DEPUTY COMMISSIONER OF INCOME TAX -1(1), RAIPUR vs. CHHATTISGARH STATE POWER DISTRIBUTION COMPANY LIMITED, RAIPUR

आदेश / ORDER PER BENCH: The captioned appeals preferred by the Revenue emanates from the respective orders of the Ld.CIT(Appeals)/NFAC, Delhi dated 30.10.2025, 23.10.2025 & 06.11.2025 for the assessment years 2010-11 to 2015-16, 2017-18 & 2018-19 as per the grounds of appeal on record.

A. Disallowance of ad-hoc expenses on account of repair and maintenance of plant and machinery and building; B. Disallowance of ad-hoc expenses on account of consultancy charges; C. Disallowance of expenses on account of interest to Power Finance Corporation D. Disallowance of other expenses as claimed by the assessee in ITR; E. Disallowance of interest expenses attributable to capital WIP;

3 DCIT, Circle-1(1), Raipur (C.G.)/JCIT (OSD) Vs. Chhattisgarh State Power Distribution Company Limited ITA Nos.796 to 802/RPR/2025 ITA No.30/RPR/2026 F. Disallowance of expenses on account of donation and contribution being share of expenses of CSPHCL; G. Bad debts Disallowance

A. Disallowance of ad-hoc expenses on account of repair and maintenance of plant and machinery and building; 4. The aforesaid issue runs through all the years of appeal. However, we shall take up the appeal of the Revenue in ITA No.796/RPR/2025 for A.Y.2010-11 as lead matter for adjudication. On the issue, the Ld.CIT(Appeals)/NFAC has held and observed as follows:

“The appellant company stated that it had filed its reply on 04/01/2025 rind 25/03/2025 in response to show cause notice and submitted a detailed submission during set-aside proceedings. It further submitted that it has filed complete ledger of the expenses claimed on said account along with amount, narration and name of the party is duly stated. As per the appellant, the appellant company being a State Government entity is subject of various audit like audit as per companies Act, Tax Audit, revenue audit and audit by CAG. As per the appellant, during the year under consideration, the appellant company has incurred expenses on account of general repairs and maintenance of its plant & machinery and building and incurred Rs.78,58,08,256/- under the head repair on account of Plant & Machinery and Rs.5,25,14,599/- under the head repairs to building. Further, appellant has submitted that the appellant company is having gross block of plant & machinery and buildings of Rs.1997,89,87,561/- and against the said huge block of P & M and buildings, the assessee company has incurred sum of Rs.84,90,48,508/- (Rs.84,43,26,786/- and Rs.47,21,722/-) on repairs & maintenance which is around 4.25% of gross block of assets i.e. plant & machinery and buildings, which is very normal.

4 DCIT, Circle-1(1), Raipur (C.G.)/JCIT (OSD) Vs. Chhattisgarh State Power Distribution Company Limited ITA Nos.796 to 802/RPR/2025 ITA No.30/RPR/2026 Further, it is important to mention here that the appellant company is having 8 Regional Accounts Office (RAO's) in the entire state of Chhattisgarh and the expenses incurred on account of repairs & maintenance are related to all the RAO's. The appellant has also mentioned that the same addition on account of repairs & maintenance on plant & machinery and building was made by the assessing officer in the case of erstwhile Chhattisgarh State Electricity Board in the assessment orders framed for the various assessment years, the details of the same are as under:

5 DCIT, Circle-1(1), Raipur (C.G.)/JCIT (OSD) Vs. Chhattisgarh State Power Distribution Company Limited ITA Nos.796 to 802/RPR/2025 ITA No.30/RPR/2026

From the above chart, it is apparent that in all the years the claim of the erstwhile assessee i.e. Chhattisgarh State Electricity Board on account of repairs & maintenance has been allowed by the assessing officer in various remand proceedings. year under consideration should be allowed, as there is no change in facts of the case of the earlier years and for the year Therefore, in view of principles of consistency as laid down by Apex Court in the case of Radha Saomi Satsang vs Commissioner of Income Tax [1992] 193 ITR 321, the claim of the assessee for the under consideration. Further, it is important to mention here that in all the above assessment orders, the assessing officer has made similar addition which was made by the assessing officer in the case of appellant i.e. disallowance of 2/3 of expenses claimed on account of repairs & maintenance.

