DCIT, Lucknow V. M/s. Madhyanchal Vidyut Vitran Nigam Ltd., Lucknow

ITA 99/LKW/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62154 (ITAT-LUCKNOW)
• Duration Of Justice: 2 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 25-05-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 08-02-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: R C JAIN
• Keywords: Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A , LUCKNOW BEFORE SHRI S UNIL KUMAR YADAV , JUDICIAL MEMBER AND SHRI S. V. MEHROTRA , ACCOUNTANT MEMBER ITA NO. 99/LKW/2010 ASSESSMENT YEAR: 2004 - 05 DCIT RANGE I, LUCKNOW V. M/S MADHYANCHAL VIDYUT V ITARAN NIGAM LTD. 4A, GOKHELEY MARG LUCKNOW PAN: AAECM01085 (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI. PRAVEEN KUMAR, CIT (DR) RESPONDENT BY: SHRI. R. C. JAIN, C.A. DATE OF HEARING: 25.05.2012 DATE OF PRONOUNCEMENT: 26.06.2012 O R D E R PE R S UNIL KUMAR YADAV : THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A) MAINLY ON TWO GROUNDS WHICH ARE AS UNDER: - 1 . THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF ` 35,37,46,984 BY HOLDING THAT THE SAID RE CEIPT WAS ON CAPITAL ACCOUNT. 2 . THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF ` 1,17,00,000 MADE TOWARDS PRIOR PERIOD EXPENSES WHICH DID NOT EVEN RELATE TO THE ASSESSEE - COMPANY. 2 . APROPOS GROUND NO.1, IT IS NOTICED THAT THE ASSESSEE R ECEIVED AN AMOUNT OF ` 35,37,46,984 UNDER VARIOUS HEADS I.E. ON ACCOUNT OF PRADHAN MANTRI GRAMIN YOJNA, RE WORKS AND BORDER AREA. THOUGH AS PER BALANCE : - 2 - : SHEET AS ON 31.3.2004 , IT HAS BEEN STATED THAT THE AMOUNT ( ON ACCOUNT OF PRADHAN MANTRI GRAMIN YOJNA AT ` 13,24,47,957 ; ON ACCOUNT OF RE WORKS AT ` 19,54,08,611 AND ON ACCOUNT OF BORDER AREA AT ` 2,58,90,416 ) TOTALING TO ` 35,37,46,984 RECEIVED BY U.P. POWER CORPORATION LTD. FROM THE GOVT. OF U.P. AS EQUITY ON BEHALF OF NIGAM HAVE BEEN SHOWN AS SHARE APPLICATIO N MONEY OF U.P. POWER CORPOR ATION LTD. IN THE BALANCE SHEET , T HE ASSESSING OFFICER HAS TREATED THIS AMOUNT AS AN GRANT AND SUBSIDY AND CONSIDERED IT TO BE REVENUE RECEIPT. ACCORDINGLY ADDITION OF ` 35,37,46,984 WAS MADE AGAINST WHICH AN APPEAL WAS FILED BE FORE THE LD. CIT(A) WITH THE SUBMISSION THAT UNDER DIFFERENT HEADS THE AMOUNT HAS BEEN RECEIVED BY U.P. POWER CORPORATION LTD. FROM THE GOVT. OF U.P., BUT IT WAS CONTRIBUTED TO THE ASSESSEE AS SHARE APPLICATION MONEY. IN THE SUCCEEDING YEAR SHARES WERE AL SO ALLOTTED TO U.P. POWER CORPORATION LTD. ACCORDINGLY THE IMPUGNED ADDITION WAS DELETED BY THE LD. CIT(A). 3 . N OW THE REVENUE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL WITH THE SUBMISSION THAT THIS AMOUNT WAS RECEIVED AS A WORKING CAPITAL TO ENCOURAGE ITS COMMERCIAL ACTIVITIES. THE ASSESSING OFFICER HAS RIGHTLY TREATED IT TO BE REVENUE RECEIPT IN VIEW OF THE JUDGMENT OF THE APEX COURT IN THE CASE OF SAHNEY STEEL AND PRESS WORKS LIMITED AND OTHERS. V. COMMISSIONER O F INCOME TAX, 228 ITR 25 3. 