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Income Tax Appellate Tribunal, BENCH “I”, MUMBAI
Before: SHRI D.KARUNAKARA RAO & SHRI PAWAN SINGH
Assessee by : Mr. Niraj Sheth -AR Revenue by : Shri Saurabh Kumar Rai -DR Date of hearing : 23.02.2017 Date of Pronouncement : 15.03.2017 Order Under Section 254(1) of Income Tax Act PER PAWAN SINGH, JM: 1. This appeal by assessee u/s.253 of the Income Tax Act (the Act) is directed against the order of Ld. Commissioner of Income-Tax(Appeals) [Ld. CIT(A)]- 21, Mumbai dated 19.11.010 for Assessment Year (AY) 2007-08. The assessee has raised only one ground of appeal is that the ld. CIT(A) erred in confirming the disallowance of Rs. 24,85,000/- being expenditure on repairs to plant and machinery.
2. Brief facts of the case are that the assessee is subsidiary of Maharashtra State Electricity Board holding company limited. The assessee is engaged in transmission and distribution of electricity in the State. The assessment for relevant assessment year was completed on 29.09.2009 u/s 143(3) of the Act. While framing the assessment, the Assessing Officer (AO) disallowed Rs. 24,85,000/- on account of overstatement repairs. On appeal before the ld.
Maharashtra State Electricity Transmission Co. Ltd.
CIT(A), the disallowance was sustained. Thus, the present appeal is filed before us.
We heard the ld AR for the assessee and the ld DR for the Revenue. The ld. AR of the assessee argued that the issue raised in the present appeal is covered in his favour by the decision of Mumbai Tribunal including Rashtriya Chemicals and Fertilizers Ltd. (ITA No. 3863/Mum/2006 dated 07.10.2008 and the decision of Delhi Tribunal in Escorts Limited vs. IAC (2004) 89 TTJ (Del) 221. The Ld. Authorized Representative (AR) of the assessee further argued that expenditure incurred by assessee is only 0.043% of total turnover of the assessee-company. The accounts of assessee-company are always subjected to an audit by the Comptroller & Auditor General of India in term of section 619(4) of the Companies Act. The assessee made the expenditure on repair of plant and machinery on different location in the preceding year. As a result, the expenditure on repair and maintenance of plant and machinery was overstated. In fact the expenditure is almost negligible comparative to the turnover of the assessee. was under stated. On the other hand, ld. Departmental Representative (DR) for the Revenue supported the order of authorities below.
We have considered the rival contention of the parties and gone through the order of authorities below. We find that almost identical issue was adjudicated by co-ordinate bench of this Tribunal in Rashtriya Chemicals and Fertilizers Ltd. (supra), wherein the expenses in dispute was .005% of total turnover of the assessee which was allowed of errors and omission being period expenses was allowed. The co-ordinate bench passed the following order: “8. We have considered the rival submissions and perused the record of the case. Admittedly, the assessee was following mercantile system of accounting and, therefore, all the accrued liabilities and all the accrued income had to be accounted for in the year in which the said liability crystallised and income accrued. However, it cannot be ruled out that in the big set up, which the company had, there could not be any errors or omissions in maintaining the accounts. We find the issue is covered in favour of the assessee by the decision of Co-ordinate Bench in assessee’s own case for the AY 1997-98 (supra). Wherein, on identical facts, the Tribunal following the decision of the ITAT Delhi in the case of Escorts Limited (supra), decided the issue in favour of the assessee. The relevant para is reproduced hereunder:
Maharashtra State Electricity Transmission Co. Ltd.