The Raipur bench of the Income Tax Appellate Tribunal directed readjudication for disallowing the 2/3rd of Repair and Maintenance Expenditure as Capital Expenditure for Chhattisgarh State Power Transmission by Assessing Officer (AO).
The assessee Company (Chhattisgarh State Power Transmission Company Ltd.) 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/-.
It was observed by the A.O that the assessee company had, 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.
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.
Further 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 made an addition of the aforesaid amount of Rs.15,77,667/- to the returned income under Section 41(1) of the Income Tax Act, 1961.
It was also observed by the A.O that the assessee 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.
Aggrieved the assessee assailed the order passed by the A.O under Section 143(3) dated 28.03.2014 before the CIT(Appeals), but without any success in so far the aforesaid additions/disallowances made by the A.O were concerned. The assessee company being aggrieved with the order of the CIT(Appeals) carried the matter in appeal before the tribunal.
After careful consideration, the tribunal found that the primary issue that had weighed in the mind of the A.O while recharacterizing 2/3rd of the assessee’s claim for deduction of repair and maintenance expenditure as a capital expenditure was the fact that such approach was adopted by his predecessor while framing assessment for the earlier years.
The tribunal’s attention was drawn to the order passed by the Coordinate Bench of the Tribunal, Bench “C”, Mumbai in the case of Chhattisgarh State Electricity Board Vs. DCIT, wherein the Tribunal after deliberating at length on the issue of recharacterizing of the assessee’s claim for deduction of repair and maintenance expenditure as a capital expenditure by the A.O had restored the matter to the file of the A.O for fresh adjudication on merits.
The two-member bench consisting of Arun Khodpia (Judicial member) and Ravish Sood (Accountant member) restored 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. Thus, the Ground of appeal raised by the assessee company was allowed for statistical purposes.
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