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TaxTMI 
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2015 (11) TMI 927
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....gly upheld that the "Energy Meters" are eligible for depreciation @ 25% as against the claims @ 80%. In this regard she has ignored the facts that these meters are for measuring electric energy which has been specifically mentioned as eligible for 80% depreciation in the depreciation schedule of the Income-tax Rules, 1962. Further these meters also have the characteristics of energy saving device which is subject to depreciation @ 80%. In view of the above, depreciation @ 25% as against the 80% claim on energy meters resulting in a disallowance of Rs. 21,33,46,193, is wrong, against the facts of the case and unsustainable in the eyes of law." 3. The assessee has also moved applications for admission of the following additional grounds for the adjudication of the bench: Additional ground of appeal: 1. "Service Line Deposits received from the Consumers are of Capital nature: The Learned CIT(Appeals) erred in not directing the Assessing Officer to reduce the amount of service line deposits credited to the profit and loss account during the year amounting to Rs. 14,94,91,835 (as per the Company's policy of offering the Service Line Deposits for Revenue over a period of three years....
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.... relief sought in the appeal, it cannot be said that such ground cannot be raised before the ITAT. The relevant para Nos. 38 & 39 of this decision are being reproduced hereunder: "38. It thus becomes clear that the decision of the Hon'ble Supreme Court in the case of Goetze (India) Ltd. (supra) is confined to the powers of the Assessing Officer and accepting a claim without revised return. This is what Hon'ble Supreme Court observed in the said judgment while distinguishing the judgment in the case of NTPC Ltd. (supra). When it comes to the power of Appellate Commissioner or the Tribunal, the Courts have recognized their jurisdiction to entertain a new ground or a legal contention. A ground would have a reference to an argument touching a question of fact or a question of law or mixed question of law or facts. A legal contention would ordinarily be a pure question of law without raising any dispute about the facts. Not only such additional ground or contention, the Courts have also, as noted above, recognized the powers of the Appellate Commissioner and the Tribunal to entertain a new claim for the first time though not made before the Assessing Officer. Income-tax proceedings are....
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....as erred on facts and in law in deleting the addition of Rs. 50200000 made on account of valuation of closing stock ignoring that: a) in this particular case the assessee was earlier following First In First Out (FIFO) method for valuation of stores/spares. Under any circumstances FIFO method is more correct & hence more appropriate for the valuation of stores/spares as closing stock as compared to "Moving Average" method. b) no sound reasoning/acceptable logic is given by the assessee company for change in the cost method from FIFO to Moving Average. c) the order of CIT(A) is not acceptable because the change in the method of valuation is neither bona fide nor regularly followed by the assessee as required for the change in the method of valuation. d) further, no perusal of the accounting standard-2, provisions of the IT Act, case laws & relevant extracts from 3CD report which clearly states that due to change of valuation of inventories, profit of the company is lower by Rs. 5.02 crores, it can be soundly concluded that A.O. is correct while making the addition on account of valuation of closing stock." Ground No.1 (assessee's appeal): 8. The grievance of the assessee in th....
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....r did not agree with and rejected the claimed depreciation at the rate of 80% in respect of the aforesaid meters. The reasons shown by the Assessing Officer for disallowance remained that the equipments were primarily 'reading meters' for measuring energy, indirect energy saving features were not enough to regard the meters as "Energy saving devices", 60% of the meters were mechanical meters which did not have advanced features as available in other electronic/smart meters and assessee had also claimed higher depreciation on bus bar chambers, which are devices through which connection from overhead lines/under ground cable is provided to the meters. 8.3 The Learned CIT(Appeals) affirmed the assessment order with the finding that the said equipments were merely reading meters and they did not facilitate in energy conservation. This First Appellate Order has been questioned in ground No.1 of the appeal preferred by the assessee. 9. In support of the ground, the Learned AR contended that the denial of depreciation at the prescribed rate of 80% in respect of the above meters is not legally sustainable for the reasons stated hereunder: - "Advanced feature of automatic electric load m....
