M/s Odisha Power Generation Corporation Ltd, Bhubaneswar V. ACIT, Bhubaneswar

ITA 554/CTK/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81468 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 11 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2014
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 14-10-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 16-11-2012
• Court: TRIBUNAL
• Department Lawyers: K AJAY KUMAR OPGC
• Assessee Lawyers: D K MOHANTY
• Keywords: Rectification of order; Principle of natural justice; Non-deduction of tax

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH , CUTTACK BEFORE S/SHRI S.V.MEHROTRA (AM) AND GEORGE MATHAN (JM) I.T.A. NO.554/CTK/2012 : ASSESSMENT YEAR: 2007-08 I.T.A. NO.626/CTK/2012 : ASSESSMENT YEAR: 2008-09 I.T.A. NO.77/CTK/2013 : ASSESSMENT YEAR: 2009-10 ODISHA POWER GENERATION CORPORATION LTD., 7 TH FLOOR, FORTUNE TOWERS, CHANDRASEKHARPUR, BHUBANESWAR- 751023 PA NO.AAACO 4759 R VS ACIT, CIRCLE - 1(1), BHUBANESWAR. APPELLANT RESPONDENT I.T.A. NO.636/CTK/2012 : ASSESSMENT YEAR: 2008-09 I.T.A. NO.145/CTK/2013 : ASSESSMENT YEAR: 2009-10 ACIT, CIRCLE - 1(1), BHUBANESWAR. VS ODISHA POWER GENERATION CORPORATION LTD., 7 TH FLOOR, FORTUNE TOWERS, CHANDRASEKHARPUR, BHUBANESWAR-751023 PA NO.AAACO 4759 R APPELLANT RESPONDENT C.O.NO.008/CTK/2013 (ARISING OUT OF I.T.A. NO.636/CTK/2012 : ASSESSMENT YEAR: 2008-09) C.O.NO.026/CTK/2013 (ARISING OUT OF I.T.A. NO.145/CTK/2013 : ASSESSMENT YEAR: 2009-10) ODISHA POWER GENERATION CORPORATION LTD., 7 TH FLOOR, FORTUNE TOWERS, CHANDRASEKHARPUR, BHUBANESWAR- 751023 PA NO.AAACO 4759 R VS ACIT, CIRCLE - 1(1), BHUBANESWAR. CROSS OBJECTOR RESPONDENT FOR THE ASSESSEE: SRI D.K.MOHANTY FOR THE REVENUE: SHRI K.AJAY KUMAR, CIT-DR 2 OPGC DATE OF HEARING: 14/10/.2014 DATE OF PRONOUNCEMENT: 22/10/2014 ORDER PER BENCH: THE APPEALS FILED BY THE ASSESSEE FOR ASSESSMENT YE ARS 2007-08 TO 2009-2010 AND CROSS APPEALS FILED BY THE REVENUE FOR ASSESSMENT YEARS 2 008-09 AND 2009-2010 ARE DIRECTED AGAINST THE ORDERS OF LD CIT(A) DATED 5.9.2012, 4.10.2012 & 18.12.2012. THE ASSESSEE HAS ALSO FILED CROSS OBJECTIONS FOR THE ASSESSMENT YEARS 2008-09 & 2009-2010. SINCE COMMON ISSUES ARE INVOLVED IN ALL THESE APPEALS AND PERTAIN TO SAME A SSESSEE, THE APPEALS WERE HEARD TOGETHER AND BEING DISPOSED OF BY A COMMON ORDER FOR THE SAK E OF CONVENIENCE AND BREVITY. 2. NOW, WE TAKE UP THE APPEAL OF THE ASSESSEE FOR A SSESSMENT YEAR 2007-08 IN ITA NO.554/CTK/2012. 3. GROUNDS OF APPEAL TAKEN BY THE ASSESSEE ARE AS U NDER: 1. THAT THE ASSESSMENT ORDER DATED 31.12.2009 & RECTIFICATI ON ORDER DATED.30.06.2010 PASSED BY THE LD ASSESSING OFFICER ARE VOID AB INTIO, AGAINST THE NATURAL JUSTICE, UNJUSTIFIED ,ERRONEOUS ,ARBITRARY , CONTRARY TO FACTS ,BAD IN LAW, WITHOUT JURISDICTION AND / OR IN EXCESS OF JURISDICTION AND LEGALLY UNTENABLE. 2. THAT THE LEARNED ASSESSING OFFICER HAS MISCONS TRUED /MIS-APPRECIATED THE FACTS AND THE EXCLUSION OF RS.2,51,00,337/- WHI LE COMPUTING THE DEDUCTION OF ' POWER PROFITS' U/S 801A OF THE ACT A ND THE DETERMINATION OF DEDUCTION OF RS.203,55,84,247/- IN STEAD OF RS.2 06,05,01,377/- IS CONTRARY TO FACTS, BASED ON IRRELEVANT CONSIDERATIO N PRESUMPTIONS, CONJECTURES AND SURMISES WITHOUT ANY EVIDENCE ON RE CORD, ARBITRARY INCORRECT AND LEGALLY NOT TENABLE. 3. THAT THE LD ASSESSING OFFICER HAS F AILED TO APPLY THE SETTLED JUDICIAL PRONOUNCEMENTS AND HAS ERRONEOUSLY EXCLUDED RS.2,51,00,337/- WHILE COMPUTING THE DEDUCTION OF ' POWER PROFITS U/S 80IA OF THE ACT. 3 OPGC 4. THAT WITHOUT PREJUDICE TO ABOVE THE LD .A.O HA S ERRED ON FACT AND LAW NOT TO DETERMINE RS. 2,51,00,337/-AS INCOME AS DERIVED FRO M POWER BUSINESS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA AND TREATED AS INCOME FROM OTHER SOURCES WHILE COMPUTING THE IN COME FOR THE IMPUGNED YEAR . 