TAMILNADU TRANSMISSION CORPORATION LTD.,CHENNAI vs. ACIT CORPORATE CIRCLE 3(1), CHENNAI

Disallowance of Guarantee Commission of Rs.11.48 Crores as paid to State government of Tamilnadu 2.1 The assessee paid commission for the guarantee given by the state government on portion of loans raised by the assessee for resource mobilization. The Ld. AO disallowed the same on the ground that this payment was never seriously intended to be paid. The Ld. CIT(A) confirmed the same against which the assessee is in further appeal before us. 2.2 This issue has been decided in assessee’s favor by Tribunal in & 1046/Chny/2019 for AYs 2014-15 & 2015-16 order dated 28-10-2021. The bench, in para-10, directed Ld. AO to allow the same as business expenditure. Respectfully following the same, we would hold that this expenditure would be allowable to the assessee. The corresponding grounds as raised by the assessee stand allowed.

Disallowance of liability towards contribution to recognized provident fund for employees for Rs.13.24 Crores 3.1 The assessee debited employee cost of Rs.13.24 Crores. The same represent amount collected from employees and an equal contribution of the assessee towards provident fund. However, this amount was not paid to recognized provident fund on the ground that approval from state government was yet to be received. Since the same was not paid, Ld. AO disallowed the same. The Ld. CIT(A) confirmed the same and held that the same could be claimed on payment basis. Aggrieved, the assessee is in further appeal before us.

Prior Period Adjustments 4.1 The assessee claimed net prior period expenses of Rs.1853.75 Crores. The prior period income was netted off against the same and net amount of Rs.1458.29 Crores was claimed as prior period expenditure. Since the expenditure did not relate to this year, the Ld. AO disallowed entire expenditure of Rs.1853.75 Crores. The Ld. CIT(A) partly allowed the same against which the assessee is in further appeal before us. 4.2 The first item is provision for Insurance Reserves for Rs.404.98 Crores. This reserve was created for creating a self-insurance. This amount was kept aside for meeting any loss of assets on account of fire, flood and cyclone. However this amount was never utilized and accordingly, not allowed by Ld. CIT(A). The findings of lower authorities remain undisturbed before us also. Nothing has been shown that this reserve has been created on a scientific basis. Therefore, the same has rightly been disallowed. We order so. 4.3 The next item is excess Transmission Charges for Rs.75.74 Crores. The same represent transmission charges excessively billed in earlier years and offered to tax in AY 2015-16. The credit note was stated to be issued to TANGEDCO during January, 2016 and accordingly, the revenue was reversed in this year. It was pointed out that the TANGEDCO also offered the same to tax in this year. However, Ld. CIT(A) denied the same on the ground that any omissions or mistake on the part of the assessee could not be condoned in subsequent years. We are of the considered opinion, that this item represents excess billing done by the assessee in earlier years which has been reversed in this year by issuance of credit note. The crystallization has happened in this year and the benefitting party has also offered the same to tax in this year. The said amount has been offered to tax by the assessee in earlier years. Therefore, the same would be allowable to the assessee subject to verification by Ld. AO that this revenue was offered to tax in earlier years. 4.4 Similar is the issue of excess billing of Rs.6.70 Crores which is stated to be offered to tax in FYs 2013-14 and 2014-15. Facts being pari- materia the same, we would hold that the same would be allowable to the assessee subject to verification by Ld. AO that this revenue was offered to tax in earlier years. 4.5 Similar is the issue of is excess Operation and Maintenance Charges for Rs.10.90 Crores which has been accounted in excess from TANTRANSCO. The same is stated to be offered to tax in FYs 2013-14 and 2014-15. Facts being pari-materia the same, we would hold that the same would be allowable to the assessee subject to verification by Ld. AO that this revenue was offered to tax in earlier years. 4.6 The next item is disallowance of interest expenditure for Rs.2.06 Crores and disallowance of employees and other costs for Rs.7.85 Crores. The Ld. CIT(A) denied the deduction of the same on the ground that these were prior period expenditure and represent omissions and mistake on the part of the assessee. The Ld. AR has stated that interest expenditure was revenue in nature but the same was capitalized in earlier year. The same has been reversed in this year and the cost of the asset has been reduced and lower depreciation has been claimed by the assessee. The Ld. AO is directed to verify the same and if found correct, allow the same to the assessee. The Ld. AR has stated that the employee cost of Rs.7.85 Crores has already been disallowed by the assessee in the computation of income and disallowing the same would amount to double taxation. The Ld. AO is directed to verify the same and disallow the expenditure only once. 4.7 All these grounds stand allowed for statistical purposes. The appeal stand partly allowed in terms of our above order.

Pursuant to revisionary directions by appropriate authority, Ld. AO framed another assessment on 29-03-2022. In the revision order, it was noted that assessee’s own contribution as well as contribution received from the employee was not deposited into PFRDA Account. In the regular assessment, Ld. AO only disallowed employers’ contribution but failed to disallow employee’s contribution. The same would constitute income of the assessee in terms of Sec. 36(1)(va) r.w.s. 2(24)(x). Accordingly, Ld. AO revised the assessment. The assessee stated that though PFRDA was formed by Government of India to act as a regulator for the pension sector, the Government of Tamilnadu did not stipulate the guideline for managing and investment of CPS funds with pension managers. Consequently, the aforesaid amount could not be deposited with PFRDA. When the orders are received from Government of Tamilnadu, the same would be deposited with PFRDA along with applicable interest. However, rejecting the same, Ld. AO added unpaid amount of Rs.20.15 Crores to the income of the assessee. The Ld. CIT(A) confirmed the same for want of response from the assessee. Aggrieved, the assessee is in further appeal before us.

Since similar ground of employers’ contribution has been restored back by us in regular appeal to the file of Ld. AO for fresh adjudication, this appeal is also restored back to the file of Ld. AO on similar lines. The appeal stand allowed for statistical purposes. Conclusion 7. stand partly allowed. stand allowed for statistical purposes. Order pronounced on 15th January, 2025.