6 DCIT, Circle-1(1), Raipur (C.G.)/JCIT (OSD) Vs. Chhattisgarh State Power Distribution Company Limited ITA Nos.796 to 802/RPR/2025 ITA No.30/RPR/2026

I have examined the assessment record, reply of the appellant and case history of the appellant. In my considered opinion, the AO has not been able to bring on record any discrepancy in the accounts produced by the appellant with respect to repair and maintenance. AO has merely mentioned that the replies 3f assessee are only based on explanations without any cogent supporting evidence. The AO has mentioned that the appellant has furnished ledger accounts and some bills and vouchers but the issue cannot be decided in absence of all supporting documents. The assessing officer has failed to bring on record any evidence which proves the fact that the expenses claimed by the appellant are in capital in nature or absence of which supporting evidence could lead to addition. The defects in books of accounts pointed out by the AO, neither the books of accounts has been rejected. AO has not met the contention of the appellant that not even a single expense has been pointed out which is in capital in nature. It is also important to note that all the expenses incurred by the appellant company are through banking channels and each and every bill has to pass through various check and balances being a State Government entity. The appellant had day-to-day books of accounts which includes bills, vouchers, journal, cash book, ledgers, the summary of which produced before AO. The expenses are in line with previous year expenses incurred under this head. The action of the assessing officer in making ad-hoc disallowance does not carry any weightage as no specific defect or discrepancy has been pointed out. Therefore, the addition made by the assessing officer amounting to Rs.52,36,58,610/- is deleted. The grounds of appeal No. 3 are allowed.”

7 DCIT, Circle-1(1), Raipur (C.G.)/JCIT (OSD) Vs. Chhattisgarh State Power Distribution Company Limited ITA Nos.796 to 802/RPR/2025 ITA No.30/RPR/2026 the assessee are in capital in nature and there are no corroborative evidence which leads to the impugned addition. Further, books of account had not been rejected. It is settled principles of law that without resorting to Section 145(3) of the Income Tax Act, 1961 (for short ‘the Act’), there cannot be any addition on estimate basis. The aforesaid view is fortified by the decision of ITAT, DB & SMC Bench, Raipur in the cases of (i) Anil Kumar Jain Vs. ACIT (Central), Bilaspur, ITA No.584 & 585/RPR/2025, dated 06.01.2026; and (ii) Isha Metal Stores Vs. ACIT, Central Circle-2, Raipur (C.G.), ITA No.756/RPR/2025, dated 23.02.2026; and (iii) Step Logistics Private Limited Vs. DCIT, Circle-1(1), Raipur (C.G.), ITA No. 636/RPR/2025, dated 19.03.2026.

8 DCIT, Circle-1(1), Raipur (C.G.)/JCIT (OSD) Vs. Chhattisgarh State Power Distribution Company Limited ITA Nos.796 to 802/RPR/2025 ITA No.30/RPR/2026 i.e. A.Ys.2011-12 to 2015-16, 2017-18 & 2018-19. Resultantly, this ground of appeal raised by the Revenue for all the years of appeal stands dismissed.

B. Disallowance of ad-hoc expenses on account of consultancy charges; 8. The aforesaid issue runs through all the years of appeal. However, we shall take up the appeal of the Revenue in ITA No.796/RPR/2025 for A.Y.2010-11 as lead matter for adjudication. On the issue, the Ld.CIT(Appeals)/NFAC has held and observed as follows:

