appeal filed by assessee is directed against order of CIT(A). appeal relates to asst. yr. 1997-98. assessee company, upon incorporation on 3rd Sept., 1987, took over various nuclear power projects including existing power stations located at different places across country from Department of Atomic Energy, Government of India. assessee company is public sector undertaking wholly owned by Government of India in Department of Atomic Energy. assessee has obtained approval of COD to pursue present litigation before this Tribunal. First four grounds of appeal taken by assessee are inter-linked and read as under: "1. learned CIT(A) erred in confirming inclusion in income of amount of Rs. 3,000.26 lakhs being Renovation & Modernisation levy collected by appellant. learned CIT(A) erred in holding that this was case of application of receipts and not that of diversion of income at source. Without prejudice to ground No. 1 above, learned CIT(A) erred in holding that amount collected towards Renovation & Modernisation levy was not in nature of capital receipt exempt from tax. learned CIT(A) erred in confirming inclusion in income of amount of Rs. 1,800.15 lakhs being Research & Development levy collected by appellant. learned CIT(A) erred in holding that this was case of application of receipts and not that of diversion of income at source. Without prejudice to ground No. 3 above, learned CIT(A) erred in holding that portion of amount collected towards Research & Development levy was not in nature of capital receipt exempt from tax." Briefly stated, facts of case are that assessee company filed its return of income for assessment year under appeal, i.e., asst. yr. 1997-98 on 1st Dec., 1997 declaring income at Rs. 17,141.19 lakhs before set off of losses and NIL total income after set off of unabsorbed business loss and unabsorbed depreciation of earlier years. income declared by assessee has, however, been assessed by AO under s. 143(3) on 24th March, 2000 at Rs. 25,353.45 lakhs before set off of unabsorbed business loss and unabsorbed depreciation of earlier years and at NIL total income after setting off unabsorbed business loss and unabsorbed depreciation of earlier years. Major addition made by AO is on account of treatment of (i) Renovation and Modernisation Levy (Rs. 3,000.26 lakhs); and (ii) Research and Development L e v y (Rs. 1,800.15 lakhs) collected by assessee, as taxable revenue receipts. As stated earlier, assessee company is engaged in business of generation of electricity through various nuclear power plants located all over country. In exercise of powers conferred by s. 22(1)(b) of Atomic Energy Act, 1962, Central Government in consultation with Central Electricity Authority issued Notification dt. 11th July, 1996 (published in Gazette of India-Extraordinary-Part II- s. 3(ii) on 17th July, 1996) fixing norms in accordance with which tariff for sale of electricity was to be determined by assessee. By paras 1.16 and 1.17 of said Notification, Central Government further authorized assessee company to (i) include Research and Development (R&D) Levy of 3 paise/kwh in tariff to cover expenditure on R&D activities; and (ii) further include Renovation & Modernisation (R&M) Levy of 5 paise/kwh in tariff to cover equity portion of expenditure on renovation and modernization activities. assessee collected aforesaid levies from its customers but excluded them from sales and credited them to respective reserve accounts. On being asked to clarify as to why said levies were reduced from sales and consequentially from profits, assessee explained before AO that they were collected on behalf of Government and hence did not form part of income in hands of assessee. assessee further claimed that levies so collected stood diverted at source by overriding title and therefore could not be considered as income in its hands following decisions in CIT vs. Sitaldas Tirathdas (1961) 41 ITR 367 (SC); CIT vs. Travancore Sugars & Chemicals Ltd. 1973 CTR (SC) 49: (1973) 88 ITR 1 (SC); Somaiya Organo Chemicals Ltd. vs. CIT (1994) 117 CTR (Bom) 1: (1995) 216 ITR 291 (Bom), CIT vs. Salem Co-operative Sugar Mills Ltd. (1997) 138 CTR (Mad) 352: (1998) 229 ITR 285 (Mad); and Dalmia Cement Ltd. vs. CIT (1999) 153 CTR (SC) 401: (1999}237 ITR 617 (SC). Without prejudice to aforesaid submissions, assessee also claimed before AO that portion of aforesaid levies were to be utilized for purposes of capital expenditure and hence they were in nature of capital receipts not liable to income-tax. In support of its case, assessee filed copy o f letter dt. 15th March, 2000 issued by Department of Atomic Energy before AO which stated that aforesaid levies collected by assessee would not form part of general sales