Case Number: ITA 5578/DEL/2019
Appellant: NTPC Vidyut Vyapar Nigam Ltd., New Delhi
Respondent: Assistant Commissioner of Income Tax, Circle-18(2), New Delhi
Assessment Year: 2013-14
Result: Appeal Allowed
Case Filed on: 2019-06-26
Order Type: Final Tribunal Order
Date of Order: 2023-05-31
Pronounced on: 2023-05-31
The case pertains to an appeal filed by NTPC Vidyut Vyapar Nigam Ltd. against the order passed by the Assistant Commissioner of Income Tax, Circle-18(2), New Delhi, for the assessment year 2013-14. The appeal addresses disputes related to the treatment of bank guarantee encashment, superannuation benefits, and corporate social responsibility (CSR) expenses.
The appeal was filed by NTPC Vidyut Vyapar Nigam Ltd. against the order of the Commissioner of Income Tax (Appeals)-6, New Delhi, dated 23rd April 2019. The appellant sought relief from the disallowances and adjustments made by the Assessing Officer (AO) and upheld by the CIT(A), particularly concerning the treatment of bank guarantee encashment, prior period expenses towards superannuation benefits, and CSR expenses.
The appellant raised several grounds of appeal, contesting the disallowances made by the AO and sustained by the CIT(A). These included:
The appeal was heard before the Income Tax Appellate Tribunal (Delhi Bench ‘E’) in New Delhi on 31st March 2021. The bench comprised Shri N.K. Billaiya, Accountant Member, and Shri Anubhav Sharma, Judicial Member.
NTPC Vidyut Vyapar Nigam Ltd. was represented by Sh. Ved Jain, Advocate, and Ms. Supriya, CA. The respondent was represented by Ms. Sarita Kumari, CIT-DR. The appeal challenged the disallowances made by the AO and sustained by the CIT(A) on various grounds.
The appellant’s counsel argued that the disallowances made by the AO were incorrect and that the amounts related to bank guarantee encashment, superannuation benefits, and CSR expenses should be allowed as they were incurred in accordance with governmental guidelines and directives. The counsel further argued that the amounts encashed from bank guarantees and interest thereon were directed to be kept in interest-bearing accounts as per the Ministry of New and Renewable Energy’s instructions and did not constitute income for the appellant.
The respondent’s representative, Ms. Sarita Kumari, CIT-DR, argued that the disallowances made by the AO were justified as the amounts related to bank guarantee encashment and interest income were treated as income in previous years, and there was no justification for reversing this treatment. The disallowances of superannuation benefits and CSR expenses were also argued to be correct as they were not incurred wholly and exclusively for the purposes of business.
The Tribunal considered the details and arguments presented by both parties. The Tribunal observed that NTPC Vidyut Vyapar Nigam Ltd. acted as a nodal agency for the Jawaharlal Nehru National Solar Mission (JNNSM) under the Ministry of New and Renewable Energy and followed the ministry’s directives regarding the treatment of bank guarantee encashment and interest income.
The Tribunal found that the directions of the Ministry of New and Renewable Energy to keep the encashed amounts in interest-bearing accounts and not treat them as income were binding on the appellant. Therefore, the amounts related to bank guarantee encashment and interest income should not be treated as income for the appellant.
The Tribunal also held that the expenses towards superannuation benefits were incurred based on government audit observations and guidelines from the Department of Public Enterprises (DPE). The change in accounting and computation was due to the binding nature of the DPE guidelines, and therefore, the expenses were allowable as they crystallized during the year under consideration.
Regarding the CSR expenses, the Tribunal noted that the appellant, being a government enterprise, was obligated to incur CSR expenses as per the guidelines issued by the Department of Public Enterprises. The CSR expenses were incurred wholly and exclusively for the purposes of business, and the disallowance made by the AO and sustained by the CIT(A) was not justified.
The Tribunal allowed the appeal filed by NTPC Vidyut Vyapar Nigam Ltd. against the order of the ACIT, Circle-18(2), New Delhi. The Tribunal directed the AO to delete the addition made on account of amounts received on encashment of bank guarantees during the financial year 2012-13 along with interest accrued on the encashed bank guarantees for the financial year 2012-13. The addition made on account of reversal amount realized through bank guarantees of SPDs and the interest earned thereon received till 31/03/2012 was also directed to be deleted. The Tribunal further allowed the expenses towards superannuation benefits and CSR expenses, finding them to be incurred as per government directives and guidelines.
Members Present:
Shri N.K. Billaiya, Accountant Member
Shri Anubhav Sharma, Judicial Member
Document Reference:
Copy forwarded to:
1. Appellant: NTPC Vidyut Vyapar Nigam Ltd., Core-7, Scope Complex 7, Institutional Area Lodi Road, New Delhi-110003
2. Respondent: ACIT, Circle-18(2), New Delhi
3. CIT
4. CIT(A)
5. DR: ITAT
Assistant Registrar, ITAT, New Delhi
NTPC Vidyut Vyapar Nigam Ltd. vs. ACIT, Circle-18(2), New Delhi – ITA No. 5578/DEL/2019
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