Income Tax Appellate Tribunal - Chandigarh
M/S Punjab State Power Corporation ... vs Dcit, Circle, Patiala on 24 May, 2019
आयकर अपील य अ धकरण,च डीगढ़ ,आयकर धकरण यायपीठ "B" च डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH "B" BENCH, CHANDIGARH BEFORE SHRI N.K. SAINI, Vice-President AND SHRI HRI S.S.GODARA S.S.GODARA, JUDICIALMEMBER ITA No. No.977-979/CHD/2018 Assessment Year Years:2009-10 to 2011-12 Punjab State Electricity v. ACIT, Circle-Patiala Board, PSEB Head Office, The Mall, Patiala TAN/PAN:AABCP AABCP 7651 E अपीलाथ (Appellant) यथ (Respondent) ITA No. No.1028-1029 & 1030/CHD/2018 Assessment Year: 200 2009-10 to 2011-12 ACIT, Circle-Patiala v. Punjab State Electricity Board, PSEB Head Office, The Mall, Patiala TAN/PAN:
अपीलाथ (Appellant) यथ (Respondent)
आवेदक क ओर से/Assessee by: Shri K.P.Bajaj, Advocate
राज व क ओर से/Revenue
/Revenue by: Shri G.S. Phani Kishare, CIT
CIT-DR
ITA No.
No.980 & 1236/CHD/2018
Assessment Year: 2011-12
2011 & 2014-15
Punjab State Power v. ACIT, Circle-Patiala
Corporation Ltd., Chief
Financial Officer, Sheran
Wala Gate, Patiala
Punjab State Power DCIT, Circle, Patiala
Corporation Ltd., PSEB Head v.
Office, The Mall, Patiala
TAN/PAN:AAFCP
AAFCP 5120 Q
अपीलाथ (Appellant) यथ (Respondent)
Page 2 of 13
ITA No.1023 & 1209-1210/CHD/2018
Assessment Year:2011-12, 2013-14 to 2014-15 ACIT/DCIT, Circle-Patiala v. Punjab State Power Corporation Ltd., Chief Financial Officer, Sheran Wala Gate, Patiala TAN/PAN:AAFCP 5120 Q अपीलाथ (Appellant) यथ (Respondent) आवेदक क ओर से/ Assessee by: Shri Rajiv Saldi, CA राज व क ओर से/ Revenue by: Shri G.S. Phani Kishare, CIT-DR सन ु वाई क तार ख Date of 21 05 2019 hearing:
घोषणा क तार ख Date of 24 05 2019
pronouncement:
आदे श /O R D E R
PER BENCH:
The instant batch of eleven cases pertain to two assessees M/s Punjab State Electricity Board and Punjab State Power Corporation Ltd. The above latter assessee came into being after former's restructuring. The former assessee and the Revenue have filed their cross-appeals ITA No.977 to 979/Chd/2018 and ITA No.1028 to 1030/Chd/2018 against the Commissioner of Income-tax (Appeals)-Patiala's separate order(s) dated 03.05.2018, 08,05,2018 and 10.05.2018 passed in case Nos. T- 47-266/IT/CIT(A)/PTA/11-12, 1888/IT/CIT(A)/PTA/11-12 & 28/IT/ CIT(A)/PTA/14-15; respectively. Five cases pertain to latter assessee. It has filed two cases ITA No.980 & 1236/Chd/2018 alongwith Revenue's cross-appeals ITA No.1023 and 1210/Chd/2018 in assessment years Page 3 of 13 2011-12 and 2014-15 as well as ITA No.1209/Chd/2018 in assessment year 2013-14 against the very CIT(A)'s orders dated 10.05.2018 in first and 02.07.2018 in latter two assessment year(s) in case Nos.29/IT/CIT(A)/PTA/14-15, 10238/IT/CIT(A)/PTA/17-18; respectively, involving proceedings u/s 143(3) of the Income Tax Act, 1961; in short 'the Act'.
2. It transpires during the course of hearing that most of the issues sought to be raised in the instant batch are identical / inter- connected. The same are therefore disposed of vide our common adjudication for the sake of convenience and brevity.