income of assessee and also that they were to be kept separately and distinct from funds of assessee. AO, however, did not accept aforesaid submissions and treated levies so collected as income of assessee and thus brought same to charge of income-tax. Rejecting plea of assessee that impugned receipts collected by assessee stood diverted at source by overriding title, he held that aforesaid levies were collected by assessee in normal course of its business and mere fact that they were subsequently transferred to certain reserves could not form sound basis for their exclusion from income of assessee. In support of his action, AO has relied upon decision in Vellore Electric Corporation Ltd. vs. CIT (1997) 141 CTR (SC) 398: (1997) 227 ITR 557 (SC). assessee carried matter in appeal before learned CIT(A). assessee, apart from filing copies of Notification dt. 11th July, 1996 and letter dt. 15th March, 2000 issued by Department of Atomic Energy as filed before AO, also filed before learned CIT(A) copy of Notification dt. 28th July, 2000 ("second Notification" in short) partially modifying earlier Notification dt. 11th July, 1996 regarding impugned levies. Before we proceed further, it may be useful to briefly refer to them in their chronological order. They are as under: (i) It is by Notification dt. 11th July, 1996 issued by Central Government that assessee was authorized to collect both levies from its customers. Para 1.16 of said Notification provided: "A Research and Development (R&D) levy of 3 paise/kwh shall be included in tariff for sale of electricity from all atomic power stations to cover expenditure on R&D activities". Likewise Para 1.17 of said Notification provided: "A Renovation & Modernisation (R&M) levy of 5 paise/kwh shall be included in tariff from sale of electricity from all atomic power stations to cover equity portion of expenditure on renovation and modernization activities". It is quite evident that aforesaid Notification, in very clear and unambiguous terms, provided that both aforesaid levies would be included in and thus would form part of tariff raised and collected by assessee from sale of electricity. It is equally evident that while R&D levy was to cover expenditure on R&D activities of assessee, R&M levy was to cover equity portion of expenditure on renovation and modernization activities of assessee. Both levies were to be collected and retained by assessee. As mentioned earlier, Notification authorizing assessee to collect aforesaid levies was issued on 11th July, 1996 and hence would be relevant for assessment year under appeal, i.e., asst. yr. 1997-98. (ii) In letter dt. 15th March, 2000 issued by Department of Atomic Energy, reference was made to said Notification laying down norms for fixing tariff for Nuclear Power Stations. letter further states: "This is to reiterate that amount collected as Decommissioning levy, Research & Development levy and Renovation and Modernisation levy is not to be construed as part of general sales income of Nuclear Power Corporation of India Ltd. amount collected as abovementioned levies should be kept separately, distinct from funds of NPCIL and shall be used for specific purposes for which levies are collected". It is evident on bare perusal of aforesaid letter that it was issued after expiry of year under appeal. It is equally clear that levies collected by assessee were to be retained and utilized by assessee for specified purposes. restriction placed by said letter was with regard to utilization or application of levies collected. (iii) Government of India (Department of Atomic Energy) issued another Notification dt. 28th July, 2000 ("second Notification" in short) partially modifying earlier Notification dt. 11th July, 1996 regarding impugned levies. It is specifically made retrospectively effective from 17th July, 1996, i.e., date on which first Notification dt. 11th July, 1996 was published in Gazette of India-Extraordinary-Part II-s. 3(ii). Paras 1.16 and 1.17 in Notification dt. 11th July, 1996 have been substituted by new Paras as notified in second Notification. Substituting Paras providing for treatment to be second Notification. Substituting Paras providing for treatment to be given to both levies are substantially different from one in substituted Paras as in first Notification and hence they need to be briefly commented upon here. (iv) Para 1.16 dealing with R&M Levy, as modified by second Notification with retrospective effect from 17th July, 1996, provides that (1) Research and Development Levy of 3 paise/kwh shall be recovered in tariff from sale of electricity from all atomic power stations and that said levy is being collected by Government of India in order to cover its equity portion of