Chhattisgarh State Power Transmission Company Ltd Vs ACIT (ITAT Raipur)
ITAT Raipur held that assessee company was entitled for depreciation on WDV on consideration that was paid by it and not on WDV that was lastly shown by CSEB, before its disintegration.
Facts- The assessee company which is owned by the State Government of Chhattisgarh and is engaged in the business of transmission of electricity in the state of Chhattisgarh was formed after the disintegration of erstwhile Chhattisgarh State Electricity Board. The return of income was e-filed by the assessee company for A.Y.2011-12 on 31.03.2013, declaring a loss of Rs.(-) 41,21,48,674/-(as per revised return). Case of the assessee was, thereafter, selected for scrutiny assessment u/s.143(2) of the Act.
It was observed by the A.O that the assessee company had, inter alia, raised a claim for depreciation of Rs.155,28,95,676/- on the basis of WDV received as per the transfer scheme. However, the A.O was of the view that the assessee company was entitled for depreciation on the WDV that was lastly shown by CSEB, before its disintegration, for each block of assets, which thereafter, were ultimately transferred to all the new companies formed on its disintegration, viz. CSPGCL, CSPTCL (i.e. assessee company), CSPDCL and CHPHCL. The A.O on the basis of his aforesaid observations restricted the assessee’s claim for deprecation to an amount of Rs.140,28,29,892/-. Accordingly, the assessee’s claim for excess depreciation of Rs.15,00,65,784/- was disallowed by the A.O.
It was observed by the A.O that the assessee company had failed to come forth with the relevant details with respect to its claim for deduction of repair and maintenance expenses. The A.O observing that his predecessor while framing assessment for the preceding years had held 2/3rd part of the expenditure as capital expenditure and restricted its entitlement under similar circumstances to 1/3rd of its claim for deduction of revenue expenditure, thus, adopted the same approach and disallowed an amount of Rs.14,40,56,831/- out of the aforesaid claim for deduction of repair and maintenance expenses as was raised by the assessee company.
Conclusion- ITAT Mumbai in the case of Chhattisgarh State Power Distribution Company Ltd. vs. DCIT had held that the cost of assets acquired by the assessee company would be the consideration that was paid by it by issuing equity shares to CGSPHCL. It was further observed by the Tribunal that cost of assets in the hands of the assessee would be the value on which depreciation would be allowed as per the rates prescribed u/s.32(1)(ii) of the Act. Backed by its aforesaid observations, the Tribunal had directed the A.O to allow deprecation to the assessee on the cost of acquisition of the assets as was recorded by the assessee in accordance with the scheme framed by the State Government of Chhattisgarh.
As the facts involved in the case before us remains the same as were there before the Tribunal in the aforementioned case of Chhattisgarh State Power Distribution company Ltd., therefore, we respectfully follow the same. Accordingly, we set-aside the order of the CIT(Appeals) and direct the A.O to allow depreciation to the assessee company on the cost of acquisition of the assets as recorded by the assessee in accordance with the scheme framed by the State Government of Chhattisgarh.
We are of the considered view that now when in the case of CSEB for A.Y.2004-05 the matter has been remitted by the Tribunal to the file of the A.O for fresh adjudication, therefore, in all fairness, a similar direction would be required qua the issue in hand in the case of the present assessee company before us. We, thus, in terms of our aforesaid observations restore the matter to the file of the A.O for fresh adjudication qua the admissibility of the assessee’s claim for deduction of repair and maintenance expenses.
FULL TEXT OF THE ORDER OF ITAT RAIPUR
The captioned appeals filed by the assessee are directed against the orders passed by the CIT(Appeals)-1, Raipur dated 29.02.2016 85 27.02.2019 respectively, which in turn arises from the orders passed by the A.O. u/s.143(3) of the Income-tax Act, 1961 (for short ‘Act’), dated 28.03.2014 and 25.03.2015 for A.Ys. 2011-12 85 2012-13, respectively. As common issues are involved in the aforementioned appeals, therefore, the same are being taken up and disposed off by way of a consolidated order.
