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Income Tax Appellate Tribunal, Hyderabad ‘ B ‘ Bench, Hyderabad
Before: Shri Laxmi Prasad Sahu & Shri K. Narasimha Chary
Aggrieved by the order dated 8.6.2018 passed by the CIT(A)-5, Hyderabad (“learned CIT”), in the case of Variety Polyesters Ltd, (“assessee”) for the A.Y 2013-14, assessee preferred this appeal on the following grounds: “
1. On the facts and in the circumstances of the case, the order of the learned CIT (A)-5 Hyderabad, is erroneous, illegal and unsustainable on facts and in law.
2. The CIT (A) erred in sustaining the addition of FSA charges of Rs.45,14,399/- made by the Assessing Officer on the alleged ground that the same relates to prior period item. The authorities below failed to appreciate that the appellant has incurred and paid such expenditure in the previous year relevant to the assessment year under consideration and therefore the said expenditure was allowable.
3. The reliance placed by the authorities below on the judgments cited in the respective orders for making/sustaining addition of FSA charges of Rs.45,14,399/- is totally misplaced as the said judgements are not applicable to the facts of the appellant’s case.
4. The CIT (A) erred in not adjudicating the other grounds viz., (i) addition of Rs.1,45,051/- u/s 2(24)(x) r.w.s. 36(1)(va) of the Act (ii) disallowance of audit fee of Rs.2,00,000/-, (iii) disallowance of hire charges of Rs.7,20,000/-, (iv) disallowance of Rs.30,480/- being the expenditure incurred by Director on behalf of employees and (v) addition of income tax refund of Rs.27,030/-. The CIT (A) ought to have granted an opportunity to the appellant to carry out the requirement of law as the omission of the above grounds in the e- appeal was inadvertent.
5. The CIT (A) ought to have appreciated the issues which were raised in the written submissions (apart from the ones which were uploaded with e-appeal) arise from the assessment order and therefore, ought to have adjudicated the said grounds. The appeal proceeding before CIT(A) being an extension of the assessment proceedings, the CIT (A) could not have rejected the same on hyper technical grounds without affording an opportunity to the appellant for rectifying the procedural defects.
6. The CIT(A) having allowed the time sought to file submissions on 16.3.2018 and 05.06.2018, could not have made adverse comments about the filing of written submissions on 7.5.2018.
For these and other grounds that may be urged at the time of hearing, it is prayed that the Hon'ble Tribunal may be pleased to allow the appeal”.
Brief facts of the case are that the assessee is a company. They have filed their return of income for the A.Y 2013-14 on 30.09.2013, declaring income of Rs.21,39,750/-. During the course of assessment, learned Assessing Officer found that the assessee has claimed an amount of Rs.43,35,96/- in the P&L A/c under the head “extra-ordinary item” and that the electricity Fuel Surcharge Adjustment (FSA) charges include electricity charges for the financial years 2010-11 to 2012-13. According to the learned Assessing Officer, insofar as the FSA charges relating to the financial year 2010-11 and 2011-12 pertain to earlier period in respect of which liability had not been crystallized in view of the pendency of the matter before the Hon'ble Supreme Court. He, therefore, observed that the liability of this expenditure depends upon the orders of the Hon'ble Supreme Court and also the High Court as such, such an expenditure relating to the earlier year is not allowable for the A.Y 2013-14. On this premise, learned Assessing Officer disallowed the claim of the assessee in respect of FSA charges to the tune of Rs.45,14,399/- holding that it related to the earlier A.Ys.
So also, the Assessing Officer made certain additions in respect of section 43B of the Act to the tune of Rs.1,45,051/- and u/s 40(a)(ia) to the tune of Rs.9,20,000/- and interest u/s 244A of Rs.27,030/-.
Aggrieved by these disallowances and additions, the assessee preferred an appeal before the learned CIT(A). Learned CIT (A) by way of the impugned order, upheld the disallowance of the FSA charges relating to the A.Ys 2011-12 & 2012-13 on the same ground as held by the learned Assessing Officer sating that in respect of this prior period expenditure, the liability is unascertained. In respect of the other additions, the learned CIT (A) held that, only three grounds were mentioned in Form 35 and no additional grounds were filed and therefore, such addition cannot be challenged before him. Holding that such ground do not emanate from the form of appeal nor through any admission of additional ground, the same cannot be deserves to be adjudicated. Learned CIT (A) rejected the same also.
The assessee is therefore, in appeal before us stating that the authorities below failed to appreciate that the assessee incurred and paid such an expenditure in the previous year relating to the A.Y 2013-14 and therefore, the same is to be allowed. Learned AR submitted that though the FSA charges ere leviable from earlier A.Y, for the first time, the FSA charges were levied by way of bills in the financial year 2012-13 only in which year the assessee took the same into account. He, therefore, submits that in the absence of any allegation that no such expenditure was met, the same cannot be disallowed stating that it relates to the prior period. He further submitted that despite questioning the levy of FSA, the assessee made payment and in case of ultimately, the Hon'ble Supreme Court holds the issue against the assessee it will be offered to tax as income in that year, and because, as on the date the issue is held in favour of the assessee, the assessee is entitled to claim the same.
