COMMISSIONER OF INCOME TAX-III, HYD vs. VBC FERRO ALLOYS LIMITED, HYDERABAD

IMTHE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAT) WEDNESDAY ,THE TWENTY FIRST DAY OF SEPTEMBER TWO THOUSAND AND TWENTY TWO PRESENT THE HON'BLE THE CHIEF JUSTICE UJJAL BHUYAN AND THE HON'BLE SRI JUSTICE C.V. BHASKAR REDDY INCOME TAX TRIBUN AL APPEAL NO: 64 0F 2004 Appeal Under Section 260 A of the lncome Tax Act , 1961 aggrieved by the order in l.T.A. No. 643 t Hyd I 2001 datecl 30-05-2002 on the file of the lncome Tax Appellate Tribunal , Hyderabad Bench- A., Hyderabad preferred against the order of the Commissioner of lncome Tax ( Appeals ) ' ll HyderabadinlTANo.24lJCSR'5/ClT(A)-ll/1999-2000dated13-06-2001 preferred against the order of the Joint commissioner of lncometax ( Assts)., Special Range -5, Hyderabad dated 30'03'1999 in PAN / GIR No' V'3 /SR's Between: Commissioner Of lncome Tax-lll, Hyderabad. ...APPELLANT AND VBC Ferro Alloys Limited, Hyderabad' ,,.RESPONDENT Counsel for the Appellant: SRl. J. V. PRASAD (SC FOR INCOME TAX) Counsel for the Respondent: SRI CHALLA GUNARANJAN The Court made the following: ORDER

THE HON'BLE THE CHIEFJUSTICE UJJAI BHUYAN AND THE HON'BLE SRIJUSTICE C.V.BHASKAR REDDY I.T.T.A.No. 64 of 2004 IUDGMELI, Prr rhe Hon'bh rhe ChieJJ'li@ Uial Bh,Ja,,) Heard Mr. J.V.Ptasad, learned Standing Counsel for the lncome Tax Department appearing for the appellant and Mr. Challa Gunaranjan, learned counscl for rhe r espondenr- ASSCSSEE. 2. This appeal has been prcferred by thc re\renuc as the appellant under Section 260-A of the Income 'fax Act, 1961 (briefly 'the Act' hereinafter) assailing the legaliry ancl validiry of rhe order dated 30.05.2002 passed by the Income Tax Appellare Tribunal, Hydeabad Bench 'A', Hyderabad (fribunal) 1n I.T.A. No. 643/Hyd /2001 for the assessmentyear 1996-97. 3. Though the appeal was admitted on 01.04.2004, substanrial questions of law were not framed as requircd under Section 260-4 of the Act. However, lrom the memo of appeal, rvc find that the following rrvo questions have been proposed its substandal

2 \l\ questions of law: (A) In the facts and citcumstances of the case, whether the Appellate Tribunal is iustified in holding that the additional charges and interest payable to the A.P.State Electricity Board for the delayed pa)':rnent of consumption charges does not fall vdthin the puruiew of fee and hence it is deductable as expenditure nonvithstanding non-remittance of the same before the date stipulated U/s.438 of the I.'I.Act ? (t)) Whcther thc Appellate Tribunal is justified in holding that the assessee is entided to giant of deduction of the cxpendirure in spite of the same not having bcen recorded in the books of accounts much less claimed as a deduction in the return under the I.T.Act ? 4. As per the lrst question, decision of the Tribunal that additional charges and interest paid to the Andhra Ptadesh State Elecricity Board for delayed payment of consumption chatges does not fall vithin the purview of fee and hence, it is deductible as expendirure, is questioned. It is questioned on the ground that it