2. We shall first take up the appeal filed by the assessee in ITA No.81/RPR/2020 for A.Y.2011-12, wherein the impugned order has been assailed on the following grounds of appeal before us:
“1. On the facts and in the circumstances of the case and in law the Commissioner of Income-tax (Appeals)-I, erred in sustaining the disallowance of depreciation expenses to the extent of Rs.15,00,65,784/-.
The appellant humbly prays that the depreciation expenses to the extent of Rs.15,00,65,784/- may kindly be allowed in the interest of justice and equity.
2. On the facts and in the circumstances of the case and in law the Commissioner of Income—tax (Appeals)-1 erred in sustaining the disallowance of Repairs & Maintenance expenses to the extent of Rs.14,40,56,831/- on the facts and in the circumstances of the case and in law.
The appellant humbly prays that the Repairs & Maintenance expenses to the extent of Rs.14,40,56,831/- may kindly be allowed in the interest of justice and equity.
3. On the facts and in the circumstances of the case and in law the Commissioner of Income-tax (Appeals)-I erred in sustaining the addition of Rs.3.84,838/- to the income on account of Income assessed in the hands of Holding Company.
The appellant humbly prays that the addition of Rs.3,84,838/- to the income account of Income assessed in the hands of holding Company may kindly be deleted in the interest of justice and equity.
4. On the facts and in the circumstances of the case and in law the Commissioner of Income-tax (Appeals)-I erred in sustaining the addition of Rs.9,35,24,807/- to the income on account of Employees contribution to GPF, GSLIS, NCP and EPF.
The appellant humbly prays that the addition of Rs.9,35,24,807/- to the income account of Employees contribution to GPF, GSLIS, NCP and EPF may kindly be deleted in the interest of justice and equity.
5. In view of the above the appellant humbly prays that the appeal preferred by the appellant may kindly be allowed in the interest of justice and equity.
6. The Appellant prays that the Appeal he heard and allowed for the advancement of the substantial cause of Justice.”
3. Succinctly stated, the assessee company which is owned by the State Government of Chhattisgarh and is engaged in the business of transmission of electricity in the state of Chhattisgarh was formed after the disintegration of erstwhile Chhattisgarh State Electricity Board. The return of income was e-filed by the assessee company for A.Y.2011-12 on 31.03.2013, declaring a loss of Rs.(-) 41,21,48,674/-(as per revised return). Case of the assessee was, thereafter, selected for scrutiny assessment u/s.143(2) of the Act.
4. During the course of assessment proceedings, it was observed by the A.O that the assessee company had, inter alia, raised a claim for depreciation of Rs.155,28,95,676/- on the basis of WDV received as per the transfer scheme. However, the A.O was of the view that the assessee company was entitled for depreciation on the WDV that was lastly shown by CSEB, before its disintegration, for each block of assets, which thereafter, were ultimately transferred to all the new companies formed on its disintegration, viz. CSPGCL, CSPTCL (i.e. assessee company), CSPDCL and CHPHCL. The A.O on the basis of his aforesaid observations restricted the assessee’s claim for deprecation to an amount of Rs.140,28,29,892/-. Accordingly, the assessee’s claim for excess depreciation of Rs.15,00,65,784/- [Rs.155,28,95,676/- (-) Rs. 140,28,29,892/-] was disallowed by the A.O.
5. Further, on perusal of the details, it was gathered by the A.O that the assessee had shown an amount of Rs.15,77,667/- as a liability outstanding against stale cheques. The A.O holding a conviction that there could be no liability based on stale cheques for the reason that the concerned party could not raise any claim on the basis of cheques which had become barred by time, thus, made an addition of the aforesaid amount of Rs.15,77,667/- to the returned income of the assessee company u/s.41(1) of the Act.
6. Apart from that, it was observed by the A.O that the assessee company had failed to come forth with the relevant details with respect to its claim for deduction of repair and maintenance expenses. The A.O observing that his predecessor while framing assessment for the preceding years had held 2/3rd part of the expenditure as capital expenditure and restricted its entitlement under similar circumstances to 1/3rd of its claim for deduction of revenue expenditure, thus, adopted the same approach and disallowed an amount of Rs.14,40,56,831/- out of the aforesaid claim for deduction of repair and maintenance expenses as was raised by the assessee company, as under:
