MAHARASHTRA STATE ELECTRICITY DISTRIBUTION COMPANY LTD, MUMBAI V. ACIT 10(1), MUMBAI

ITA 720/MUM/2010

• Counselvise Citation: 72019914 RSA 2010
• Duration Of Justice: 5 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 29-06-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 29-01-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J D MISTRI; K K VED A R MSED
• Assessee Lawyers: G M DOSS
• Keywords: Capital asset; Business income; Depreciation; Principle of natural justice; Additional evidence; Capital receipt; Unabsorbed depreciation; Revenue expenditure
• Section: 43B

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI . . , , . . , BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER, AND N.K. BI LLAIYA ACCOUNTANT MEMBER . / ITA NO.762/MUM/2010 ( / ASSESSMENT YEAR : 2006-07 ) ACIT 10(1), R.NO.455, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020 .. !' / APPELLANT # V/S M/S. MAHARASHTRA STATE ELECT RICITY DISTRIBUTION CO. LTD., PRAKASHGAD, ANANT KANEKAR MARG, STATION ROAD, BANDRA (E) MUMBAI-400 051 .... $%!' / RESPONDENT . / ITA NO.720/MUM/2010 ( / ASSESSMENT YEAR : 2006-07 ) M/S. MAHARASHTRA STA TE ELECTRICITY DISTRIBUTION CO. LTD., PRAKASHGAD, ANANT KANEKAR MARG, STATION ROAD, BANDRA (E) MUMBAI-400 051 .. !' / APPELLANT # V/S ACIT 10(1), R.NO.455, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020 .... $%!' / RESPONDENT ! . / PERMANENT ACCOUNT NUMBER AAECM2933K REVENUE BY : SHRI G.M. DOSS (DR) RESPONDENT BY : SHRI J.D. MISTRI & K.K. VED, (A R) MSED 2 ' ( ) *+ / DATE OF HEARING 08.07.2015 , -. ) *+ / DATE OF ORDER 12.08.2015 / ORDER . . , / PER A.D.JAIN, J.M. THESE CROSS APPEALS HAVE BEEN FILED BY THE DEPARTMEN T AS WELL AS ASSESSEE FOR THE ASSESSMENT YEAR 2006-07 AGAINST THE ORDER DATED 24.11.2009, PASSED BY THE LD. COMMISSIONER OF INCOM E TAX(APPEALS) 21, MUMBAI, AGAINST THE ASSESSMENT ORDER PASSED U/S 14 3(3) BY THE ASSESSING OFFICER DATED 31.12.2008. 2. WE FIRST TAKE UP THE APPEAL FILED BY THE REVENUE I N ITA NO.762/M/2010. THE GROUNDS RAISED BY THE REVENUE IS REPRODUCED HEREUNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, T HE LD. CIT(A) ERRED IN ADMITTING THE ADDITIONAL EVIDENCES I N VIOLATION OF RULE 46A WITHOUT APPRECIATING THAT THE APPROPRIATE AND S UFFICIENT OPPORTUNITIES WERE GIVEN TO THE ASSESSEE TO EXPLAIN THE ISSUES ON WHICH ADDITIONS ARE MADE IN THE ASSESSMENT ORDER. 2.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE IN RESPECT OF LOWER PROVISION FOR FOCA THAN AUTHORIZED BY MERC ORDER WIT HOUT APPRECIATING THAT THOUGH THE MERC ORDER WAS ISSUED AT A LATER DATE, IT WAS RECEIVED BEFORE THE CLOSURE OF BOOKS OF A CCOUNTS AND HENCE, REQUIRED TO BE GIVEN EFFECT IN THE SAID BOOKS . 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN ALLOWING THE CLAIM OF WRITE-OFF OF CA PITAL ITEMS OF RS.7.41 LAKHS WITHOUT APPRECIATING AT WRITE-OFF OF ITE MS OF CAPITAL NATURE IS NOT ALLOWABLE AS DEDUCTION OR CHAR E TO P&L A/C IRRESPECTIVE OF THE AMOUNT INVOLVED. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) ERRED IN ALLOWING THE CLAIM OF SET-OFF OF B F LOSS/UNABSORBED DEPRECIATION WITHOUT APPRECIATING THAT IN THE CASE OF MS EB, NO LOSS OR UNABSORBED DEPRECIATION WAS ALLOWED TO BE C ARRIED MSED 3 FORWARD M THE FINAL ORDER FOR AY 2006-07 AND HENCE. THERE CANNOT BE ANY ELIGIBILITY FOR SET-OFF OR ALLOWANCE O F LOSS OR UNABSORBED DEPRECATION IN THE CASE OF ASSESSEE UNDER ANY PROVISIONS . 5. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON T HE ABOVE GROUND BE SET ASIDE AND THAT OF THE A.O. BE RESTORED. 6. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GR OUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 3. GROUNDS NO.5 & 6 ARE GENERAL AND DO NOT NEED ANY SPECIFIC ADJUDICATION . 4. GROUND NO.1 DEALS WITH THE GRIEVANCES OF THE REVENUE A BOUT THE ACTION OF LD. CIT(A) IN THE ADMITTING THE ADDITIONAL E VIDENCES IN VIOLATION OF RULE 46A. DURING THE COURSE OF HEARING , THE LD. DR SUBMITTED THAT SUFFICIENT OPPORTUNITIES WERE GIVEN TO TH E ASSESSEE TO EXPLAIN THE ISSUES AND THEREFORE THE LD. CIT(A) OUGH T NOT HAVE ADMITTED THE ADDITIONAL EVIDENCES. ON THE OTHER HAND, THE LD AUTHORIZED REPRESENTATIVE (AR) APPEARING ON BEHALF O F THE ASSESSEE COMPANY SUBMITTED THAT THE ASSESSEE COMPANY IS A PUBL IC SECTOR UNDER TAKING AND THERE WERE VALID REASONS DUE TO WHI CH SOME OF THE EVIDENCES COULD NOT BE SUBMITTED BEFORE THE AO DURING THE COURSE ASSESSMENT PROCEEDINGS. THE CASE OF THE ASSESSEE FALLS WITHIN THE PARAMETERS OF RULE 46A OF THE INCOME TAX RULES 1962 . LD. CIT(A) HAS ADMITTED THE ADDITIONAL EVIDENCES VERY MUCH ACCORDING TO THESE RULES AND HE ALSO SUBMITTED THAT NO PREJUDICE IS CAUSED TO THE REVENUE AS LD. CIT(A) HAD CALLED FOR THE REMAND REPORT FROM THE ASSESSING OFFICER AND DURING THE COURSE OF REMAND PROCEEDINGS THE AO HA D FULL OPPORTUNITY TO EXAMINE ALL REQUIRED DETAILS AND EVID ENCES. HE FURTHER SUBMITTED THAT NONE OF THE EVIDENCES ARE AFTER THOUGH T AND ALL THE EVIDENCES ARE VERY CRUCIAL FOR ADJUDICATION OF THIS APPEAL. MSED 4 5. WE HAVE HEARD BOTH THE PARTIES AT LENGTH. THE L D. CIT(A) HAS GIVEN DETAIL REASONING FOR ADMISSION OF ADDITIONAL EVIDEN CES IN PARA 4.2(H). LD. CIT(A) HAS MENTIONED THAT NO SPECIFIC QUERY WAS RA ISED BY THE AO. DURING THE ASSESSMENT PROCEEDINGS IN RESPECT OF ISSUES ON WHICH ADDITION/DISALLOWANCE WAS TO BE MADE AND ACCORDINGL Y HE HELD THAT IN THESE CIRCUMSTANCES, THE APPLICANTS CASE WAS COVERED BY CLAUSE (D) OF RULE 46A. IT WAS FURTHER HELD BY LD. CIT(A) THAT THE ASSESSEES CASE WAS ALSO COVERED BY CLAUSE (C) OF RULE 46A, AS THE ASSESSEE WAS PREVENT ED BY SUFFICIENT CAUSE FROM PRODUCING THESE EVIDENCES BEFORE THE AO. THESE ADDITIONAL EVIDENCES WERE RELEVANT TO THE GROUND OF APPEALS. IT WAS OBSE RVED BY LD. CIT(A) THAT THESE SUFFICIENT CAUSES WERE UNPRECEDENTED TRIFURCA TION OF MSEB, VOLUMINOUS RECORDS OF MSEB TAKEN OVER BY APPELLANT AND APPELLA NTS OPERATIONS SPREAD OVER FAR AND WIDE AREAS INCLUDING NAXALITE INFECTED REMOTE AREAS. IN ADDITION TO THE ABOVE IT WAS FURTHER SEEN BY US THAT THE LD. CIT(A) HAD CALLED FOR A REMAND REPORT. THE LD. AO HAD SENT THE REMAND REPOR T AND THE SAME WAS CONSIDERED BY THE LD. CIT(A) BEFORE PASSING THE APP ELLATE ORDER. UNDER THESE CIRCUMSTANCES ADMISSION OF ADDITIONAL EVIDENCES IS JUSTIFIED. WE DERIVE SUPPORT FROM THE JUDGMENT OF HONBLE DELHI HIGH COU RT IN THE CASE OF VIRGIN SECURITIES & CREDITS (P)( LTD. 332 ITR 396 (DEL.) . THUS, VIEWED FROM ALL THE ANGLES, WE FIND THAT ADMISSION OF ADDITIONAL EVIDEN CES BY THE LD.CIT(A) IN THE CASE OF THE ASSESSEE IS ON THE BASIS OF PROPER REASONING AND HAS BEEN DONE IN VIEW OF PRINCIPLES OF NATURAL JUSTICE A ND THE SAME IS HELD TO BE JUSTIFIED AND GROUND NO.1 OF THE REVENUES APPEA L IS DISMISSED. 