I 3:: is covered under Section 438 of the Act. Since there was non- payment within the stipulated period, it was not a deductable item. 5. On the other hand, second question pcrtains to entitlement of the assessee to deduction ol the cxpenditure incurrcd in spite of the same not being recorded in the books o[ accour.tt as rvell as not claimed as a deduction in the income tax returfl filecl under the lct. The second quest.ion has been raised on the ground that the said deduction was oot so claimed by the assessee either in thc income tax return filed or during the assessment proceedings before the assessing officer. 6. It is not necessary for us to traverse through the orders passed by the revenue authorities inasmuch as both the qucst.ions are covered b1, decisions oF the Supreme Court as rvcil as o[ this Cout. l Insofar the first question is concerned, the same is squarely\, covered by a decision of this Court reported in CIT v. Andhra

::4:: Ferro Alloys (P) Ltdt. In the sard decision, a Division Bench of this Coutt had examined the contours of Section 438 of the Act and thereafter, held as follows: Section 438 of the Act does not specifically mention about the electricity charges. The proviso to the Section says that an assessee has to pay the actual Liabitty on or before the due date applicable in this case for furnishing the return of income. In the instant case, the assessee challenging the balance elecuiciry clrarges of Rs.52,23,790/-, filed a writ petition before this Court against the APSEB and this Coutt granted interim stay and the writ petition is pending. As such, the assessee has shown tl:e said amount as liabiliry. In this view of the matter, we are of the cotrsidered opinion that the assessee has to pay tlre disputed clectricitl' charges of Rs.52,23,790/- to the APSEB as it obtained stay from this Court, and as sucl-r, the provisions of Sectjon 43B of the Act would not attract to such unpaid electricity charges. Further, non-payment of such disputed electricity chatges to the APSEB cannot be termed as 'fees' and that thc Revenue has to give deduction to the said t 2ot2 (349) ITR 255 amount.

( J The Tribunal while allowing the Appeal held that the electricity charges partake the narurc of statutory liabilitv and accordingly will have to be allorvcd as deduction irrespective of whether or not the same has been paid and notwithstanding that thc assessee has disputed any liability to pay any part of such charges. Section 438 of the Act does not speak about the electricity charges. Nowhere it is mentioned in the Section or proviso to it that unpaid electricity charges are flot deductable. The Revenue cannot intelpret the provisions of Section 43B of the Act in its favour, since the provisions of Section do not incolporate the electricity charges. Therefore, we are o[ the considered opinion that such electricity charges ate in the nature of starutory Iiability and the Revenue has to allow them as deduction irrespective of rvhether or not the same has been paid and notwidrstanding that the assessee has disputed any liabiliqv to pay any part of such charges." 8. Regarding the second question, the issue was setded by the Supreme Court in National Thermal Power Company Limited v Commissioner of Income Tax2, rvhich rvas explained by the Supreme Court in Goetze (India) Ltd. V. Commissioner of 2 1tm1l SCC 489 = 1998 (229) ITR 383

6 Income Tax3. -fhis issue croppcd up again before the Supreme Court in Wipro Finance Limited v. CITa wherein it has been before the Tribunal though such a bar may oPerate against the reveflue. 9. In vierv of the above, both the questions proposed AS substantial queslions o[ law are answered against the revenue and in lavour of the as sessee. 10. Consequendy, the appeal is dismissed. No costs. As a sequel, miscellaneous petitions, pending if any, stand dismissed. SD/.B.S.CHI EVI JOINT REGI RAR //TRUE COPY// FICER To, 1. The lncome Tax Appellate Tribunal , Hyderabad Bench- A., Hyderabad 2. The Commissioner of lncome Tax ( Appeals ) - ll Hyderabad 3. The Joint Commissioner of lncometax ( Assts)., Special Range -5, Hyderabad 4. One CC to SRl. J. V. PRASAD (SC FOR INCOME TAX), Advocate IOPUC] 5. One CC to SRl. CHALLA GUNARANJAN, Advocate IOPUC] 6. Two CD Copies 7. One Spare Copy N fr\r-'-- I clarified tl-rat thcrc is no bar for an assessee to set up a fresh claim SECTION \

HIGH COURT DATED:21 10912022 STAT6 O t \ 2t olI ?$11 ) I, ORDER ITTA.No.64 of 2004 DISMISSING THE TTTA WITHOUT COSTS N\',A a, \"\-- @