3. A combined perusal of the instant case file(s) reveals that first and foremost common issue raised in all these appeals is that of correctness of prior period expenditure disallowance made in the course of assessments and partly confirmed in the CIT(A)'s respective orders by adopting netting method against the corresponding prior period income. We treat the former assessee M/s Punjab State Electricity Board's first appeal ITA No.977/Chd/2018 for the assessment year 2009-10 raising former substantive ground as the "lead" case in this regard. Following grounds have been raised in this appeal:-
"1. That on facts and circumstances of the case the ld. CIT(A) is not justified in upholding the disallowance out of prior period expenses incurred on administrative charges and interest and finance charges amounting to Rs.665,74,705/-.
2. That on facts and circumstances of the case the ld. CIT(A) is not justified in upholding the disallowance of expenses incurred in providing mobile facility to its employees."
4. There is no quarrel between the parties about the fact that it is not the issue of genuineness of assessee's claim of total prior period Page 4 of 13 expenditure amounting to Rs.127,95,27,809/- that calls for our adjudication since both the learned lower authorities are of the view that it has failed to prove the same to have crystallized during the relevant impugned previous year. There only case is that the assessee follows mercantile system of accounting and therefore, it ought to have raised claim in issue in the year of accrual going by mercantile system of accounting. Learned departmental representative vehemently contends during the course of hearing that the CIT(A) has rather erred in partly restricting the impugned expenditure to Rs.65,74,705/- only after netting of above gross claim against the assessee's prior period income. We find no merit in Revenue's instant argument. Hon'ble Gujarat high court's decision in Tax Appeal No.566 of 2016 PCIT vs. M/s Adani Enterprise holds that this is a revenue's neutral issue in case the assessee concerned is assessed at the same rate in both years i.e. the year of accrual and crystallization. This is not the Revenue's case that the assessee has not been assessed at the same rate in all these assessment years. Coupled with this, it has further come on record that the department has itself assessed assessee's prior period income in all these assessment years but disallowed prior period expenditure. We see no reason to express our concurrence with such an inconsistent method of assessment of prior period income and prior period expenditure. We accordingly conclude that the assessee is entitled to claim the impugned prior period outgo as allowable business expenditure in the impugned assessment year going by the above stated legal position. This assessee's former substantive ground, Revenue's second substantive ground in cross-appeal No.1028/Chd/2018 as well as first and second substantive grounds in former cases pertaining to three assessment years are decided against the Revenue going a similar analogy. We accept the latter assessee's identical first substantive ground in both of Page 5 of 13 its two appeals and decline the Revenue's first substantive grounds in its third cross-appeals (supra).
5. We continue to proceed issue-wise. The former assessee's identical second substantive grievance in its first two appeals in assessment years 2009-10 & 2010-11 seek to delete mobile facilities expenditure disallowance of Rs.7,08,895/- and Rs.10,04,856/-; respectively made in the course of assessment and affirmed in the lower appellate proceedings. The CIT(A)'s detailed discussion to this effect reads as under:-
"04. Ground of appeal No.23. During the course of Assessment proceedings the Ld A.O. found that the appellant had made an expenditu9re of Rs./7,82,202/- on account of Satellite charges for V Sat expenses and asked Appellant to show cause as to why the expenses should not be treated as Capital expenditure. The Appellant submitted that An equipment was placed on Punjab Wireless System, SAS Nagar, Mohali called V-sat satellite for providing communication system to the Board and that the same was viewed by the Ld CIT Appeals as a revenue expenditure. The Ld A.O. did not accept the submissions. During the appellate proceedings the Ld AR submitted as under:-
'Return of income in this case was filed on 27.09.2010 declaring therein loss for the current year at Rs./11043,24,96,868/-. The case was taken in scrutiny and the assessment u/s. 143(3) was made by the Ld. ACIT, Circle, Patiala (hereinafter referred to as the A.O., on net loss of Rs.728,72,47,770/- by making additions aggregating to Rs.314,52,48,698/- on following accounts:-
Satellite expenses 7,82,202 Bad debts by treating the same as provision13,03,319 Cost of mobile sets provided to staff For connectivity 10,04,856 Prior period expenses 190,41,26,739 Impact of audit observations 21,70,00,000 Income from other sources 102,10,31,582 304,52,48,698 In working out the assessed loss, the Ld. A.O. has made certain accounting mistakes inasmuch as per finding in the Page 6 of 13 observations of the auditor, which is reproduced at page 9 of the assessment order, as a result of not making certain adjustment the deficit declared in the books will go up from 13011.52 crores to 1323.22 crores. The loss to that extent should have, therefore, been added to the return loss. Similarly, out of the total loss declared from business, a part thereof being Rs.102,10,31,582/- has been treated as income under the head 'Income from Other Sources'. Having done so, the income should have been taken out from the income under the head business and profession. All these actions of the Ld. A.O. have been contested in appeal.
