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Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
Before: SHRI V. DURGA RAO, HON’BLE & SHRI D.S. SUNDER SINGH, HON’BLE
per the Directors' Report. In this context, it is noticed that in the Director’s Report, the expenditure incurred towards electricity only has been shown by the appellant as part of disclosure with respect to Conservation of Energy, whereas in the profit & loss account there was an expenditure incurred towards Leased Shed Electricity Charges and Boiler Maintenance of Rs.3,98,891/- and Rs.1,99,12,305 respectively, which was claimed under the head Power and Fuel Expenditure. In fact, it is further noticed that the appellant has been using a licensed boiler for many years and the expenditure on Husk for firing the said boiler and the generator maintenance by way of diesel and other connected expenditure has been allowed all along. It is also observed that in the preceding assessment year, such expenditure has been claimed by the appellant and was not subjected to any disallowance by the Assessing Officer. The appellant produced evidences in respect of installation of a new high capacity boiler during the year under consideration with appropriate licences during the course of assessment proceedings as well as during the appeal proceedings before me. It is observed that the Assessing Officer has allowed the depreciation claimed by the appellant on this asset. Further, it is also observed from the comparative statement of sales, G.P. and N.P. submitted by the appellant that the turnover for the year under consideration was Rs.83.65 crores as against 30.82 crores in the preceding year. Similarly, the expenditure towards 'Power and Fuel' increased from Rs.1,31,44,144/- to Rs.3,84,60,222/- during the year on account of expansion and to fuel the new boiler and there is increase in turnover also. In view of the foregoing, I am of the opinion that the Assessing Officer has only relied upon the Directors Report in making the disallowance without considering that there is increase in turnover as compared to the preceding year vis-a-vis increase in the expenditure during the year, increase in gross profit and net profit. The appellant has been claiming the expenditure in respect of Boiler Maintenance during the preceding year and was allowed, by the Assessing Officer and also there in no change in the nature of the business of the appellant. Hence, the Assessing Officer is not justified in disallowing the difference of Power and Fuel Expenditure of Rs.20393529/-. Accordingly, the Assessing Officer is directed to delete the disallowance made in this regard.”
9 ITA No.26 /VIZ/2015 C.O.No. 17/VIZ/2015 (M/s. Kwality Feeds Ltd.)
On being aggrieved, Revenue carried the matter in appeal before this Tribunal. 8. Ld. Departmental Representative has submitted that assessee has not able to substantiate the expenditure incurred in respect of husk and coal of Rs. 2,03,93,529/-, hence Assessing Officer disallowed the same. He further submitted that ld. CIT(A) without examining the details of the expenditure incurred in respect of coal and husk, based on the submissions made by the assessee directed the Assessing Officer to allow the expenditure, is not correct and submitted that issue may be remitted back to the file of the Assessing Officer for fresh consideration. 9. On the other hand, the Authorised Representative for the assessee strongly relied on the order passed by the ld. CIT(A). He also submitted that the Assessing Officer disallowed the expenditure only based on the Director’s Annual Report, which is factually incorrect and therefore, the entire expenditure incurred by the assessee has to be allowed and submitted that the order passed by the ld. CIT(A) may be upheld. 10. We have heard both the parties, perused the material available on record and gone through orders of the authorities below.
10 ITA No.26 /VIZ/2015 C.O.No. 17/VIZ/2015 (M/s. Kwality Feeds Ltd.)
The assessee has claimed expenditure of Rs. 3,84,60,222/- under the head ‘power and fuel’ in the profit & loss account. The Assessing Officer has noticed from the Director’s Report (Form-A) that the expenditure incurred under the head power & fuel consumption was only of Rs. 1,80,66,693/-. Therefore, Assessing Officer asked the assessee to substantiate the entire expenditure claimed in the profit & loss account. The assessee has submitted before the Assessing Officer that the Director’s Report (Form-A) is aimed to disclose the energy conservation measures taken by the specified industries with regard to petroleum products i.e. diesel oil, furnace oil and other oils and electricity in view of their impact on economy due to the reason that crude oil is imported from other countries. To initiate control measures upon such resources, Form-A is prescribed by the Ministry of Company Affairs. Whereas, paddy husk is only agro waste generated by rice milling units and it is bulky in nature and it could be used locally, its transportation and labour charges are normally more than its cost. In view of these, Director’s report did not specifically disclose these items in Form-A. The Assessing Officer after considering the explanation of the assessee, came to a conclusion that the entire amount of Rs. 3,84,60,222/- is not exclusively incurred for the
11 ITA No.26 /VIZ/2015 C.O.No. 17/VIZ/2015 (M/s. Kwality Feeds Ltd.)
purpose of business and only expenditure incurred as per the Director’s Report (Form-A) of Rs. 1,80,66,693/-, is allowed by treating it as exclusively incurred for the purpose of business. The remaining balance of Rs. 2,03,93,529/- (Rs. 3,84,60,222 – Rs.1,80,66,693) was disallowed and added back to the total income of the assessee. On appeal, ld. CIT(A) by considering the explanation given by the assessee directed the Assessing Officer to delete the addition. We find that ld. CIT(A) not at all examined the details in respect of Rs. 2,03,93,529/- claimed by the assessee. Even, the Assessing Officer also not examined the details filed by the assessee. The assessee has not filed the Director’s Report before us. Under these facts and circumstances of the case, we are of the opinion that the claim of the assessee has to be examined with proper evidence. In view of the above, we set aside the order passed by the ld. CIT(A) and remit the matter back to the file of the Assessing Officer and direct the Assessing Officer to decide the issue denovo by considering the details in accordance with law after providing reasonable opportunity of hearing to the assessee. The assessee is also directed to file all the details in respect of expenditure claimed of Rs. 2,03,93,529/- before the Assessing Officer.
12 ITA No.26 /VIZ/2015 C.O.No. 17/VIZ/2015 (M/s. Kwality Feeds Ltd.)
C.O.No. 17/VIZ/2015 12. At the time of hearing, ld. Authorised Representative for the assessee has submitted that he doesn’t want to press this Cross Objection. In view of the statement made by the Authorised Representative for the assessee, this Cross Objection filed by the assessee is dismissed. 13. In the result, appeal filed by the Revenue is allowed for statistical purpose and the Cross objection filed by the assessee is dismissed. Order Pronounced in open Court on this 18th day of July, 2018. sd/- Sd/- (D.S. SUNDER SINGH) (V. DURGA RAO) Accountant Member Judicial Member Dated : 18th July, 2018. vr/- Copy to: 1. The Assessee-M/s. Kwality Feeds Ltd., No.3/57, Ramanapudi, Gudivada Rural Mandakl, Krishna Dist. 2. The Revenue – DCIT, Circle-1(1), Vijayawada. 3. The CIT, Vijayawada. 4. The CIT(A), Vijayawada. 5. The D.R., Visakhapatnam. 6. Guard file. By order
(VUKKEM RAMBABU) Sr. Private Secretary, ITAT, Visakhapatnam.