6. GROUND NO.2, IN THIS GROUND THE REVENUE HAS CHALLE NGED THE ACTION OF LD. CIT(A) IN DELETING THE ADDITION MADE BY AO IN RESPECT OF LOWER PROVISION FOR FUEL AND OTHER COST ADJUSTMENT [F OCA] AUTHORIZED BY MAHARASHTRA ELECTRICITY REGULATORY COMMI SSION. THE LD. MSED 5 AO HAS DISCUSSED THE ISSUE IN PARA 4.1 AND 4.2 OF TH E ASSESSMENT ORDER. THE ASSESSING OFFICER HAS MADE ADDITION OF R S.346.57 CRORES ON THE GROUND THAT MERC HAD ALLOWED THE ASSESSEE COMPANY T O RECOVER AN AGGREGATE OF AMOUNT OF RS.1410.52 CRORES TOWARDS THE FUEL AND OTHER COSTS ADJUSTMENTS. HOWEVER, THE ASSESSEE COMPANY P ROVIDED IN THE BOOKS OF ACCOUNT AS REVENUE ONLY FOR AGGREGATE AM OUNT OF RS. 1063.95 CRORES AND AS PER AO, IN THIS MANNER THE REV ENUE OF THE ASSESSEE COMPANY WAS UNDERSTATED BY AN AMOUNT OF RS.3 46.56 CRORES. ACCORDINGLY THE LD. AO MADE ADDITION OF THIS AMOUNT TO THE INCOME OF THE ASSESSEE COMPANY. BEFORE THE LD. CIT(A), THE ASSE SSEE COMPANY CONTESTED THIS ISSUE AND LD. CIT(A) DELTED THIS ADDIT ION BY MAKING A DETAILED DISCUSSION IN PARA 4 TO 4.3(F) OF HIS ORDE R. 7. BEFORE US, BOTH THE PARTIES HAVE ARGUED THIS ISSUE AT LENGTH. LD. DR REITERATED THE OBSERVATIONS MADE IN THE ASSESSMENT ORDER AND SUBMITTED THAT THERE WAS A UNDERSTATEMENT OF INCOME B Y THE ASSESSEE COMPANY TO EXTENT OF RS.346.57 CRORES AND THEREFORE, THE LD. CIT(A) HAS WRONGLY DELETED THE SAME AND REQUESTED FOR REVER SING THE ACTION OF THE LD. CIT(A) AND UPHOLDING THAT OF THE AO. ON T HE OTHER HAND, LD. COUNSEL OF THE ASSESSEE HAS RELIED UPON THE ORDER PA SSED BY THE LD. CIT(A) AND SUBMITTED THAT LD. CIT(A) HAS PASSED WELL R EASONED ORDER AND THE SAME IS IN ACCORDANCE WITH LAW AND IS FACTUALL Y CORRECT AND MSED 6 THEREFORE, THE ORDER OF THE LD. CIT(A) BE UPHELD. TH E FINDINGS OF THE LD. CIT(A) WERE READ BEFORE US AND ARGUMENTS WERE M ADE ACCORDINGLY. 8. WE HAVE CONSIDERED BOTH THE SIDES AND HAVE GONE TH ROUGH THE ORDERS PASSED BY THE AUTHORITIES BELOW AS WELL AS THE MATERIAL PLACED BEFORE US IN THE PAPER BOOK. THE ISSUE IN BRIEF IS TH AT THE AMOUNT OF RS.346.57 CRORES WAS INCLUDED IN ITS INCOME BY THE AS SESSEE COMPANY IN ASSESSMENT YEAR 2007-08, WHEREAS THE AOS STAND WAS THAT THE SAME SHOULD HAVE BEEN ACCOUNTED FOR IN THE YEAR UND ER CONSIDERATION I.E. A.Y. 2006-07. THUS, THE ISSUE WAS NOT THAT OF SU PPRESSION OF INCOME, BUT - THE YEAR OF TAXABILITY OF INCOME. THE UND ISPUTED FACT IS THAT THE ASSESSEE HAS ALREADY INCLUDED THIS INCOME IN TH E NEXT ASSESSMENT YEAR I.E. A.Y. 2007-08. WE HAVE OBSERVED THAT THE LD. CIT(A) HAS PASSED VERY WELL REASONED ORDER ON THIS ISSUE AND WE FIND IT APPROPRIATE TO REPRODUCE ALL THE RELEVANT OPERATIVE PARAS OF THE ORDER OF LD. CIT(A) HEREUNDER FOR THE SAKE OF READY REFERENCE: 4.3(B) M/S. MSEB WAS EARLIER ENGAGED IN THE ACTIVITY OF GENERATION, TRANSMISSION AND DISTRIBUTION OF ELECTRICI TY IN THE STATE OF MAHARASHTRA. DURING THE YEAR, THE MSEB WAS TRI FURCATED INTO THREE NEW COMPANIES AND EACH COMPANY TOOK OVER ON E ACTIVITY OF MSEB. THE ERSTWHILE MSEB WAS UNDER STATUTO RY CONTROL OF MAHARASHTRA ELECTRICITY REGULATORY COMMISSIONER (ME RC) IN RESPECT OF TARIFF OF ELECTRICITY TO BE CHARGED FROM TH E PUBLIC. AFTER TRIFURCATION, ALL THE THREE NEW COMPANIES INCLUDING APPELLANT WERE UNDER CONTROL OF MERC. THE APPELLANT WAS PURCHASING E LECTRICITY FROM MSE POWER GENERATION CO. LTD., BUT IT COULD PURCH ASE AT THE RATE TO BE APPROVED BY THE MERC. SIMILARLY, THE APPEL LANT WAS MSED 7 SELLING ELECTRICITY TO THE PUBLIC BUT THE SELLING RATE WAS SUBJECT TO APPROVAL BY THE MERC. TILL THE APPROVAL WAS NOT RECEI VED, THE APPELLANT WAS ACCOUNTING SALE OF ELECTRICITY TO PUBLI C ON ACTUAL BASIS. THE RATE TO BE APPROVED BY MERC ( AT A LATER D ATE) COULD BE LESS OR MORE. THE APPELLANT'S PREVIOUS YEAR ENDED ON 31.3.2006 AND TILL THAT DATE, THE MERC ORDER WAS NOT RECEIVED. THEREFORE, APART FROM ELECTRICITY CHARGES, THE APPEL LANT PROVIDE / ACCOUNTED FOR REVENUE OF RS. 1063.95 CRORE TOWARDS FOCA (I.E. FUEL AND OTHER COST ADJUSTMENT TO BE CHARGED FROM PUB LIC) TILL THE END OF PREVIOUS YEAR. HOWEVER, THE MERC VIDE ORD ER DTD. 5.5.2006 AND 1.6.2006 AUTHORIZED THE APPELLANT TO CH ARGE FOCA FROM PUBLIC AT ENHANCED RATE I.E. RS. 1410.52 CRORE. THE MERC ALSO ORDERED THAT THE EXCESS FOCA CHARGES (AT RS.346. 57 CRORE) WAS TO BE RECEIVED / COLLECTED FROM THE PUBLIC IN THE BILLING MONTHS OF JUNE, JULY AND AUGUST, 2006. THEREFORE, T HE APPELLANT COLLECTED THAT AMOUNT OF RS. 346.57 CRORE FROM PUBLIC IN THE PREVIOUS YEAR 2006-07 AND ACCORDINGLY, OFFERED THE SAME AS REVENUE IN THE AY 2007-08. 4.3 (C) IN MY CONSIDERED OPINION, THE APPELLANT'S ACT ION OF OFFERING FOCA REVENUE OF RS.346.57 CRORE IN NEXT ASS ESSMENT YEAR WAS CORRECT. THERE WAS NO DISPUTE ON THE FACT THA T THE MERC ORDER WAS STATUTORILY BINDING ON THE APPELLANT. THE APP ELLANT WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND IT'S PRE VIOUS YEAR ENDED ON 31.3.2006.TIII 31.3.06, MERC ORDER WAS NOT IN EXISTENCE AND THEREFORE, THE APPELLANT COULD NOT HAVE VISUALIZED THE FIXATION OF TARIFF AT HIGHER RATE BY THE MERC. IN THE PREVIOUS YEAR, THE INCOME / REVENUE COLLECTED FROM PUBLIC WA S OFFERED AS SALES. THE APPELLANT COULD NOT HAVE CHARGED MORE FR OM THE PUBLIC WITHOUT AUTHORIZATION BY THE MERC. THIS FACT WAS MORE RELEVANT IN VIEW OF THE FACT THAT THE MERC COULD HAVE DECIDED L ESSER TARIFF ( AS WAS DONE IN CASE OF M/S. MSEP GENERATION CO. L TD. IN WHICH MSEPG ACCOUNTED FOR REVENUE AT HIGHER SALE RATE OF E LECTRICITY TO APPELLANT WHEREAS MERC ORDERED FOR LOWER SALE RATE OF ELECTRICITY) THEREFORE, THE APPELLANT CORRECTLY SHOWN REVENUE IN TH E ACCOUNTS ON THE BASIS OF ACTUAL COLLECTED FROM PUBLIC. 