capital expenditure on Research and Development activities related to engineering and design of Atomic Power Stations; (2) said levy shall not form part of tariff or sales income of assessee and further that fixation of Research and Development Levy and its revision from time to time shall not constitute revision of tariff; (3) receipts of R&M Levy shall be credited at end of year to separate Fund designated as "NPCIL-Research and Development Fund"; (4) said Fund shall be utilized by assessee for purpose of meeting capital and revenue expenditure on Research and Development and for no other purpose; (5) any proposal for utilisation of Fund for research and development works (both capital as well as revenue) shall be included in respective budgets and specific approval of Board of assessee company should be obtained; (6) assessee shall furnish annual return to Department of Atomic Energy providing information relating to amount credited during year to R&D Fund and item-wise utilization out of said Fund for meeting capital and revenue expenditure on R&D; (7) assessee shall invest balance amount in said Fund in specified forms of investments; (8) income from investments so made shall also be credited to said Fund and that any amount remaining un-invested shall be deemed to earn rupees equivalent of 12 per cent return per annum; (9) Board of assessee company shall formulate guidelines fixing investment criteria in line with Government of India guidelines for investment of surplus funds of PSUs; and (10) said Fund will be capital reserve and will not be distributable as dividend. Substituting Para 1.17 contains parameters for R&M Levy, which are similar to those for R&D Levy and hence they are not being specifically dealt with. In support of its case that impugned levies stood diverted at source by overriding title before they could reach assessee as its income, assessee submitted, inter alia, before CIT(A) that R&M levy (i) was collected together with tariff for sale of electricity to cover equity portion of expenditure on renovation and modernization activities; (ii) was collected on behalf of Government and therefore amount so collected belonged to Government and not to assessee with result that it could not be treated as income in its hands; (iii) received by assessee stood diverted at source by overriding title and therefore it did not reach hands of assessee as its income; (iv) collections were required to be transferred to reserve irrespective of profits made or losses suffered by assessee and hence it was case of diversion of income by overriding title and not case of appropriation of profits as in Vellore Electric Corpn. s case (supra); and (v) collections were required to be utilized under directions of Government of India and were not at all available to assessee for any other purpose including recoupment of losses. Similar arguments were advanced for non- taxability of collections of R&D levy. Without prejudice to aforesaid submissions, assessee also contended before leaqrned CIT(A) that impugned receipts were meant for meeting capital expenses and hence they were in nature of capital receipts not liable to tax. assessee relied upon decisions in Hoshiarpur Electric Supply Co. vs. CIT (1961) 41 ITR 608 (SC) and Sadichha Chitra vs. CIT (1990) 90 CTR (Bom) 135: (1991) 189 ITR 774 (Bom). Learned CIT(A) took note of factual matrix of case and in particular, to admitted fact that (i) assessee had collected impugned levies along with normal tariff from its clients, namely, State Electricity Boards, etc . in course of its business operations, i.e., supply of electricity/power; and (ii) said receipts, after they had reached assessee, were subsequently applied and used for intended purposes. learned CIT(A) however, rejected submission of assessee that impugned receipts were not taxable as they stood diverted at source by overriding title. He held that it was case of application of income after levies had accrued to assessee and reached his hands. As regards alternative plea of assessee that levies were in nature of capital receipts and hence not taxable, learned CIT(A) held that subsequent destination or application of income after it has reached/accrued to assessee would not change character of receipts. Aggrieved by order of learned CIT(A), assessee is now in appeal before this Tribunal. In support of appeal, learned counsel for assessee invited our attention to factual aspects of case and, in particular, to stipulations contained in letters and Notifications issued by Department of Atomic Energy, which have already been referred to earlier in this order. He invited our attention to observation made by AO at page 6 of assessment order which reads: "To this extent, contention