GROUND NO.2: Satellite Expenses of Rs.7,82,292/-:- An equipment was placed on Punjab Wireless System, SAS Nagar, Mohali called V-set satellite for providing communication system to the Board. It is used for collecting data for supervisory control and date acquisition. The amount paid was operational &*& usage charges of the V- sate satellite communication systems which were incidental to the business of the PSEB. No such satellite of its own was installed by the Board or an asset of enduring benefit came into existence. Therefore, the amount paid was not made for acquisition of any asset but for use thereof. Moreover, the books of accounts were audited by Comptroller & Auditor General of India and the same was not pointed out during the course of Audit. Further, while deciding the appeal no. 129/IT/CIT/PTA/08-09 dated 28.10.2009 for AY 2006-07 and appeal no.
337/IT/CIT/PTA/09-10 dated 231.02.2011 for AY 22007-09 viewed that payment made for usage of satellite are of revenue nature. The view taken has been upheld by the Hon'ble Jurisdictional Tribunal for the assessment year 2006-07 and 2007-08. It is therefore, requested that the addition made may kindly be deleted.
I have perused the submissions of the Ld AR in the Appellant's own case on the same issue for AY 2006-07 and 2007-08 my predecessor has while deciding the appeal no.
129/IT/CIT/PTA/08-09 dated 28.10.2009 for A Y 2006-07 and appeal no. 337/IT/CIT/PTA/09-10 dated 21.02.2011 for AY 2007-08 held that the impugned payment made for usages of satellite are of reavaenue nature. The view taken has been upheld by the Hon'ble Jurisdictional Tribunal for the assessment year 2006-07 and 2007-08. Respectfully following Page 7 of 13 the above decisions, I direct that the addition of Rs.7,82,202 be deleted./ Appellant succeeds on this ground of Appeal."
Learned counsel vehemently contends during the course of hearing that assessee has incurred the impugned expenditure for smooth functioning of its work-force comprising of senior officers officials in order to ensure better connectivity without bringing into existence a new asset forming part of corresponding block of assets and also that the impugned expenditure has been incurred wholly and exclusively for the purpose of its business u/s 37 of the Act. The Revenue's case on the other hand is that the assessee has purchased mobile sets for its work-force and therefore, the same has created a new asset(s) in the nature of capital asset giving enduring advantage and therefore, both the lower authorities have rightly disallowed the same as capital expenditure.
6. We have given our thoughtful consideration to rival contentions. The assessee's detailed instructions regarding the impugned mobile facilities to its work-force forming part of case file at pages 91 to 96 of the paper book from time to time makes it clear that it has not purchased even a single mobile set but reimbursed a fixed amount to different categories of employees drawing various pay-scales. This clinching fact has gone unrebutted at the Revenue's behest during the course of hearing. We therefore are of the view that the assessee itself has not purchased even a single mobile set. No new asset has come into existence in its books. We are rather dealing with a fixed amount reimbursement from employee-to-employee not partaking the character of mobile set purchases. We conclude in these facts that both the lower authorities have erred in holding the assessee's said reimbursement as capital expenditure. The assessee succeeds in its Page 8 of 13 identical second substantive ground in the two foregoing appeals. These two appeals ITA No.977 and 978/Chd/2018 raising these twin grievance(s) are allowed accordingly.
7. We now move on to Revenue's cross-appeals in these two assessment years ITA No.1028-1029/Chd/2018. Following grounds have been raised in ITA No.1028/Chd/2018 for the assessment year 2009- 10:-
"1. Whether in the facts and circumstances of the case, the Ld. CIT(A), Patiala is legally correct in deleting the addition of Rs.16,72,803/- on account of provision for Bad and Doubtful Debts.