5. THAT WITHOUT PREJUDICE TO ABOVE AND ASSUMING BUT NOT ADMITTING THAT THE AFORESAID RECEIPT /INCOME ARE TO BE EXCLUD ED IN COMPUTING THE 'POWER PROFITS U/S 80IA ,THE AO OUGHT TO HAVE TAKEN INTO ACCOUNT THE TOTAL EXPENDITURE RELATED TO THE AFORESAID RECEIPTS WHILE EXCLUDING THE AFORESAID RECEIPTS /INCOME IN COMPUTING THE DEDUCTI ON OF 'POWER PROFITS' U/S 80IA OF THE ACT. 6. THAT THE DISALLOWANCE OF RS. 34,03,487/- UNDER T HE HEAD PERIPHERAL DEVELOPMENT EXPENSES ARE BASED ONLY ON PRESUMPTION CONJECTURE AND SURMISES CONTRARY TO THE SUBMISSIONS PLACED BEFORE THE LD. A.O/AS WELL AS CIT (A) AND AS SUCH ARE ARBITRARY, UNJUSTIFIED AND NOT TENABLE IN THE EYES OF LAW. 7.THAT DISALLOWANCE OF RS.92,979/- ON ACCOUNT OF EN TERTAINMENT EXPENSES ARE BASED ONLY ON PRESUMPTION, CONJECTURE AND SURMISES CONTRARY TO THE SUBMISSIONS PLACED BEFORE THE LD.A. O/AS WELL AS CIT (A) AND AS SUCH ARE ARBITRARY, UNJUSTIFIED AND NOT TENA BLE IN THE EYES OF LAW. 8. WITHOUT PREJUDICE TO THE GROUNDS AS ABOVE, EVEN IF ABOVE, DISALLOWANCE OF EXPENDITURE AND ADDITIONS ARE MADE, THE SAME SHOULD HAVE BEEN CONSIDERED AS ADDITION TO THE BUSINESS PR OFIT ELIGIBLE FOR DEDUCTION U/S. 80IA OF INCOME TAX ACT. THEREFORE, NON CONSIDERATION OF SUCH SUM IS ARBITRARY, UNJUSTIFIED AND NOT TENABLE IN THE EYES OF LAW., 4. BRIEF FACTS OF THE CASE ARE THAT, IN THE RELEVAN T ASSESSMENT YEAR, THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF POWER GENERATION IN THE STATE OF ODISHA. IT HAD GENERATION FROM THERMAL POWER & MINI HYDRO POWER UNITS. THE POWER GENERATION BY THE ASSESSEE HAD BEEN SOLD TO GRIDCO AS PER POWER PURCHASE AGREEMENT (PPA). ASSESEE HAD FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME AT NIL. ASSESSEE HAD SHOWN NET PROFIT AS PER PROFIT AND LOSS ACCOUNT OF RS.176,86,85,295/- AFTER PRIOR PERIOD AD JUSTMENT AND GROSS TOTAL INCOME OF RS.231,82,90,129/- AFTER STATUTORY ALLOWANCES AND D ISALLOWANCES. ASSESSEE HAD CLAIMED ENTIRE TAXABLE PROFIT AMOUNTING TO RS.231,82,90,129/- AFTE R STATUTORY DISALLOWANCES AND ALLOWANCES AS DEDUCTION U/S. 80-IA OF THE I T ACT. ASSESSEE HAD PAID TAX AS PER SECTION 115JB, THE BOOK PROFIT 4 OPGC SHOWN WAS RS.176,58,41,856/-. THE ASSESSMENT WAS C OMPLETED AT A TOTAL SUM OF RS.57,39,86,854/- UNDER THE NORMAL PROVISIONS OF TH E ACT. ON APPEAL, LD CIT(A) PARTLY ALLOWED THE ASSESSEES APPEAL. BEING AGGRIEVED BY THE ORDE R OF LD CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 5. GROUND NO.1 IS GENERAL IN NATURE, HENCE REQUIRES NO ADJUDICATION. 6. APROPOS GROUND NOS.2,3,4 & 5, BRIEF FACTS ARE TH AT, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER, ON PERUSAL OF S CHEDULE-10 OF THE AUDITED PROFIT AND LOSS ACCOUNT, NOTICED THAT OTHER INCOME DISCLOSED BY T HE ASSESSEE WAS AS UNDER: SL.NO. NATURE OF RECEIPT TOTAL RECEIPT IN RS. 1. INCOME FROM INVESTMENT/DEPOSITS 25,77,43,691 2. INT. ON REFUND OF ADVANCE INCOME TAX 45,061 3. INT. INCOME FROM EMPLOYEES & OTHERS 19,06,515 4. RECEIPT FOR RENT, ELECT.CHARGES 80,43,368 5. SUNDRY RECEIPT 29,50,613 6. SALE OF SCRAP 1,19,30,199 7. PROFIT ON SALE OF DISPOSAL OF FIXED ASSETS 2,69,642 TOTAL: 28,28,89,089 HE WAS OF THE OPINION THAT DEDUCTION U/S. 80IA WAS NOT ALLOWABLE, INTER ALIA, IN RESPECT OF INCOME FROM INVESTMENT/DEPOSITS AS THE INCOME WAS N OT DERIVED FROM BUSINESS OF GENERATION OF ELECTRICITY. 7. AFTER CONSIDERING THE ASSESSEES SUBMISSIONS, TH E ASSESSING OFFICER RESTRICTED THE DEDUCTION UNDER SECTION 80-IA OF THE ACT TO RS.203, 54,01,040/- , INTER ALIA, OBSERVING AS UNDER: THE ISSUE IS SIMILAR TO THE EARLIER ASSESSMENT YEA RS 2003-04, 2004-05, 205-06 AND DETAILED REASONING ARE GIVEN REJECTING THE ASSE SSEE CONTENTIONS. THE LD ITAT, CUTTACK BENCH VIDE ORDER PRONOUNCED ON 11.12. 2008 FOR A.Y. 2002-03 & 2003-04 IN ITA NOS.60 & 84/CTK/2007 HAD UPHELD THE DEPARTMENT VIEW AND 5 OPGC REJECTED ASSESEES APPEAL ON THE IDENTICAL ISSUE. FOR THE SAKE OF BREVITY THE DETAILED REASONS ADDUCED TO THOSE ASSESSMENT YEARS TO REJECT THE CONTENTION OF THE ASSESSEE ARE NOT REPEATED AND FOR THE SAME REAS ONS WHICH IS RELEVANT FOR THIS ASSESSMENT YEAR ALSO, THE ELIGIBLE PROFIT FROM BUSINESS OF GENERATION OF ELECTRICITY WILL BE TAKEN AS RS.203,54,01,040/- AND ACCORDINGLY DEDUCTION U/S.80- IA WILL BE RESTRICTED TO THAT AMOUNT. 