of assessee is accepted that there is diversion of title" and submitted that AO after having accepted that there was diversion of title ought to have excused impugned levies from taxation. Reiterating arguments taken by assessee before AO and learned first appellate authority, he further submitted that assessee collected impugned levies for and on behalf of Central Government as its agent and hence they could not be taxed in hands of assessee. His next submission was that levies collected stood diverted at source by overriding title and hence they were not taxable in hands of assessee. His alternative submission was that impugned receipts were in nature of capital receipts not liable to tax. In support of his submissions, learned counsel for assessee has referred to following judgments: (i) Sadichha Chitra s case (supra); (ii) Salem Co-operative Sugar Mills Ltd. case (supra); (iii) CIT vs. New Horizon Sugar Mills (P) Ltd. (2000) 244 ITR 738 (Mad) affirmed by Supreme Court in CIT vs. New Horizon Sugar Mills (P) Ltd. (2004) 269 ITR 397 (SC); (iv) M.K. Bros. (P) Ltd. vs. CIT 1972 CTR (SC) 357: (1972) 86 ITR 38 (SC); (v) Addl. CIT vs. Rani Pritam Kunwar ((1980) 16 CTR (All) 117: 1980) 125 ITR 102 (All); (vi) Vellore Electric Corporation Ltd. case (supra); (vii) Dalmia Cement Ltd. case (supra); (viii) Vibhuti Glass Works vs. CIT (1989) 77 CTR (SC) 77: (1989) 177 ITR 439 (SC); (ix) Sitaldas Tirathdas case (supra). He has, in particular, emphasized that factual matrix and decisions in Salem Co-operative Sugar Mills Ltd s case (supra) and New Horizon Sugar Mills (P) Ltd. s case (supra) affirmed by Hon ble Supreme Court in New Horizon Sugar Mills (P) Ltd. s case (supra) in which amounts set apart as required by Molasses Control Order towards Molasses Storage Reserve Fund have been held to be not includible in total income, were similar to factual matrix of present case and hence issue was covered in favour of assessee by said decisions. Per contra, learned Departmental Representative supported the. orders passed by AO and learned CIT(A). At time of hearing, he filed his written submissions, which are quite comprehensive. He has invited our attention to certain undisputed facts having material bearing on case: one, impugned levies were collected by assessee in ordinary course of its business of power generation and distribution on basis of power consumed by its customers; and two, impugned levies collected by assessee were neither required to be parted with nor were actually parted with in favour of any third party or Government. They were rather used by assessee to meet its expenditure. According to him, reserves were created out of Revenue receipts collected through impugned levies for meeting its expenditure. He has also referred to judgment of Hon ble Supreme Court in Chowringhee Sales Bureau (P) Ltd. vs. CIT 1973 CTR (SC) 44: (1973) 87 ITR 542 (SC) for proposition that if amount (sales tax in that case) is received by assessee in his character as trader, amount would form part of his trading or business receipt and that it is true nature and quality of receipt and not head under which it is entered in account books as would prove decisive and further that if receipt is trading receipt, fact that it is not so shown in account books of assessee would not prevent assessing authority from treating it as trading receipts. He further submitted that mere fact that levies were set apart as reserves would not distract position that receipts were generated in ordinary course of business of assessee and were thus business receipts of revenue character. According to him, reserve is created out of profits/surplus generated by proprietor over and above capital contributed by him and therefore reserves represent acceretion to profit and therefore are in nature of application of profit/income after they have accrued to assessee and not diversion of income at source in favour of any third party. In support of his submissions, he has relied upon following decisions: (i) Associated Power Co. Ltd. vs. CIT (1996) 130 CTR (SC) 393: (1996) 218 ITR 195 (SC); (ii) Vellore Electric Corporation Ltd. vs. CIT 1977 CTR (MAD) 0380: (1977) 109 ITR 454 (Mad); (iii) CIT vs. Sijua (Jharriah) Electric Supply Co. Ltd. (1984) 145 ITR 740 (Cal)-Approved in Associated Power Co. Ltd. vs. CIT (1996) 130 CTR (SC) 393: (1996) 218 ITR 195 (SC); (iv) Chowringhee Sales Bureau s case (supra). learned Departmental representative submitted that looking to facts of present case, decision in Associated Power Co. (P) Ltd. s case (supra) was squarely applicable for reason that money collected as part of sale proceeds had never changed hands and was always available with assessee for use and to meet its expenditure and therefore