In respect of other conditions, it is submitted on behalf of the assessee that the appeal was filed before the CIT (A) in the year which is the first year after online filing of appeals and due to the technical incompetence, the other ground could not be uploaded in a proper way and though the statement of facts and the written submissions were addressed in respect of these additions, the CIT (A) rejected the same on technical ground. According to the learned AR, all the endeavor of the tax authorities is to determine the correct tax liability of the assessee, the technicalities play a very little role. He, therefore, prayed that ground no.4 of this appeal may be restored to the file of the CIT (A) for adjudication on merits.
learned DR brought to our notice clause v in page No.4 of the assessment order to say that the APSPDCL raised the demand for payment of the dues on 7.11.2015 and therefore, such crystallization of the liability of the assessee falls in the financial year 2015-16 only but not in 2013-14 and therefore, the authorities below rightly disallowed the same. He also justified the order of the learned CIT (A) in respect of the items mentioned in Ground No.4 of this appeal stating that there was no ground raised by the assessee either originally or by way of additional ground, the CIT (A) cannot adjudicate the same.
We have gone through the record in the light of the submissions made on either side. As could be gathered from the submissions before us on behalf of the assessee, the case of assesse is twofold in this appeal. Firstly, the bills allowing the FSA were issued during financial year 2012-13 followed by the letter dated 7.11.2015 subsequent to the adjudication of the matter by the competent authority and therefore, it is only in the year of crystallization of the liability, the assessee had taken into account, the liability in respect of FSA charges. On this ground, learned AR submitted that such an expenditure is allowable.
On this aspect, we find from the paper book at page Nos. 27 to 38 that irrespective of the fact of the FSA coming to force at a much earlier period of time, the liability was crystallized only during the financial year 2012-13 in which the appeals under page no.27 onwards in the paper book were issued. It is also not in dispute that there was a dispute raised by the assessee and others by way of writ petition and the Hon'ble High Court observes that the orders of the Regulatory Commission passed on 17.1.2012 shall not be enforced for the financial year 2009-10 till the disposal of the SLPs by the Hon'ble Supreme Court. Learned Assessing Officer also observed that the liability pertains to the relevant years is sub judice, the year in which the Hon'ble Supreme Court finalizes the issue and also the Hon'ble High Court disposes the assessee’s writ petition in that financial year, the interest would be allowed.
At this juncture, it is relevant to note that absolutely there is no dispute as to when for the first time, the FSA was levied by way of bills. It is not in dispute that pursuant to the bills issued in the financial year 2012-13 and referred to in the demand were payable in instalments and to that extent, the liability is crystallized. The expenditure is genuine. However, how many instalments were paid and to what extend the assessee is entitled to claim as expenditure is a fact to be verified at the end of the learned Assessing Officer. Suffice it to say that insofar as such payments were considered, the liability was crystallized only during the financial year 2012-13 pursuant to which the payments were made by the assessee and claimed as expenditure during the A.Y 2013-14.
With this view of the matter, we are of the considered opinion that inasmuch as the bills were issued in the financial year 2012-13 and as a result of litigation, the APSPDCL raised the demand on 7.11.2015 for payments of dues up to 06.08.2016 in instalments and the assessee paid such instalments, they are entitled to claim such payments in the A.Y 2013-14. Observing thus, we restore the issue to the file of the learned Assessing Officer for verification of the amounts paid during the financial year 2012-13 and to grant relief. Grounds 2 & 3 of this appeal are accordingly allowed for statistical purposes.
Ground No.4 relates to the additions u/s 2(24)(x) r.w.s.36(1)(va) and others etc., are concerned, the impugned order speaks that the learned CIT (A) observed that inasmuch as no specific ground is raised either originally or by way of additional grounds, the same do not deserves to be adjudicated. Hardships expressed by the assessee is that it is the first year for submission of the online appeals and therefore, due to the technical incompetence, there was an error in uploading the grounds, though the statement of facts and the written submission explained in detail, the plea of the assessee on this addition. It is prayed that an opportunity may be granted to the assessee to have their correct tax liability determined by the learned CIT (A).
Considering the hardships pleaded by the assessee and also in view of the fact that no rights are crystallized in the parties by such lapse of the assessee, we are of the opinion that the technicalities should not be allowed to overrun the delivery of substantial justice and this case deserves a lenient view. We accordingly set aside ground no.4 of this appeal to the file of the learned CIT (A) for adjudication on merits. Ground No.4 accordingly allowed for statistical purposes.
In the result, appeal of the assessee is allowed for statistical purposes.