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.... electric energy and power factor meters (f) Maximum demand indicator and clamp on power meters xxxxxxxxxx" (emphasis supplied) 9.4 On perusal of the aforesaid, it will kindly be appreciated that item III (8)(ix)(B) of the Depreciation Schedule provides for higher rate of depreciation in respect of 'meters for measuring........ electric energy'. 9.5 It is emphatically submitted that there is, as such, no further/ additional condition requiring the assessee to actually establish any direct relationship of the meters with the energy saved. The said Schedule also does not mandate that the energy meters should be 'electrical' or 'mechanical' devices, and merely provides that the meters should be electricity/ energy measuring devices. 9.6 It is, thus, respectfully submitted that electricity measuring meters are per se recognized as energy saving device by the aforesaid Schedule, since even if the meter does not have any special feature, accurate measurement of energy consumption by itself, results in conserving energy in as much as it enables regulation of energy consumption and arrests losses due to power theft. 9.7 In view of the aforesaid, and without anything more, it is respec....
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.... part of the machine and would accordingly, be eligible for depreciation as part of the machine: - CIT vs. Elecon Engg. Co. Ltd. : 166 ITR 66 (SC) - CIT vs. Birla Jute & Industries Ltd.: 260 ITR 55 (Cal) - CIT vs. Oswal Woollen Mill Ltd.: 289 ITR 261 (P&H) - CIT vs. Metalman Auto (P.) Ltd: 336 ITR 434 (P&H) - CIT v. India Turpentine & Rosin Co. Ltd.: 75 ITR 533 (All.) - DCIT vs. UAL Industries: 31 taxmann.com 111 (Kolkata - Trib.) (tm) - Ghaziabad footwear (P.) Ltd vs. DCIT: 142 Taxman 18 (Del Tri.) - Madhu Industries Ltd, Ahmedabad vs. ITO: 132 TTJ 233 (Ahd) In view of the above, it is respectfully submitted that meters acquired and installed by the appellant were capable of performing specific functions as aforesaid and were covered under the specific entries appearing in Appendix to Income Tax Rules, eligible for higher rate of depreciation @ 80%." 10. The Learned CIT(DR) on the other hand placed reliance on the orders of the authorities below on the issue. He submitted that the Learned CIT(Appeals) after discussing the issue in detail has rightly come to the conclusion that the meters are more technologically advanced and do have features which can help consumers sav....
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....ries under which the depreciation was claimed by the assessee during the relevant assessment year reads as under: "III. Machinery and Plant xxxxxx (8) (ix) Energy saving devices, being19 A. xxxx B. Instrumentation and monitoring system for monitoring energy flows: (a) Automatic electrical load monitoring systems; (b) Digital heat loss meters; xxxxxxxxx (e) meters for measuring heat losses, furnace oil flow, stream flow, electric energy and power factor meters (f) Maximum demand indicator and clamp on power meters xxxxxxxxxx" 12.2 The perusal of aforesaid provisions make it clear that item-III(8)(ix)(B)(e) of the depreciation schedule provides for higher rate of depreciation in respect of "meters for measuring....electric energy". 12.3 The submission of the assessee that there is no further/additional condition requiring the assessee to actually establish any direct relationship of the meters with the energy saved nor the said schedule also mandate that the energy meters should be "electrical" or "mechanical" devices and merely provides that the meters should be electricity/energy measuring devices finds substance. In the aforesaid schedule, the electricity measur....