it was case of application of income and not of diversion of income in favour of any third party. We have heard parties and considered their rival submissions including authorities referred to by them. Following facts emerge on perusal of each Notification: A. Facts emerging on perusal of first Notification: (1) Both levies authorized by Government were to be included in tariff fixed by assessee from its customers and were therefore collected as part of overall tariff. (2) assessee was not required to part with levies so collected in favour of Government. In fact, levies, after their collection, were to be retained by assessee. (3) Both levies were intended to generate financial resources to enable assessee to use and apply them for meeting its expenditure on notified activities. (4) None of levies collected by assessee was intended to be passed over or was actually passed over to Government. Both levies were collected and retained by assessee. What Notification provided was manner in which levies would be used by assessee. B, Facts emerging on perusal of second Notification: (1) Under second Notification, both levies authorized by Government were to be recovered in tariff fixed by assessee from its customers. In earlier Notification, what was provided was that they would be included in tariff. (2) In second Notification also, assessee was not required to part with levies so collected in favour of Government. In fact, levies, after their collection, were to be retained by assessee. (3) second Notification did not alter fact that both levies were intended to generate financial resources to enable assessee to use and apply them for meeting its expenditure. (4) Second Notification also did not alter position that none of levies collected by assessee would be passed over or was actually passed over to Government. Both levies were collected and retained by assessee for its use. What second Notification provided was manner in which levies would be used by assessee for its own purposes. (5) Second Notification specifically provided that both levies would not form part of tariff or sales income in hands of assessee. In other words, distinction was created between tariff forming part of sales income and levies, which were declared to be not forming part of tariff or sales income of assessee. fact however remains that levies were required to be collected along with tariff though under separate head. Notwithstanding stipulation in second Notification that levies would not form part of sales income of assessee, assessee was to retain levies collected and use same for purposes of meeting its own capital and revenue expenditure on notified activities. On factual matrix of case, assessee has all along been claiming that income by way of levies stood diverted at source by overriding title in favour of Government and hence was not taxable. AO and learned first appellate authority have however rejected aforesaid submission. Both of them have held that it is case of application of income and not of diversion of income at source. It is correctness of aforesaid finding, which is subject-matter of present appeal. Sometimes, portion of income arising out of corpus held by assessee is consumed at source itself for purpose of meeting some recurring or non-recurring expenditure arising out of obligation imposed on assessee by contract or by statute or by law of land. In such cases, question arises whether such portion of income so consumed or expended is to be treated as income assessable to tax in hands of assessee. answer is that if income before it reaches hands of assessee is diverted away by superior title so that assessee, when he receives income, has to pass it on to third party, portion passed on, or is liable to be passed on, is not income of assessee but of person to whom it is passed on or is liable to be passed on. In cases of diversion of income, it is existence of superior title which not only deprives assessee of his title to income but also requires him to part with same in favour of third party as assessee in receipt of income would be receiving it both on behalf of himself and third party by virtue of overriding receiving it both on behalf of himself and third party by virtue of overriding title and not exclusively for himself. In cases of diversion of income, income does not accrue to assessee at all; it, in fact, accrues to third party in that destination of income is not towards assessee in whose hands money is placed but towards third party in whose favour and for whose benefit title is created. Resultantly, assessee, after income stands diverted at source by superior title to third party, would no longer be concerned with that income. In Sitaldas Tirathdas case (supra), part