4.3(D) THE MERC ORDER, AUTHORIZING COLLECTION OF FOCA FROM PUBLIC AT HIGHER RATE, WERE DATED 5.5.2006 AND 01.6 .06. SINCE THE MERC ORDERS WERE STATUTORILY BINDING, THEREFORE, APPELLANT'S ARGUMENT IS CORRECT THAT THE RIGHT TO RECOVER FOCA FR OM PUBLIC ACCRUED ONLY IN THE PREVIOUS YEAR 2006-07 I.E. A Y 2 007-08 AND NOT IN THE YEAR UNDER CONSIDERATION. ON THE PROPOSITI ON 'WHEN INCOME ACCRUES' THE APPELLANT HAS CORRECTLY RELIED O N VARIOUS CASE LAWS WHICH ARE IN APPELLANT'S FAVOUR. THUS, IN MY CONSIDERED MSED 8 OPINION, THE RIGHT TO RECOVER ENHANCED FOCA CHARGES FROM PUBLIC DID NOT ACCRUED TO APPELLANT IN THE YEAR UNDER CONSID ERATION AND THEREFORE, APPELLANT CORRECTLY ACCOUNTED FOR FOCA ON THE BASIS OF ACTUAL. WITHOUT PREJUDICE TO THIS ARGUMENT THE AO HI MSELF (IN THE CASE OF M.S.P. GENERATION CO. LTD.) THAT THAT SINCE THE MERC ORDER DTD. 07.09.2006 WAS RECEIVED 01. 26.09.06 I.E IN THE NEXT ASSESSMENT YEAR, THE EFFECT OF MERC ORDER WAS REQUIRED TO BE GIVEN IN SUBSEQUENT ASSESSMENT YEAR. THE SAME PRINCIP LE APPLIES IN CASE OF APPELLANT AND THEREFORE, EFFECT OF MERC OR DER DATED 05.05.06 AND 01.06.2006 WERE CORRECTLY GIVEN BY APPE LLANT IN NEXT ASSESSMENT YEAR. 4.3( E) THE MERC IN THEIR ORDER ALSO DECIDED AND OR DERED THAT THE EXCESS FOCA CHARGES WERE TO BE COLLECTED BY THE APPELLANT FROM PUBLIC IN THE BILLS FOR THE MONTHS OF JUNE, JUL Y AND AUGUST 2006, WHICH WERE FALLING IN THE PY 2006-07 RELEVANT TO NEXT ASSESSMENT YEAR. THUS, WHEN THE APPELLANT WAS DEBARRED FROM COLLECTING THE FOCA BEFORE JUNE, 2006, HOW THE APPELL ANT COULD HAVE OFFERED THE SAME IN THE P.Y ENDED ON 31.03.06. AS PER DIRECTION OF MERC, SUCH FOCA WAS COLLECTED BY APPELLA NT AND CORRECTLY OFFERED AS REVENUE IN THE NEXT ASSESSMENT YE AR. 4.3(F) CONSIDERING THE ENTIRETY OF FACTS AND CIRCUMSTA NCES, THE BINDING NATURE OF MERC ORDER, AND DIRECTIONS OF MERC , PRINCIPLES OF ACCRUALS OF INCOME AND THE FACT THAT THERE WAS NO L OSS OF REVENUE (SINCE OFFERED IN NEXT YEAR), THE ADDITION MA DE BY A.O IS HEREBY DELETED. 9. IN ADDITION TO THE FINDINGS GIVEN BY THE LD. CIT(A ), WE FURTHER DERIVE SUPPORT FROM THE JUDGMENT OF HONBLE DELHI HI GH COURT IN THE CASE OF CIT VS. VISHNU INDUSTRIAL GASES P LTD (ITR NO 229/1988) AND FROM THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. EXCEL INDUSTRIES LTD. AND ORS. (358 ITR 295 ). MSED 9 10. KEEPING IN VIEW THE POSITION OF LAW AND FACTS A ND CIRCUMSTANCES OF THE CASE WE FIND THAT THE ORDER OF LD. CIT(A) ON THIS ISSUE IS IN ACCORDANCE WITH LAW AND FACTS AND NO INTERFERENCE IS C ALLED FOR THEREIN AND THE SAME IS UPHELD AND GROUND NO.2 RAISED BY THE REVENUE IS DISMISSED. 11. GROUND NO.3 DEALS WITH THE ACTION OF LD. CIT(A) IN ALLOWING THE CLAIM OF WRITE-OFF OF CAPITAL ITEMS OF RS.7.41 LAKHS. THE AO HAS DISCUSSED THIS ISSUE AT PARA NO.14 AT PAGE NO.4 OF TH E ASSESSMENT ORDER WHEREAS THE LD. CIT(A) HAS DISCUSSED THIS ISSU E IN PARA NO.14 AT PAGE 29 OF THE APPELLATE ORDER.THE LD. AO DISALLOWED THIS AMOUNT ON THE GROUND THAT THE EXPENDITURE WAS CAPITAL IN NATURE. THE LD. CIT(A) HAS ALLOWED THE SAME, VIDE PARA 14.3 OF THE APPEAL ORDER ON THE GROUND THAT THOUGH THE ITEMS WRITTEN OFF WERE OF CAPI TAL NATURE, BUT BEING LOW COST ITEMS, THE WRITING OFF THE SAME/CHARGI NG OF SAME TO P&L ACCOUNT WAS PERMISSIBLE. IT WAS FURTHER HELD BY THE LD . CIT(A) THAT IN VARIOUS CASES, COURTS/TRIBUNALS HAVE ALLOWED METHOD O F ANNUALLY WRITTEN OFF OF INVENTORY ITEMS OF LOW VALUE @ 5% OR LE SS. ACCORDINGLY THE DISALLOWANCE MADE BY LD. AO ON THIS GROUND IS DEL ETED BY LD. CIT(A). MSED 10 12. BEFORE US THE LD. DR RELIED UPON THE ORDER OF THE AO AND ON THE OTHER HAND THE LD. COUNSEL OF THE ASSESSEE HAS ARGUED THAT THE ITEMS WRITTEN OFF TRULY CONSTITUTED REVENUE ITEMS, WHICH WERE CHARGED TO THE COST OF THE APPELLANTS OPERATIONS. IT WAS FURTHER SUBM ITTED BY LD. COUNSEL THAT THE APPLICANT WITH THE ASSETS OF THOUSANDS OF CRORES, AND IN THE BUSINESS OF POWER DISTRIBUTION WAS BOUND TO CHA RGE LOW COST ITEMS TO ITS COST OF OPERATIONS, PARTICULARLY IF MAN DATED BY THE OVERRIDING ACCOUNTING GUIDELINES. IT WAS ALTERNATIVEL Y PRAYED BY THE LD. COUNSEL THAT IN ANY CASE THE ASSESSEE WAS ELIGIBLE TO THE CLAIM OF DEPRECIATION ON THESE ITEMS. 13. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MAD E BY BOTH THE SIDES. WE FIND THAT THE LD. CIT(A) HAS DELETED THE DIS ALLOWANCE WITH PROPER REASONING AND NO INTERFERENCE IS CALLED FOR IN THE ORDER OF LD. CIT(A). WE DERIVE SUPPORT FROM THE JUDGMENT OF HONBL E SUPREME COURT IN THE CASE OF EXCEL INDUSTRIES LTD. (SUPRA) AND JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. CIT VS. VISHNU INDUSTRIAL GASES P LTD. (SUPRA) . THUS, THE ORDER OF THE LD. CIT(A) ON THIS GROUND IS UPHELD AND GROUND NO.3 OF REVENUES A PPEAL IS DISMISSED. MSED 11 14. GROUND NO.4 DEALS WITH THE GRIEVANCE OF THE REVEN UE REGARDING ACTION OF LD. CIT(A) IN ALLOWING THE CLAIM OF SET OF F OF BROUGHT FORWARD/LOSS/UNABSORBED DEPRECIATION. THE ASSESSING OFFICER HAS DISCUSSED THIS ISSUE AT PARA 15.1 TO 15.3 ON PAGE NO .