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Income Tax Appellate Tribunal, MUMBAI BENCH “D” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI SANDEEP SINGH KARHAIL
This appeal by the Revenue and cross This appeal by the Revenue and cross-objection by the objection by the assessee are directed against order dated 29.08.2022 passed by the assessee are directed against order dated 29.08.2022 passed by the assessee are directed against order dated 29.08.2022 passed by the National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2014 assessment year 2014-15 respectively. The ground raised by the 15 respectively. The ground raised by the Revenue is reproduced as under: Revenue is reproduced as under:
1. On the facts and in the circumstances of the case, the On the facts and in the circumstances of the case, the On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition made by the Ld. CIT(A) erred in deleting the addition made by the Ld. CIT(A) erred in deleting the addition made by the AO of ₹ ₹5,14,18,327/- on account of prior period on account of prior period expenses merely relying on the submissions made by nses merely relying on the submissions made by nses merely relying on the submissions made by the AR of the assessee and on the basis of various the AR of the assessee and on the basis of various the AR of the assessee and on the basis of various judicial judicial judicial decisions decisions decisions made made made by by by the the the courts courts courts without without without considering the genuine fact of the case. considering the genuine fact of the case.
2. The grounds raised by the assessee in cross The grounds raised by the assessee in cross The grounds raised by the assessee in cross-objection are reproduced as under: reproduced as under:
The appellant submits that, in case it is held that the The appellant submits that, in case it is held that the The appellant submits that, in case it is held that the prior period expenditure of prior period expenditure of ₹5,14,18,327/- are not to be are not to be allowed allowed allowed then then then the the the prior prior prior period period period income income income of of of ₹1,64,78,59,865/ 1,64,78,59,865/- credited to the profit and loss credited to the profit and loss account too should not be taxed account too should not be taxed following the same following the same logic/rationale as is applied for disallowance of the logic/rationale as is applied for disallowance of the logic/rationale as is applied for disallowance of the prior period expenditure. prior period expenditure.
M/s Maharashtra State Power Generation M/s Maharashtra State Power Generation 3 Company Limited & CO No. 153/Mum/2022 ITA No. 2752 & CO No. 153/Mum/2022
In case it is held that the prior period expenditure are In case it is held that the prior period expenditure are In case it is held that the prior period expenditure are not to be allowed for the captioned assessment year not to be allowed for the captioned assessment year not to be allowed for the captioned assessment year then the Assessing Officer be directed to allow then the Assessing Officer be directed to allow then the Assessing Officer be directed to allow the expenses for the earlier year(s) to which they pertain to. expenses for the earlier year(s) to which they pertain to. expenses for the earlier year(s) to which they pertain to.
2.1 Further, the assessee has also raised additional cross Further, the assessee has also raised additional cross Further, the assessee has also raised additional cross- objection, which is reproduced as under: objection, which is reproduced as under:
1. The respondent submits that levy of interest under The respondent submits that levy of interest under The respondent submits that levy of interest under sections 234A, 234B and 234C of the Income-tax sections 234A, 234B and 234C of the Inco sections 234A, 234B and 234C of the Inco Act, 1961 is bad in law and the Commissioner of Act, 1961 is bad in law and the Commissioner of Act, 1961 is bad in law and the Commissioner of Income Income-tax (Appeals)-NFAC ought to have held as NFAC ought to have held as such.
Briefly stated, facts of the case are that the assessee, a public Briefly stated, facts of the case are that the assessee, a public Briefly stated, facts of the case are that the assessee, a public sector undertaking of the state of Maharashtra sector undertaking of the state of Maharashtra, during the relevant during the relevant year under consideration was engaged in the business of generation year under consideration was engaged in the business of generation year under consideration was engaged in the business of generation of electricity. The assessee filed return of income for the year under of electricity. The assessee filed return of income for the year under of electricity. The assessee filed return of income for the year under consideration consideration consideration on on on 27.11.2014 27.11.2014 27.11.2014 declaring declaring declaring net net net loss loss loss of of of ₹714,84,163,368/-. The return of income filed b . The return of income filed by the assessee was y the assessee was selected for scrutiny and statutory notices under the Income-tax selected for scrutiny and statutory notices under the Income selected for scrutiny and statutory notices under the Income Act, 1961 (in short ‘the Act’) were issued and complied with. The Act, 1961 (in short ‘the Act’) were issued and complied with. The Act, 1961 (in short ‘the Act’) were issued and complied with. The assessment u/s 143(3) of the Act was completed on 30.12.2016 assessment u/s 143(3) of the Act was completed on 30.12.2016 assessment u/s 143(3) of the Act was completed on 30.12.2016 after making disallowance including prior per after making disallowance including prior period expenses of iod expenses of ₹514,18,327/-. In the demand notice interest u/s 234A, 234B, . In the demand notice interest u/s 234A, 234B, . In the demand notice interest u/s 234A, 234B, 234C and 234D of the Act were also levied. 234C and 234D of the Act were also levied.