of income from property paid as maintenance allowance to dependants under decree of Court, without maintenance allowance being charged upon property yielding income, was held to be case of application of income. In Sijua (Jharriah) Electric Supply Co. Ltd. s case (supra) Hon ble High Court has considered judgment in Sitaldas Tirathdas case (supra) and held as under: "The concept of real income or diversion of income by overriding title was explained by Hidayatullah, J. in case of Sitaldas Tirathdas (supra) at pp. 374-375: In our opinion, true test is whether amount sought to be deducted, in truth, never reached assessee as his income. Obligations, no doubt, there are in every case, but it is nature of obligation which is the-decisive fact. There is difference between amount which person is obliged to apply out of his income and amount which by nature of obligation cannot be said to be part of income of assessee. Whereby obligation income is diverted before it reaches assessee, it is deductible; but where income is required to be applied to discharge obligation after such income reaches assessee, same consequence, in law, does not follow. It is first kind of payment which can truly be excused and not second. second payment is merely obligation to pay another portion of one s own income, which has been received and is since applied. first is case in which income never reaches assessee, who even if he were to collect it, does so, not as part of his income, but for and on behalf of person to whom it is payable If this test is applied, it will be seen that there has been no diversion of income by overriding title at all. amount appropriated to contingencies reserve was collected by assessee as its revenue from sale of electricity. amount remained at disposal of assessee and for benefit of assessee. It could be used only for few specified purposes but purposes for which fund could be used were all business purposes of assessee company. Payment of compensation to workers, replacement of plant and machinery or other expenditure envisaged in para v, which we have set out earlier, are all normal business expenditure of company. This is not case of diversion of income before it reaches assessee, but only case of setting apart of portion of assessee s income under compulsion of law for use and benefit of assessee although mode and objects of expenditure are statutorily restricted ." In Vibhuti Glass Works case (supra) referred to by learned CIT(A) in his order, assessee was under financial crisis. In package of financial assistance, Industrial Finance Corporation agreed to grant loan of Rs. 20 lakhs to assessee provided State Government guaranteed repayment and also allowed Industrial Finance Corporation to have first charge under t h e mortgage deeds. State Government agreed to do so provided assessee transferred its business to State Government to manage and run same. Under Agreement, State Government was entitled to 50 per cent of profits. assessee contended that profits earned from glass factory was not assessable in its hands but in hands of Government which was running and managing said business. It was alternatively contended that only 50 per cent of profits could be assessed in hands of assessee. Rejecting both aforesaid submissions, Hon ble Supreme Court has held that income earned from that business accrued to assessee directly which was merely applied by State Government to discharge obligations of assessee. On perusal of catena of decisions on subject, it transpires that, in order to constitute diversion of income at source by overriding title, following facts must be established: (i) There must be income arising out of corpus held by assessee; (ii) portion of income so generated must be charged to source itself by overriding title in favour of third party or, in other words, obligation must attach to source of income in that income itself should not accrue to receiver and not to receiver of income to apply it in particular manner; (iii) income so charged must be passed on or is required to be passed or, in other words, is required to be diverted in favour of third party before it reaches assessee; and (iv) assessee, after income stands diverted at source by superior title, is no longer concerned with that income or, in other words, assessee must be completely divested of any kind of dominion over income. Applying aforesaid tests to facts of case before us, it is seen that assessee was entitled to collect and recover levies from its customers during course of its business. income by way of levies thus accrued to assessee in its own right. levies so collected were not only retained by assessee but were also available to it for use and application for meeting its own