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/DEPRECIATION DOES NOT BELONG TO THE ASSESSEE COMPANY BUT BELONG TO ERSTWHILE MAHARASHTRA STATE ELECTRICITY BOARD (MSEB) WHICH WAS TRIFURCATED INTO TH REE COMPANIES I.E. FOR GENERATION, TRANSMISSION AND DISTRIBUTION. T HE 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 BASIS OF A CHART SHOW ING THE BROUGHT FORWARD LOSS AND UNABSORBED DEPRECIATION FROM 1990-1 999 ON WARDS BELONGING TO THE AFORESAID MSEB. THE ASSESSEE COMPAN Y MADE THE CLAIM IN TERMS OF SECTION 72(A)(4) OF THE INCOME TAX ACT 1961. IT WAS FURTHER CLAIMED BY THE ASSESSEE THAT BUSINESS LOSS AN D UNABSORBED DEPRECIATION OF MSEB HAS BEEN APPORTIONED TO THE ASS ESSEE COMPANY (1/3 RD SHARE) AND THE SAME WAS SET OFF AGAINST THE TOTAL INC OME OF THE IMPUGNED YEAR AND THE BALANCE AMOUNT WAS CARRIED FO RWARD FOR SET OFF AGAINST INCOME OF SUBSEQUENT YEARS. THE LD. AO DENI ED THE CLAIM FOR MSED 12 SET OFF OF BROUGHT FORWARD BUSINESS LOSS AND UNABSOR BED DEPRECIATION DUE TO THE FOLLOWING REASONS: (I) THE BASIS OF APPORTIONMENT OF THE SAID LOSSES AMO NG THE THREE TRIFURCATED ENTITIES OF MSEB IS NOT EXPLAINED. (II) THE FIGURES OF LOSSES SUBMITTED ARE BASED ON THE RETURNS FILED BY MSEB, BUT THE ASSESSED LOSSES ARE NOT REPORTED BY TH E ASSESSEE COMPANY. (III) THE PETITION CLAIMED TO HAVE BEEN MADE BEFORE THE CBDT 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 DEMERGE R HAS NOT BEEN PROVED BY IT FOR WHICH THE ONUS WAS ON ITSELF. (V) THE ELIGIBILITY OF THE ASSESSEE COMPANY TO CLAIM SET OFF AND CARRY FORWARD OF THE BROUGHT FORWARD LOSSES OF M/ S. MSEB IS NOT ESTABLISHED. (VI) THE INFORMATION RELATING TO THE TRIFURCATION OF C ARRIED FORWARD ASSESSED LOSS WAS ALSO NOT GIVEN. (VII) THE ASSESSMENT ORDER FOR THE AY 2006-07 HAS BE EN PASSED IN THE CASE OF M/ S MSEB. THE TOTAL INCOME IS COMPUTED AT NIL AFTER SET-OFF OF BROUGHT FORWARD LOSSES/UNABSORBED D EPRECIATION TO THE EXTENT OF INCOME AVAILABLE I.E. RS.838,65,23, 129/ -. HOWEVER, NEITHER ANY DETAILS OF BALANCE LOSS ALLOWED TO BE CARRIED FORWARD NOR ANY CHART OF APPORTIONMENT OF THE SAID LOS S TO THE TRIFURCATED ENTITIES ARE MENTIONED THEREIN. 15. THE ISSUE WAS CONTESTED BY THE ASSESSEE COMPANY B EFORE LD. CIT(A) AND LD. CIT(A) ALLOWED THE CLAIM OF THE ASSESS EE BY PASSING 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 AP PELLATE ORDER. THE RELEVANT OPERATIVE PARA OF THE LD. CIT(A) IS REPR ODUCED BELOW FOR READY REFERENCE: MSED 13 15.3(I) TO CONCLUDE, IT IS HELD THAT THE DEMERGER OF MSEB AND TRIFURCATION INTO THREE NEW ENTITLES, INCLUDING THAT OF APPELLANT WAS PROVED BEFORE 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. LOSSES I DEPRECIATION OF MSEB AGAINST ITS INCOME. TH E A.O. IS DIRECTED TO ALLOW APPELLANT'S CLAIM AFTER VERIFYING THE FACTS IN THE CASE OF MSEB. THE YEAR UNDER CONSIDERATION WAS LAST ASSESSMENT YEAR OF MSEB AND THE FIRST YEAR OF THE APPELLANT COMPA NY. IN CASE OF MSEB, THE FIGURES OF UNABSORBED LOSSES / DEP RECIATION OF VARIOUS YEARS WILL GO ON CHANGING ON RECEIPT OF ORDE RS OF APPELLATE AUTHORITIES, WHICH WILL HAVE BEARINGS ON TH E LAST ASSESSMENT ORDER OF THE MSEB AND CONSEQUENTLY ON THE FIRST ASSESSMENT YEAR UNDER CONSIDERATION OF THE APPELLANT. THE A.A IS DIRECTED TO ASCERTAIN THE FACT OF UNABSORBED LOSSES I D EPRECATION IN CASE OF MSEB FROM TIME TO TIME AND ALLOW THE BENEFI T OF CARRY FORWARD OF THE SAME IN THE. HANDS OF APPELLANT FOR TH E YEAR UNDER CONSIDERATION. SUBJECT TO THIS OBSERVATION, THIS GROUN D OF APPEAL IS ALLOWED. 16. BEFORE US, BOTH THE PARTIES ARGUED THIS ISSUE VE HEMENTLY. LD. DR RELIED UPON THE ASSESSMENT ORDER AND SUBMITTED THAT THE CLAIM HAS BEEN RIGHTLY REJECTED BY THE AO. ON THE OTHER HAND LD. COUNSEL OF THE ASSESSEE HAS SUBMITTED THAT LD. CIT(A) HAS RIGHTLY AL LOWED THE CLAIM AFTER CONSIDERING ALL THE FACTS AND CIRCUMSTANCES AND CORRECT POSITION OF LAW AND FURTHER SUBMITTED THAT IN ANY CASE VIDE SUB SEQUENT YEARS THE AO HAS HIMSELF ALLOWED THE SET OFF OF BROUGHT FORW ARD BUSINESS LOSS/UNABSORBED 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 OF THE COMPILATION MSED 14 II. ORDER DATED 10 MARCH 2010 PASSED U/S.154 OF THE INCOME 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 INCOME TAX, ACT 1961 FOR THE ASSESSMENT YEAR 2007-08 REFER PAGE NO.11 OF THE COMPILATION IV. ORDER DATED 02 MAY 2011 PASSED U/S.154 OF THE IN COME-TAX ACT 1961 FOR THE ASSESSMENT YEAR 2007-08 REFER PAG E NO.13 OF THE COMPILATION. 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 ALLOWED THIS CLAIM TO THE ASSESSEE IN SUBSEQUENT YEA RS. THE LD. CIT(A) HAS PASSED 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 SUBJECT TO VERIFICATION BY THE AO TO ASCERTAIN THE CORRECT FACT BE FORE ALLOWING THIS CLAIM. UNDER THESE CIRCUMSTANCES WE DO NOT FIND IF ANY PREJUDICE WOULD BE CAUSED TO THE REVENUE. IN VIEW OF THE ABOVE GROUN D NO.4 OF THE REVENUE BEING DEVOID OF MERITS IS HEREBY DISMISSED. 18. NOW, WE TAKE UP THE APPEAL FILED BY THE ASSESSEE IN ITA NO.720/M/2010 FOLLOWING GROUNDS HAVE RAISED BY THE A SSESSEE COMPANY ALONG WITH THE APPEAL MEMO. GROUND NO. 1 MSED 15 1. THE LEARNED CIT (APPEALS) ERRED IN CONFIRMING TH E FOLLOWING ADDITIONS MADE TO THE TOTAL INCOME OF THE APPELLANT BY T HE ASSESSING OFFICER, SINCE THEY ARE CONTRARY TO THE FACTS OF THE CASE AND ARE NOT AS PER THE APPLICABLE PROVISIONS OF THE I NCOME TAX ACT, 1961. RS. (IN LACS) * EXCESS PROVISION FOR INTEREST/FINANCE CHARGES 52.79 * EXCESS PROVISION FOR PURCHASE OF POWER. 32072.00 * INTEREST RELATED TO ACQUISITION OF FIXED ASSETS NOT CAPITALISED. 