2. Whether in the facts and circumstances of the case, the Ld. CIT(A), Patiala is legally correct in deleting the addition of Rs.127,29,53,104/- on account of prior period expenses/losses.
3. Whether in the facts and circumstances of the case, the Ld. CIT(A). Patiala is legally correct in deleting the addition of Rs.116.28,00,000/-- on account of discrepancies pointed out in C&AG report."
The Revenue's identical first substantive pleads that CIT(A) has erred in law as well as on facts in reversing the Assessing Officer's action disallowing bad and doubtful debts provision of Rs.16,72,803/- and Rs.13,03,319/-. Suffice to say, it transpires during the course of hearing that this tribunal's co-ordinate bench's decision in ITA No.1127 & 1130/Chd/2009 filed at Revenue's and assessee's behest in assessment year 2006-07 decided on 31.03.2013 had restored the issue back to the Assessing Officer. Learned assessing authority is stated to have allowed the said claim after due factual verification. There is no distinction on facts or law pin-pointed by either of the parties in the impugned assessment year. We therefore adopt judicial consistency to restore the instant issue as well back to the Assessing Officer for necessary factual verification in light of his findings in assessment year 2006-07. The Page 9 of 13 Revenue's instant first substantive ground in both these appeals is accepted for statistical purposes.
8. The Revenue's second substantive ground raising prior period disallowance issue already stands declined in both these two appeals (supra).
9. The Revenue's third substantive ground in these two appeals seeks to reverse the CIT(A)'s findings deleting additions of Rs.116,28,00,000 and Rs.21,70,00,000/- made by the Assessing Officer after noticing various discrepancies pointed out in CAG's (Comptroller and Auditor General)'s report. Both the learned representatives point out herein as well that this tribunal's findings in the corresponding issue raised in assessment year 2006-07 (supra) had restored the very issue back to the Assessing Officer wherein no disallowance has been made in consequential proceedings. We therefore follow judicial consistency to restore the instant issue as well back to the Assessing Officer for afresh factual verification to be decided in these with his findings in assessment year 2006-07. These two substantive issues are accepted for statistical purposes.
10. The Revenue's appeal ITA No.1028/Chd/2018 raising these two issues only accepted for statistical purposes in above terms.
11. Next comes Revenue's fourth substantive ground in assessment year 2010-11 that the CIT(A) has erred in law and on facts in treating the assessee's income derived from various sources i.e. interest on staff loan and advances, staff welfare activities, fixed deposits and other miscellaneous receipts amounting to Page 10 of 13 Rs.1,02,10,31,582/- as business income than income from other sources during the course of assessment. It transpires that CIT(A) has restricted the impugned addition to the extent of Rs.59,59,89,053/-from Rs. 1,02,10,31,582/-. It further emerges that this tribunal's order in ITA No.1024 & 1022/Chd/2018 dated 15.04.2019 in ACIT Vs. M/s Punjab State Transmission Corporation Ltd. (group concern after restructuring) has restored the issue back to the Assessing Officer to be adjudicated afresh in light of yet another co-ordinate bench's direction in assessment year 2005-06 in ITA No.446/Chd/2009 decided on 22.01.2004. We adopt judicial consistency herein as well therefore and direct the Assessing Officer to carry out necessary factual verification as per law. This fourth substantive ground in the instant Revenue's appeal is accepted for statistical purposes therefore. The main appeal ITA No.1029/Chd/2018 filed at the Revenue's behest in assessment year 2010-11 is partly allowed for statistical purposes.
12. Now comes assessment year 2011-12. The assessee's remaining second substantive in appeal ITA 979/Chd/2018 ground seeks to treat its income from various sources of Rs.675,29,993/- restricted to Rs.76,41,997/- as business income than income from other sources. Suffice to say, we have already restored the very issue back to the Assessing Officer in preceding paragraph in assessment year 2011-12. We adopt the said directions mutatis mutandis to accept the instant second substantive ground for statistical purposes. This assessee's appeal is allowed for statistical purposes in above terms.