expenses. Notifications issued by Government simply enabled assessee to raise resources for meeting its own expenses. They gave authority to assessee to collect levies, which it had no authority to collect in absence of aforesaid Notifications. levies were neither required to be diverted at source nor were actually diverted at source in favour of any third party. Second Notification issued by Government simply regulated application and utilization of funds. fact that reserve was created in terms of Notification issued by Department of Atomic Energy is not really of any consequence. If assessee sets apart sum of money every year to reserve, it cannot be said that sum so set apart has been diverted at source by overriding title. Similarly, if sum is set apart under compulsion of Notification issued by Government, diversion of income at source by overriding title does not take place. Both levies collected and reserve created belonged to assessee company; assessee company had title to fund, dominion over fund and also use of fund. In these circumstances, it cannot be said that there has been any diversion of income at source by overriding title from assessee company or that amount that has been appropriated to fund does not form part of real income of assessee. On facts of case, we are in agreement with well-reasoned order of learned CIT(A) that it is case of application of income and not of diversion of income at source. We therefore endorse his order. We have also considered submission of assessee that AO has himself accepted that there was diversion of title at page 6 of assessment order. We find that AO has made aforesaid observation in context of decommissioning charges and not in context of impugned levies. alternative plea of assessee that impugned levies are in nature of capital receipts has been dealt with by learned CIT(A) in Para 15 of his order. In order to constitute capital receipt, receipt should be traceable to loss of capital. assessee has not collected levies against loss of capital. They were included and collected along with tariff in ordinary course of business. Once they have been so collected, their ultimate destination or application will not change their character from being business receipts to capital receipts. In our view, CIT(A) has correctly held that impugned receipts were not capital receipts. We endorse his order. We have considered all submissions made including judicial authorities referred to by parties though we have not individually commented upon them as decision in present case has turned essentially on facts. In view of foregoing, Ground Nos. 1 to 4 taken by assessee are dismissed. Ground No. 5 taken by assessee reads as under: "5. learned CIT(A) erred in confirming disallowance of Rs. 11.04 lakhs as prior period expenditure." Briefly stated, facts of case relevant to aforesaid ground are that AO noticed that bills raised by TCS Ltd. were dt. 12th Feb., 1996, that AO noticed that bills raised by TCS Ltd. were dt. 12th Feb., 1996, which were received by assessee on 27th Feb., 1996. On this factual matrix, AO held that amount (Rs. 3,99,736) payable to TCS Ltd. were expenses o f prior period and hence he disallowed same. He also noted that prior period expenses relating to LM Financial Services Ltd. (Rs. 7,05,813) were claimed by assessee without providing any bill or voucher supporting that expenses had crystallized during year under consideration. He therefore disallowed both of them. On appeal, learned CIT(A) has confirmed order of AO in this behalf. We have heard parties. ld. counsel for assessee invited our attention to bills raised by Tata Consultancy Services placed at pp. 79-83 of assessee s paper book. All of them relate to financial year 1995- 96. As far as expenses relating to J.M. Financial & Investment Consultancy Services Ltd. are concerned, assessee has not filed any copy of bills etc. assessee claims deduction for both expenses on ground that amount actually payable was determined during previous year relevant to assessment year under appeal and hence should be allowed as deduction. In our view, learned CIT(A) has correctly rejected claim of assessee. There is no evidence on record to suggest that both expenses were incurred during year under appeal and hence it is not possible to accept request made by assessee. Ground No. 5 is dismissed. Ground Nos. 6 and 11 read as under: "6. learned CIT(A) erred in not deleting disallowance of interest of Rs. 3,043 lakhs as prior period expense. learned CIT(A) erred in not deciding following ground of appeal: 6. learned JOT erred in disallowing amount of Rs. 3,054.04 lakhs as prior period expenditure. appellant submits that as expenditure had crystallized during previous year relevant to