8. LD CIT (A) UPHELD THE AOS ACTION IN EXCLUDING T HE AMOUNT OF RS.28,28,89,089/- FOLLOWING THE ORDER OF THE CIT(A) FOR ASSESSMENT YE AR 2003-04, WHICH WAS CONFIRMED BY THE TRIBUNAL IN ITS ORDER, AS REPRODUCED BY THE CIT(A) IN THE IMPUGNED ORDER AT PARA 3.2.1 AS UNDER: 'WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORD. AT THE OUTSET, WE WOULD LIKE TO STATE THAT DETAILS OF OTHER INCOME HAS BEEN PROVIDED BY THE APPELLANT IN GROUND NO. 5. FROM THE SAME, IT IS ABSOLUTELY CLEAR THAT RS. 14,45,50,798/- WAS THE AMOUNT OF INTEREST SHOWN ON SHORT TERM DEPOSITS IN BANK AND RS.9,00,00,000/- WAS INTEREST FROM GRIDCO BONDS, WHICH WERE RECEIVED BY THE ASSESSEE IN LIEU OF UNPA ID ENERGY BILLS. THUS, THE CONTENTION OF FOR THE ASSESSEE THAT RS.9,00,00, 000/- WAS INTEREST RECEIVED FOR DELAYED PAYMENT OF POWER BILLS BY M/S. GRIDCO IS NOT BORNE OUT OF THE FACTS ON RECORD. THE ASSESSEE HAS NOT BE EN ABLE TO SHOW ANY NEXUS BETWEEN IMPUGNED INTEREST RECEIVED BY IT WITH INTEREST PAYMENTS. THUS, WE FIND THAT THE DISPUTED ISSUE IS SQUARELY C OVERED BY THE DECISION OF THE HON'BLE APEX COURT IN THE CASE PANDIAN CHEMI CALS LTD. VS. CIT [262 ITR 278 (SC)], WHICH WAS FOLLOWED BY THE HON'B LE JURISDICTIONAL HIGH COURT IN THE CASE OF TATA SPONGE (I) LTD. (SUPRA). WE HOLD THAT INTEREST OF RS. 9,00,00,000/- WAS EARNED BY THE ASSESSEE FROM- INVESTMENT OF FUND IN GRIDCO BOND. THUS, THE SAME CANNOT BE CONSIDERED AS INTEREST RECEIVED BY THE APPELLANT FOR LATE PAYMENT OF ELECTRICITY BY THE GRIDCO. IN THE ABOVE CIRCUMSTANCES, WE HOLD THAT THE ASSESSEE IS N OT ENTITLED TO DEDUCTION U/S.80IA W.R.T. OTHER INCOME OF RS,24,97, 18,456/- AS MENTIONED IN GROUND NOS.2 AND 5 TAKEN BY THE APPELLANT THEREF ORE, THESE GROUNDS RAISED BY THE ASSESSEE ARE REJECTED.' 9. AT THE TIME OF HEARING, LD COUNSEL FOR THE ASSES SEE FAIRLY CONCEDED THAT ABOVE ISSUE HAS BEEN DECIDED BY THE TRIBUNAL AGAINST THE ASSESS EE IN EARLIER ASSESSMENT YEAR. HOWEVER, THE APPEAL HAS BEEN FILED BEFORE THE HONBLE JURISD ICTIONAL HIGH COURT AND, THEREFORE, IN ORDER 6 OPGC TO KEEP THE ISSUE ALIVE, THESE GROUNDS MAY BE DECID ED AS PER THE DECISIONS OF EARLIER ASSESSMENT YEARS FOR THE REASONS GIVEN IN ASSESSMEN T YEAR 2003-04. 10. IN VIEW OF ABOVE SUBMISSIONS OF LD COUNSEL FOR THE ASSESSEE, WE DISMISS GROUND NOS.2 TO 5. 11. AS FAR AS GROUND NO.6 IS CONCERNED, BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAD INCURRED A SUM OF RS.95,94,541/- AS PERIPHERAL DEVE LOPMENT EXPENSES AND DEBITED TO P&L ACCOUNT. AFTER EXAMINING THE ASSESSEES CONTENTION , THE AO DISALLOWED RS.61,91,054/-, INTER ALIA, OBSERVING AS UNDER: IT IS SEEN THAT MOST OF THE UNDER MENTIONED ITEMS OF EXPENDITURE ARE NOT RELATED TO THE BUSINESS OF THE ASSESSEE AND ARE OF VOLUNTARY I N NATURE AND THUS PRIMA FACIE INADMISSIBLE. SUCH EXPENSES ARE NOT PROVED TO BE I NCIDENTAL TO THE CARRYING ON THE BUSINESS AND INCURRED WHOLLY AND EXCLUSIVELY FOR RU NNING OF THE BUSINESS. ACCORDINGLY, THE SUM OF RS.61,91,054/- AS DETAILED BELOW IS DISA LLOWED: 1. WATER SUPPLY TO PERIPHERAL VILLAGE 5551092 2. BOUNDRY WALL OF RENGALI PRIMARY SCHOOL 48306 3. SUPPLY OF TABLE CHAIR TO SCHOOL 41000 4. HEALTH CAMP EXP. IN PERIPHERAL VILLAGE 94681 5. CONSTRUCTION OF SCHOOL BUILDING 141302 6. SPORTS EXP. 78233 7. CONSTRUCTION OF BOUNDRY WALL FOR ME SCHOOL AT SAHAJBAHAL 92261 8. CONST. OF SCHOOL BUILDING AT SARDHAPALLI 144179 TOTAL: 6191054 12. LD CIT(A) CONFIRMED THE AOS ACTION, INTER ALIA , OBSERVING AS UNDER: 5.1. I HAVE CAREFULLY CONSIDERED THE MATTER. THER E IS NO DISPUTE THAT 7 OPGC EXPENDITURE INCURRED ON THE DEVELOPMENT OF THE PERI PHERY OF THE INDUSTRY IS WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINE SS, SINCE A BUSINESS CANNOT FUNCTION IN ISOLATION FROM THE SOCIAL ENVIRO NMENT. FOR PERIPHERAL DEVELOPMENT, IT APPEARS THAT GOVERNMENT OF ORISSA H AS ISSUED GUIDELINES RELATING TO THIS SUBJECT. UNDER SIMILAR CIRCUMSTANC ES, FOR AY 2004-05 SUCH EXPENDITURE WAS DISALLOWED BY THE AO AND UPHELD BY THE CIT(A) SINCE THE EXPENDITURE WAS INCURRED FOR AREA WHERE THE APPELLA NT HAD NO INDUSTRIAL ACTIVITY. THE APPELLANT HAS NOT CLARIFIED THAT THE EXPENDITURE HAS BEEN INCURRED IN RESPECT OF AREA WHERE INDUSTRIAL ACTIVI TY IS BEING CARRIED OUT. I HAVE NO MATERIAL BEFORE ME TO TAKE A DIFFERENT VIEW THAN THE AO. ACCORDINGLY, THE DISALLOWANCE MADE BY THE AO IS CON FIRMED. 5.1 THE AO IN THE TABLE AT PAGE 5 OF THE ASSESSMEN T ORDER CONSIDERS DISALLOWABLE ITEMS FOR RS,61,91,054/- WHEREAS HE 'A CTUALLY DISALLOWS AMOUNT OF RS.34,03,487/-. THERE ARE FURTHER DISCREP ANCIES BETWEEN THE FIGURES DISCUSSED BY THE AO AND GIVEN BY THE APPELL ANT. THE AO CONSIDERS THE AMOUNT OF RS.55,51,092/-WHEREAS THE APPELLANT R EFERS TO RS.27,63,525/- (AS PER WRITTEN SUBMISSION) AGAINST THE ITEM 'WATER SUPPLY TO PERIPHERAL VILLAGE'. ALL OTHER ITEMS TAKEN BY TH E AO AND APPELLANT ARE TALLYING, EXCEPT TOTAL FIGURE, I.E. THE AO CONSIDER S THE DISALLOWANCE TO, BE RS.34,03,487/- WHEREAS THE APPELLANT HAS GIVEN THE FIGURE OF RS.34,18,487/-. ACCORDINGLY, THE AO IS DIRECTED TO RECHECK THE FIGURES AND CONSIDER RECTIFICATION U/S.154 IF NECESSARY. 13. LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN A SSESSMENT YEAR 2009-2010, LD CIT(A) HAS ALLOWED THIS EXPENSE INCURRED UNDER THIS HEAD. THE REFORE, HE URGED TO ALLOW THE EXPENSE FOR THIS ASSESSMENT YEAR ALSO. 14. WE HAVE CONSIDERED THE SUBMISSIONS OF PARTIES A ND PERUSED THE RECORD OF THE CASE. IN ASSESSMENT YEAR 2009-10, OUT OF THE TOTAL EXPENSES OF RS.89,70,409/-, LD CIT(A) HAS DIRECTED TO RESTRICT THE DISALLOWANCE TO AN AMOUNT OF RS.25,41 ,312/- ON ACCOUNT OF PERIPHERAL DEVELOPMENT 8 OPGC BECAUSE THE AMOUNT PAID THROUGH CORPORATION OFFICE AT BHUBANESWAR WAS NOT IN CONNECTION WITH BUSINESS. IN THE PRESENT ASSESSMENT YEAR, LD CIT(A) HAS CLEARLY OBSERVED THAT THE ASSESSEE HAD NOT CLARIFIED THAT THE EXPENDITURE HAD BEEN INCURRED IN RESPECT OF AREA WHERE INDUSTRIAL ACTIVITY WAS BEING CARRIED OUT. THEREFO RE, THE FACTS FOR ASSESSMENT YEAR 2009-10 ARE DISTINGUISHABLE FROM THE FACTS FOR ASSESSMENT YEAR 2007-08. THE ASSESSEE HAS NOT BEEN ABLE TO CONTROVERT THE FINDINGS OF LD CIT(A). AS THE EX PENDITURE HAD NOT BEEN INCURRED IN RESPECT OF AREA WHERE INDUSTRIAL ACTIVITY WAS BEING CARRIED OU T, THE SAME CANOT BE HELD TO BE WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS. IN VIEW O F THIS, GROUND NO.6 IS DISMISSED. 15. AS FAR AS GROUND NO.7 IS CONCERNED, FACTS OF TH E CASE ARE THAT THE ASSESSING OFFICER NOTICED THAT SOME OF THE EXPENSES UNDER THE HEAD E NTERTAINMENT EXPENSES APPEARED TO BE PERSONAL IN NATURE. ACCORDINGLY, HE DISALLOWED 20% OF SUCH EXPENSES ON ESTIMATE BASIS. BEFORE LD CIT(A), ASSESSEE SUBMITTED THAT THE ACCOU NTS HAD BEEN AUDITED AND TAX AUDIT REPORT HAD BEEN FILED AND, THEREFORE, THE DISALLOWANCE WA S NOT CALLED FOR. LD CIT(A) CONFIRMED THE AOS ACTION OBSERVING THAT QUITE A FEW ITEMS WERE PERSONAL IN NATURE. 16. HAVING HEARD THE RIVAL CONTENTIONS, WE FIND TH AT THE AO HAS DISALLOWED 20% OF THE CLAIM OF ENTERTAINMENT EXPENSES ON ADHOC BASIS WITH OUT POINTING OUT SPECIFIC ITEM, WHICH ALLEGEDLY WERE PERSONAL IN NATURE. THE ASSESSEE IS A GOVERNMENT OF ODISHA UNDERTAKING. THUS BEING A LEGAL ENTITY, NO DISALLOWANCE IS CALLED FOR PARTICULARLY ON THE GROUND OF THE SAME BEING PERSONAL IN NATURE. ACCORDINGLY, GROUND NO.7 IS AL LOWED. 17. AS FAR AS GROUND NO.8 IS CONCERNED, BRIEF FACTS OF THE CASE ARE THAT THE AO HAD EXCLUDED VARIOUS DISALLOWANCES FROM THE AMBIT OF ALLOWABLE D EDUCTION UNDER SECTION 80-IA. THE ASSESSEES CLAIM IS THAT IF DISALLOWANCES ARE SUSTA INED CORRESPONDINGLY ELIGIBLE BUSINESS PROFITS WILL INCREASE. WE FIND THAT THERE WAS NO GROUND BE FORE LD CIT(A) IN THIS REGARD. THEREFORE, THIS ISSUE DOES NOT ARISE OUT OF THE ORDER OF LD CIT(A). THUS, THIS GROUND IS MISCONCEIVED AND, THEREFORE, DISMISSED. 18. IN THE RESULT, APPEAL FILED BY THE ASSESSEE FO R A.Y. 2007-08 IS PARTLY ALLOWED. 9 OPGC 19. NOW, WE TAKE UP THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2008-09 IN ITA NO.626/.CTK/2012. 20. GROUND NO.1 IS GENERAL IN NATURE. 21. GROUND NOS.2 TO 5 ARE SIMILAR TO GROUND NOS.2 T O 5 TAKEN BY THE ASSESSEE FOR ASSESSMENT YEAR 2007-08. 22. IN LINE WITH OUR DECISION FOR ASSESSMENT YEAR 2 007-08, GROUND NOS.2 TO 5 ARE DISMISSED. 23. GROUND NO.6 READS AS UNDER: THAT THE DISALLOWANCE OF RS.7,75,792/- PRIOR PERIO D EXPENSES IS BASED ONLY ON PRESUMPTION CONJECTURE AND SURMISES CONTRARY TO THE SUBMISSIONS PLACED BEFORE THE AO AND AS SUCH ARE ARBITRARY, UNJUSTIFIED AND N OT TENABLE IN THE EYES OF LAW. 24. THE ASSESSING OFFICER DISALLOWED RS.8,43,448/- BEING PRIOR PERIOD EXPENSES NOT RELATED TO THE ASSESSMENT YEAR UNDER CONSIDERATION BUT TO A SSESSMENT YEAR 2007-08. BEFORE LD CIT(A), IT WAS SUBMITTED THAT ALL SUCH EXPENSES WERE APPROV ED FOR PAYMENT DURING THE FINANCIAL YEAR 2007-08 RELEVANT TO ASSESSMENT YEAR 2008-09, THEREF ORE, SAME SHOULD BE ALLOWED. THE PRIOR PERIOD EXPENSES INCLUDED CABLING & LIGHTING, SUPERV ISION CHARGES, LUNCH EXPENSES AND REIMBURSEMENT OF SERVICE TAX FOR ASSESSMENT YEAR 20 07-08. LD CIT(A) OBSERVED THAT AN AMOUNT OF 67, 656/- RELATED TO PERIOD MAY 2005 TO M ARCH 2007 AND SAME WAS PAID AS AND WHEN BILL WAS RAISED, THEREFORE, THE LIABILITY HAD ARISEN DURING THE PERIOD RELEVANT TO INSTANT ASSESSMENT YEAR. ACCORDINGLY, HE DIRECTED THE AO T O ALLOW RS.67,656/-. HOWEVER, FOR THE BALANCE AMOUNT I.E. RS.7,75,792/-, HE DISALLOWED ON THE GROUND THAT THE SAME WERE NOT RELATED TO ASSESSMENT YEAR 2008-09. 