13. We are left with Revenue's third appeal ITA No.1030/Chd/2018 with first and third issue of bad and doubtful debts and as to whether the taxpayer's income of Rs.599,24,012/- as business income or income from other sources. We make it clear that we have Page 11 of 13 already declined second substantive ground of prior period expenditure in preceding paragraphs (supra). It is further noticed that we have also restored the Revenue's identical substantive ground of bad debts and restored the latter issue of head of income back to the Assessing Officer in assessment years 2009-10 and 2010-11. We adopt the said detailed direction herein as well. The Revenue's first ground of bad and doubtful debts and third substantive ground stand restore back to the Assessing Officer. Its main appeal ITA No.1030/Chd/2018 is partly allowed for statistical purposes in above terms.
14. Now come the remaining five cases pertaining to latter assessee wherein we have already decided the prior period expenditure disallowance in assessee's favour (supra). The first assessment year herein as assessment year 2011-12. We reiterate that most of issues raised in these appeals are also identical / inter connected. The assessee's appeal ITA No.980/Chd/2018 in assessment year 2011-12 raises former substantive ground of prior period expenditure disallowance has already been accepted (supra). Next substantive ground seek to treat its income of Rs.939,506,622/- from various heads as in former assessee's case as business income than income from other sources. We adopt our preceding detailed directions mutatis mutandis as agreed upon by both the learned representatives and restore back instant second issue in assessment years 2011-12 as well as 2014-15 involving ITA No.1236/Chd/2018 for necessary factual verification. These two assessee's appeals ITA No.980 and 1236/Chd/2018 are partly allowed in above terms since we have already deleted prior period expenditure disallowance forming subject-matter of first substantive ground.
Page 12 of 1315. We are now left with Revenue's three appeals in ITA No.1023, 1209 and 1210/Chd/2018; issue-wise. Its first identical ground raises prior period expenditure disallowance which has already declined (supra). The Revenue's second substantive ground in all these cases qua term of assessee's receipt from various heads as income from other sources than business income. Suffice to say, we have already followed our direction in former assessee's case (supra) whilst restoring back these issues to the Assessing Officer. We adopt the said directions mutatis mutandis and leave the issue open to the Assessing Officer for necessary factual verification. The second substantive ground in all these three appeals is accepted for statistical purposes.
16. The Revenue's third substantive ground seeks to reverse CIT(A)' s identical action in all these three cases accepting the assessee's claim of brought forward loss amounting to Rs.76,38,36,74,320/-, Rs.1837,44,46,607 & Rs.1253,66,86,523; respectively. Its case is that assessee has not followed any scientific basis for apportionment of its losses. Case file(s) suggest that the very issue in assessee's case pertaining to assessment years 2011-12 to 2014-15 in the name and style of M/s Punjab State Transmission Corporation Ltd.(supra) involving ITA No.1023 to 1027/Chd/2018 filed at the Revenue's behest and decided on 15.04.2019 has restored the issue back to the Assessing Officer for necessary factual verification. We follow the suit herein as well and restore the last issue back to the Assessing Officer in above terms. These three Revenue's appeals are partly accepted for statistical purposes in above terms. Ordered accordingly.
17. To sum up, assessee's appeal ITA No.977-978/Chd/2018 are allowed and ITA 979, 980 and 1236/Chd/2018 partly allowed for Page 13 of 13 statistical purpose; Revenue's appeals ITA No.1028-1030, 1209-1210 & 1023/Chd/2018 are allowed for statistical purposes. A copy of this order be placed in respective case files.
Order pronounced in the open Court on ...24/05/2019.
Sd/- Sd/-
[N.K.SAINI] [S.S.GODARA]
VICE PRESIDENT JUDICIAL MEMBER
च"डीगढ़ DATED:...24/05/2019
*Dkp
आदे श क त ल प अ!े षत / Copy of Order Forwarded to:-
1. अपीलाथ / Appellant
2. यथ / Respondent
3. संबं,धत आयकर आय.
ु त च"डीगढ़/ Concerned CIT Chandigarh
4. आयकर आय.
ु त- अपील च"डीगढ़/ CIT (A) Chandigarh
5. 2वभागीय 4त4न,ध, आयकर अपील य अ,धकरण, च"डीगढ़ / DR, ITAT, Chandigarh
6. गाड7 फाइल / Guard file.
By order/आदे श से, /True Copy/ सहायक पंजीकार आयकर अपील य अ,धकरण, ।