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....pportunity of being heard to the assessee. 12.5 Regarding the claimed higher depreciation on the "bus bar chamber", the Learned AR submitted that these are devices through which connection from overhead line/underground cable is provided to the meters and the said device forms integral/inextricable part of the meters without which the meter cannot function. The authorities below have denied the claimed higher depreciation on this instrument on the basis that these are not energy saving device. We set aside this matter to the file of the Assessing Officer to verify the above claim of the assessee that 'bus bar chamber' forms integral/inextricable part of the meters without which a meter cannot function and allow the depreciation thereupon accordingly after affording opportunity of being heard to the assessee. The ground No.1 of the appeal preferred by the assessee is accordingly allowed for statistical purposes. 13. Additional ground No.1(assessee ) and ground No.1 (Revenue): The facts in brief are that in the assessment year under consideration, the appellant received a sum of Rs. 15.68 crores as non-refundable 'service line deposits' from customers as per the provisions of the D....
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....directly or indirectly met by any other person, then, the actual cost to be adjusted for purposes of depreciation should be the amount incurred for acquisition of the asset as reduced by the cost met by any other person. He referred the following provisions of the Act: Section 43(1) of the Act defining 'actual cost' and Explanation 10 thereto reads as under: "43. Definitions of certain terms relevant to income from profits and gains of business or profession. In sections 28 to 41 and in this section, unless the context otherwise requires- "actual cost" means the actual cost of the assets to the assessee, reduced by that portion of the cost thereof, if any, as has been met directly or indirectly by any other person or authority: Explanation 10.-Where a portion of the cost of an asset acquired by the assessee has been met directly or indirectly by the Central Government or a State Government or any authority established under any law or by any other person, in the form of a subsidy or grant or reimbursement (by whatever name called), then, so much of the cost as is relatable to such subsidy or grant or reimbursement shall not be included in the actual cost of the asset to the as....
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....ned AR submitted that the Ld. CIT(A) has erred in not directing the assessing officer to reduce the amount received for the cost of assets, merely because the appellant was following erroneous principle of recognizing the same as income over a period of three years. 14.8 In this regard, it was submitted that the method of accounting erroneously followed by the appellant of recognizing service line deposits as income, over a period of three years, could not be the basis of bringing to tax the entire amount received as trading receipt, notwithstanding the mandate of Explanation 10 to section 43(1) of the Act. 14.9 It is settled proposition of law that no tax can be levied or recovered without authority of law. Article 265 of the Constitution of India imposes an embargo on imposition and collection of tax if the same is without authority of law. 14.10 Reliance, in this regard, was placed on the decision of Hon'ble Supreme Court in the case of Lily Thomas v. U.O.I.: AIR 2000 SC 1650, where the Hon'ble Court observed as under: "It cannot be denied that justice is a virtue which transcends all barriers and the rules or procedures or technicalities of law cannot stand in the way of ad....
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....ited v. CIT: 229 ITR 383 (SC) − Assam Company (India) Ltd. vs. CIT: 256 ITR 423 (Gau.) − Nathmal Bankatlal Parikh & Co. V. CIT: 122 ITR 168 (AP -FB) − CIT V. Smt. Archana R. Dhanswatay: 136 ITR 355 (Bom) − Smt. Shen Lata Jain V. CIT: 192 CTR 50 (J&K) 14.16 In view of the aforesaid submissions and the cited decisions, the Learned AR submitted that the assessing officer may kindly be directed to reduce the service line deposits from the cost of assets falling under the 'plant and machinery' in accordance with the mandate of Explanation 10 to Section 43(1) of the Act. 15. The learned CIT(DR) while opposing the additional ground No.1 raised by the assessee and supporting ground No.1 of the appeal preferred by the Revenue, submitted that the Learned CIT(Appeals) was not justified in deleting the addition of Rs. 73,75,590 made on account of security line deposit from customers. He submitted that these service line receipts are not a liability of the assessee but are revenue receipts received during the year on running of business operations of the assessee company. The assessee is engaged in selling electricity to the consumers from whom it charges fees in t....