4 . THE LD. D.R. , ON THE OTHER HAND, HAS INVITED OUR ATTENTION TO THE MINUTES OF THE MEETING OF THE ASSESSEE DATED 29.1.2008 IN WHICH 3,53,746 SHARES WERE ALLOTTED TO U.P. POWER CORPORATION LTD . THE AMOUNT RECEIVED BY THE ASSESSEE FROM U.P. POWER CORPORATION LTD. WAS SHOWN IN THE BALANCE SHEET AS SHARE APPLICATION MONEY UNDER THE HEAD SHAREHOLDERS FUND. THEREFORE, IT CANNOT BE TREATED EITHER AS SUBSIDY OR REVENUE RECEIPT. 5 . HAVING GIVEN A THOUGHTFUL CONSIDERATION TO THE RIVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF RECO RD, WE FIND THAT UNDOUBTEDLY THIS AMOUNT OF ` 35,37,46,984 WAS RECEIVED BY U.P. POWER CORPORATION LTD. UNDER : - 3 - : VARIOUS HEADS FROM THE GOVERNMENT OF U.P. BUT IT WAS CONTRIBUTED TO N THE ASSESSEE AS A SHARE APPLICATION MONEY FOR ALLOTMENT OF SHARES. THE SIMILA R TREATMENT WAS GIVEN BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT WHICH IS CLEAR FROM THE NOTES ON THE ACCOUNTS ANNEXED TO AND FORMING PART OF BALANCE SHEET AND PROFIT AND LOSS ACCOUNT FOR THE PERIOD ENDING ON 31.3.2004. CONSEQUENTLY SHARES WERE ALSO ALLOTTED TO U.P. POWER CORPORATION LTD. BY THE ASSESSEE VIDE BOARDS MEETING ON 29.1.2008. THEREFORE BY ANY STRETCH OF IMAGINATION, THE AMOUNT RECEIVED BY THE ASSESSEE CANNOT BE CONSIDERED TO BE A SUBSIDY GRANTED BY THE GOVERNMENT. THE QUESTION OF NATURE OF SUBS IDY ONLY ARISE IF THE ASSESSEE RECEIVES A SUBSIDY FROM THE GOVERNMENT, BUT IN THE INSTANT CASE THE ASSESSEE HAS RECEIVED SHARE APPLICATION MONEY, THEREFORE, IT CANNOT BE CONSIDERED TO BE REVENUE RECEIPT. ACCORDINGLY WE CONFIRM THE ORDER OF THE LD. CIT(A) WHO HAS RIGHTLY ADJUDICATED THE ISSUE. 6 . NEXT GROUND RELATES TO THE DELETION OF ADDITION OF ` 1.17 CRORES MADE TOWARDS PRIOR PERIOD EXPENSES. 7 . THE FACTS BORNE OUT FROM THE RECORD IN THIS REGARD ARE THAT THE ASSESSING OFFICER HAS NOTICED DURING THE COURSE OF AS SESSMENT PROCEEDINGS FROM THE AUDITORS REPORT DATED 13.6.2006 THAT THE EXPENDITURE AMOUNTING TO ` 1.17 CRORES HAVE BEEN CHARGED AS CURRENT YEARS EXPENDITURE THOUGH THE EXPENDITURE PERTAINS TO THE PERIOD PRIOR TO 12.8.2003. SINCE THE ASSESSEE FOLLOWS MERC ANTILE SYSTEM OF ACCOUNTING, SUCH PRIOR PERIOD EXPENSES WE RE NOT ALLOWED AS EXPENDITURE BY TH E ASSESSING OFFICER AND HE ACCORDINGLY ADDED BACK TO THE ASSESSEES INCOME . 8 . AN APPEAL WAS FILED BY THE ASSESSEE BEFORE THE LD. CIT(A) WITH THE SUBMISSION THAT THIS IS THE FIRST YEAR OF THE COMPANY AND QUESTION OF ANY PRIOR PERIOD EXPENDITURE DOES NOT ARISE. THE LIABILITY WITH REGARD TO EXPENDITURE OF ` 1.17 CRORES ACCRUED AFTER THE COMMENC EMENT OF THE BUSINESS OF THE COMPANY I.E. 12.8.2003. THE EXPENDITURE, THEREFO RE, DID NOT COME UNDER THE HEAD PRIOR PERIOD EXPENDITURE. IT WAS FURTHER : - 4 - : CONTENDED THAT THOUGH THE AMOUNT SHOULD HAVE BEEN DEBITED TO U.P. POWER CORPORATION LTD., BUT THE FACT IS THAT LIABILITY AROSE AFTER FORMATION OF THE COMPANY AND HENCE THE COMPANY HAS RIGHTLY ACCOUNTED FOR THIS LIABILITY IN ITS BOOKS OF ACCOUNT. BEING CONVINCED WITH THE EXPLANATION OF THE ASSESSEE, THE LD. CIT(A) DELETED THE ADDITION. 