO RS.28,920/-. IN THE AUDITED ACCOUNTS THE SAID AMOUNT WAS CLAIMED UNDER THE HEAD ALLOWABLE EXPENSES. DURING T HE COURSE OF HEARING BEFORE THE FAA THE ASSESSEE CONSIDERED THAT DISPUTED AMOUNT WAS NOT AL LOWABLE (PAGE 10 OF THE PAPER BOOK). HOWEVER,HE ALLOWED THE CLAIM MADE BY THE ASSESSEE, AS IT WAS ALSO PART OF THE RECONCILIATION STATEMENT. 419/M/10(06-07) MSETRANSMISSION CO.LTD. 8 7.1. WE FIND THAT THE ASSESSEE ITSELF HAD STATED THAT AM OUNT IN QUESTION WAS NOT ALLOWABLE. THEREFORE, IN OUR OPINION,THE FAA WAS NOT JUSTIFIED IN ALLOWING THE CLAIM. REVERSING HIS ORDER, WE DECIDE GROUND NUMBER FIVE IN FAVOUR OF TH E AO. 8. NEXT THREE GROUNDS (GOA-6TO8) DEAL WITH HIGH VOLTAG E DIRECT CURRENT (HVDC) PROJECT. DURING THE ASSESSMENT PROCEEDINGS THE AO FOUND THAT THE ASSESSEE HAD INCURRED THE COST OF INSURING THE PROJECT WHICH WAS YET TO BE CAPITALISE D IN THE BOOKS OF ACCOUNTS, THAT THE AMOUNT IN QUESTION WAS RS. 89.44 LAKHS. HE HELD THAT ASSES SEE HAD NOT CAPITALISED THE EXPENDITURE SO CLAIM MADE BY IT UNDER THE HEAD REVENUE EXPENDITURE COULD NOT BE ALLOWED. HE MADE AN ADDITION OF RS. 89, 44, 174 TO THE TOTAL INCOME OF THE ASSESSEE. HE FURTHER FOUND THAT THE ASSESSEE HAD INCURRED AN EXPENDITURE OF RS. 95.80 L AKHS ON LEASE RENTALS OF HDVC PROJECTS. AS THE EXPENDITURE ON LEASE RENTALS WAS NOT CAPITAL IZED,SO, HE DISALLOWED THE CLAIM MADE BY THE ASSESSEE. SIMILARLY AN EXPENSE OF RS. 3.83 LAKH S AND 41.95 LAKHS CLAIM UNDER THE HEADS TAXES AND CHARGES WERE DISALLOWED BY THE AO IS THE EXPENDITURE WAS NOT CAPITALISED/IT PERTAINED TO CAPITAL ASSETS. 8.1. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FAA.BEFORE HIM,IT WAS ARGUED THAT THE PROJECT HAD ALREADY BEEN COMMISSION,THAT DISALLOWANCE IS WERE MADE WITHOUT ANY DISCUSSION WITH THE ASSESSEE,THAT THE HDVC PROJECT WAS COMMENCED BY MSEB ON 13/11/1998 AND WAS TRANSFERRED TO THE ASSES SEE, THAT THE PROJECT WAS AN EXISTING UNIT, THAT THE AO HAD IGNORED THE SCHEDULE F TO THE SCHEME OF UNBUNDLING, THAT THE ASSESSEE WERE TRANSFERRED FROM BHEL TO MSEB ON 13/11/1998, T HAT THE EXPENDITURE OF RS. 89.44 LAKHS PERTAIN TO THE INSURANCE CHARGES FOR THE PROJECT FO R THE PERIOD 01/10/2005 TO 30/09/2006. DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE FILE D A COPY OF THESE AGREEMENT DATED 21/05/ 1997 AND OFFICE NOTES DATED 28/04/1999 AND 25/05/19 99 TO SUBSTANTIATE THE CLAIM THAT AS HDVC PROJECT WAS NOT A NEW ONE AND WAS EXISTING SIN CE LAST FOR MANY YEARS. IT WAS STATED THAT THESE DOCUMENTS WERE NOT SUBMITTED BEFORE THE AO IS HE DID NOT CALL FOR THE SAME. THE ASSESSEE ALSO FILED COPIES OF JOURNAL VOUCHERS EVID ENCING THE PAYMENT OF LEASE RENTALS AND TAXES FOR THE PROJECT. IT WAS STATED THAT ALL THE D OCUMENTS SHOULD BE ADMITTED AS ADDITIONAL EVIDENCES. THE FAA FORWARDED THE DOCUMENTS TO THE A O AND DIRECTED TO