“The appellant company submitted that during assessment proceedings, a detailed copy of ledger of expenses incurred on account of consultancy charges. In the said ledger details like date, name of party, nature of expenses, amount incurred etc. purpose of expense are duly stated. As per appellant, the expenses incurred by the appellant are routine expenses like fees to advocate, fees to CA, technical fees etc. and the same are revenue in nature. The appellant further submitted that none of the expenses incurred by the assessee company are capital in nature, hence, the same is an allowable expense. During the assessment, the assessing officer made an ad-hoc addition of 25% of expenses incurred on account of total consultancy charges of Rs.4,83,63,167/-. The perusal of the assessment order shows that the assessing officer has not pointed out any discrepancy in the ledger/expenses incurred by the appellant that the same are not for the purpose of business or are capital in nature. All the expenses incurred through banking channel. AO has merely mentioned that the replies of assessee are only based on explanations without any cogent supporting evidence. The AO has mentioned that the appellant has furnished ledger accounts and some bills and vouchers but the issue cannot be decided in absence of all supporting documents. The action of the assessing officer in making ad-hoc disallowance does not carry any weightage as no specific defect or discrepancy has been pointed out. Therefore, the addition

9 DCIT, Circle-1(1), Raipur (C.G.)/JCIT (OSD) Vs. Chhattisgarh State Power Distribution Company Limited ITA Nos.796 to 802/RPR/2025 ITA No.30/RPR/2026 made by the assessing officer, amounting to Rs.1,20,90,790/- is deleted. The grounds of appeal No. 4 are allowed.”

10 DCIT, Circle-1(1), Raipur (C.G.)/JCIT (OSD) Vs. Chhattisgarh State Power Distribution Company Limited ITA Nos.796 to 802/RPR/2025 ITA No.30/RPR/2026 10. That in so far this issue of disallowance of ad-hoc expenses incurred on account of consultancy charges are concerned, our decision rendered in ITA No.796/RPR/2025 for A.Y.2010-11 shall mutatis-mutandis apply to remaining years of appeal of the Revenue where this issue is arising i.e. in A.Ys.2011-12 to 2015-16 & 2017-18. Resultantly, this ground of appeal raised by the Revenue for all these years of appeal stands dismissed.

C. Disallowance of expenses on account of interest to Power Finance Corporation;

11 DCIT, Circle-1(1), Raipur (C.G.)/JCIT (OSD) Vs. Chhattisgarh State Power Distribution Company Limited ITA Nos.796 to 802/RPR/2025 ITA No.30/RPR/2026 12. That it was brought to the notice of the A.O and submitted by the assessee that the assessee company had paid sum of Rs.23,35,368/- as interest charges to Power Finance Corporation of India Limited. Out of the sum of Rs.23,35,368, sum of Rs.16,20,366/- was related to the project loan, hence the same has been capitalized and balance of Rs.7,15,002/- was related to day to day activities of the assessee company and not related any project which is under implementation. The Ld. CIT(Appeals)/NFAC had allowed this ground by observing that the said expenses being allowable expenditure and the A.O had not mentioned any reason to sustain the said addition, therefore, the same was deleted. The Ld. CIT-DR only submitted that it was disallowed by the A.O since complete details were not furnished by the assessee but what exactly are those details does not appear in the order of A.O. Accordingly, we do not find any infirmity in the findings of the Ld.CIT(Appeals)/NFAC on this issue which is upheld and the relief provided to the assessee is hereby sustained. Thus, this ground of appeal raised by the Revenue is dismissed.

D. Disallowance of other expenses as claimed by the assessee in ITR;

12 DCIT, Circle-1(1), Raipur (C.G.)/JCIT (OSD) Vs. Chhattisgarh State Power Distribution Company Limited ITA Nos.796 to 802/RPR/2025 ITA No.30/RPR/2026 this issue wherein, disallowance of other expenses of Rs.22,57,73,600/- was claimed by the assessee in its ITR. On the issue, the Ld.CIT(Appeals)/NFAC has held and observed as follows: “The assessee company has claimed following expenses:

As per the appellant, these are day-to-day operational revenue expenses which are incurred for the purpose of business and during the course of business. As per the appellant, all the expenses incurred by the assessee company are paid through regular banking channels only. Further, the appellant stated that the assessing officer has accepted the above expenses claimed by the appellant in all the earlier years i.e. AY 2010-12, 2011-12, 2012-13 and 2013-14 which were pending before him in set aside proceedings. The nature of expenses claimed by the appellant in the year under consideration and in all the preceding years are exactly same.