25. AT THE TIME OF HEARING, LD COUNSEL FOR THE ASSE SSEE SUBMITTED THAT THE EXPENSES ARE SUPPORTED WITH DOCUMENTS/EVIDENCES. HE SUBMITTED T HAT SINCE THE PAYMENTS ARE MADE DURING THE ASSESSMENT YEAR UNDER CONSIDERATION, SAME SHOUL D BE ALLOWED. HE FURNISHED A DETAILED CHART AS UNDER: 10 OPGC SL.NO. PARTICULARS AMOUNT (RS.) REMARKS 1. CABLING & LIGHTING FOR PERIOD 1.11.06 TO 30.3.07 1,03,929 PAID DURING 07 - 08 2. SUPERVISION CHARGES FOR PERIOD FROM 18.11.2006 TO 18.12.2006 84,180 PAID DURING 07 - 08 3. REIMBURSEMENT OF SERVICE TRAX FOR 2005 - 06 & 2006-07 TO SHREE VISWAKARMA CONSTRUCTION 3,62,778 THE PARTY CLAIMED DURING 2007-08 4. LUNCH PROVIDED TO POLICE PERSONNEL DURING STRIKE ON 29.7.06 TO 3.9.2006 83,400 PARTY CLAIMED DURING 07-08 5. LOSS ON SALE OF SCRAP 1,41,505 LOSS AROSE ON DISPOSAL OF BRUNT CABLES. 7,75,792/ - 26. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE RECORD OF THE CASE. SINCE THE AO HAS HIMSELF OBSERVED THAT THESE EXPENSES CRYSTAL ISED IN ASSESSMENT YEAR 2007-08, THEREFORE, HE IS DIRECTED TO ALLOW THESE EXPENSES I N ASSESSMENT YEAR 2007-08 WHILE GIVING EFFECT TO OUR ORDER FOR ASSESSMENT YEAR 2007-08 VIDE ITA N O.554/CTK/2012. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 27. GROUND NO.7 RELATES TO DISALLOWANCE OF RS.1,41, 89,570/- ON ACCOUNT OF PERIPHERY DEVELOPMENT. 28. THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAD INCURRED A SUM OF RS.1,08,77,070/- AS PERIPHERAL DEVELOPMENT EXPENSES AND DEBITED TO PROF IT AND LOSS ACCOUNT. HE ALSO NOTICED THAT AN ADDITIONAL AMOUNT OF RS.33,12,500/- HAD BEEN BOO KED AS PERIPHERAL DEVELOPMENT EXPENSES FROM ACCOUNT NAMED JVR 3288 DT..31.3.2008. AFTER C ONSIDERING THE ASSESSEES SUBMISSIONS, THE 11 OPGC AO OBSERVED THAT THE EXPENDITURES WERE NOT RELATED TO THE BUSINESS OF THE ASSESSEE AND WERE OF VOLUNTARY IN NATURE. ACCORDINGLY, HE DISALLOWED AN AMOUNT OF RS.1,41,89,570/-. 29. BEFORE LD CIT(A), IT WAS SUBMITTED THAT THE PE RIPHERAL DEVELOPMENT EXPENSES WERE IN THE NATURE OF WATER SUPPLY TO PERIPHERAL VILLAGE, B OUNDARY WALL OF SAHAJBAHAL ME SCHOOL, SUPPLY OF FURNITURE TO THE SCHOOL, CONSTRUCTION OF COMMUNI TY HALL, SPORTS EXPENDITURE, ETC. THEY HAD BEEN INCURRED FOR CARRYING OUT SMOOTH ACTIVITIES AN D MAINTAINING SOCIAL RELATIONSHIP AS A GOOD CORPORATE CITIZEN. IT WAS ALSO SUBMITTED THAT AN A MOUNT OF RS.33,12,500/- HAD BEEN DOUBLY ADDED, WHICH WAS PART OF RS.1,08,77,070/- CLAIMED B Y THE ASSESSEE UNDER THIS HEAD. LD CIT (A) OBSERVED THAT THE EXPENDITURE INCURRED ON THE D EVELOPMENT OF THE PERIPHERY OF THE INDUSTRY WAS WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSIN ESS SINCE THE BUSINESS COULD NOT FUNCTION IN ISOLATION FROM THE SOCIAL ENVIRONMENT. HOWEVER, AS SESSEE HAD TO ESTABLISH THAT SUCH EXPENDITURE WAS RELATED TO THE ADVANCEMENT OF THE P URPOSE OF BUSINESS. FOLLOWING THE DECISION FOR THE ASSESSMENT YEAR 2004-05 UNDER SIMILAR CIRCU MSTANCES, PAYMENTS MADE TO DISTRICT COLLECTOR, BOLANGIR FOR INCURRING FOR PERIPHERAL DE VELOPMENT WAS ALLOWABLE, HE DIRECTED THE AO TO ALLOW RS.33,12,500/- BEING THE AMOUNT PAID TO COLLE CTOR FOR PERIPHERAL DEVELOPMENT. HE OBSERVED THAT WHETHER THE TOTAL AMOUNT OF RS.1,08,7 7,070/- INCLUDED THE AMOUNT OF RS.33,12,500/- AS CLAIMED BY THE ASSESSEE WAS TO BE VERIFIED BY THE AO. ACCORDINGLY, HE DIRECTED THE AO TO VERIFY THE SAME AND RECOMPUTE TH E DISALLOWANCE ACCORDINGLY. HOWEVER, IN SUM AND SUBSTANCE, HE CONFIRMED THE ACTION OF THE A O FOLLOWING THE ASSESSMENT YEAR 2004-05, BY EXCLUDING AN AMOUNT OF RS.33,12,500/- AND CONFIR MING THE ADDITION OF RS.75,64,170/-. BEING AGGRIEVED, ASSESSEE IS IN FURTHER APPEAL BEFORE US. 30. AT THE TIME OF HEARING, LD COUNSEL FOR THE ASSE SSEE SUBMITTED THAT THE DETAILS OF PERIPHERAL DEVELOPMENT EXPENSES ARE SUPPORTED WITH APPROVAL/VOUCHER, ETC AND THE SAME ARE INCURRED FOR THE BUSINESS OF THE ASSESSEE. 31. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD OF THE CASE. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF LD CIT(A) FOR THE REASONS GIVEN IN RESPECT OF GROUND NO.6 FOR ASSESSMENT YEAR 2007-08 (SUPRA). HENCE, T HIS GROUND IS REJECTED. 12 OPGC 32. GROUND NO.8 RELATES TO DISALLOWANCE OF RS.4,09, 128/- ON ACCOUNT OF ENTERTAINMENT EXPENSES. 33. THE AO OBSERVED THAT SOME OF THE EXPENSES UNDER THE HEAD ENTERTAINMENT EXPENSES APPEARED TO BE PERSONAL IN NATURE. ACCORDINGLY, HE DISALLOWED 20% OF SUCH EXPENSES. LD CIT(A) CONFIRMED THE AOS ACTION. 34. THIS ISSUE CAME UP FOR CONSIDERATION IN ASSESSM ENT YEAR 2007-08 VIDE GROUND NO.7 AND WE HAVE DELETED THE DISALLWOANCE FOR THE REASONS GI VEN THEREIN. HENCE, THIS GROUND IS ALLOWED. 35. NOW WE TAKE UP THE APPEAL FOR ASSESSMENT YEAR 2009-2010 FILED BY THE ASSESSEE IN ITA NO.77/CTK/2013. 36. GROUND NO.1 IS GENERAL IN NATURE. 37. GROUND NO.2 RELATES TO DISALLOWANCE OF RS.25,41 ,312/- UNDER THE HEAD PERIPHERAL DEVELOPMENT EXPENSES. 38. THE ASSESSING OFFICER DISALLOWED RS.89,70,409/- ON ACCOUNT OF PERIPHERY DEVELOPMENT EXPENSES ON THE GROUND THAT SAID EXPENDITURE WAS NO T RELATED TO THE BUSINESS OF THE ASSESSEE AND VOLUNTARY IN NATURE. LD CIT(A) OBSERVED THAT A N AMOUNT OF RS.25,41,312/- HAD BEEN SPENT THROUGH CORPORATE OFFICE, BHUBANESWAR, THEREFORE, S AME COULD NOT BE CONSIDERED FOR THE BUSINESS PURPOSE OF THE ASSESSEE. ACCORDINGLY, HE DISALLOWED RS.25,41,312/-. HOWEVER, FOR THE BALANCE AMOUNT OF RS.64,29,097, HE OBSERVED THAT SA ME WAS INCURRED IN CONNECTION WITH THE BUSINESS PURPOSE OF THE ASSESSEE AS THE SAME HAD BE EN SPENT AT IB THERMAL STATION. THEREFORE, HE DIRECTED THE AO TO ALLOW THE SAME. A GGRIEVED, ASSESSEE IS IN APPEAL BEFORE US. 39. WE HAVE HEARD REPRESENTATIVES OF THE PARTIES AN D PERUSED THE RECORD OF THE CASE. BEFORE US, LD COUNSEL FOR THE ASSESSEE COULD NOT PRODUCE A NY SUPPORTING MATERIAL TO TAKE CONTRARY VIEW THAT THE AMOUNT, CONFIRMED BY LD CIT(A), WAS IN CON NECTION WITH THE BUSINESS PURPOSES OF THE ASSESSEE. THIS ISSUE CAME UP FOR CONSIDERATION IN ASSESSMENT YEAR 2007-08 AND 2008-09. IN LINE WITH OUR DECISION FOR THE SAID ASSESSMENT YEAR S, WE REJECT THIS GROUND. 13 OPGC 40. GROUND NO.3 RELATES TO DISALLOWANCE OF RS.7,93, 787/- UNDER THE HEAD PRIOR PERIOD EXPENSES. 41. THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF R S.1,14,60,407/- BEING PRIOR PERIOD EXPENSES. BEFORE LD CIT(A), IT WAS SUBMITTED THAT AN AMOUNT OF RS.1,06,66,620/- WAS ON ACCOUNT OF RECTIFICATION OF MISTAKE IN SETTLEMENT W ITH GRIDCO AND OTHER AMOUNTS WERE RECTIFICATION OF MISTAKES DURING THE YEAR FOR THE E XPENSES RELATED TO EARLIER YEARS. AFTER CONSIDERING THE ASSESSEES SUBMISSION, LD CIT(A) OB SERVED THAT THE ADJUSTMENT OF RS.1,06,66,620/- WAS ON ACCOUNT OF RE-ADJUSTMENT OF INCOME IN VIEW OF CHANGES IN RATES AND NOT ACTUALLY RELATED TO EXPENSES. SINCE, THE INCOM E HAD ALREADY BEEN TAXED IN EARLIER YEAR AND GETTING ADJUSTED IN THE IMPUGNED ASSESSMENT YEAR, H E DIRECTED THE AO TO DELETE RS.1,06,66,620/-. ACCORDINGLY, HE CONFIRMED THE BA LANCE AMOUNT OF RS.7,93,787/-. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 42. HAVING HEARD BOTH THE SIDES, WE FIND THAT AN AM OUNT OF RS.7,93,787/- WERE THE EXPENSES RELATED TO EARLIER YEARS. THE AO HAS OBSE RVED THAT THE SAME RELATES TO ASSESSMENT YEAR 2008-09. IN VIEW OF THIS, WE DIRECT THE AO TO ALLOW THE EXPENDITURE IN THE YEAR IN WHICH THE EXPENDITURE CRYSTALLIZED. HENCE, GROUND NO.3 I S ALLOWED FOR STATISTICAL PURPOSES. 43. GROUND NO.4 RELATES TO DISALLOWANCE OF RS.4,36, 937/- ON ACCOUNT OF ENTERTAINMENT EXPENSES ON ESTIMATION. 44. THIS ISSUE CAME UP FOR CONSIDERATION IN ASSESSM ENT YEAR 2007-08 VIDE GROUND NO.7 AND FOR THE REASONS GIVEN IN ASSESSMENT YEAR 2007-08, W E ALLOW THIS GROUND. 45. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 46. NOW WE TAKE UP THE APPEAL OF THE REVENUE FOR AS SESSMENT YEAR 2008-09 IN ITA NO.636/CTK/2012. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) IS NOT JUSTIFIED IN DELETING THE AMOUNT OF RS.33,12,50 0/- OUT OF THE ADDITION OF RS.1,41,89,570/- MADE BY THE AO ON ACCOUNT OF PE RIPHERY DEVELOPMENT EXPENSES BY OVERLOOKING THE FINDING OF THE AO THE SAME WAS NOT INCIDENTAL TO THE BUSINESS OF THE ASSESSEE. 