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| The Tax Publishers2020 TaxPub(DT) 4612 (Ctk-Trib) INCOME TAX ACT, 1961
Section 37(1)
Though expenditure had been incurred for maintenance of dam, it was kept under provision account for settlement with government against amounts receivable from government. This practice of accounting has been followed consistently. Though amount had been debited to the provision account, same had actually been spent and awaiting settlement/adjustment with government against the amounts receivable. Accordingly, provision for maintenance of dam was an allowable expenditure.
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Business expenditure - Allowability - Provisions made for maintenance of dam -
Assessee, a Public Sector Undertaking of the Government of Orissa, solely and wholly engaged in generation of hydro-power claimed deduction of provision made for maintenance of dam. AO disallowed deduction stating that provision claimed was not an allowable expenditure. Held: In accordance with Govt. of Odisha notification, hydro power projects at Upper Kolab, Rengali and Upper Indravati Projects were transferred to assessee from the Government and Hirakud Power House, Burla and Balimela projects were transferred from OSEB for generation of power. Assessee was required to maintain some projects and share the cost of maintenance with government with respect to their utility component. Though expenditure had been incurred for maintenance of dam, it was kept under provision account for settlement with government against amounts receivable from government. This practice of accounting has been followed consistently. Though amount had been debited to the provision account, same had actually been spent and awaiting settlement/adjustment with government against the amounts receivable. Accordingly, provision for maintenance of dam, was an allowable expenditure.
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2005-06
INCOME TAX ACT, 1961
Section 37(1)
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