M/s Maharashtra State Power Generation M/s Maharashtra State Power Generation 4 Company Limited & CO No. 153/Mum/2022 ITA No. 2752 & CO No. 153/Mum/2022
Aggrieved, the assessee filed appeal before the Ld. CIT(A) but Aggrieved, the assessee filed appeal before the Ld. CIT(A) but Aggrieved, the assessee filed appeal before the Ld. CIT(A) but could succeed partly. Aggrieved with the order of the Ld. CIT(A), the could succeed partly. Aggrieved with the order of the Ld. CIT(A), the could succeed partly. Aggrieved with the order of the Ld. CIT(A), the Revenue is by way of appeal whereas, the assessee is by way of Revenue is by way of appeal whereas, the assessee is by way of Revenue is by way of appeal whereas, the assessee is by way of cross-objection as reproduced above. objection as reproduced above.
In the ground raised by the Revenue in its appeal, the sole In the ground raised by the Revenue in its appeal, the sole In the ground raised by the Revenue in its appeal, the sole issue is regarding deleting the addition made by the AO of issue is regarding deleting the addition made by the AO of issue is regarding deleting the addition made by the AO of ₹514,18,327/- on account of prio on account of prior period expenses.
We have heard rival submissions of the parties on the issue We have heard rival submissions of the parties on the issue We have heard rival submissions of the parties on the issue- in-dispute and perused the relevant material on record. Before the dispute and perused the relevant material on record. Before the dispute and perused the relevant material on record. Before the Ld. CIT(A), it was submitted by the assessee that prior period Ld. CIT(A), it was submitted by the assessee that prior period Ld. CIT(A), it was submitted by the assessee that prior period expenses were of the routine nature of the expenses were of the routine nature of the business and payments business and payments were deleted because of procedure were deleted because of procedure delay and due and due to various administrative reasons. The assessee provided detailed breakup of administrative reasons. The assessee provided detailed breakup of administrative reasons. The assessee provided detailed breakup of prior period income/ex prior period income/expenditure before the Ld. CIT(A). penditure before the Ld. CIT(A). For ready reference, the said details is reproduced a the said details is reproduced as under:
“2. The The The detailed detailed detailed breakup breakup breakup of of of the the the prior prior prior period period period income/expenditure is given hereunder for your Honour’s income/expenditure is given hereunder for your Honour’s income/expenditure is given hereunder for your Honour’s ready reference : ready reference : Particulars Amount in ₹ Amount in Other Income 4,78,01,845 4,78,01,845 Other excess provisions in prior periods Other excess provisions in prior periods 1,42,14,32,383 1,42,14,32,383 Coal/Gas related gain Coal/Gas related -- (Excess)/short provision for depreciation (Excess)/short provision for depreciation 5,53,80,107 5,53,80,107 In the consolidated order dated 22nd April 2021 the appeal in In the consolidated order dated 22nd April 2021 the appeal in In the consolidated order dated 22nd April 2021 the appeal in pertains to ‘Maharashtra State Power ITA No. 4440/M/2015 pertains to ‘Maharashtra State Power ITA No. 4440/M/2015 pertains to ‘Maharashtra State Power
M/s Maharashtra State Power Generation M/s Maharashtra State Power Generation 5 Company Limited & CO No. 153/Mum/2022 ITA No. 2752 & CO No. 153/Mum/2022
Generation Co. Ltd.’ and pertains to Generation Co. Ltd.’ and ITA No. 3634/M/2017 pertains to Generation Co. Ltd.’ and ITA No. 3634/M/2017 pertains to ‘Maharashtra St ‘Maharashtra State Electricity Transmission Co. Ltd.’ ate Electricity Transmission Co. Ltd.’ – however, in the said order of the ITAT only the name of however, in the said order of the ITAT only the name of however, in the said order of the ITAT only the name of ‘Maharashtra State Power Generation Co. Ltd.’ has been ‘Maharashtra State Power Generation Co. Ltd.’ has been ‘Maharashtra State Power Generation Co. Ltd.’ has been erroneously mentioned against both the appeal numbers. erroneously mentioned against both the appeal numbers. erroneously mentioned against both the appeal numbers.
