By Sri. A. Shankar, Sr. Counsel For.sri v. Chandrashekar, Adv

IN THE HIGH COURT OF KARNATAKA AT BENGALURUDATED THIS THE 9 DAY OF JUNE 20271. PRESENT| THE HON’BLE MR. JUSTICE ALOK ARADHE AND| THE HON’/BLE MR. JUSTICE HEMANT CHANDANGOUDARLT.A.§ NC.424 OF 2014 BETWEEN: 1.|THE COMMISSIONER OF INCOME-TA® C.R. BUILDING, QUEENS ROAD BANGALORE. 2.|THE ASSISTANT COMMISSIONER| OF INCOME TAX, CIRCLE-11(5)_ RASHTROTHANA BHAVAN NRUPATHUNGA ROAD BANGALORE-560001. (BY SRI. K.V. ARAVIND, ADV.,) .., APPELLANTS~ AND" M/S. KARNATAKA POWER|CORPORATION LTD.,.SHAKTHI BHAVAN, NO.32RACE COURSE ROADBANGALORE. .., RESPONDENT (BY SRI. A. SHANKAR, SR. COUNSEL FOR.SRI. V. CHANDRASHEKAR, ADV.) | THIS I.T.A. IS FILED UNDER SEC. J6O0-A OF INCOME TAXACT 1961, ARISING OUT OF ORDER DATED 09.05.2014 PASSEDIN ITA NO.323/BANG/2012 FOR THE ASSESSMENT YEAR 2006-07,PRAYING TQ: | (1) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW,STATED ABOVE. (ii) ALLOW THE APPEAL AND SET ASIDE THE ORDER.PASSED BY THE ITAT, BANGALORE IN ITA NO.323/BANG/2012,DATED 09-05-2014 AND CONFIRM THE ORDER OF THE APPELLATE.COMMISSIONER CONFIRMING THE ORDER PASSED BY THE.ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-11(5),.BANGALORE. THIS I.T.A. COMING ON FOR FINAL HEARING, THIS DAY, |ALOK ARADHE J.,DELIVERED THE FOLLOWING: | JUDGMENT This appeal under Section 260A of the Income TaxAct, 1961 (hereinafter referred to as the Act for short)nas been preferred by the revenue. The subject matterof the appeal pertains to the Assessment year 2006-07.The appeal was admitted by a bench of this Court on thefollowing substantial questions of law: “(1hether on tne facts and In the'circumstances of the case, the Tribunal was|correct in holding that section 115JB wasnot applicable to the assessee in view ofExplanation-3 to section 115JB_ withoutappreciatingthattheamendmentIS.applicable only with effect from 01.04.2013|relevant Assessment Year 7013-14? (ii) Whether on the facts and in thecircumstances of the case the Tribunal wascorrect in accepting the additional groundraised regarding applicability of section115JB|withoutappreciatingthat|theassessee has neither raised the issue beforethe Assessing officer or before the AppellateCommissioner and the assessee itself in it'sreturnofIncome.hasadmittedtheapplicability of section 115JB of the Act?| (i1i)Whether on the facts and in thecircumstances of the case, the tribunal was|correct in allowing prior period expense ofRs.2,07,60,000/-.madetowardsCoaltransport agency due to price escalationand Rs./0,63,081/- being the differential|surface transport charges to coal suppliers|without appreciating that the assessee has|not made any submission on this tissueeither before the Assessing Officer or beforetheappellateCOmmIssionerand|with providing opportunity to examine the issueand recorded perverse finding? (iv) Whether on the facts and in the circumstances of the case, the tribunalw as|correct in directing to accept the claim of|Rs.82,43,612/- in respect of expenses|claimed by the assessee’s employees and|other agencies by accepting the explanationoffered by the assessee that it DooKS were|audited.and|thattheyoucherswerevoluminous to e produced before theAssessing Officer, without appreciating thatthe onus is on the assessee to prove it's|claim of crystallization of liability. andrecorded perverse finding? 2.Facts leading to filing of this appeal briefly|stated are that the respondent is a public limitedcompany engaged in|the business. ofpowergeneration. The respondent filed the return of income for the Assessment Year 2JOO6-O7 anddeclared the income after claiming deduction underSection 80IA of the Act. The return was selected forscrutiny and a notice under Section143(2) of the Actwas issued on 04.10.2007. The Assessing Officer by an order dated 31.17.7008 made additions underthe normal provisions of the Act viz., prior periodexpenditure, capital expenditure and disallowance of 2.Facts leading to filing of this appeal briefly|stated are that the respondent is a public limitedcompany engaged in|the business. ofpowergeneration. The respondent filed the return of income for the Assessment Year 2JOO6-O7 anddeclared the income after claiming deduction underSection 80IA of the Act. The return was selected forscrutiny and a notice under Section143(2) of the Actwas issued on 04.10.2007. The Assessing Officer by an order dated 31.17.7008 made additions underthe normal provisions of the Act viz., prior periodexpenditure, capital expenditure and disallowance of set off, Drought forward loss as the same was set offin earlier years. However, deduction under SectionSOIA of the Act was increased to the extent otfdisallowance. Tne Assessing Officer also disallowedthe provision for leave encashnment and pension for the purposes of computation of Dook profit under.Section 115JB of the Act. 3Being aggrieved, the assessee filed an|appeal before the Commissioner of Income Tax(Appeals) who by an order dated 30.11.2011 afterobtaining remand report from the Assessing Officer,dismissed the appeal with regard to additions madeunder the normal provisions of the Act, whereas, theSame was allowed in respect of additions under Section 115JB of the Act. Tne assessee thereupon.filed an appeal before the Income Tax AppellateTridunal (hereinafter referred to as the tribunal’ forShort). The tribunal by an order dated 09.05.2014partly allowed the appeal preferred by the assessee.In this factual background, this appeal nas beenfiled. 