asst. yr. 1997-98, said expenditure was fully allowable as deduction. Without prejudice to Ground No. 6 above, learned Joint CIT erred in not allowing deduction in respect of expenditure treated as prior period in years to which same related to ." At time of hearing, learned counsel for assessee submitted that both aforesaid issues were challenged before CIT(A) but he has not adjudicated upon them and hence they should be restored to his file for adjudication. Learned Departmental Representative also agreed with aforesaid submission. In this view of matter, issues raised in both aforesaid grounds namely ground Nos. 6 and 11 are restored to file of CIT(A) for adjudication in accordance with law after giving reasonable opportunity of hearing to both parties. Ground Nos. 6 and 11 are treated as allowed for statistical purposes. Ground No. 7 reads as under: "7. learned CIT(A) erred in confirming disallowance of Rs. 12.29 lakhs being provision made for doubtful advances." We have heard parties. learned CIT(A) has dealt with issue in Paras 25-27 of his order as under: "25. facts of case, in respect of above dispute, are that AO, in course of assessment proceedings, found that appellant company had debited sum of Rs. 12.29 lakhs on account of provision for doubtful debts. It was submitted before AO that appellant had given advances to canteen for various purposes. AO found that appellant had not written off bad debts in its books of account and as such, case of appellant was not covered within ambit of s. 36(1)(vii) r/w s. 36(2) of Act. AO accordingly disallowed sum of Rs. 12.29 lakhs as referred to above. Before me, submissions made before AO have been reiterated and it has been urged that disallowance of Rs. 12.29 lakhs merits deletion. I have given careful thought to submissions made by learned counsel vis-a-vis AO s order. In my considered opinion, appellant company does not satisfy conditions as laid down in s. 36(1)(ii) r/w s. 36(2) of Act. As such, I am of view that AO has rightly drawn adverse inference on this score. Accordingly, disallowance of Rs. 12.29 lakhs is, inference on this score. Accordingly, disallowance of Rs. 12.29 lakhs is, hereby confirmed." At time of hearing, it was pointed out that assessee provides canteen facilities to employees out of commercial expediency for which advances are given to canteens to meet their day-to-day expenditure. In present case also advances were given to canteens, which were not settled by canteens for considerable period of time and hence assessee debited advances so given, as their recoveries were doubtful. It is submitted by learned counsel for assessee that amount given was not in nature of debt but in nature of advances to meet day-to-day expenses of canteen. In our view, submissions made by assessee carry substantial weight. assessee is public sector undertaking having power stations in remote areas. advances given to canteens and their settlement are quite normal. amount remaining unsettled does not mean that canteens had not used or utilized them. Considering totality of facts and circumstances of case we consider it appropriate to allow ground No. 7. We order accordingly. Ground Nos. 8 and 9 read as under: "8. learned CIT(A) erred in confirming disallowance of guest house expenditure of Rs. 18.35 lakhs. Without prejudice to Ground No. 8 above, learned CIT(A) erred in not directing JCIT to allow depreciation allowance amounting to Rs. 1,14,482 in respect of Guest House buildings included in guest house expenses of Rs. 1835 lakhs." We have heard parties. learned counsel for assessee submits that guest-houses are essentially in nature of transit house for employees and hence should not be denied deduction in view of decision of Hon ble Bombay High Court in Greaves Cotton & Co. Ltd. vs. CIT (2006) 201 CTR (Bom) 544: (2005) 279 ITR 42 (Bom). learned CIT(A) has not examined case in aforesaid prospective. issue is therefore restored to his file for fresh decision in accordance with law after giving reasonable opportunity of hearing to assessee. Ground Nos. 8 and 9 are treated as allowed for statistical purposes. Ground No. 10 reads as under: "10. learned CIT(A) erred in not specifically directing Joint CIT to allow interest under s. 244A up to date of adjustment of refund," We have heard parties. We find that learned CIT(A) has restored issue to file of AO with direction to do needful in accordance with law. Since CIT(A) himself has directed AO to decide matter as per law, we see no valid reason to interfere with his order. assessee shall be free to make all submissions before AO. Ground No. 10 is dismissed. Appeal filed by assessee is partly allowed. *** NUCLEAR POWER CORPORATION OF INDIA LTD. v. JOINT COMMISSIONER OF INCOME TAX