39.23 * RECOVERY FROM TEMPORARY SERVICE CONNECTIONS 768.00 GROUND NO.2 THE LEARNED CIT (APPEALS) ERRED IN HOLDING THAT THE ELECTRICITY DUTY COLLECTED ,AND PAID/ADJUSTED BY THE APPELLANT, AM OUNTING TO RS.23291.59 LACS IS COVERED/GOVERNED BY THE PROVISIO NS OF SECTION 43B OF THE INCOME TAX ACT, 1961, AND REJECTING THE APPELLANT'S CONTENTION THAT ELECTRICITY DUTY IS NOT COVER ED BY THE PROVISIONS OF SECTION 43B OF THE ACT, WHICH IS CONTRA RY THE FACTS OF THE CASE AND IS NOT AS PER THE APPLICABLE PROVISIONS OF THE ACT. GROUND NO.3 3. WITHOUT PREJUDICE TO GROUND NO. 2 ABOVE, THE LEARN ED AO ERRED IN ISSUANCE OF NOTICE U/S. 271(1)(C) OF THE ACT AND THE SAME BE CANCELLED, SINCE IT IS CONTRARY TO THE FACTS OF THE CASE AND IS NOT AS PER THE APPLICABLE PROVISIONS OF THE ACT. 19. IN GROUND NO.1(A), THE ASSESSEE HAS CHALLENGED THE ACTION OF LD. CIT(A) IN CONFIRMING THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF EXCESS PROVISION FOR INTEREST/ FINANCE CHARGES AMOUN TING TO RS.52.79 LAKHS. THIS ISSUE HAS BEEN DISCUSSED BY THE AO ON P ARAGRAPH NO.8 AT PAGE NO.3 OF THE ASSESSMENT ORDER WHEREAS THE LD. CI T(A) HAS DISCUSSED THIS ISSUE IN PARA 7.1 TO 7.3 ON PAGE NO.17 OF THE APPELLATE ORDER. THE LD. AO HAS MADE DISALLOWANCE ON THE GROU ND THAT IN SOME MSED 16 CASES ASSESSEE MADE PROVISION OF EXCESS INTEREST AN D ON SOME OTHER CASES THE ASSESSEE HAD MADE SHORT PROVISION AND ACCO RDING TO THE AO NET EXCESS AMOUNT PROVIDED BY THE ASSESSEE COMPANY IN ITS BOOKS OF ACCOUNT ON ACCOUNT OF INTEREST AND OTHER FINANCE CHARGES IS AMOUNTING TO RS.52.79 LAKHS. BEFORE THE LD. CIT(A) THE ASSESSEE MADE DETAILED SUBMISSIONS AND IN BRIEF THE ASSESSEE SUBMITTED THAT TH E ASSESSEE DEALT WITH VOLUMINOUS TRANSACTIONS AND THERE WAS A TOTA L ANNUAL EXPENDITURE OF RS.339.11 CRORES AND UNDER SUCH VOLUM INOUS TRANSACTIONS POSSIBILITY OF THE ERROR COULD NOT BE RULE D OUT AND ERROR WAS MINISCULE AND WAS INHERENT OF THE APPELLANTS ACC OUNTING YEAR AFTER YEAR. IT WAS FURTHER SUBMITTED BY THE ASSESSEE COMPA NY THAT IN THE NEXT YEAR, NECESSARY RECTIFICATION ENTRIES HAD ALREA DY BEEN PASSED BY THE REDUCING THE EXPENDITURE TO THE EXTENT OF EXCESS PRO VISION MADE DURING THE YEAR UNDER CONSIDERATION. BUT THE LD. CIT (A) WAS NOT SATISFIED AND CONVINCED WITH THE ARGUMENTS OF THE ASS ESSEE COMPANY AND THEREFORE, THE DISALLOWANCE WAS CONFIRMED BY THE LD. CIT(A). THE RELEVANT OPERATIVE PARA OF THE ORDER OF LD. CIT(A) IS REPRODUCED BELOW: I HAVE CONSIDERED THE FACTS OF THE CASE. IN PRINCIPL E THE ASSESSEE HAD ALSO ACCEPTED THE EXCESS PROVISION OF INTEREST/FINANCE CHARGE AT RS.52.79 LAKHS. THOUGH, T HE APPELLANT HAD TRIED TO JUSTIFY ITS ACTION OF MAKING EXCESS PROVI SION BUT THE FACT IS THAT AS PER MERCANTILE SYSTEM OF ACCOUNTING, TH E INCOME AND EXPENDITURE ARE REQUIRED TO BE ACCOUNTED FOR IN THE YEAR TO WHICH THEY RELATED. THE DISALLOWANCE MADE BY AO IS TH EREFORE, MSED 17 CONFIRMED. HOWEVER, THE APPELLANT HAS STATED THAT THIS EXCESS PROVISION WAS RECTIFIED IN ACCOUNTS OF NEXT YEAR. THE AO IS DIRECTED TO ALLOW RELIEF ON THIS ACCOUNT IN THE NEXT AS SESSMENT YEAR AFTER VERIFICATION OF APPELLANTS CLAIM. 20. BEFORE US THE LD. COUNSEL OF THE ASSESSEE HAS AS SAILED THE ORDER OF LOWER AUTHORITIES AND SUBMITTED AS UNDER: THE SAID ADDITIONS WERE MADE ON THE BASIS OF THE CAG COMMENT ON THE ACCOUNTS OF THE APPELLANT. IN THE MATTER OF FINALIZATION OF ACCOUNTS, PROVISIO NS WERE BASED ON REASONABLE ESTIMATES, MADE ON THE BASIS OF DATA AV AILABLE ON RECORD, THE OPERATIONS OF THE APPELLANT ARE SPREAD F UR AND WIDE AND INTO INTERIOR RURAL AREAS, WHICH RESULTED IN UNAVO IDABLE GAPS IN COMMUNICATION AND ERRORS IN TRANSMISSION; IT IS NOT DISPUTED THAT THE PROVISION WAS MADE ON TH E BASIS OF THE DATA AVAILABLE. IT WOULD BE IMPOSSIBLE TO MAKE ESTIMATES WHICH ERE EXACT IN THE CIRCUMSTANCES. EXCESS PROVISIONS MADE IN THE ASSESSMENT YEAR 2006 -07 WAS RECTIFIED IN THE SUBSEQUENT YEAR I.E., ASSESSMENT YEA R 2007-08 THE CIT(A) UPHELD THE ADDITION IN THE A.Y. 2006-07, HOWEVER, DIRECTED THE AO TO GRANT SUBSEQUENT RELIEF IN THE A.Y. 2007-08 AFTER VERIFICATION OF THE CLAIM. 21. WE HAVE HEARD BOTH THE PARTIES AND CONSIDERED THE MATERIAL BEFORE US. IT IS SETTLED LAW THAT EXPENDITURE CAN BE ALLOWED AGAINST THE BUSINESS INCOME ONLY IF THE EXPENSE HAS BEEN INCURRE D FOR THE PURPOSE OF THE BUSINESS AND HAS BEEN INCURRED DURING THE YE AR UNDER CONSIDERATION AND THAT THE EXPENDITURE SHOULD NOT B E A CAPITAL NATURE. ALL THESE THREE CONDITIONS ARE CUMULATIVE. IT IS AN ADM ITTED POSITION BY THE ASSESSEE ALSO THAT THE EXPENDITURE UNDER CONSIDER ATION DID NOT PERTAIN TO THE YEAR UNDER CONSIDERATION AND THE SAME W AS RECORDED IN THE BOOKS OF ACCOUNT, AS A RESULT OF AN ERROR. THEREF ORE, IN VIEW OF MSED 18 THESE FACTS WE FIND THAT THE AO HAS RIGHTLY DISALLOWED T HE CLAIM AND THE LD. CIT(A) HAS RIGHTLY UPHELD THE ACTION OF AO IN THIS REGARD. IT IS FURTHER SEEN BY US THAT THAT LD. CIT(A) WAS FAIR ENOU GH IN ISSUING REQUISITE DIRECTION TO THE AO TO ALLOW THE RELIEF ON T HIS ACTION IN THE NEXT ASSESSMENT YEAR AFTER VERIFICATION OF THE CLAIM MADE BY THE ASSESSEE. UNDER THESE CIRCUMSTANCES WE DO NOT FIND A NYTHING WRONG IN THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND THE SAM E IS UPHELD AND THIS GROUND OF THE ASSESSEE IS DISMISSED. 22. IN GROUND NO.1(B), THE ASSESSEE HAS CHALLENGED THE ACTION OF LD. CIT(A) IN CONFIRMING THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF EXCESS PROVISION FOR PURCHASE OF POWER AMOUNTING TO RS.320.72 CRORES. THE AO HAS DISCUSSED THIS ISSUE IN PARA 7 OF PAGE 3 OF THE ASSESSMENT ORDER WEREAS THE LD. CIT(A) HAS DISCUSSED THIS ISSUE ON PARA NO.8 ON PAGES 18 TO 21 OF THE APPELLATE ORDER. THE AO HAS MAD E THE DISALLOWANCE ON THE GROUND THAT THE ASSESSEE COMPANY HAS MADE PROVISION FOR PURCHASE OF COST OF POWER. THE ASSESS EE CONTESTED THE MATTER BEFORE THE LD. CIT(A) AND THE LD. CIT(A) ALS O DID NOT PROVIDE ANY RELIEF TO THE ASSESSEE. THE ASSESSEE HAS FILED AN APPEAL BEFORE THE TRIBUNAL ON THIS ISSUE ALSO. DURING THE COURSE OF HEA RING FOLLOWING SUBMISSIONS WERE MADE BY THE LD. COUNSEL OF THE ASSES SEE. THE CIT(A) HAS DIRECTED THE AO TO GRANT RELIEF IN THE SUBSEQUENT IN THE ASSESSMENT YEAR 2007-08 SINCE THE MSED 19 APPELLANT HAD OFFERED THE SAME AS INCOME IN THE A.Y . 2007- 08. THE CIT(A) STATES THAT HE HAD DISALLOWED THE CLAIM FOR REDUCTION OF INCOME IN THE HANDS OF THE RECIPIENT MAHARASHTRA STATE POWER GENERATION CO. LTD. UPTO THE END OF THE RELEVANT ACCOUNTING YEAR THERE W AS NO MERC ORDER AND THE PROVISION WAS MADE BASED ON A MUTUALLY AGREE BASIS. 