FILE A REMAND REPORT. IN HIS REPORT THE AO STATED THAT ASSESSEE HAD NOT F URNISHED ANY EVIDENCE REGARDING PAYMENT OF RS. 89.44 LAKHS, 95.80 LAKHS AND RS. 3.83 LAKHS UND ER THE HEADS INSURANCE EXPENDITURE, PLEASE RENTALS AND TAXES/CHARGES RESPECTIVELY,THAT 50% OF THE INSURANCE CHARGES PERTAINED TO SUBSEQUENT ASSESSMENT YEAR. 419/M/10(06-07) MSETRANSMISSION CO.LTD. 9 AFTER CONSIDERING THE AVAILABLE MATERIAL,THE FAA HE LD THAT THE PROJECT WAS AN EXISTING PROJECT/ UNIT OF ERSTWHILE COMPANY, THAT IT COMMENCED IN THE YEAR 1998, THAT THE ABOVE-MENTIONED THREE EXPENSES WERE NOT REQUIRED TO BE CAPITALISED, THAT SAME WERE TO BE ALLOWED AS REVENUE EXPENSES,THAT HALF OF THE INSURANCE CHARGES (44.72 LAKHS) PERTAIN TO SUBSEQUENT YEAR, THAT SAME WAS NOT ALLOWABLE IN THE YEAR UNDER CONSIDERAT ION. FINALLY HE PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 8.1. DURING THE COURSE OF HEARING BEFORE US, THE DR STAT ED THAT MATTER COULD BE DECIDED ON MERITS.THE AR SUPPORTED THE ORDER OF THE FAA AND RE FERRED TO PAGE 246 OF THE PB. 8.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL. WE FIND THAT THE PROJECT WAS COMMISSIONED IN THE YEAR 1998, THAT THE MACHINE RY WAS PURCHASED BY THE ERSTWHILE COMPANY, THAT ON TRIFURCATION OF MSEB THE PROJECT W AS HANDED OVER TO ASSESSEE, THAT THE EXPENSES INCURRED BY THE ASSESSEE WERE FOR RUNNING THE PROJECT, THAT THE FAA HAD DISALLOWED 50% OF THE EXPENDITURE INCURRED UNDER THE HEAD INSU RANCE EXPENSES.WE ARE UNABLE TO UNDERSTAND AS TO HOW THE AO IS AT THE CONCLUSION TH AT PROJECT WAS A NEW PROJECT AND THE EXPENSES WERE TO BE CAPITALIZED. WE DO NOT SEE ANY INFIRMITY IN THE ORDER OF THE FAA. SO, CONFIRMING HIS ORDER WE DISMISS ALL THE THREE GROUN DS(GOA-6,7,&8). 9 .NINTH GROUND DEALS WITH DELETING THE ADDITION OF R UBY 70,000/-IN RESPECT OF THE ELECTRICITY DUTY.DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUN D THAT THE ASSESSEE HAD SHOWN A LIABILITY ON ACCOUNT OF ELECTRICITY DUTY TO THE TUNE OF RS. 7 0,000/- AS ON 31/03/2006, THAT THE DUTY WAS COLLECTED BUT WAS NOT PAID TO THE GOVERNMENT AGENCI ES. HE HELD THAT PROVISIONS OF SECTION 43B WERE APPLICABLE TO THE AMOUNT IN QUESTION, THAT THE ASSESSEE HAD NOT PRODUCED ANY PROOF OF PAYMENT OF THE DISPUTED AMOUNT ON OR BEFORE THE DUE DATE OF FILING OF RETURNS OF INCOME.REFERRING TO THE JUDGMENT OF CHOWRANGHEE SAL ES BUREAU(222 ITR 344), THE AO MADE AN ADDITION OF RUBY 70,000/-TO THE INCOME OF THE AS SESSEE. 9.1. BEFORE THE FAA,DURING THE APPELLATE PROCEEDINGS, TH E ASSESSEE ARGUED THAT THE FINANCIAL STATEMENTS WERE PREPARED IN FORMAT PRESCRIBED UNDER ELECTRICITY SUPPLY ANNUAL ACCOUNTS RULES,1985,THAT THE DISPUTED AMOUNT REPRESENTED INS PECTION CHARGES PAYABLE TO THE GOVERN - MENT FOR ELECTRICAL INSPECTION OF SUBSTATIONS AND W AS DISCLOSED ACCORDINGLY UNDER THE AFORESAID HEADING, THAT DURING THE ASSESSMENT PROCE EDINGS IT WAS BROUGHT TO THE NOTICE OF THE AO THAT THE AMOUNT IN QUESTION DID NOT CONSIST ELEC TRICITY DUTY AND THAT SAME WERE INSPECTION CHARGES. 