2015 (11) TMI 927 - AT - Income Tax

Tribunal Ruling: Assessee prevails on key issues incl. depreciation, stock valuation, and loan treatment.

BSES Rajdhani Power Ltd. Versus Assistant CIT, Circle-3 (1), New Delhi and Deputy CIT, Circle 3 (1), New Delhi Versus BSES Rajdhani Power Ltd.,

BSES Rajdhani Power Ltd. Versus Assistant CIT, Circle-3 (1), New Delhi and Deputy CIT, Circle 3 (1), New Delhi Versus BSES Rajdhani Power Ltd., - TMI Issues Involved:1. Depreciation on energy meters.2. Service line deposits received from consumers.3. Assessment of income under Section 115JB.4. Valuation of closing stock.5. Disallowance of legal claims.6. Disallowance of extra depreciation on computer peripherals/accessories.7. Deemed dividend under Section 2(22)(e).Detailed Analysis:1. Depreciation on Energy Meters:Facts and Contentions:- The assessee claimed depreciation at 80% on energy meters, arguing they are energy-saving devices.- The Assessing Officer allowed only 25% depreciation, considering them as mere reading meters.- The CIT(A) upheld the AO's decision.Judgment:- The Tribunal found that the energy meters have advanced features facilitating energy conservation.- Section 32 and the relevant depreciation schedule in the Income-tax Rules support 80% depreciation for energy meters.- The Tribunal directed the AO to verify and allow 80% depreciation on electronic meters/energy meters.2. Service Line Deposits:Facts and Contentions:- The assessee received non-refundable service line deposits from customers for laying service lines.- The AO treated these deposits as revenue receipts.- The CIT(A) held them as capital receipts but did not direct the AO to reduce the amount credited to the profit and loss account.Judgment:- The Tribunal held that service line deposits are capital receipts.- The AO was directed to reduce the amount credited to the profit and loss account while computing the total income.3. Assessment of Income under Section 115JB:Facts and Contentions:- The assessee argued that Section 115JB was not applicable as it prepared accounts under the Electricity Act and DERC regulations, not under Schedule VI of the Companies Act.- The AO applied Section 115JB.Judgment:- The Tribunal held that Section 115JB was not applicable to companies governed by special Acts like the Electricity Act.- The amendments to Section 115JB by the Finance Act, 2012, are prospective and apply from AY 2013-14 onwards.- The AO was directed to assess the income under normal provisions of the Income-tax Act.4. Valuation of Closing Stock:Facts and Contentions:- The assessee changed its stock valuation method from FIFO to Moving Average.- The AO added Rs. 5.02 crores to the income, arguing the change was not bona fide.Judgment:- The Tribunal found the change bona fide and in line with Accounting Standard 2.- The change was consistently followed in subsequent years.- The addition made by the AO was deleted.5. Disallowance of Legal Claims:Facts and Contentions:- The AO made an ad hoc disallowance of 25% of legal claims, considering them penal in nature.Judgment:- The Tribunal held that the AO failed to identify specific penal expenses.- The disallowance was deleted as the expenses were compensatory and incurred in the regular course of business.6. Disallowance of Extra Depreciation on Computer Peripherals/Accessories:Facts and Contentions:- The AO allowed only 15% depreciation on computer peripherals/accessories, against the claimed 60%.Judgment:- The Tribunal followed the Delhi High Court's decision in the assessee's own case, which allowed 60% depreciation on computer peripherals.- The disallowance was deleted.7. Deemed Dividend under Section 2(22)(e):Facts and Contentions:- The AO treated loans from BSES Rajdhani Power Ltd. to the assessee as deemed dividend.- The CIT(A) deleted the addition, holding that the assessee was not a shareholder in BSES Rajdhani Power Ltd.Judgment:- The Tribunal upheld the CIT(A)'s decision, following the Special Bench decision in ACIT vs. Bhaumik Colour (P) Ltd.- The provisions of Section 2(22)(e) were not applicable as the assessee was not a shareholder in BSES Rajdhani Power Ltd.- The matter was remanded to the CIT(A) to verify if BSES Rajdhani Power Ltd. is a company in which the public is substantially interested.Summary:The Tribunal provided detailed rulings on each issue, directing the AO to make necessary adjustments and verifications. The appeals by the assessee were partly allowed, and those by the Revenue were dismissed.