Madhya Gujarat Vij Co.Ltd., Baroda V. The ACIT, Circle-4, Baroda

ITA 87/AHD/2014

AI Insights

The case involves Madhya Gujarat Vij Company Ltd, which appealed against the order of the Commissioner of Income Tax (Appeals)-III, Ahmedabad, concerning the disallowance of a claim for expenditure related to electricity duty amounting to Rs.2,15,82,707. The primary legal issue was whether this expenditure could be allowed under section 43B of the Income Tax Act, 1961, given that the payment was not made before the due date of filing the return. The ITAT had previously directed verification of whether the amount was adjusted against government grants before the due date. The CIT(A) found that the assessee failed to establish this adjustment for the financial year 2005-06, leading to the disallowance. However, the ITAT, considering the peculiar facts and circumstances, allowed the claim in the succeeding year when it was demonstrated that the dues were settled through government grants.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 133623 (ITAT-AHMEDABAD)
• Duration Of Justice: 9 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 23-01-2023
• Assessment Year: 2006-2007
• Appeal Filed On: 09-01-2014
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: MEHUL K. PATEL
• Keywords: Opportunity of being heard
• Section: 43B

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठअहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठ ‘D’ अहमदाबाद। अहमदाबाद।अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD BEFORE SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER ITA No.87/Ahd/2014 Assessment Year :2006-07 Madhya Gujarat Vij Company Ltd Sardar Patel Vidyut Bhavan Race Course Circle, Baroda PAN: AADCM 7439 H ACIT, Cir.4 Baroda. (Applicant) (Responent) Assesseeby : Shri Mehul K. Patel, Advocate Revenue by : Shri Atul Pandey, Sr.DR स ु नवाई क तार ख/Date of Hearing : 24/01/2023 घोषणा क तार ख /Date of Pronouncement: 08/01/2023 आदेश/O R D E R PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER Present appeal has been filed by the assessee against order passed by the ld. Commissioner of Income Tax (Appeals)-III, Ahmedabad[hereinafter referred to as “Ld.CIT(A) under section 250(6) of the Income Tax Act, 1961 ("the Act" for short) dated 4.10.2013 pertaining to the Asst.Year 2006-07. 2. This is the second round of litigation before us, and the sole issue relates to allowability of claim of expenditure relating to electricity duty amounting to Rs.2,15,82,707/-, disallowed for non- payment of the same to the Government before the due date of filing ITA No.87/Ahd/2014 2 of the return of income ,as per the provisions of section 43B of the Act. 3. The specific direction of the ITAT in this respect, in the first round, was to verify the fact that this amount of electricity duty stood adjusted against/recovered fromGovernment grants given to the assessee, before the due date of filing of the return ofincome. The direction of the ITAT reproduced at page no.2 of the CIT(A)’s order is as under: “4.1 With regard to verification of date of payment, we are of the view that this needs verification at the end of the Assessing Officer. We are, therefore, of the view that the learned Commissioner of Income Tax (Appeals) ought to have allowed an opportunity of being heard to the Assessing Officer to examine the dates on which the amount has been recovered by the Government of Gujarat by any of adjustment from the grants given the same allowable under section 43B of the I.T. Act. Similarly, whether the compounding fees have been paid prior to filling of the return also needs verification. In case, both have been paid prior to filing of the return of income, inthat event, the Assessing Officer is directed to allow the same. Therefore, for the purpose of limited verification, the matter is restored to the file of the Assessing Officer, who will make the necessary verification, after giving necessary opportunity of being heard to the assessee.” 4. In lieu of the aforesaid direction the assessee was unable to convince that this electricity duty of Rs.2,15,82,707/- was adjusted from grant given by the Government for the said purpose before the due date of filing of the return of income, both tothe AO and the Ld. CIT(A. Specific findings of the ld.CIT(A) in this regard at para 4.3.1 of his order as under: “4.3.1 So far a he payment of electricity duty is concerned the appellant has only submitted the resolution dated 16.05.2006 of Government of Gujarat which states that the amount of Rs.91,71,65,000/- sanctioned as subsidy to the appellant shall be adjusted against electricity ITA No.87/Ahd/2014 3 duty payable by GUVNL to the state government for the year 2006-07. But, on which date, such adjustment was actually made has not been established by the appellant. Besides, in the current appeal, the electricity duty payable for the FY 2005-06 is the issue and not the electricity duty payable for the FY 2006-07. The resolution submitted by the appellant talks of electricity duty payable