3. Receipts from consumers Receipts from consumers 12,32,45,530 12,32,45,530 [A] 1,64,78,59,865 1,64,78,59,865 Expenses Fuel related (gains/losses) Fuel related (gains/losses) 2,09,24,739 2,09,24,739 Net interest and finance charges Net interest and finance charges - Operating expenses Operating expenses 1,36,94,209 1,36,94,209 Employee costs Employee costs 9,00,177 9,00,177 Excess in billing of earlier years Excess in billing of earlier years 1,18,43,904 1,18,43,904 Material related expenses Material related expenses 40,55,298 40,55,298 [B] 5,14,18,327 5,14,18,327 Prior period (credits)/charges (Net (B-A) Prior period (credits)/charges (Net (B 1,59,64,41,538 1,59,64,41,538 During the course of assessment proceedings, the Assessing During the course of assessment proceedings, the Assessing During the course of assessment proceedings, the Assessing Officer had inter Officer had inter-alia called upon the Appellant to explain as to alia called upon the Appellant to explain as to why the prior period expenses amounting to why the prior period expenses amounting to ₹5,14,18,538/ ₹5,14,18,538/- should not be disallowed while arriving at its normal profits. ould not be disallowed while arriving at its normal profits. ould not be disallowed while arriving at its normal profits.
6.1 The Ld. CIT(A) after considering the submission of the The Ld. CIT(A) after considering the submission of the The Ld. CIT(A) after considering the submission of the assessee held as under: assessee held as under:
“I have considered the facts and circumstances of the case, I have considered the facts and circumstances of the case, I have considered the facts and circumstances of the case, the observations of the AO, submissions of the appe observations of the AO, submissions of the appellant and observations of the AO, submissions of the appe material available on record on the above matter. During the material available on record on the above matter. During the material available on record on the above matter. During the year under considerationappellant has shown prior period year under considerationappellant has shown prior period year under considerationappellant has shown prior period income of Rs 1,64,78,59,865 and prior period expense of Rs income of Rs 1,64,78,59,865 and prior period expense of Rs income of Rs 1,64,78,59,865 and prior period expense of Rs 5,14,18,327/ 5,14,18,327/-. AO accepted the income and disallowed the . AO accepted the income and disallowed the M/s Maharashtra State Power Generation M/s Maharashtra State Power Generation 6 Company Limited & CO No. 153/Mum/2022 ITA No. 2752 & CO No. 153/Mum/2022 prior period expenses of Rs 5,14, 18,327/ expenses of Rs 5,14, 18,327/- stating that the Act stating that the Act do not provide for claim of any prior period expenses. do not provide for claim of any prior period expenses. do not provide for claim of any prior period expenses. Appellant claims that the same should be allowed as the Appellant claims that the same should be allowed as the Appellant claims that the same should be allowed as the expenditure expenditure expenditure has has has crystallized crystallized crystallized during during during the the the year year year under under under consideration. This is recurring issue in consideration. This is recurring issue in the case of the the case of the appellant and the same has been decided in the favour of the appellant and the same has been decided in the favour of the appellant and the same has been decided in the favour of the appellant by the Hon'ble Mumbai TAT Bench. Appellant has appellant by the Hon'ble Mumbai TAT Bench. Appellant has appellant by the Hon'ble Mumbai TAT Bench. Appellant has submitted submitted submitted the the the copy copy copy of of of Hon'ble Hon'ble Hon'ble ITAT ITAT ITAT order order order ITA ITA No 1394/MUM/2015 for AY 1394/MUM/2015 for AY 2010-11,ITA No 4440/Mum/2015 11,ITA No 4440/Mum/2015 for for AY AY 2011-12 2011 in appellant ant case case and and ITA ITA No No 3634/Mum/2017 for AY 2012 3634/Mum/2017 for AY 2012-13. ITA-No 3813/Mum/2009 No 3813/Mum/2009 for AY 2001- -02, ITA No 1647/Mum/2010 for AY 2002 No 1647/Mum/2010 for AY 2002-03 and ITA No. 1648/Mum/2010 for AY 2003 ITA No. 1648/Mum/2010 for AY 2003-04 in the case of 04 in the case of Maharashtra State Electricity Transmission Co Ltd. Thus in Maharashtra State Electricity Transmission Co Ltd. Thus in Maharashtra State Electricity Transmission Co Ltd. Thus in view of the above, view of the above, following the decision of the Hon'ble ITAT following the decision of the Hon'ble ITAT Mumbai 'B" Bench, I hereby allow the claim of prior period Mumbai 'B" Bench, I hereby allow the claim of prior period Mumbai 'B" Bench, I hereby allow the claim of prior period expenses. Accordingly, the grounds of appeal No 2 to 2.3 of expenses. Accordingly, the grounds of appeal No 2 to 2.3 of expenses. Accordingly, the grounds of appeal No 2 to 2.3 of the appellant are hereby allowed. the appellant are hereby allowed.”