419/M/10(06-07) MSETRANSMISSION CO.LTD. 10 THE FAA,AFTER CONSIDERING THE AVAILABLE MATERIAL, H ELD THAT PAYMENT MADE BY THE ASSESSEE WAS ON ACCOUNT OF INSPECTION CHARGES, THAT SAME WAS ALLOWABLE AS REVENUE EXPENDITURE, THAT THE SAME WAS OUTSIDE THE PURVIEW OF SECTION 43B OF THE ACT. FINALLY, HE DELETED THE ADDITION MADE BY THE AO. 9.2. BEFORE US, THE DR STATED THAT NO EVIDENCE WAS PRODU CED BEFORE THE AO. THE AR SUPPORTED THE ORDER OF THE FAA. 9.3. WE FIND THAT THE CHARGES PAID BY THE ASSESSEE WERE INSPECTION -CHARGES (PAGE 183 OF THE PAPER BOOK).THE ASSESSEE HAD PAID THE INSPECTION CH ARGES TO THE ELECTRICAL DEPARTMENT, GOVERNMENT OF MAHARASHTRA. THEREFORE, IN OUR OPINIO N, SAME COULD NOT BE TREATED AS DUTY AND HENCE PROVISIONS OF SECTION 43B CANNOT BE INVOKED.C ONFIRMING THE ORDER OF THE FAA, WE DECIDE NINTH GROUND AGAINST THE AO. 10. LAST GROUND OF APPEAL IS ABOUT ALLOWING THE CLAIM O F SET OFF OF BROUGHT FORWARD LOSSES/ UNABSORBED DEPRECIATION. DURING THE ASSESSMENT PROC EEDINGS, THE AO REJECTED THE CLAIM OF THE ASSESSEE OF SETTING OFF OF BROUGHT FORWARD LOSS ES/DEPRECIATION ON THE GROUND THAT IMPUGNED BROUGHT FORWARD /LOSS/DEPRECIATION DID NOT BELONG TO THE ASSESSEE BUT BELONG TO THE ERSTWHILE MSEB. 10.1. WE FIND THAT IDENTICAL ISSUE WAS DECIDED BY THE TRI BUNAL WHILE ADJUDICATING THE APPEAL FOR THE ASSESSMENT YEAR 2006-07(ITA/762/MUM/2010,DATED 12/08/2015). WE ARE REPRODUCING THE RELEVANT PORTION OF THE ORDER AND IT READS AS UNDER : GROUND NO.4 DEALS WITH THE GRIEVANCE OF THE REVENU E REGARDING ACTION OF LD. CIT(A)IN ALLOWING THE CLAIM OF SET OFF OF BROUGHT F ORWARD/LOST/ UNABSORBED DEPRECIATION.THE ASSESSING OFFICER HAS DISCUSSED TH IS ISSUE AT PARA-15.1TO 15.3 ON PAGE NUMBER 4 TO 5 OF THE ASSESSMENT ORDER. THE LD. AO HAS REJECTED THE CLAIM OF THE ASSESSEE OF SET OFF OF BROUGHT FORWARD / LOSS/DEPRECIATION ON THE GROUND THAT THE IMPUGNED BROUGHT FORWARD/ LOSS/ DEP RECIATION DOES NOT BELONG TO THE ASSESSEE COMPANY BUT BELONG TO ERSTWHILE MAH ARASHTRA STATE ELECTRICITY BOARD (MSEB) WHICH WAS TRIFURCATED INTO THREE COMPA NIES I.E. FOR GENERATION, TRANSMISSION AND DISTRIBUTION.THE ASSESSEE COMPANY BEING ONE OF THESE THREE COMPANIES. IN OTHER WORDS THE ASSESSEE COMPANY WAS DEMERGED OUT OF ERSTWHILE MSEB. THE ASSESSEE COMPANY MADE THIS CLAIM ON THE B ASIS OF A CHART SHOWING THE BROUGHT FORWARD LOSSES AND UNABSORBED DEPRECIAT ION FROM 1990-1999 ONWARDS BELONGING TO AFORESAID MSEB.THE ASSESSEE CO MPANY MADE THE CLAIM IN TERMS OF SECTION 72(A)(4) OF THE INCOME TAX ACT 196 1. IT WAS FURTHER CLAIMED BY THE ASSESSEE THAT BUSINESS LOSS AND UNABSORBED DEPR ECIATION OF MSEB