9 . NOW THE REVENUE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL WITH THE SUBMISSION THAT THE AUDITOR H AS MADE A SPECIFIC OBSERVATION IN ITS REPORT DATED 13.6.2006 THAT A SUM OF ` 1.17 CRORES HAVE BEEN CHARGED AS CURRENT YEARS EXPENDITURE UNDER O&M EXPENSES , EMPLOYEES COST AND ADMINISTRATIVE AND G ENERAL EXPENSES THOUGH THEY PERTAIN TO THE PERIOD PRIOR TO 12 .8.2003. THE AUDITOR HAS ALSO OPINED THAT THIS SHOULD BE DEBITED TO U.P. POWER CORPORATION LTD. SINCE THE EXPENDITURE PERTAINS TO U.P. POWER CORPORATION LTD., NOTHING HAS BEEN PLACED ON RECORD TO ESTABLISH AS TO WHY THE ASSESSEE HAS CHARGED THIS EXPENDIT URE IN ITS BOOKS OF ACCOUNT. EVEN BEFORE THE LD. CIT(A) THE ASSESSEE HAS NOT FURNISHED ANY EXPLANATION FOR BOOKING THIS PRIOR PERIOD EXPENSES AND THE LD. CIT(A) HAS DELETED THE ADDITION WITHOUT ASSIGNING ANY REASON. 10 . THE LD. COUNSEL FOR THE ASSESSEE HAS SU BMITTED THAT THESE EXPENSES IN FACT BELONG TO U.P. POWER CORPORATION LTD. AND ON RESTRUCTURING , THE LIABILITIES WERE TAKEN OVER BY THE ASSESSEE . T HEREFORE IT IS RIGHTLY BOOKED IN ITS BOOKS OF ACCOUNT. 11 . HAVING GIVEN A THOUGHTFUL CONSIDERATION TO THE RIVAL S UBMISSIONS AND FROM A CAREFUL PERUSAL OF RECORD, WE FIND THAT UNDENIABLY THE AUDITOR HAS MADE AN OBSERVATION IN HIS REPORT DATED 13.6.2006 WHICH IS AS UNDER: - A SUM OF ` 1.17 CRORES HAS BEEN CHARGED AS CURRENT YEAR EXPENDITURE UNDER O&M EXPENSES, EMPLOYEES COST AND ADMINISTRATIVE AND GENERAL EXPENSES THOUGH THEY PERTAINS TO THE PERIOD PRIOR TO : - 5 - : 12.8.2003. IN OUR OPINION, THIS SHOULD BE DEBITED TO U.P. POWER CORPORATION LTD. 12 . WHEN THE AUDITOR HAS MADE A SPECIFIC OBSERVATION, THE ASSESSING OFFICER WAS HAVING A REASONABLE BELIEF FOR MAKING DISALLOWANCE. NOW THE ONUS SHIFTS ON THE ASSESSEE TO EXPLAIN THAT AS TO HOW THE ASSESSEE CAN BOOK THIS EXPENDITURE. IF THE ASSESSEE HAS TAKEN OVER THE ASSETS AND LIABILITIES OF U.P. POWER CORPORATION LTD. ON ITS RESTRUCTURI NG, THE ASSESSEE HAS TO PLACE SOME EVIDENCE ON RECORD. IT IS ALSO A FACT THAT THE ASSESSEE WAS INCORPORATED DURING THE FINANCIAL YEAR 2003 - 04 AND THIS IS THE FIRST YEAR OF ACCOUNT. THEREFORE, EXPENDITURE PERTAINING TO SOM E OTHER ASSESSEE/ CONCERN CANNO T BE BOOKED BY THE ASSESSEE AS ITS OWN EXPENDITURE. SINCE ALL THESE FACTS ARE NOT CLEAR FROM THE ORDERS OF THE LOWER AUTHORITIES, WE ARE OF THE VIEW THAT THIS ISSUE NEEDS FRESH ADJUDICATION BY THE ASSESSING OFFICER AND THE ASSESSEE IS ALSO DIRECTED TO PRODU CE ALL THE RELEVANT EVIDENCE TO PROVE TH AT AS TO HOW T HE HAS BEEN DEBITED THIS EXPENDITURE TO ITS ACCOUNT. ACCORDINGLY, THIS MATTER IS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION AFTER AFFORDING A PROPER OPPORTUNITY OF BEING HEARD TO THE ASSESSEE . 13 . IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 26.6.2012. SD/ - SD/ - [ S. V. MEHROTRA ] [ S UNIL KUMAR Y ADAV ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 26.6.2 012 JJ: 0706 : - 6 - : COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR ASSISTANT REGISTRAR