for the FY 2006-07. From the details of adjustments made as submitted by the appellant as per Annexure II of its submission, it is seen that the opening balance as on 1.4.2006 of duty payable was Rs. 21582707.22. Such duty for the month of April,2006 was Rs.17,5312511.98. Vide JV No. 15 of July,2006, the amount of Rs.175812511.98 has been adjusted against the grant. This clearly establishes that only duty pertaining to FY 2006-07 was to be adjusted against such grant and not of earlier year. Accordingly, such resolution cannot be taken as proof of adjustment of the electricity duty payable for the FY 2005-06. Moreover, as stated, the actual date of such adjustment has not been established by the appellant to show that such adjustment even if made was made before the due date of filing of return of income. The details filed established the adjustment of duty payable for the month of April, 2006 only. Accordingly, it is held that the AO has rightly disallowed this amount in his order.” 5. As is evident from the above, the assessee had pleaded that by virtue of Resolution of the Government of Gujarat dated 16.5.2006 it had been sanctioned subsidy to be adjusted against electricity dues payable by the assessee and the amount outstanding at the end of the year of Rs.2.15 crs stood accordingly adjusted from the same. The ld.CIT(A) however noted that this subsidy had been granted for settlement of dues pertaining to the year 2006-07 i.e. grant relating to Asst.Year.2007-08 and not the impugned assessment year before us i.e. Asst.Year 2006-07. He further noted that even as per the evidence submitted by the assessee by way of journal vouchers of July, 2006 making entries of adjustment of electricity dues from government grants, the subsidy was seen to be adjusted against the outstanding electricity due for the month of April, 2006 of Rs.17.58 crores, which was exactly the amount of subsidy adjusted against the same. Therefore noting the fact as above from the evidences filed by the assessee that the grants given by the government were for purposes of adjusting electricity duty dues of the succeeding year and the outstanding dues were not ITA No.87/Ahd/2014 4 actually settled against the grant so received, the Ld.CIT(A) found that the assessee had been unable to establish the settlement of the outstanding dues against government grants by the due date of filing of return of income and accordingly upheld the denial of deduction of the electricity duty dues of Rs.2.15 Crs u/s 43B of the Act. 6. The ld.counsel for the assessee before us has relied on the very same evidence as that before the ld.CIT(A), but has been unable to pin-point any infirmity in the finding of the fact by the ld.CIT(A) to the effect that the grant of subsidy as per Resolution dated 16.5.2006 pertained to the financial year 2006-07 and not financial year 2005-06 pertaining to A.Y 2006-07 before us, and also that the amount of subsidy adjusted against the electricity duty in July 2006 exactly tallied with the amount of duty of April 2006. The Ld.CIT(A), we hold has rightly inferred from the same that the dues settled from government grants did not relate to that outstanding as at the end of the impugned year of Rs.2.15 Crs but related to that of the succeeding year pertaining to the month of April 2006. 7. In view of the above, since the assessee has been unable to establish adjustment of the electricity duty outstanding as at the end of the year of Rs.2.15 Crs from government grants upto the due date of filing of return of income , as directed by the ITAT in the first round, we see no reason to interfere in the order of the Ld.CIT(A) upholding the denial of deduction of the said duty u/s 43B of the Act . ITA No.87/Ahd/2014 5 8. The ld.counsel for the assessee made an alternate contention before us that this claim of electricity due payable for the impugned year of Rs.2.15 crores be directed to be allowed in the subsequent year, when it can be actually treated as paid. In this regard, as evidence, he produced before us, copy of the audited balance sheet of the assessee-company, and pointed out that the outstanding electricity duty payable as at the end of the succeeding year was Rs.16 crores plus odd; which was the average monthly electricity duty which the assessee was required to pay. The fact that the average monthly electricity duty payable was to the tune of Rs.16 Crswas evidenced from the details of adjustment of electricity duty against the subsidy granted in the subsequent year, which was placed before us at PB Page no.3 wherein the electricity duty payable for first four months of the financial year 2006-07 were shown as under: April, 2006 : Rs.17.58 crores May, 2006 : Rs.20.13 crores June, 2006 : Rs.20.83 crores July, 2006 : Rs.21.71 crores. He pointed out that all these dues were adjusted against the subsidy granted vide Government Resolution (GR) dated 16.5.2006. Thus, he stated that it is evident that on an average, the assessee incurred a liability to pay electricity duty of Rs.17 crores to Rs.20 crores and the amount outstanding as at the end of the year 31.3.2007 on electricity duty amounted to Rs.16.73 crores. Copy of the audited balance sheet was placed before us at pageno.2 reflecting the said amount. He, therefore, stated that it is clear from the same that as at the end of the succeeding year only the electricity duty for the month of March, 2007 was outstanding for payment and all other outstanding payables were adjusted through ITA No.87/Ahd/2014 6 grants, which implied that even outstanding due payable for the month of March, 2006, which is in dispute before us, amounting to Rs.2.15 crores also stood adjusted by the end of the succeeding year i.e. 31.3.2007. 