HAS BEEN APPORTIONED TO THE ASSESSEE COMPANY (1/3RD SHARE) A ND THE SAME WAS SET OFF AGAINST THE TOTAL INCOME OF THE IMPUGNED YEAR AND T HE BALANCE AMOUNT WAS CARRIED FORWARD FOR SET OFF AGAINST INCOME OF SUBSE QUENT YEARS.THE LD. AO DENIED THE CLAIM FOR SET OFF OF BROUGHT FORWARD BUS INESS LOSS AND UNABSORBED DEPRECIATION DUE TO THE FOLLOWING REASONS: 419/M/10(06-07) MSETRANSMISSION CO.LTD. 11 (I)THE BASIS OF APPORTIONMENT OF THE SAID LOSSES AM ONG THE THREE TRIFURCATED ENTITIES OF MSEB IS NOT EXPLAINED. (II) THE FIGURES OF LOSSES SUBMITTED ARE BASED ON THE RE TURNS FILED BY MSEB, BUT THE ASSESSED LOSSES ARE NOT REPORTED BY THE ASSESSEE CO MPANY. (III) THE PETITION CLAIMED TO HAVE BEEN MADE BEFORE THE C BDT IS STILL PENDING AND NO APPROVAL HAS BEEN GRANTED. (IV) THE ASSESSEE COMPANY HAS CLAIMED DEMERGER FROM THE ORIGINAL ENTITY I.E. MSEB. HOWEVER, THE SAID DEMERGER HAS NOT BEEN PROVE D BY IT FOR WHICH THE ONUS WAS ON ITSELF. (V) THE ELIGIBILITY OF THE ASSESSEE COMPANY TO CLAIM SE T OFF AND CARRY FORWARD OF THE BROUGHT FORWARD LOSSES OF M/ S.MSEB IS NOT ESTABLISHED. (VI) THE INFORMATION RELATING TO THE TRIFURCATION OF CAR RIED FORWARD ASSESSED LOSS WAS ALSO NOT GIVEN. (VII) THE ASSESSMENT ORDER FOR THE AY 2006-07 HAS BEEN PA SSED IN THE CASE OF M/ S MSEB. THE TOTAL INCOME IS COMPUTED AT NIL AFTER SET-OFF O F BROUGHT FORWARD LOSSES/ UNABSORBED DEPRECIATION TO THE EXTENT OF INCOME AVA ILABLE I.E. RS.838,65,23, 1291 -. HOWEVER, NEITHER ANY DETAILS OF BALANCE LOS S ALLOWED TO BE CARRIED FORWARD NOR ANY CHART OF APPORTIONMENT OF THE SAID LOSS TO THE TRIF URCATED ENTITIES ARE MENTIONED THEREIN. 15. THE ISSUE WAS CONTESTED BY THE ASSESSEE COMPANY BEFORE LD. CIT(A) AND LD.CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY PASS ING SPEAKING ORDER AND THE RELEVANT DISCUSSION WAS MADE BY THE LD. CIT(A) IN PARA 15.1 TO 15.3 ON PAGE 29 TO 34 OF THE APPELLATE ORDER. THE RELEVANT OPERATIVE PARA OF THE LD. CIT(A) IS REPRODUCED BELOW FOR READY REFERENCE: 15.3 (I) PG-13 .... SCAN ATTACH 15.3(I) TO CONCLUDE, IT IS HELD THAT THE DEMERGER O F MSEB AND TRIFURCATION INTO THREE NEW ENTITLES, INCLUDING THAT OF APPELLANT WAS PROVED B EFORE A.O DURING ASSESSMENT PROCEEDINGS ITSELF. THEREFORE, IN TERMS OF SECTION 72A( 4) R. W.S. 2(19AA) OF THE ACT, THE APPELLANT WAS ENTITLED FOR BENEFIT OF SET OFF OF BALANCE B/F. LO SSES / DEPRECIATION OF MSEB AGAINST ITS INCOME. THE A O. IS DIRECTED TO ALLOW APPELLANT'S CLAIM AF TER VERIFYING THE FACTS IN THE CASE OF MSEB. THE YEAR UNDER CONSIDERATION WAS LAST ASSESSMENT Y EAR OF MSEB AND THE FIRST YEAR OF THE APPELLANT COMPANY. IN CASE OF MSEB, THE FIGURES OF UNABSORBED LOSSES / DEPRECIATION OF VARIOUS YEARS WILL GO ON CHANGING ON RECEIPT OF ORD ERS OF APPELLATE AUTHORITIES, WHICH WILL HAVE BEARINGS ON THE LAST ASSESSMENT ORDER OF THE MSEB AND CONSEQUENTLY ON THE FIRST ASSESSMENT YEAR UNDER CONSIDERATION OF THE APPELLAN T. THE AO IS DIRECTED TO ASCERTAIN THE FACT OF UNABSORBED LOSSES / DEPRECATION IN CASE OF MSEB FROM TIME TO TIME AND ALLOW THE BENEFIT OF CARRY FORWARD OF THE SAME IN THE. HANDS OF APPE LLANT FOR THE YEAR UNDER CONSIDERATION. SUBJECT TO' THIS OBSERVATION, THIS GROUND OF APPEAL IS ALLOWED. 