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....n of the assessee's business, but are receipts for bringing into existence capital of lasting value. Since the contributions made were not made merely for services rendered and to be rendered, but for installation of capital equipment, the same constituted 'capital receipt'. The Hon'ble Apex Court further held that even the balance amount retained by the assessee, which had not been expended, could not also be considered to be a revenue receipt. 16.6 In support of above, the Learned AR cited following decisions: − Rohatak & Hissar Districts Electric Supply Co. (P.) Ltd. vs. CIT: 5 Taxman 116 (Del) − Ranchi Electric Supply Co. Ltd. vs. CIT: 16 Taxman 213 (Pat.) − CIT vs. Cochin Electric Co: 57 ITR 82 (Ker.) − CIT vs. Poona Electric Supply Co. Ltd.: 14 ITR 622 (Bom) − Monghyr Electric Supply Co. vs. CIT: 26 ITR 15 (Orissa.) 16.7. Further, even in the impugned assessment order, the assessing officer has merely emphasized on the point that since the assessee-company is primarily a service provider, the charges received from consumers were revenue in nature, without appreciating that the said charges were actually received as reimbursement towards in....
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....vice line, such concession/reimbursement would have to be reduced for the purpose of computing the actual cost of the fixed assets acquired by the assessee. We thus find substance in the contention of the Learned AR that merely because the assessee was following erroneous principles of recognizing the amount received from the cost of assets as income over a period of three years, the Learned CIT(Appeals) was not justified in not directing the Assessing Officer to reduce the amount received from the cost of assets. There is no dispute that as per the settled proposition of law, no tax can be levied or recovered without authority of law and thus the mandate of Explanation 10 to section 43(1) of the Act cannot be ignored only because the method of accounting was erroneously followed by the assessee of recognizing service line deposits as income over a period of three years. Of course, there is no estoppels in law and we fully concur with this contention of the Learned AR. The very purpose of the assessment is to compute income in accordance with the provisions of the Act. We thus while setting aside the orders of the authorities below on the issue raised by the assessee in the additio....
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....o is a service provider for providing services to the consumers. It may have to incur capital expenditure for providing services to the consumer but that does not make the receipts on trading account in lieu of this expenditure from customer in its hands as capital receipts. 5.2 In appeal before me, the A/R's present for the appellant submitted that as per the consistent policy followed by the co, the Assessee is transferring the service line deposits received during the year to the P & L a/c over a period of three years. In respect of the nature of service line deposits and provisions relating to receiving of service line deposits, the A/Rs referred to the related provisions of the DERC and Electricity Act and submitted that the assessee company is governed by Rules and Regulations as laid down by Delhi Electricity Regulatory Commission (DERC). The relevant Rules of DERC relating to Service Line Deposits are laid down in the schedule of Misc Charges as finalized by DERC on 16.06.2003.In accordance with the above Notification/Rules and Regulations of DERC, the assessee was charging service line as well as development charges as the case may be and both were accounted for under the....
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.... of Delhi Electricity Regulatory Commission(DERC).The capital expenditure incurred in respect of service line deposits on account of service line cables, cost of GI pipes, bricks etc. were capitalized under the head meter accessories (on which depreciation was claimed @ 80% but was reduced to 25% by the DCIT). However, the capital expenditure incurred on development charges were duly included under the head (plant and machinery) which was subject to the normal depreciation @25%. Accordingly the development charges are required to be de-capitalized from the plant and machinery @ 25% and service line deposits from plant and machinery (meter) @ 80%, in accordance with the provisions of Section 43(1). App. No.187/09-10 12 M/s BSES Rajdhani Power Ltd. A.Y.2005-06; u/s 143(3) 5.4 The appellant also objected to various observation of the A.O and it was submitted that the A.O has observed that it is not a deposit but a receipt as it is non-refundable. In rebuttal the appellant argued that service line charges are being recovered from the customers as per the Electricity Act, 2003 and the regulations framed under the Act by the DERC from time to time. These charges are levied to recover th....
