M/S KARNATAKA POWER CORPORATION LIMITED,BANGALORE vs. ACIT, BANGALORE
What did the Tribunal hold?
The tribunal restored the issue of disallowance under Section 40(a)(ia) to the AO for fresh examination. It upheld the disallowance of ROC charges and confirmed the CIT(A)'s disallowance of prior period expenses.
What were the facts?
The assessee, a state government undertaking engaged in power generation, appealed against the CIT(A)'s order for AY 2009-10. The appeal involved disallowances under Section 40(a)(ia), for ROC charges, and for prior period expenses.
What were the issues?
Whether disallowances under Section 40(a)(ia) and for prior period expenses were justified, and whether ROC charges for increased authorized capital were deductible.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A’’ BENCH : BANGALORE
Before: SHRI B.R BASKARAN & SHRI PAVAN KUMAR GADALE
O R D E R PER B.R BASKARAN, ACCOUNTANT MEMBER :
This appeal filed by the assessee is directed against the order dated 24/12/2013 passed by the CIT (A)-1, Bengaluru and it relates to the Assessment Year 2009-10.
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:-
(a) Disallowance u/s 40(a)(ia) of the Act. (b) Disallowance u/s 37 of ROC charges paid for increase of Authorized Capital (c) Disallowance of Prior Period Expenses.
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.
Order pronounced in the Open Court on 3rd May, 2019.
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- J.D. Marketing, Kolkata vs ITO, Ward 37(1), KolkataITA 1492/KOL/2026[2013-2014]Status: Disposed15 Oct 2026AY 2013-2014
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