16. BEFORE US, BOTH THE PARTIES ARGUED THIS ISSUE V EHEMENTLY. LD. DR RELIED UPON THE ASSESSMENT ORDER AND SUBMITTED THAT THE CL AIM HAS BEEN RIGHTLY REJECTED BY THE AO. ON THE OTHER HAND LD. COUNSEL O F THE ASSESSEE HAS SUBMITTED THAT LD. CIT(A) HAS RIGHTLY ALLOWED THE C LAIM AFTER CONSIDERING ALL THE FACTS AND CIRCUMSTANCES AND CORRECT POSITION OF LAW AND FURTHER SUBMITTED THAT IN ANY CASE VIDE SUBSEQUENT YEARS TH E AO HAS HIMSELF ALLOWED THE SET OFF OF BROUGHT FORWARD BUSINESS LOSS/UNAB SORBED DEPRECIATION TO THE ASSESSEE COMPANY BEING VIDE FOLLOWING ORDERS: 'I ORDER DATED NIL PASSED U/S.143(3) R.W.S. 263 OF THE INCOME TAX, ACT 1961 FOR THE ASSESSMENT YEAR 2006-07- REFER PAGE NO.06 TO 07 OR OF THE COMPILATION. 419/M/10(06-07) MSETRANSMISSION CO.LTD. 12 II. ORDER DATED 10 MARCH 2010 PASSED U/S.154 OF THE INC OME TAX, ACT 1961 FOR THE ASSESSMENT YEAR 2007-08- REFER PAGE NOS.08 TO 09 OF THE COMPILATION III. ORDER DATED 16 MARCH 2011 PASSED U/S.154 OF THE INC OME TAX, ACT 1961 FOR THE ASSESSMENT YEAR 2007-08 REFER PAGE NO.11 OF THE COM PILATION IV. ORDER DATED 02 MAY 2011 PASSED U/S.154 OF THE INCOM E-TAX ACT 1961 FOR THE ASSESSMENT YEAR 2007-08 REFER PAGE NO.13 OF THE C OMPILATION. 17.WE HAVE CONSIDERED ARGUMENTS OF BOTH SIDES AND M ATERIAL PLACED BEFORE US FOR OUR CONSIDERATION.IT IS SEEN THAT THE AO HAS HIMSELF AL LOWED THIS CLAIM TO THE ASSESSEE IN SUBSEQUENT YEARS. THE LD. CIT(A) HAS PA SSED SPEAKING ORDER AND THE REASONING GIVEN BY LD.CIT(A)IN ALLOWING THIS CLAIM IS JUSTIFIED AND DOES NOT NEED ANY INTERFERENCE OF OUR PART.FURTHER,LD.CIT(A) HAS ALLOWED THIS CLAIM S UBJECT TO VERIFICATION BY THE AO TO ASCERTAIN THE CORRECT FACT BEFORE ALLO WING THIS CLAIM. UNDER THESE CIRCUMSTANCES WE DO NOT FIND IF ANY PREJUDICE WOULD BE CAUSED TO THE REVENUE.IN VIEW OF THE ABOVE GROUND NO.4 OF THE REVENUE BEING DEVOID OF MERITS IS HEREBY DISMISSED. RESPECTFULLY, FOLLOWING THE ABOVE ORDER,WE DECIDE T HE LAST GROUND OF APPEAL AGAINST THE AO.HOWEVER, HE SHOULD MAKE THE VERIFICATION WITH RE GARD TO THE CLAIM MADE BY THE ASSESSEE AND AS OBSERVED BY THE TRIBUNAL IN THE ORD ER FOR THE EARLIER AY. AS A RESULT, APPEAL FILED BY THE AO STA NDS PARTLY ALLOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH MARCH, 2017. 10 , 2017 SD/- SD/- ( !' / AMARJIT SINGH ) ( #$% / RAJENDRA ) $&& '& / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 10.03.2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.