13 DCIT, Circle-1(1), Raipur (C.G.)/JCIT (OSD) Vs. Chhattisgarh State Power Distribution Company Limited ITA Nos.796 to 802/RPR/2025 ITA No.30/RPR/2026 The appellant contested that the assessing officer failed to give any cogent or reasonable ground for making said ad-hoc disallowance. The assessing officer has made ad-hoc disallowance of 10% of total other expenses claimed by the appellant company. It has been observed that no such ad-hoc disallowance were made by the assessing officer in any of the previous years. No specific discrepancy has been pointed out in these expenses by AO. In view of above discussion, disallowance of other expenses of Rs.22,57,73,600/- made by the A.O is deleted. The grounds of appeal is allowed.”

14 DCIT, Circle-1(1), Raipur (C.G.)/JCIT (OSD) Vs. Chhattisgarh State Power Distribution Company Limited ITA Nos.796 to 802/RPR/2025 ITA No.30/RPR/2026 disallowance, therefore, there is no reason to interfere with the findings of the Ld. CIT(Appeals)/NFAC which is therefore, upheld. Thus, this ground of appeal raised by the Revenue for this year of appeal is dismissed.

E. Disallowance of interest expenses attributable to capital WIP;

“During the instant year, the appellant company has incurred finance cost of Rs.17550.61 lacs. As per the appellant company, it has been incurred for the purpose of business and during the course of business on borrowed funds. The appellant company mentioned that the appellant company itself has capitalized the interest cost of Rs.1913.20 lacs to its fixed asset as the same were related to the borrowed funds used for capital assets. In the original assessment order, the assessing officer has made ad-hoc disallowance on the presumption that the 50% of the capital work in progress

15 DCIT, Circle-1(1), Raipur (C.G.)/JCIT (OSD) Vs. Chhattisgarh State Power Distribution Company Limited ITA Nos.796 to 802/RPR/2025 ITA No.30/RPR/2026 shown in note no. 6.1(c) has been capitalized out of borrowed funds and made ad-hoc disallowance of Rs.53,01,63,000/-. The appellant company stated that the claim of finance cost of Rs.17550.61 lacs is correct and an allowable expenses u/s 36(1)(iii) of the Act. The above submission and explanation has been made before the assessing officer during the course of set-aside proceedings. The assessing officer has not mentioned any discrepancy or reasoning to sustain this addition during the set aside proceedings. In my considered opinion, it is an allowable expenses u/s. 36(1)(iii) of the Act. Hence, AO's action of disallowing interest expenses of Rs.53,01,63,000/- is not found sustainable. The addition is deleted. The ground of appeal is allowed.”

16 DCIT, Circle-1(1), Raipur (C.G.)/JCIT (OSD) Vs. Chhattisgarh State Power Distribution Company Limited ITA Nos.796 to 802/RPR/2025 ITA No.30/RPR/2026 No.801/RPR/2025, A.Y.2015-16. Resultantly, this ground of appeal raised by the Revenue for this said year of appeal also stands dismissed.

F. Disallowance of expenses on account of donation and contribution being share of expenses of CSPHCL; 19. The aforesaid issue runs through only in the following years of appeal i.e. A.Y.2011-12 (ITA No.797/RPR/2025) & 2012-13 (ITA No.798/RPR/2025). We shall take up the appeal of the Revenue in ITA No.797/RPR/2025 for A.Y.2011-12 as the lead matter wherein disallowance of expenses of Rs.11,10,12,001/- were incurred on account of donation and contribution being share of expenses of CSPHCL. The Ld. CIT(Appeals)/NFAC had provided relief to the assessee observing as follows: “As per the appellant, “the account head used in the trial balance is donation and contribution and in the audited is classified as “A & G Expenses of Holding Company”. The assessee has not made any donation of Rs.11,10,12,001/- during the year under consideration. The books of accounts of the assessee are maintained under a coded accounting software and as at the time of preparation of account of the relevant year, there was no specific account head available to debit the expenses incurred on account of share of administrative expenses incurred by the Holding Company” As per the appellant, it is the share of expenses of Holding Company which is an allowable expenses under section 37(1) of the Act. To allow it is an expnese, the expenditure must not be of a capital or personal nature and it must have been laid out or expended wholly and exclusively for the purposes of the subsidiary’s business. As no discrepancy has been pointed out with respect to the transfer of Rs.11,10,12,001/- by the appellant company to account for its share of administrative expenses, the addition on this account is deleted. Ground No.5 is allowed.”