23. IN ADDITION TO THE ABOVE, LEARNED COUNSEL ALSO A RGUED THAT THE SUBMISSIONS MADE IN RESPECT TO GROUND 1A ABOVE SHOULD ALSO BE TREATED TO HAVE BEEN HERE FOR GROUND NO.1B ALSO. ON T HE OTHER HAND, LD. DR SUPPORTED THE ORDER OF AO AND LD. CIT(A) SUBMI TTED THAT THE ASSESSEE SHOULD NOT BE GIVEN THE BENEFIT OF WRONG C LAIM AND REQUESTED FOR UPHOLDING THE ORDER OF LD. CIT(A) ON THIS ISSUE . WE HAVE HEARD BOTH SIDES ON THIS ISSUE AND WE FIND TH AT THE LD. CIT(A) WAS FAIR ENOUGH TO GIVE REQUISITE DIRECTION TO THE AO TO ALLOW THE RELIEF TO THE ASSESSEE COMPANY IN A.Y. 2007-08 AFTER DUE VER IFICATION. IN OUR VIEW THE ASSESSE SHOULD NOT BE AGRIEVED WHEN APPROPR IATE DIRECTION HAS ALREADY BEEN ISSUED TO ALLOW THE CLAIM IN THE CO RRECT MANNER AND IN THE CORRECT YEAR. WE FIND THE GROUND OF THE ASSES SE IS TO BE DEVOID OF MERITS AND THE SAME IS DISMISSED UPHOLDING THE OR DER OF THE LD. CIT(A) ON THIS ISSUE. MSED 20 24. IN GROUND NO.1C THE ASSESSEE IS AGGRIEVED WITH TH E ACTION OF LD. CIT(A) IN UPHOLDING THE ACTION OF AO IN MAKING DISAL LOWANCE OF RS.39.23 LAKHS ON ACCOUNT OF CAPITALIZATION OF INTER EST. THE AO HAS DISCUSSED THIS ISSUE IN PARA 9 ON PAGE 3 OF THE ASSE SSMENT ORDER WHEREAS LD. CIT(A) HAS DISCUSSED THIS ISSUE IN PARA 9 ON PAGE 3 OF THE ASSESSMENT ORDER WHEREAS LD. CIT(A) HAS DISCUSSED T HIS ISSUE IN PARA 9 ON PAGE NO.21 TO 22 OF THE APPELLATE ORDER. THE LD. CIT(A) HAS ALSO NOT ACCEPTED THE CLAIM OF THE ASSESSEE MAINLY ON THE GR OUND THAT THE IMPUGNED EXPENDITURE WAS A CAPITAL NATURE AND THEREFOR E, IT WAS NOT ALLOWABLE AS AN EXPENDITURE IN THE YEAR UNDER CONSI DERATION. THE LD. COUNSEL HAS MADE FOLLOWING SUBMISSION BEFORE US. THE SAID ADDITIONS WERE MADE ON THE BASIS OF THE CA G COMMENT ON THE ACCOUNTS OF THE APPELLANT. THE AO HAS SELECTIVELY RELIED ON CAG COMMENTS AND M ADE ADDITIONS TO TAXABLE WHILE IGNORING OVERSTATEMENT OF I NCOME AS PER THE SAME REPORT. RECTIFICATION ENTRIES PASSED IN THE SUBSEQUENT YEAR VIZ. ASSESSMENT YEAR 2007-08 25. BEFORE US, BOTH THE PARTIES HAVE ARGUED THE MATTER IN DETAIL AND LD. DR HAS SUPPORTED THE ORDERS OF AUTHORITIES BELOW AND REQUESTED FOR CONFIRMATION OF THE SAME. WHEREAS LD. COUNSEL OF THE A SSESSEE REQUESTED FOR ALLOWING THE CLAIM. IT IS FURTHER BROUG HT TO OUR NOTICE THAT NECESSARY RECTIFICATION ENTRIES HAVE BEEN CARRIED OUT IN THE BOOKS OF ACCOUNT OF THE ASSESSEE IN THE NEXT YEAR. WE FIND T HAT THE CLAIM OF THE ASSESSEE WAS NOT IN ACCORDANCE WITH LAW. LD. COUN SEL HAS NOT BEEN MSED 21 ABLE TO SHOW ANYTHING TO CONVINCE THAT IMPUGNED INTERES T EXPENSE CAN BE ALLOWED AS REVENUE EXPENDITURE DURING THE YEAR U NDER CONSIDERATION. IN THESE CIRCUMSTANCES, WE FIND THAT TH IS CLAIM CANNOT BE ALLOWED TO THE ASSESSEE AND THEREFORE, THE ORDER OF THE LD. CIT(A) IS UPHELD AND THE GROUND NO.1C RAISED BY THE ASSESSEE IS DISMISSED. 26. IN GROUND NO.1D IN THIS GROUND THE ASSESSEE HAD CHALLENGED THE ACTION OF LD. CIT(A) IN CONFIRMING THE ADDITION MAD E BY LD. AO ON ACCOUNT OF RECOVERY FROM TEMPORARY SERVICE COMMUNICA TION AMOUNTING TO RS.7.68 CRORES. LD. AO HAS DISCUSSED THIS ISSUE O N PARA NO.11 ON PAGE 3 WHEREAS THE LD. CIT(A) HAS DISCUSSED THIS IS SUE IN PARA NO.11.3 ON PAGE NO.25 OF THE APPELLATE ORDER. THE LD. AO HA S OBSERVED IN THE ASSESSMENT ORDER THAT THE RECOVERY IS MADE AMOUNTING TO RS.7.68 CRORES FROM TEMPORARY SERVICE COMMUNICATION WERE TRAN SFERRED TO LIABILITY ACCOUNT BY THE ASSESSEE COMPANY. THE LD. A O FURTHER OBSERVED THAT STATUTORY AUDITOR HAVE ALSO POINTED OUT THAT THIS AMOUNT SHOULD HAVE BEEN ADDED TO THE MISCELLANEOUS INCOME IN THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE BUT THE ASSESSEE DID NOT INCLUDE THE SAID AMOUNT IN ITS INCOME. ACCORDINGLY, LD. AO MADE THE AD DITION FOR THE SAME IN THE ASSESSMENT ORDER. BEFORE THE LD. CIT(A) THE ARGUMENTS OF THE ASSESSEE IN NUTSHELL WAS THAT DUE TO VOLUMINOUS TRAN SACTIONS AND TEMPORARY DEMERGER PROCESS, THE ASSESSEE COULD NOT FO CUS ON ITS MSED 22 ACCOUNTING METICULOUSLY AND THEREFORE, IT COULD NOT BE TRANSFERRED TO THE INCOME DURING THE YEAR UNDER CONSIDERATION BUT IN THE SUBSEQUENT YEARS RECTIFICATION ENTRIES HAVE BEEN PASSED BUT LD. CIT(A) DID NOT AGREE WITH THE SUBMISSION OF THE ASSESSEE AND IT WAS H ELD BY HIM THAT THE IMPUGNED AMOUNTS OF RECOVERIES MADE FROM THE TEMPOR ARY SERVICE COMMUNICATIONS WAS NEITHER A CAPITAL RECEIPT NOR A L IABILITY BUT WAS IN FACT INCOME OF THE APPELLANT AND THEREFORE, THE ASSESSE E COMPANY SHOULD HAVE SHOWN THE SAME IN THE INCOME ACCOUNT. BE FORE US LD. COUNSEL HAS MADE HIS ARGUMENTS IN DETAIL AND THE ARG UMENTS MADE IN THE WRITE UP SUBMITTED BY LD. COUNSEL ARE REPRODUCED HEREUNDER FOR THE SAKE OF READY REFERENCE: IN LIGHT OF THE UNCERTAINTY AND LACK OF CLARITY PERSISTI NG AT THAT POINT IN TIME DUE TO THE THEN RECENT RESTRUCTURING OF THE ERSTWHILE MSEB WHICH ALSO HAPPENED IN THE SAME YEAR, THE PAYME NTS THOUGH MADE BY THE APPELLANT, WERE ACCOUNTED FOR AS HAVING BEING MADE BY MSEBHCL FOR THE VARIOUS CIRCLE OFFICE S OF THE APPELLANT COMPANY. THIS ENTRY WAS WRONG BECAUSE THOUGH THE RELEVANT E XPENSE / CAPITAL ASSET WAS DEBITED / CREATED IN THE BOOKS OF AC COUNTS OF THE APPELLANT COMPANY, CORRESPONDING CREDIT WAS GIV EN TO THE MSEBHCL AND NOT TO THE BANK. ACCOUNT THROUGH WHICH THE PAYMENT WAS MADE SINCE IT WAS NOT CLEAR AT THE RELEVANT POINT OF TIME AS TO WHICH ENTITY THE BANK ACCOUNT PERTAINED T O AND SINCE THE POSITION WAS NOT CLEAR THE ACCOUNT OF MSEBHCL WA S CREDITED. THIS ERROR WAS REALIZED DURING THE FINALIZATION OF ACCOUNTS WHEN THE PICTURE VIS--VIS THE DEMERGER OF THE VARIOUS UND ERTAKINGS OF THE MSEB ALSO BECAME CLEAR AND ACCORDINGLY AN ENTRY WAS PASSED ON 31 MARCH 2006 RECTIFYING THE AFORESAID ERROR ALON G WITH THE OTHER SIMILAR ERRORS - FILED AS AN ADDITIONAL EVIDE NCE ON 29 JUNE 2015. MSED 23 THIS FACT WAS ADEQUATELY COMMUNICATED TO THE CAG BY THE APPELLANT VIDE ITS LETTER DATED 17 FEBRUARY 2007 (BEA RING REFERENCE NO.AD/WML2006-07/325 W.M. SECTION) TITLED ' REPLY TO AUDIT ENQUIRY NO.3.' FILED AS AN ADDITIONAL EVIDENCE ON 29 JUNE 2015 .J 27. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER OF THE AUTHORITIES BELOW AND SUBMITTED THAT THERE WAS SUPPRESSION OF THE INCOME ON THE PART OF THE ASSESSEE COMPANY AND LD. CIT(A) HAS RIG HTLY CONFIRMED THE ADDITION AND THEREFORE, THE ORDER OF LD. CIT(A) SHO ULD BE CONFIRMED. WE HAVE GONE THROUGH THE ARGUMENTS OF BOTH THE SIDES TH IS FACT HAS NOT BEEN REBUTTED BY LD. COUNSEL THEN BEFORE US THAT TH E IMPUGNED AMOUNT IS INCOME OF THE ASSESSEE. THE ASSESSEE IS OBL IGED UNDER THE LAW TO INCLUDE IT IN ITS INCOME. SINCE THE ASSESSEE HA D NOT DONE SO, THE AO HAD RIGHTLY BROUGHT THIS AMOUNT TO TAX AS PART OF INC OME OF THE YEAR UNDER CONSIDERATION AND LD. CIT(A) HAS RIGHTLY CONFIRMED THE ORDER OF AO ON THIS ASPECT. LD. COUNSEL COULD NOT ASS AIL THE FINDINGS OF THE LD. CIT(A) AND WE DO NOT FIND ANY ERROR IN THE ORD ER OF LD. CIT(A) AND THE SAME IS UPHELD AND GROUND NO.1D OF THE ASSESS EE IS DISMISSED. 28. GROUND NO.2, THIS GROUND DEALS WITH THE ACTION O F LD. CIT(A) IN HOLDING THAT ELECTRICITY DUTY COLLECTED AND PAID/ADJUSTED BY THE ASSESSEE COMPANY AMOUNTING TO RS.23291.59 LAKHS IS CO VERED UNDER THE PROVISIONS OF SECTION 43B OF THE INCOME TAX ACT 1 961. THE LD. AO MSED 24 HAS DISCUSSED THIS ISSUE AT PARA NO.12.1 TO 12.2 ON P AGES 3 TO 4 OF THE ASSESSMENT ORDER WHEREAS THE LD. CIT(A) HAS DISCUSSE D THIS ISSUE IN PARA NO.12 TO 12.3 ON PAGE NO.25 TO 27 OF THE ORDER. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE COMPANY HAD SHOWN LIABILITY TO THE TUNE OF AFORESAID AMOUNT ACCORDINGLY, HE WAS OF THE OPINION THAT THE SAID AMOU NT OF DUTY WAS COLLECTED BUT WAS NOT PAID TO THE GOVERNMENT AND CONSE QUENTLY THE PROVISIONS OF SECTION 43B WERE ATTRACTED AND THE IMPUGNE D AMOUNT WAS DISALLOWABLE AND ACCORDINGLY, THE AO MADE AN ADD ITION OF THIS AMOUNT TO THE INCOME OF THE ASSESSEE. THE ASSESSEE CA RRIED THE MATTER BEFORE THE LD. CIT(A) AND SUBMITTED BEFORE LD. CIT(A) THAT THE ASSESSEE COLLECTED ELECTRICITY DUTY FROM THE CONSUMERS ON BEHALF OF THE GOVERNMENT OF MAHARASHTRA AND WAS REQUIRED TO PAY THE SAME TO THE GOVERNMENT. IT WAS FURTHER SUBMITTED THAT SINCE THE GOM ITSELF WAS REQUIRED TO MAKE PAYMENT TO THE APPELLANT UNDER A VA RIETY OF ACCOUNTS, OR TO CERTAIN POOR OR BACKWARD REGION/SECTI ON OF SOCIETY, AT NIL OR SUBSIDIZED CHARGES, TO BE RECOVERED FROM THE G OVERNMENT, THE GOM SETTLES ITS INTER SE ACCOUNTS WITH THE APPELLANT ON ACCOUNT OF ELECTRICITY DUTY BY SETTING OFF/ADJUSTING THE AMOUNT RE CEIVABLE AGAINST THE AMOUNT PAYABLE. THE INTER SE PAYMENTS WERE THUS EF FECTED THROUGH SET OFF OF MUTUALLY RECEIVABLE/PAYABLE BALANC ES, FOR WHICH NOTIFICATIONS WERE ISSUED BY THE GOM FROM TIME TO TIME. THE PROCESS OF MSED 25 ISSUE OF SUCH NOTIFICATION WAS COMPLEX AND TIME CONS UMING, SINCE IT INVOLVED A VARIETY OF PROCEDURE WITH VARIOUS AUTHORI TIES. DURING THE APPELLATE PROCEEDINGS THE APPELLANT FURNISHED A COP Y OF NOTIDICATION DT.31.03.2008 ISSUED BY THE GOM IN SUPPORT OF ITS CON TENTION. 29. IT IS FURTHER SUBMITTED BEFORE THE LD. CIT(A) THAT THE ASSESSEE DID NOT ACCOUNT FOR THIS AMOUNT THROUGH ITS PROFIT AND LOSS ACCOUNT AND ONLY THE NET AMOUNT WAS DULY EFFECTED IN THE BALANCE SHEET AND THUS ELECTRICITY DUTY WAS NOT EXPENDITURE OF THE ASSESSEE AND THEREFORE, IT WAS OUTSIDE THE PREVIEW OF SECTION 43B OF THE INCOME TAX ACT. IT WAS FURTHER ARGUED THAT THE RATION OF CHOURANGHEE SALES B UREAU COULD NOT BE APPLIED IN THE CASE OF APPELLANT SINCE THAT CASE WAS PERTAINING TO SALES TAX COLLECTED, WHEREAS THE APPELLANTS CASE WAS IN RESPECT OF COLLECTION OF ELECTRICITY DUTY IN THE LIGHT OF SECTION 4 OF BOMBAY ELECTRICITY ACT 1958. 30. IT WAS FURTHER ARGUED BY THE ASSESSEE BEFORE THE LD . CIT(A) WITHOUT PREJUDICE THAT IN CASE IF THE PROVISIONS OF SEC TION 43B ARE HELD TO BE APPLICABLE TO THE ELECTRICITY DUTY, THEN IN THE AL TERNATIVE APPROPRIATE DIRECTION MUST BE GIVEN TO THE AO TO ALLOW AS DEDUCTION THE ELECTRICITY DUTY PAID UPTO THE DATE OF FILING OF TH E RETURN. FOR THE PURPOSE OF PAYMENT OF ELECTRICITY DUTY THE APPELLANT ARGUED THAT SINCE THE DUTY PAYABLE TO GOM ARE SETTLED BY ADJUSTMENT OF THE A MOUNT RECEIVABLE BY IT TOWARDS THE SALE OF POWER, THE ADJUS TMENT OF SUCH MSED 26 AMOUNT BETWEEN THE APPELLANT AND GOVT. BE CONSIDERED AS PAYMENT OF ELECTRICITY DUTY IN THIS REGARD. 31. THE LD. CIT(A) CONSIDERED THE ARGUMENTS OF THE AS SESSEE BUT DID NOT ACCEPT ITS CLAIM BUT WITH A PARTIAL RELIEF BY GIVI NG A DIRECTION THAT PAYMENT BY WAY OF ADJUSTMENT MADE AND ACTUAL PAYMEN T BOTH TILL DATE OF FILING OF RETURN SHOULD BE ALLOWED. THE OPERATIVE PARA OF LD. CIT(A)S ORDER IS REPRODUCED AS UNDER : I HAVE CONSIDERED THE FACTS OF THE CASE. THE APPELLA NT COMPANY CAME INTO EXISTENCE AS A RESULT OF TRIFURCATION OF MS EB. EARLIER MSEB WAS PAYING ELECTRICITY DUTY TO GOVT. AND THE ISSUE OF DISALLOWACE U/S.43B OF UNPAID ELECTRICITY DUTY WAS ALS O THERE. IN THE APPELLANT PROCEEDINGS OF MSEB, IT WAS HELD THAT THE PROVISION OS SECTION 43B WERE APPLICABLE IN RESPECT OF UNPAID ELECTRICITY DUTY. AS A RESULT, THE PROVISIONS OF SECTION 43B ARE ALSO APPLICABLE IN CASE OF APPELLANT BEING SUCCESSOR COM PANY OF MSEB. THEREFORE, IT IS HELD THAT PROVISION OF SECTION 43B AR E APPLICABLE IN RESPECT OF APPELLANTS UNPAID ELECTRIFY DUTY. HOWEVE R, THE AO IS DIRECTED THAT THE UNPAID ELECTRICITY DUTY SETTLED BY WA Y OF ADJUSTMENT WITH GOVT. OF MAHARASHTRA SHOULD BE TREATE D AS PAYMENT OF ELECTRICITY DUTY. 32. BEFORE US, LD. COUNSEL OF THE ASSESSEE ARGUED T HE MATTER AT LENGTH AND SUBMITTED THAT THE PROVISIONS OF SECTION 4 3B ARE NOT APPLICABLE IN THIS CASE AND RELIANCE WAS PLACED BY H IM ON THE FOLLOWING JUDGMENTS: (I)CESC LDT. VS. CIT IN ITA NO.82/110/83/84 OF 2004 /2005 (II) KERALA STATE ELECTRICITY BOARD VS. DCIT REPORT ED IN (2010) 329 ITR 91 (III) A.W. FIGGIS & CO. LTD. VS. CIT REPORTED IN (2 003) 256 ITR 268 (IV) CIT VS OVIRA LOGISTICS PVT. LTD. REPORTED IN ( 2015) 58 TAXMANN.COM 206 33. IT WAS FURTHER SUBMITTED BY LD. COUNSEL THAT THE C REDIT FOR THE SIMILAR AMOUNT WAS GRANTED BY THE AO IN THE ASSESSMENT ORDER PASSED MSED 27 FOR A.Y. 2007-08 COPY OF THE ASSESSMENT ORDER IS PLA CED IN PAPER BOOK AT PAGE NO.161 TO 175 ON OUR ATTENTION HAS BEEN DRAWN O N PAGE NO.174. ON THE OTHER HAND, LD. DR RELIED UPON THE ORD ERS OF AUTHORITIES BELOW AND REQUESTED FOR CONFIRMING THE ORD ER OF LD. CIT(A). 