6.2 We find that the Ld. CIT(A) has deleted the addition o We find that the Ld. CIT(A) has deleted the addition o We find that the Ld. CIT(A) has deleted the addition on the reasoning that the expenditure in question had crystallized during reasoning that the expenditure in question had crystallized during reasoning that the expenditure in question had crystallized during the year under consideration. During the course of hearing before the year under consideration. During the course of hearing before the year under consideration. During the course of hearing before us, the Ld. Counsel of the assessee was asked to explain as how the us, the Ld. Counsel of the assessee was asked to explain as how the us, the Ld. Counsel of the assessee was asked to explain as how the relevant expenses have crystallized during the year under relevant expenses have crystallized during the ye relevant expenses have crystallized during the ye consideration. However, he could not file any documents or consideration. However, he could not file any documents or consideration. However, he could not file any documents or evidence in support of the claim that expenses crystallized during evidence in support of the claim that expenses crystallized during evidence in support of the claim that expenses crystallized during the year under consideration. In view of above facts, the reasoning the year under consideration. In view of above facts, the reasoning the year under consideration. In view of above facts, the reasoning
M/s Maharashtra State Power Generation M/s Maharashtra State Power Generation 7 Company Limited & CO No. 153/Mum/2022 ITA No. 2752 & CO No. 153/Mum/2022 given by the Ld. CIT(A) for deleting the addition for prior period given by the Ld. CIT(A) for deleting the addition for given by the Ld. CIT(A) for deleting the addition for expenditure cannot be accepted expenditure cannot be accepted. Accordingly, we set aside the we set aside the finding of the Ld. CIT(A) and restore the matter back to the file of finding of the Ld. CIT(A) and restore the matter back to the file of finding of the Ld. CIT(A) and restore the matter back to the file of the Ld. Assessing Officer for deciding afresh with the liberty to the the Ld. Assessing Officer for deciding afresh with the liberty to the the Ld. Assessing Officer for deciding afresh with the liberty to the assessee to produce all the necessary evi assessee to produce all the necessary evidence in support of its dence in support of its claim that prior period expenses under reference were crystallized claim that prior period expenses under reference were crystallized claim that prior period expenses under reference were crystallized during the year under consideration. The ground of appeal of the during the year under consideration. The ground of appeal of the during the year under consideration. The ground of appeal of the Revenue is accordingly allowed for statistical purposes. Revenue is accordingly allowed for statistical purposes. Revenue is accordingly allowed for statistical purposes.
7. In the additional cross In the additional cross-objection, the Ld. Counsel of the objection, the Ld. Counsel of the assessee raised the issue of levy of interest u/s 234A, 234B and assessee raised the issue of levy of interest u/s 234A, 234B and assessee raised the issue of levy of interest u/s 234A, 234B and 234C of the Act.