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....capital nature and is required to be reduced from the relevant cost of plant and machinery in accordance with Section 43 (1) of the I.T. Act, 1961. As regards the A.O's observation that the assessee company is engaged in selling electricity to the consumers from whom it charges fees in the name of energy charges. These energy charges are undisputedly in the nature of revenue receipts. It was submitted that the nature of service line receipts are entirely different from the nature of energy charges. Service line receipts as discussed above deserve to be reduced from the cost of the relevant plant and machinery in accordance with Sec. 43(1) of the I.T.Act, 1961.On the other hand, energy charges are recovered from consumers for the amount of electricity consumed by them at the prevailing tariff, which is of the revenue nature. Accordingly, both these receipts, namely energy charges and service line receipts have different characteristics and therefore could not be measured with the same yardstick. With regard to the A.O's observation that the Company has not submitted any reasoning whatsoever as to why it has treated specifically 1/3rd of these receipts as revenue receipts and not &fr....
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....pital asset is brought into existence. The contribution made by the consumers is substantially as consideration for a joint adventure; the service line when installed becomes an appendage of the mains of the assessee, and by the provisions of the Electricity Act, the assessee is obliged to maintain it in proper repairs for ensuring efficient supply of energy. The assumption made by the dept. that the excess remaining in the hands of the assessee, after defraying the immediate cost of installation of a service line must be regarded as a trading profit of the company is not correct. The assessee is undoubtedly carrying on the business of distributing electrical energy to i Nagar, App. No.187/09-10 15 M/s BSES Rajdhani Power Ltd. A.Y.2005-06; u/s 143(3) the consumers. Installation of service lines is not an isolated or casual act; it is an incident of the business of the assessee. But if the amount contributed by the consumers for installation of shat is essentially reimbursement of capital expenditure, the excess remaining after expending the cost of installation out of the amount contributed is not converted into a trading receipt. This excess-which is called by the Tribunal "profit....
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....to be capital in nature Under the circumstances; the amounts received for installation of service lines are to be treated as capital receipts in the hands of the appellant. Accordingly, the addition made by the AO is herby deleted." 17.2 We find that while dealing with the issue, the Learned CIT(Appeals) has discussed the related provisions of the Electricity Act, 1910 defining "service line" as per which it is an electric supply line intended to supply energy to a single consumer or a group of consumer from the same point of the distributing main. So the service line is to be drawn from the distributing main. The lines drawn with the help of electric posts are electric supply lines and connection taken from the post to the building are service line. He has noted further that service line charges are levied to recover the cost of service line which includes the cost of GI pipes, bricks, sand, overheads or under ground cables etc. There is no dispute that the service line charges are charged from the consumer only at the time of providing new connections, to recover the expenditure incurred on such equipments and it is a one time charge levied on the consumers at the time of taking....
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....ing of the service line deposit scheme with the capital expenditure incurred on the service line connection, the justification for treating 1/3rd of the total amount of receipts in a particular year as Revenue is that by doing so the assessee is offering for Revenue all service line receipts over three years. It was submitted that at the same time the assessee is claiming 99% of the cost incurred on capitalization service line connections under plant and machinery (meter) as depreciation over three years based upon the facts that energy meters are eligible for deprecation at the higher rate of 80%. This is in line with the matching concept as enunciated under AS-I requiring Revenue to be matched with cost. Based upon the matching concept and Revenue friendly concept, the offering of service line deposits (which are in the nature of capital receipts) over a period of three years is not prejudicial to the interest of Revenue, however, the service line receipts are of capital nature and is required to be reduced from the relevant cost of plant and machinery in accordance with sec. 43(1) of the Income-tax Act, 1961, explained the assessee. 17.4 With regard to the observation of the As....