33A. WE HAVE GONE THROUGH THE ARGUMENTS MADE BY BOTH TH E SIDES AS WELL AS THE MATERIAL PLACED BEFORE US.WE HAVE ALSO C ONSIDERED THE CASE LAWS RELIED UPON BY THE LD. COUNSEL ON THIS ISSUE, CO PIES OF WHICH HAVE ALSO BEEN PLACED BEFORE US. IT IS SEEN THAT IN THE CASE OF KERALA STATE ELECTRICITY BOARD(SU.), IT WAS HELD BY THE HONBLE HIGH COURT THAT IN THESE CIRCUMSTANCES THE PROVISIONS OF S.43B WOULD NOT BE APPLICABLE. WE ALSO PLACED RELIANCE ON THE JUDGMENT OF HONBLE BOMBAY HI GH COURT IN THE CASE OF CIT VS. OVIRA LOGISTICS PVT. LTD. (SU.), WHEREIN THEIR LORDSHIPS HAVE HELD THAT IN THE CASE OF SERVICE TAX PAYMENT BY THA T ASSESSEE WHERE IT WAS FOUND THAT BEFORE END OF THE YEAR,AMOUNT ON WHICH SERVICE TAX WAS PAYABLE HAVE NOT BEEN RECEIVED FROM THE PARTIES TO WHOM SERVICES WERE RENDERED, THE CLAIM OF SERVICE TA X PAID COULD NOT BE DISALLOWED. IT WAS HELD THAT S.43B DOES NOT CONTEMPL ATE LIABILITY TO PAY THE SERVICE TAX BEFORE ACTUAL RECEIPT OF FUNDS I N THE ACCOUNT OF THE ASSESSEE AND IT WAS FURTHER HELD THAT THE LIABILITY TO PAY SERVICE INTO THE TREASURY WILL ARISE ONLY UPON THE ASSESSEE RECEIV ING FUNDS AND NOT OTHERWISE,AND IT WAS ACCORDINGLY HELD THAT LIABILITY T O PAY THE SERVICE TAX IN RESPECT OF CONSIDERATION PAYABLE WILL ARISE O NLY UPON RECEIPT OF SUCH CONSIDERATION, AND NOT OTHERWISE. IN THE CASE BEF ORE US, THE ADMITTED POSITION IS THAT BECAUSE OF SOME SETTLEMENTS PEN DING BETWEEN THE ASSESSEE COMPANY AND THE GOVERNMENT OF MAHARASHTRA,PAYMENTS COULD NOT BE MADE DURING THE F INANCIAL YEAR.IT IS FURTHER SEEN THAT THE ADMITTED FACTS ARE THAT THE ASSES SEE HAS NOT ROUTED THIS AMOUNT THROUGH THE P&L ACCOUNT.WE RELY WI TH THE JUDGMENT OF HONBLE CALCUTTA HIGH COURT IN THE CASE O F CESC LTD.(SU.) MSED 28 AND HONBLE KERALA HIGH COURT IN THE CASE OF KERAL A STATE ELECTRICITY BOARD (SUPRA) TO HOLD THAT THE ELECTRICITY DUTY IS NOT B EING A SUM PAYABLE BY THE ASSESSEE AS A PRIMARY LIABILITY BY WA Y OF TAX, DUTY CESS OR FEE, SECTION 43B IS NOT ATTRACTED TO THE ASSESSEE IN R ESPECT OF ELECTRICITY DUTY COLLECTED BY IT FOR BEING PASSED ON THE STATE GOVT. TWO RELEVANT PARAS FROM THE RECENT ORDER OF THE HONBLE C ALCUTTA HIGH COURT IN THE CASE OF CESC LTD. (SUPRA), VIDE ITS ORD ER DATED 14.05.2015 ARE REPRODUCED HEREUNDER: 19. THUS, IN OUR VIEW, THE ELECTRICITY DUTY, NOT BEI NG A SUM PAYABLE BY THE ASSESSEE AS A PRIMARY LIABILITY BY WA Y OF TAX, DUTY, CESS OR FEE, SECTION 43B IS NOT ATTRACTED TO THE LICENCEE/ASSESSEE IN RESPECT OF ELECTRICITY DUTY COL LECTED BY IT FOR BEING PASSED ON THE STATE GOVERNMENT. ON THIS POINT W E ARE IN RESPECTFUL DISAGREEMENT WITH THE DECISION OF THE GUJARA T HIGH COURT IN THE CASE OF COMMISSIONER OF INCME TAX-VS-A HMEDABAD ELECTRICITY CO. LTD. (SUPRA) AND WE ARE IN AGREEMENT WI TH THE DECISION OF THE KERALA HIGH COURT IN THE CASE OF KER ALA STATE ELECTRICITY BOARD-VS-DEPUTY COMMISSIONER OF INCOME TAX (SUPRA). WE ARE OF THE OPINION THAT SECTION 43B OF THE INCOME TAX ACT IS ATTRACTED TO A CASE WHERE PAYABLE IS TO BE MADE TO THE STATE GOVERNMENT IN THE CAPACITY OF THE STATE AS A SO VEREIGN AND NOT TO A CASE WHERE PAYMENT IS TO BE MADE TO THE STATE GOVERNMENT IN ITS CAPACITY AS A PRINCIPAL BY AN AGENT . IN THE INSTANT CASE, THE RELATIONSHIP BETWEEN THE STATE AND THE LICENSEE IS OF A PRINCIPAL AND AGENT/FIDUCIARY AND NOT THAT O F A SOVEREIGN AND A SUBJECT. 20) LOOKING AT THE ISSUE FROM ANOTHER ANGLE, THE ELEC TRICITY DUTY COLLECTED BY THE LICENSEE FROM THE CONSUMERS IS SO DON E BY THE LICENSEE AS AN AGENT OF THE STATE AND, HENCE, THE SAME CANNOT BE CONSIDERED TO A TRADING RECEIPT IN THE HANDS OF THE LIC ENSEE. IT DOES NOT CONSTITUTE INCOME OF THE LICENSEE AND CANNO T BE INCLUDED IN THE LICENSEE'S INCOME FOR THE PURPOSE OF COMPUTATION OF INCOME TAX. IT IS NOT A BUSINESS RECEIPT OF THE LIC ENSEE WHICH THE LICENSEE COLLECTS ON ITS OWN BEHALF IN CONNECTIO N WITH ITS BUSINESS OF GENERATING AND SUPPLYING ELECTRICITY. TH E LICENSEE DOES NOT COLLECT THE ELECTRICITY DUTY FOR ITS OWN CONSU MPTION OR UTILIZATION. IF THE LICENSEE COLLECTS THE DUTY BUT DOES NOT PAY THE SAME TO THE GOVERNMENT, THE STATUTE PROVIDES MECHANI SM FOR THE MSED 29 GOVERNMENT TO RECOVER THE SAME FROM THE LICENSEE. EVE N III A CASE WHERE THE LICENSEE IS UNABLE TO RECOVER THE DUTY BUT RECOVERS THE ENERGY CHARGES, THE STATUTES STILL PROVID ES A PROCEDURE FOR THE GOVERNMENT TO RECOVER THE DUTY EITHER FROM THE CONSUMER OR FROM THE LICENSEE. THIS VIEW OF OURS FINDS SUPPORT FROM THE DECISION OF THE ANDHRA PRADESH HIGH C OURT IN THE CASE OF COMMISSIONER OF INCOME TAX-VS.-DEVATHA CHANDRAIAH (SUPRA). THOUGH THE SAID CASE DEALS WITH SALES TAX, THE PRINCIPLE LAID DOWN IN THAT CASE SUPPORTS OUR VIEW. THE MISCHIE F THAT SECTION 43B OF THE INCOME TAX ACT INTENDED TO PRESENT, IS TAKEN CARE OF BY THE PROVISIONS OF THE BENGAL ELECTRICITY DUTY ACT ITSELF . 34. THUS, IN OUR CONSIDERED VIEW, THE ASSESSEE DESER VES TO SUCCEED. THE DISALLOWANCE MADE BY LD. AO ON THIS GROUND FOR R S.23291.59 LAKHS IS HEREBY DELETED AND GROUND NO.2 OF THE ASSES SEE IS ALLOWED. 35. GROUND NO.3 IS WITH REGARD IN ISSUANCE OF NOTICE U/S.271(1)(C) OF THE ACT, WE OBSERVE THAT THIS GROUND IS PREMATURE AND THE SAME IS HEREBY DISMISSED. 36. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMI SSED AND THE APPEAL OF ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH DAY OF AUGUST, 2015. SD/- SD/- N.K. BILLAIYA A.D. JAIN ACCOUNTANT MEMBER JUDICI AL MEMBER MUMBAI, DATED: .08.2015 PATEL MSED 30 , ) $*/0 1 0 * / COPY OF THE ORDER FORWARDED TO : (1) 2* / THE ASSESSEE; (2) / THE REVENUE; (3) ' 3*() / THE CIT(A); (4) ' 3* / THE CIT, MUMBAI CITY CONCERNED; (5) 067 $*8, + 8 , # ' ( / THE DR, ITAT, MUMBAI; (6) 7 :( / GUARD FILE. %0* $* / TRUE COPY , ' / BY ORDER ; / < / (DY./ASSTT. REGISTRAR) + 8 , # ' ( / ITAT, MUMBAI