4Learned Senior counsel! for the assesseeat the outset submitted that substantial questions oflaw Nos.3 and 4 have already been answered|against.therevenue|DYthisCOUTTIn‘COMMISSIONER OF INCOME TAX, BANGALOREVS. ING VYSYA BANK LTD., (2020) 114TAXMANN.COM 506 (KARNATAKA)and vide!judgment dated 17.03.2020 in I.T.A.No.143/2014passed in the case of assessee itself for AssessmentYear 2013-14. The aforesaid submission has not been fairly disputed by learned counsel for therevenue. Therefore, for the reasons assigned in theaforesaid judgments, the substantial questions oflaw Nos.3 and 4 are answered against the revenueand in favour of the assessee. 5learnedcounselfor.the.revenue submitted that the tridDunal grossly erred in allowingprior period expenses of Rs.2,07,60,000/- withoutappreciating tne fact that the assessee did not make.any submissions on the said claim either before theAssessing Officer or before the Commissioner ofIncome Tax (Appeals). It is further submitted that.the tribunal grossly erred in accepting the claim ofthe assessee for a sum of Rs.82,43,612/- in respectof expenses claimed by the assessee for payment to.its employees and the agencies, which werecrystallized. It is submitted that the finding in this regard recorded by the tribunal is perverse. It is.also submitted that the findings recorded by thetriDunal on substantial question of law Nos.1 and 2.is contrary to the law laid down by the SupremeCourt In‘TROTORK CONTROLS INIDA (P.) LTD.VS,COMMISSIONEROFINCOME- TAX, CHENNAI, (2009) 314 ITR 62 (SC) 6.On the other hand, learned Senior counselfor the assessee submitted that the claim withregard to the expenditure of Rs.2,07,60,000/- and aregard to the expenditure of Rs.2,07,60,000/- and a sum of RS./0,63,081/- were made before the.Assessing Officer as well as Commissioner ofIncome Tax (Appeals) and a remand report was also. sougnt for by the Commissioner of Income Tax(Appeals) which was submitted by the AssessingOfficer. In this connection, our attention has been invited to the documents on record and it has been| CHENNAI, (2009) 314 ITR 62 (SC) 6.On the other hand, learned Senior counselfor the assessee submitted that the claim withregard to the expenditure of Rs.2,07,60,000/- and aregard to the expenditure of Rs.2,07,60,000/- and a sum of RS./0,63,081/- were made before the.Assessing Officer as well as Commissioner ofIncome Tax (Appeals) and a remand report was also. sougnt for by the Commissioner of Income Tax(Appeals) which was submitted by the AssessingOfficer. In this connection, our attention has been invited to the documents on record and it has been| urged that the tribunal nas rightly held that theliability has crystallized during the relevant year andtne expenditure nas to be allowed as deduction In.computing the total income. It is also urged that theaforesaid finding is a finding of fact, which is notdemonstrated to be perverse. It is contended that.the first substantial question of law in fact, does notarise for consideration in this appeal. It is also urgedthat the issues raised by the revenue in this appealare revenue neutral. In this connection referencenas been made to Circular dated 02.11.2016 passedby the Central Board of Direct Taxes (CBDT). InSupport of aforesaid submissions, reliance has been|placed on decisions of Supreme Court in.‘CIT VS,EXCEL INDUSTRIES LTD’, 358 ITR 295 (SC),and CIT VS. BIHARI INVESTMENT (P) LTD,299 ITR 1 (SC). JWe have considered the submissionsmade by learned counsel for the parties and have|perused tne record. From perusal of the record, it isevident that the assessee has furnished the details.of prior period expenses incurred by it during theAssessment Year 2005-06. From communication|dated 19.10.2010 addressed to the Assessing|Officer, it is evident that the claim was made withregard to prior period expenses before the AssessingOfficer again. The assessee had filed the written|Submissions before the Commissioner of Income Tax(Appeals) in which claim with regard to prior periodexpenses was made. The Commissioner of Income|Tax (Appeals) had passed the Assessing Officer tosubmit a remand report, which was submitted bythe Assessing Officer. On the basis of materialavailable on record, the Commissioner of IncomeTax (Appeals) as well as the tribunal have allowed the claim with regard to the assessee's prior period expenses. The first substantial question of law is.therefore, answered against the revenue and in|favour of the assessee. 8.)So far as second substantial question of. law IS concerned, it is pertinent to note that on theSubmissions made by the assessee on the aforesaid claim of Rs.82,43,612/- in relation to prior periodexpenditure, the Commissioner of Income _ Ta(Appeals) had obtained a remand report and the|Dooks of accounts of the assessee have been|audited. A finding of fact nas been recorded by thetribunal, wnich could not be said to be perverse.Therefore, the second substantial question of law isalso answered against the revenue and in favour ofthe assessee. �������������!����������������������������������������!����������������������������������������� ������������ ��� �����������