ANDHRA PRADESH POWER GENERATION CORPORATION LIMITED,VIJAYAWADA vs. THE ACIT, CIRCLE-3(1), VIJAYAWADA

Similarly in respect of corporate social responsibility, the assessee submitted the detailed reply stating that the assessee had incurred the corporate social responsibility expenditure which was business expenditure in RTPP Stage-1 (O&M) as amounts were spent under NTR Sujala Pathakam for providing drinking water to the surrounding villages, therefore, argued that there is no error in the assessment order passed u/s 143, hence requested to drop the proceedings. After having heard the submissions of the assessee, the Ld.Pr.CIT observed that the assessee has claimed the expenditure under royalty to others and under the corporate social responsibility in the return of income and the AO neither verified the issues nor brought the information on records. Therefore, viewed that the assessment order passed by the AO was erroneous and prejudicial to the interest of the revenue, hence, set aside the assessment with a direction to reexamine the issues and complete the assessment denovo in accordance with law and established procedures.

Against the order of the Ld.Pr.CIT, the assessee is in appeal before us. During the appeal hearing, assailing the contention that there was no royalty payment to the state government, Ld.AR vehemently argued that the assessee has not paid the royalty, but paid the industrial water charges and made the payment for purchase of water as per the rates prescribed by the State Government in G.O.Ms No.39 and the same was recorded in annual general report and also notes on accounts, therefore, argued that since, the entire material was placed before the Pr.CIT, the Ld.Pr.CIT ought to have verified the same and dropped the proceedings. He further stated that the mention of royalty payment is a mistake and subsequently rectified the said mistake in the Income Tax returns filed for the A.Y.2017-18 onwards. With regard to corporate social responsibility, the Ld.AR submitted that the expenditure was business expenditure, hence, argued that there is no case for revision u/s 263, hence requested to quash the order passed u/s 263 by Pr.CIT, Vijayawada.

On the other hand, the Ld.DR vehemently supported the order of the Ld.Pr.CIT and argued that the Ld.Pr.CIT has rightly taken up the case for revision and requested to uphold the order of the Ld.Pr.CIT.

We have heard both the parties and perused the material placed on record. In the instant case there is no dispute that as per the return of income filed, the assessee made the claim under royalty payment to others. Similarly, expenditure was also claimed under Corporate Social Responsibility. Royalty payment to others was stated to be in respect of industrial water purchased by the assessee from the state government and corporate responsibility was stated to be related to the specific scheme formulated by the state government for NTR Sujala Pathakam providing 20 ltrs of water to surrounding areas, thus, claimed the same as business expenditure. The claim of the assessee in respect of purchase of water from the state government needs to be verified in the light of the claim made in the return of income and the actual expenditure incurred. Similarly, in the explanation, the assessee stated that Andhra Pradesh Water Resources Development Corporation was authorized to pass resolution authorizing the Andhra Pradesh Industrial Infrastructure Corporation to levy and collect the industrial water rates as fixed by the government from time to time. Whether the supply of water by the AP Industrial Infrastructure Corporation is on contract basis or outright sale basis also needs verification to ascertain the TDS if any. Only after proper verification of the complete details, the nature of expenditure and it’s allowability is to be decided whether it is for purchase of water or royalty payment or supply of water on contract basis.

Similarly, in respect of the payment made on account of corporate social responsibility, there is no dispute that the assessee made the claim under Corporate Social Responsibility and the AO has neither collected any information nor verified the genuineness of the expenditure as observed by the Ld.Pr.CIT. Whether the expenditure incurred was related to Corporate Social Responsibility or the business expenditure and the genuineness and correctness of the expenditure also required to be verified. Since the AO failed to verify the above issues, the assessment order passed by the AO is erroneous and prejudicial to the interest of the revenue and we hold that the Ld.Pr.CIT rightly taken up the case for revision u/s 263 and the same is upheld. The appeal of the assessee is dismissed.

In the result, appeal of the assessee is dismissed. Order pronounced in the open court on 25th June, 2021. (एन के चौिरी) (धड.एस .सुन्दरधसंह) (N.K.CHOUDHRY) (D.S.SUNDER SINGH) न्याधयकसदस्य/ JUDICIAL MEMBER लेखासदस्य/ACCOUNTANT MEMBER Dated : 25.06.2021 L.Rama, SPS आदेशकीप्रतितितिअग्रेतषि/Copy of the order forwarded to:- 1. तिर्धाररिी/ The Assessee -Andhra Pradesh Power Generation Corporation Ltd., C/o M.Chandra Mouleswara Rao, Chartered Accountant, C-3,Skylark Apartments, Near Skyline Theatre, Basheerbagh, Hyderabad. 2. रधजस्व/The Revenue –Asst.Commissioner of Income Tax, Circle-3(1), Vijayawada

The Pr.Commissioner of Income Tax, Vijayawada 4. तवभधगीयप्रतितितर्, आयकरअिीिीयअतर्करण, तवशधखधिटणम/DR, ITAT, Visakhapatnam 5.गधर्ाफ़धईि / Guard file आदेशधिुसधर / BY ORDER ////