M/S KARNATAKA POWER CORPORATION LIMITED,BANGALORE vs. ACIT, BANGALORE

In this appeal, assessee has raised 9 Grounds of Appeal. Grounds No.1, 2, 8 and 9 are general in nature. Ground No.7 is consequential in nature. Remaining grounds (3,4,5,6) relate to the following issues:-

The assessee is a State Government Undertaking and is engaged in the business of power generation.

The first issue relates to the disallowance made u/s 40(a)(ia) of the Act. The assessee paid a sum of Rs.9,00,788/- to M/s Occupation Health Services without deducting tax at source. Hence the AO disallowed the same u/s 40(a)(ia) of the Act. Before the ld CIT(A), the payee has offered the same as its income and hence the benefits of proviso to sec. 40(a)(ia) may be given. Since the assessee did not prove the said submissions, the Ld CIT(A) confirmed the disallowance.

We heard the parties and perused the record. In our view, in the interest of natural justice, the assessee may be provided with an opportunity to substantiate its claim. Accordingly we set aside the order passed by Ld CIT(A) on this issue and restore the same to the file of the AO for examining this issue afresh.

The next issue relates to the disallowance of ROC charges paid for increase of Authorised capital. We notice that the Ld CIT(A) has confirmed the disallowance by following the decision rendered by Hon’ble Supreme Court in the case of Brook Bond Ltd (255 ITR 798). Hence we do not find any reason to interfere with the order passed by Ld CIT(A) on this issue. The assessee has also made an alternative claim that this expenditure should be allowed in terms of sec.35D of the Act. However, we are of the view that the assessee has not satisfied the conditions prescribed in sec.35D and accordingly reject the alternative claim also.

The next issue relates to disallowance of Prior period expenses. The AO noticed that the assessee has claimed certain expenses, which were found to be related to earlier year. Before the AO, the assessee did not furnish any evidence to show that those expenses, though related to earlier period, actually got crystallized during the year under consideration. Hence the AO disallowed a sum of Rs.499.39 lakhs as prior period expenses. The Ld CIT(A) examined the details of each of the expenses and gave relief of Rs.308.70 lakhs. Remaining amount of disallowance was confirmed by Ld CIT(A), since the assessee could not prove that they got crystallized during the year under consideration.

We heard the parties on this issue and perused the record. We notice that the assessee did not furnish any details to controvert the findings given by Ld CIT(A) on this issue. Accordingly we confirm the order passed by Ld CIT(A) on this issue.

In the result, the appeal of the assessee is treated as partly allowed for statistical purposes.