8. On perusal of the order of the Ld. CIT(A) on the issue On perusal of the order of the Ld. CIT(A) on the issue On perusal of the order of the Ld. CIT(A) on the issue-in- dispute, we find that the assessee was aggrieved for not granting dispute, we find that the assessee was aggrieved for n dispute, we find that the assessee was aggrieved for n credit of advance tax amounting to ₹162 crores. In this respect, the credit of advance tax amounting to 162 crores. In this respect, the Ld. CIT(A) has directed the Assessing Officer to verify the claim of Ld. CIT(A) has directed the Assessing Officer to verify the claim of Ld. CIT(A) has directed the Assessing Officer to verify the claim of the assessee and allow the credit accordingly. The relevant finding the assessee and allow the credit accordingly. The relevant finding the assessee and allow the credit accordingly. The relevant finding of Ld. CIT(A) is reproduced as under: of Ld. CIT(A) is reproduced as under:
“6.2 I have considered the facts and circumstances of the I have considered the facts and circumstances of the I have considered the facts and circumstances of the case, submissions of the appellant and material available on case, submissions of the appellant and material available on case, submissions of the appellant and material available on record on the above matter. Appellant has claimed that it has record on the above matter. Appellant has claimed that it has record on the above matter. Appellant has claimed that it has not been granted the Advance tax payment credit of Rs not been granted the Advance tax payment credit of Rs not been granted the Advance tax payment credit of Rs 1,62,00,00,000/ 1,62,00,00,000/-. Appellant has submitted copy of challan ellant has submitted copy of challan reflecting the payment made. In view of the above AO is reflecting the payment made. In view of the above AO is reflecting the payment made. In view of the above AO is directed to verify the contentions of the appellant and if it is directed to verify the contentions of the appellant and if it is directed to verify the contentions of the appellant and if it is M/s Maharashtra State Power Generation M/s Maharashtra State Power Generation 8 Company Limited & CO No. 153/Mum/2022 ITA No. 2752 & CO No. 153/Mum/2022 found that credit has not been given for advance tax paid, the found that credit has not been given for advance tax paid, the found that credit has not been given for advance tax paid, the same may be rectified. The ground o same may be rectified. The ground of appeal no 3 to 3.3 are f appeal no 3 to 3.3 are hereby allowed subject to verification by AO hereby allowed subject to verification by AO.” grant of credit for advance tax of ₹ ₹162 crores, the 8.1 Due to non-grant of credit for advance tax of Assessing Officer has computed interest u/s 234B and 234C of the Assessing Officer has computed interest u/s 234B and 234C of the Assessing Officer has computed interest u/s 234B and 234C of the Act. The assessee filed an application for rectifica Act. The assessee filed an application for rectification of the said tion of the said interest before the Assessing Officer. However, same has been interest before the Assessing Officer. However, same has been interest before the Assessing Officer. However, same has been stated to be pending. We find that the Ld. CIT(A) directed the stated to be pending. We find that the Ld. CIT(A) directed the stated to be pending. We find that the Ld. CIT(A) directed the Assessing Officer to recalculate interest u/s 234A, 234B and 234C Assessing Officer to recalculate interest u/s 234A, 234B and 234C Assessing Officer to recalculate interest u/s 234A, 234B and 234C of the Act. In our opinion, the computation of t of the Act. In our opinion, the computation of the interest has to be he interest has to be allowed after verification of due payment by the assessee and allowed after verification of due payment by the assessee and allowed after verification of due payment by the assessee and therefore, the Ld. CIT(A) has rightly directed the Assessing Officer to therefore, the Ld. CIT(A) has rightly directed the Assessing Officer to therefore, the Ld. CIT(A) has rightly directed the Assessing Officer to verify the said issue. We find that application of the assessee verify the said issue. We find that application of the assessee verify the said issue. We find that application of the assessee seeking rectification on this issue seeking rectification on this issue is also been stated to be pending is also been stated to be pending before the AO. In the circumstances, we feel it appropriate to direct before the AO. In the circumstances, we feel it appropriate to direct before the AO. In the circumstances, we feel it appropriate to direct the Assessing Officer to comply with the direction of the Ld. CIT(A) if the Assessing Officer to comply with the direction of the Ld. CIT(A) if the Assessing Officer to comply with the direction of the Ld. CIT(A) if the rectification application of the assessee has not been disposed the rectification application of the assessee has not been disposed the rectification application of the assessee has not been disposed off by him. The ground raised in additional cross The ground raised in additional cross- objection of the assessee is accordingly allowed for statistical purposes. assessee is accordingly allowed for statistical purposes. assessee is accordingly allowed for statistical purposes.
9. Since, the ground raised Since, the ground raised in the cross-objection objection by the assessee are connected with the issue of prior period expenses which we are connected with the issue of prior period expenses which we are connected with the issue of prior period expenses which we have already restored to the file of the Assessing Officer and restored to the file of the Assessing Officer and restored to the file of the Assessing Officer and therefore, no separate adjudication required that ground of cross- therefore, no separate adjudication required that ground of cross therefore, no separate adjudication required that ground of cross objection are also allowed for statistical purposes. objection are also allowed for statistical purposes.
M/s Maharashtra State Power Generation M/s Maharashtra State Power Generation 9 Company Limited & CO No. 153/Mum/2022 ITA No. 2752 & CO No. 153/Mum/2022
In the result, both the appeal of the Revenue and cross In the result, both the appeal of the Revenue and cross In the result, both the appeal of the Revenue and cross- objection of the assessee objection of the assessee are allowed for statistical purposes. are allowed for statistical purposes.