9. The ld.counsel for the assessee pleaded that considering the fact that it is a very old issue, about 17 years old ,relating to year ending 31.3.2006,it was virtually impossible now to dig out the evidence proving the payment of the outstanding electricity duty. He contended that the fact that all these dues were settled/adjusted through government grant is accepted, when even the ITAT in the first round had restored this issue to verify exactly when the outstanding electricity duty of Rs.2.15 crores pertaining to the impugned year was adjusted against the government grant. He contended that even the notification of the Government, which Revenue authorities had read as pertaining to the succeeding year ,proved that electricity duty dues of the assessee were adjusted through government grants alone. He pleaded, therefore, that in view of the evidence as pointed out above before us, showing that as at the end of the succeeding year only duty for the month of March, 2007 was outstanding, it can be safely presumed that all other outstanding payables of the electricity duty including that for the month of March, 2006 stood adjusted against the Government grant. He pleaded that in the light of the same, it may be directed that the assessee be allowed claim of electricity duty amounting to Rs.2.15 crores in the succeeding year as perthe provisions of section 43B of the Act, when the duty can be ultimately and safely stood to be settled and adjusted against the Government grants. The ld.DR, relied on the order of the ld.CIT(A). ITA No.87/Ahd/2014 7 10. We find merit in the alternate claim of the assessee that the claim be directed to be allowed in the succeeding year. The Ld.Counsel for the assessee has sufficiently demonstrated before us that the electricity dues outstanding as at the end of the impugned year , were not outstanding at the end of the succeeding year. It has also been demonstrated that the government gives grants for settling the electricity dues. That therefore it can be safely presumed that the electricity duty dues outstanding as at the end of the impugned year of Rs.2.15 Crs stood adjusted and thus paid out of government grants in the succeeding year, entitling the assessee to claim deduction thereof in the succeeding year. 11. The audited financials of the assessee of the succeeding year, placed before us reveal outstanding electricity to the tune of Rs16.73 crores, which as per the details submitted before us at P.B 3 of adjustment of government grant against the duties for the succeeding year, F.Y 2006-07, reveals that the amount of outstanding duty is pertaining to a single month. Even otherwise the outstanding dues of the impugned year, as on 31 st March 2006, was Rs.2.15 crs. Therefore, it can be safely presumed that outstanding electricity duty as on 31.3.2007 of Rs.16.73 crores represented the outstanding liability for the month of March, 2007 alone; that dues for the month of March, 2006, which are in dispute before us, amounting to Rs.2.15 crores, were not outstanding and thus stood adjusted against the Government grant. As rightly pointed out by the ld.counsel for the assessee, the Revenue does not dispute that all the electricity duty dues were adjusted against the Government grants. Even the notification of the Government granting subsidy are to this effect and as per the directions of the ITA No.87/Ahd/2014 8 ITAT also it was an accepted fact that the electricity duty dues are adjusted against the Government grant. In view of the above, we direct the claim of electricity duty outstanding during the impugned year of Rs.2.15 crores, to be allowed in the succeeding year, when it can be safely stated to have been adjusted against the government grants. 12. Our direction as above, has been rendered in the peculiar facts and circumstances, considering that this a very old matter of 16 years, and it is virtually impossible to bring out all facts and reconcile every figure before us. In the circumstances, we have given the direction considering the case in its totality based on facts placed before us. 13. In the result, the appeal of the assessee is dismissed with the above directions. Order pronounced in the Court on 8th February, 2023 at Ahmedabad. Sd/- Sd/- (SIDDHARTHA NAUTIYAL) JUDICIAL MEMBER (ANNAPURNA GUPTA) ACCOUNTANT MEMBER Ahmedabad, dated 08/02/2023