Surya Prakash Kesarwani, J. - (1.) THIS Income Tax Reference under section 256 of the Income -tax Act, 1961 relating to the assessment year 1977 -78, arises out of the order of the Income Tax Appellate Tribunal dated 21.12.1987 passed in I.T.A. Nos. 1911 and 1961 (Alld.) of 1984. On an application by C.I.T., the Income Tax Appellate Tribunal, Allahabad Bench, Allahabad has referred the following questions of law for opinion of this Court. R.A. No. 114 (Alld.) of 1988 Whether on the facts and in the circumstances of the case, the Tribunal was, in law, justified in deleting the addition of Rs. 51,00,961/ - out of the claim of Rs. 123 lakhs under the head "expenses for transmission - R.A. No. 115(Alld.) of 1988 (1) Whether on the facts and in the circumstances of the case, the Tribunal was, in law, justified in allowing Rs. 40,25,052/ - claimed by the assessee as written off amount for intangible assets? (3) Whether on the facts and in the circumstances of the case, the Tribunal was, in law, justified in allowing Rs. 23,00,000/ - payment of interest made to the State Government out of fictitious assets? (4)(a) Whether on the facts and in the circumstances of the case, the Tribunal was, in law, justified in allowing Rs. 14,92,70,091 claimed by the assessee as amount capitalised out of revenue expenditure? (4)(b) Whether on the facts and in the circumstances of the case, the Tribunal was, in law, justified in confirming the order of the C.I.T.(A) reducing the amount out of capitalised expenditure of capital nature for the different distribution divisions of the assessee concern? We have heard Sri Shambhu Chopra, learned Senior Standing Counsel appearing for the Income Tax Department and perused the record. No one appears on behalf of the respondent -assessee.
(2.) WITH regard to the question in R.A. No. 114 (Alld.) of 1988, as reproduced above, Sri Shambhu Chopra submits that during the assessment year in question the assessee has claimed Rs. 1,23,00,000/ - under the head "expenses for transmission" as against a sum of Rs. 7,53,494/ - disclosed under this head during the last year. He submits that steep rise in transmission expenses could not be properly explained by the assessee and thus, the disallowance of Rs. 51,00,961/ - was wholly justified. He referred to the findings of the Inspecting Assistant Commissioner in the Assessment order and in the findings recorded by the C.I.T. (Appeals). He submits that the finding recorded by the Tribunal is wholly unjustified. We have gone through the orders passed by the assessing authority, C.I.T.(Appeals) as well as the I.T.A.T. The I.T.A.T. has recorded the following findings of fact: We have heard both the sides and have gone through the orders of the authorities below for our consideration. The Commissioner of Income -tax (Appeals) (CIT(A) for short) had dealt with this point at para 12 of his order. He considered the expansion of electricity facilities to rural areas and maintenance of the lines etc. According to him, some of the expenditure might be of capital in nature and, therefore, the disallowance made was justified. The C.I.T.(A) has also considered that the expenditure during the year has gone up many times. The assessee submits that there was no case at all for the disallowance. In brief, it is urged that the disallowance was not justified. On behalf of the Revenue the order of the C.I.T.(A) is supported. We have considered the facts of the case and the materials available. We find that there is force in the submissions made on behalf of the assessee. It is not the case of the Revenue that the expenditure was not verifiable nor vouched for, in fact, it has been pointed out by the assessee that the accounts were audited not only by the Departmental Auditors but also by the Accountant General. That apart, even if the expenditure was considered as capital, then to that extent, the Assessing Officer would have to consider while allowing the depreciation. In this view of the matter, we are of the opinion that the disallowance was wrongly maintained by the C.I.T.(A). The addition is deleted.
(3.) THE I.T.A.T. considered the entire materials available on record and found that the case of the Revenue is not that the expenditure are not verifiable or are not vouched. The accounts of the assessee were audited not only by the departmental auditors, but also by the Accountant General. The Assessing Officer, while disallowing the expenses on the apprehension of it being of capital nature has not pointed out as to which entry of expenditure is of capital nature. In the assessment order the Assessing Officer has observed that the expenses under the head 'transmission' during the last year was Rs. 7,53,494/ -, and that the assessee does not know as to what expenditure is and its nature and therefore, double of the expenditure as incurred in the last year is allowed for this year and the balance of Rs. 51,00,961/ - is disallowed and capitalized. While doing so, the assessing officer has not considered the aforesaid sum of Rs. 51,00,000/ - for depreciation. We find that the disallowance made by the Assessing Officer was without any basis. Since, the accounts of the assessee were not only audited by the departmental auditors, but also by the Accountant General, if there was any discrepancy with regard to the nature of expenditure shown under the head 'transmission expenses' it should have been specifically pointed out entry -wise. The I.T.A.T. has considered all the facts and has correctly deleted the addition by the Assessing Officer and maintained by the C.I.T. (Appeals). The findings recorded by the I.T.A.T. are findings of fact. We do not find any infirmity in the impugned order with regard to 'transmission expenses' recorded by the I.T.A.T. Thus, this question referred by the I.T.A.T. Is answered in affirmative, i.e., in favour of the assessee and against the revenue.;