17 DCIT, Circle-1(1), Raipur (C.G.)/JCIT (OSD) Vs. Chhattisgarh State Power Distribution Company Limited ITA Nos.796 to 802/RPR/2025 ITA No.30/RPR/2026

18 DCIT, Circle-1(1), Raipur (C.G.)/JCIT (OSD) Vs. Chhattisgarh State Power Distribution Company Limited ITA Nos.796 to 802/RPR/2025 ITA No.30/RPR/2026 21. That in so far this issue of disallowance of expenses incurred on account of donation and contribution being share of expenses of CSPHCL are concerned, our decision rendered in ITA No.797/RPR/2025 for A.Y.2011-12 shall mutatis-mutandis apply to ITA No.798/RPR/2025, A.Y.2012-13. Resultantly, this ground of appeal raised by the Revenue for the said year of appeal also stands dismissed.

G. Bad debts disallowance: 22. This issue only emanates in Revenue’s appeal in ITA No.30/RPR/2026, A.Y.2018-19. The relevant findings of the Ld. CIT(Appeals)/NFAC on this issue are extracted as follows: “The AO disallowed bad debt of Rs.96,60,00,000/- without assigning specific reasons for this disallowance. The appellant gave the following submission: "The fact of the matter is that post reorganization of erstwhile CG State Electricity Board into 5 successor companies many balances were transferred to the successor companies by the State Government through notification dated 29/10/2010. However, on subsequent follow-ups with regard to balance under the head receivable for GOCG of total amount of Rs.415.34 crore, the assessee's share was Rs.96.60 crore was not received; hence, the appellant claimed the same as an expense by debiting to the P& L account. It is further submitted that the amount receivable from the State Government is in the nature of revenue subsidy on account of free/subsidized supply of electricity to BPL card holders and farmers and the same is credited in P & L account in the year in which such supplies are made. Therefore, as the amount has been credited in P & L account, hence, if the said receivable is debited to P & L account in subsequent years such claim is allowable u/s 36(2) of the Act. However, as constant follow up and correspondence with the State Government did not yield any response, the management

19 DCIT, Circle-1(1), Raipur (C.G.)/JCIT (OSD) Vs. Chhattisgarh State Power Distribution Company Limited ITA Nos.796 to 802/RPR/2025 ITA No.30/RPR/2026 is of the opinion that the recovery of the same is highly doubtful and hence decided to write off such subsidy receivable from state government. Further, the above fact finds support from the note no. 28 of the audited financial statements for the year -under consideration." In view of above detailed explanation and accounting entry alongwith note mentioned in the audited financial statements for the year under consideration, the bad debts of Rs.96,60,00,000/- is allowed.”

20 DCIT, Circle-1(1), Raipur (C.G.)/JCIT (OSD) Vs. Chhattisgarh State Power Distribution Company Limited ITA Nos.796 to 802/RPR/2025 ITA No.30/RPR/2026 24. In the combined result, all the appeals of the Revenue are dismissed as per afore-stated terms.

Order pronounced in the open court on 20th April, 2026.

Sd/- Sd/- AVDHESH KUMAR MISHRA PARTHA SARATHI CHAUDHURY (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) रायपुर/ RAIPUR ; �दनांक / Dated : 20th April, 2026. SB, Sr. PS आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to : 1. अपीलाथ� /The Appellant. 2. ��यथ� /The Respondent. 3. The CIT(Appeals)-1, Raipur (C.G.) 4. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, रायपुर ब�च, रायपुर / DR, ITAT, Raipur Bench, Raipur. 5. गाड� फ़ाइल / Guard File. Samira Digitally आदेशानुसार / BY ORDER, signed by n Bera, Samiran Bera, // True Copy // Sr. PS, ITAT, Sr. PS, Raipur Senior Private Secretary Date: आयकर अपील�य अ�धकरण, रायपुर / ITAT, Raipur. ITAT, 2026.04.20 16:48:10 Raipur +05'30'