14 OPGC 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS NOT JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE IN FULL, WHEN THE ASSESSEE COULD NOT FURNISH THE DETAILS OF EXPENSES ON ACCOUN T OF STAFF WELFARE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS NOT JUSTIFIED IN ALLOWING RELIEF OF RS.67,655/- ON ACCO UNT OF PRIOR PERIOD EXPENSES IGNORING THE FINDING OF THE AO THAT THE AB OVE EXPENSES DID NOT CRYSTALLIZE DURING THE RELEVANT PREVIOUS YEAR. 46. THE ASSESSEE HAS FILED CROSS OBJECTION FOR THE ASSESSMENT YEAR 2008-09 AS UNDER: 1. FOR THAT, IN CONSIDERATION OF OVERALL FACTS THE OR DER OF THE CIT (A) IS JUSTIFIED IN DELETING THE AMOUNT OF RS.33,12,500/- OUT OF THE AD DITION OF RS. 1,41,89,570/- MADE BY THE AO ON ACCOUNT OF PERIPHERY DEVELOPMENT EXPENSES. THE CIT(A) FURTHER JUSTIFIED IN DIRECTING LD. AO TO VERIFY THE LEDGER BALANCE CLAIMED BY THE ASSESSEE COMPANY AS RS. 1,08,77,070 IN PLACE OF RS. 1,41,89,570/-. 2. FOR THAT IN CONSIDERATION OF DETAILS OF EXPENSES SU BMITTED BY ASSESSEE COMPANY THE CIT(A) IS JUSTIFIED IN ALLOWING THE CLAIM OF TH E ASSESSEE EXPENSES IN FULL ON ACCOUNT OF STAFF WELFARE EXPENSES. 3. FOR THAT, IN CONSIDERATION OF OVERALL FACTS THE ORD ER OF THE CIT (A) IS JUSTIFIED IN DELETING THE AMOUNT OF RS.67,655/- ON ACCOUNT OF PR IOR PERIOD EXPENSES. BY DISALLOWING RS.7,75,792 THE CIT (A) IS NOT JUSTIFIE D AS THE EXPENSES ARE INCURRED AND ELIGIBLE FOR DEDUCTION WHILE COMPUTING THE TAXA BLE INCOME. FIRST WE TAKE UP THE REVENUES APPEAL: 47. AS FAR AS GROUND NO.1 IS CONCERNED, WE FIND THA T THIS ISSUE CAME UP FOR OUR CONSIDERATION FOR ASSESSMENT YEAR 2008-09 VIDE GROU ND NO.7 IN ASSESSEES APPEAL AND FOR THE REASONS GIVEN THEREIN, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF LD CIT(A). HENCE, THIS GROUND IS REJECTED 47. AS FAR AS GROUND NO.2 IS CONCERNED, THE AO NOTI CED THAT THE ASSESSEE HAD INCURRED AN AMOUNT OF RS.59,63,289/- BEING STAFF WELFARE EXPENS ES. FOR WANT OF DETAILS, THE AO DISALLOWED RS.8,94,493/- BEING 15% OF RS.59,63,289/- ON ESTIMA TE BASIS. ON APPEAL, LD CIT(A) DELETED THE DISALLOWANCE MADE BY THE AO ON THE GROUND THAT THER E IS NO FINDING IN THE ASSESSMENT ORDER THAT THE EXPENDITURE WAS NOT RELATED TO BUSINESS. HENCE, DEPARTMENT IS IN APPEAL BEFORE US. 15 OPGC 48. HAVING HEARD BOTH THE SIDES, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF LD CIT(A) SINCE STAFF WELFARE EXPENDITURE WAS INCURRED DURING THE COURSE OF CONDUCTING BUSINESS ACTIVITY OF THE ASSESSEE. GROUND NO.2 OF THE REVEN UE IS DISMISSED. 49. APROPOS GROUND NO.3, HAVING HEARD BOTH THE SIDE S, WE FIND THAT THE AMOUNT OF RS.67,656/- BEING THE PRIOR PERIOD EXPENSES INCLUDE D STAFF OVER TIME FOR THE PERIOD MAY 2005 TO MARCH, 2007 AND WAS PAID WHEN THE BILL WAS RAISED. SINCE THE AMOUNT WAS PAID DURING THE YEAR UNDER CONSIDERATION, WE ARE OF THE VIEW THAT LD CIT (A) IS JUSTIFIED IN DELETING THE SAID AMOUNT. HENCE, THIS GROUND IS REJECTED 50. GROUND OF CROSS OBJECTIONS FILED BY THE ASSESSE E ARE IN SUPPORT OF THE ORDER OF LD CIT(A). SINCE WE HAVE UPHELD THE ORDER OF LD CIT(A), CROSS OBJECTIONS ARE RENDERED INFRUCTUOUS. 50. IN THE RESULT, APPEAL FILED BY THE REVENUE AND CROSS OBJECTION FILED BY THE ASSESSEE FOR A.Y. 2008-09 ARE DISMISSED. 51. THE DEPARTMENT HAS TAKEN THE FOLLOWING GROUNDS IN ITS APPEAL FOR THE ASSESSMENT YEAR 2009-2010 IN ITA NO.145/CTK/2013 : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS NOT JUSTIFIED IN DELETING THE AMOUNT OF RS.64,20,097/- OUT OF THE ADDITION OF RS.89,70,409/- MADE BY THE AO ON ACCOUNT OF PERIPHE RY DEVELOPMENT EXPENSES DESPITE THE FINDING OF THE AO THAT THE SAME WAS NOT INCIDENTAL TO THE BUSINESS OF THE ASSESSEE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS NOT JUSTIFIED IN DELETING THE ADDITION OF RS.11,61,172/- ON ACCOU NT OF STAFF WELFARE EXPENSES IN ABSENCE OF EVIDENCE PRODUCED BY THE ASSESSEE EIT HER BEFORE THE AO OR BEFORE THE LD. CIT(A). 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS NOT JUSTIFIED IN DELETING THE ADDITION OF RS.2,52,00,981/- MADE B Y THE AO FOR NON-DEDUCTION OF TAX U/S.194A WITHOUT GIVING THE AO AN OPPORTUNIT Y TO REBUT THE CLAIM OF THE ASSESSEE. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS NOT JUSTIFIED IN ALLOWING RELIEF OF RS.1,14,60,407/- ON ACCOUNT O F PRIOR PERIOD EXPENSES WITHOUT GIVING THE AO AN OPPORTUNITY TO REBUT THE C LAIM OF THE ASSESSEE. 16 OPGC 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS NOT JUSTIFIED IN ACCEPTING THE CONTENTION OF THE ASSESSEE WITHOUT GIVING THE AO A REASONABLE OPPORTUNITY IN VIOLATION OF RULE 46A. 52. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS IN IT S CROSS OBJECTION FOR ASSESSMENT YEAR 2009-2010; 1. FOR THAT, IN CONSIDERATION OF OVERALL FACTS THE ORDER OF THE CIT (A) IS JUSTIFIED IN DELETING THE AMOUNT TO THE EXTENT OF RS.64,20,09 7/- OUT OF THE ADDITION OF RS.89,70,409/-MADE BY THE AO ON ACCOUNT OF PERIPHER Y DEVELOPMENT EXPENSES. BUT SIMULTANEOUSLY HAS ERRED ON FACT AND LAW IN DIS ALLOWING RS.25,41,312/- AS THE EXPENSES ARE INCURRED AND ELIGIBLE FOR DEDUCTIO N WHILE COMPUTING THE TAXABLE INCOME. HENCE THE AMOUNT OF RS.25,41,312/- ARE LIAB LE TO BE DELETED. 2. FOR THAT IN CONSIDERATION OF DETAILS OF EXPENSES SU BMITTED BY THE ASSESSEE COMPANY, THE CIT(A) IS JUSTIFIED IN ALLOWING THE CL AIM OF THE ASSESSEE FOR RS.11,61,172/-ON ACCOUNT OF STAFF WELFARE EXPENSES IN FULL. 3. FOR MAT IN CONSIDERATION OF OVERALL FACTS THE ORDER OF CIT(A) IS JUSTIFIED IN DELETING THE ADDITION OF RS.2,52,00,981/- MADE BY A.O. ON AC COUNT OF NON-DEDUCTION OF TAX U/S 194A I,E, PAYMENT OF INTEREST ON LOAN TO PO WER FINANCE CORPORATION LTD RELYING UPON THE NOTIFICATION NO. 211/2006 DT. 18.0 8.2006 U/S. 194A(3)(III)(F). OF INCOME TAX ACT. 4. FOR THAT, IN CONSIDERATION OF OVERALL FACTS THE ORD ER OF THE CIT (A) IS JUSTIFIED IN DELETING THE AMOUNT OF RS.1,14,60,407/- ON ACCOUNT OF PRIOR PERIOD EXPENSES AS THE INCOME HAS ALREADY BEEN TAXED IN THE EARLIER YE AR AND GETTING ADJUSTMENT IN THE IMPUGNED ASSESSMENT YEAR DUE TO RECTIFICATION O F BILLS EARLIER RAISED, WHEREAS, HAS COMMITTED AN ERROR ON FACT AND LAW WHI LE CONFIRMING THE DISALLOWANCE TO THE EXTENT OF RS.7,93,787/- 53. GROUND NO.1 OF REVENUES APPEAL IS SIMILAR TO G ROUND NO.2 FOR ASSESSMENT YEAR 2009- 2010 IN ASSESSEES APPEAL. FOR THE REASONS GIVEN TH EREIN FOR ASSESSMENT YEAR 2009-2010, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF LD CIT(A). ACCORDINGLY, WE REJECT THIS GROUND. 54. GROUND NO.2 IS SIMILAR TO GROUND NO.2 TAKEN BY THE REVENUE FOR ASSESSMENT YEAR 2008- 09. FOR THE REASONS GIVEN THEREIN, WE REJECT THIS GROUND. 55. APROPOS GROUND NO.3, FACTS ARE THAT THE ASSESSI NG OFFICER NOTICED THAT THE ASSESSEE HAD TAKEN LOAN FROM POWER FINANCE COMMISSION ON WHICH I T PAID CERTAIN INTEREST EVERY YEAR. 17 OPGC HOWEVER, TDS WAS NOT DEDUCTED WHILE MAKING SUCH PAY MENT. HE, THEREFORE, CONCLUDED THAT THERE WAS VIOLATION OF SECTION 194A AND, THEREFORE, MADE DISALLOWANCE OF RS.2,52,00,981/- INVOKING SECTION 40(A)(IA) OF THE ACT. LD CIT(A) D ELETED THE DISALLOWANCE IN VIEW OF NOTIFICATION NO.211/2006 ISSUED DT.18.8.2006 U/S.194A(3)(III)(F) , ACCORDING TO WHICH, NO TAX WAS DEDUCTIBLE IN RESPECT OF PAYMENT OF INTEREST TO POWER FINANCE COMMISSION UNDER SECTION 194A. 56. HAVING HEARD BOTH THE SIDES, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF LD CIT(A) IN VIEW OF THE SAID NOTIFICATION. HENCE, TH IS GROUND IS REJECTED. 57. APROPOS GROUND NO.4, WE OBSERVE THAT THIS ISSUE CAME UP FOR CONSIDERATION BEFORE US IN ASSESSMENT YEAR 2009-2010 IN ASSESSEES APPEAL, WHE REIN, THE ISSUE IS DECIDED. FOR THE REASONS GIVEN IN ASSESSMENT YEAR 2009-2010, WE ALLO W THIS GROUND FOR STATISTICAL PURPOSES. 58. APROPOS GROUND NO.5, LD D.R. SUBMITTED THAT NO OPPORTUNITY WAS AFFORDED TO THE AO AND, THEREFORE, THERE WAS VIOLATION OF RULE 46A. H OWEVER, NO EVIDENCE HAS BEEN BROUGHT ON RECORD TO BUTTRACE THE ARGUMENTS THAT NO NOTICE WAS SENT TO THE AO. HENCE, WE DO NOT FIND THAT THERE WAS ANY VIOLATION OF RULE 46A. THIS GRO UND IS ACCORDINGLY REJECTED. 59. CROSS OBJECTION FILED BY THE ASSESSEE ARE IN SU PPORT OF THE ORDER OF LD CIT(A). SINCE WE HAVE UPHELD THE ACTION OF LD CIT(A), CROSS OBJECTIO NS ARE RENDERED INFRUCTUOUS. 60. IN THE RESULT, APPEAL FILED BY THE REVENUE AND CROSS OBJECTIONS FILED BY THE ASSESSEE ARE DISMISSED. SD/- SD/- ( GEORGE MATHAN) (S.V.MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, CUTTACK 22 /10/2014 B.K.PARIDA, SR. PS 18 OPGC COPY OF THE ORDER FORWARDED TO: THE ASSESSEE: ODISHA POWER GENERATION CORPORATION L TD., 7 TH FLOOR, FORTUNE TOWERS, CHANDRASEKHARPUR, BHUBANESWAR-751023 1. THE REVENUE: JCIT, RANGE-1, BHUBANESWAR 2. THE CIT, BHUBANESWAR. 3. THE CIT(A), BHUBANESWAR 4. DR, CUTTACK BENCH 5. GUARD FILE. TRUE COPY// BY ORDER ASST. REGISTRAR, ITAT, CUTTACK