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....excerpts from 3 CD Report clearly states that due to change of valuation of inventories, profit of the company is lower by Rs. 5.02 crores. Thus, the Assessing Officer was correct in making the addition on account of valuation of closing stock. 19. The Learned AR on the other hand tried to justify the First Appellate Order on the issue. He contended that in the assessment year under consideration, the assessee transited its accounting package to SAP, which adopts 'Moving Average" (weighted average) method as the most reliable and feasible method for valuation of closing stock, on account of the following reasons: (a) "Moving Average" (weighted average) method was considered as the most appropriate method for valuation of closing stock considering that the stores and spares of the assessee-company comprise mainly of cables, conductors, transformers and other metal based items, whose value keeps fluctuating considerably and are extremely volatile based on the market value of Iron/Aluminum/Copper, etc. Thus, it was more logical/reasonable to adopt the 'weighted/moving average' method, which has been consistently followed in the subsequent assessment years; (b) The aforesaid transit....
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....sic fundamental of accounting for valuing inventory at cost or net realizable value whichever is less is fully met if either of the aforesaid methods is followed. Thus, technically speaking there has been no change in the method of valuation of closing stock at cost or market value, whichever is lower, as adopted by the assessee. 19.7 It was further submitted that the provisions of section 145A of the Act nowhere bars the assessee from changing the method of valuation, but only lays down the criteria that the changed method has to be followed regularly, i.e. in subsequent years as well. 19.8 The relevant provisions of section 145A of the Act reads as under: "145A. Notwithstanding anything to the contrary contained in section 145,- (a) the valuation of purchase and sale of goods and inventory for the purposes of determining the income chargeable under the head "Profits and gains of business or profession" shall be- (i) in accordance with the method of accounting regularly employed by the assessee; and (ii) further adjusted to include the amount of any tax, duty, cess or fee (by whatever name called) actually paid or incurred by the assessee to bring the goods to the place o....
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.... to appreciate that the entire exercise is revenue neutral, in view of the fact of change in valuation of closing stock in the assessment year under consideration, the same had consequential effect of reducing the value of opening stock for the subsequent assessment year i.e. AY 2006-07, which resulted in increased profit to that extent. 19.15 Further, in holding that the assessee had adopted two different methods of valuation to value its closing and opening stock, the assessing officer failed to appreciate that since the opening stock pertained to the previous assessment year, the same could not have been tinkered with, which would have impacted the profitability of assessment year 2005-06 and thereby the opening stock remained to be valued at FIFO. 19.16 Furthermore, in holding that 'Moving average' method was not an appropriate method for valuation of stock, the assessing officer failed to provide any reason/ logic in the impugned assessment order. 19.17 Reliance placed by the assessing officer on the decision of the Hon'ble Delhi High Court in the case of CIT vs. Bharat Commerce Industries Ltd.: 240 ITR 256 and the Hon'ble Bombay High Court in the case of CIT vs. Sanjeev Wo....
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.... assessee in its financial statements for the financial year 2004-05, the year under consideration. Further, the 'moving average' (weighted average) method of valuation of inventories has been consistently followed by the assessee in all the subsequent assessment years, which has also been accepted by the assessing officer. 20.3 In the impugned assessment order, the assessing officer alleged that there was no sound reasoning or justification for the change in method of valuation of inventories undertaken by the assessee in the assessment year under consideration, which resulted in reduction of profit to the tune of Rs. 5.02 crores in the said year. Accordingly, the assessing officer brought to tax Rs. 5.02 crores, being the difference on account of change in method of valuation of inventories by concluding that 'Moving average method' is not an appropriate method for valuation of inventories. 20.4 On appeal against the aforesaid assessment order, the Ld.CIT(A) deleted the addition of Rs. 5.02 crores made by the assessing officer by holding that the change in method of valuation of inventories undertaken by the assessee in the assessment year under consideration was on account of....
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....be some distortion in the calculation of profit in the year in which the change takes place. But if the change is brought about bona fide and is in accordance with the normally accepted accounting practice, there is no reason why such a change should not be permitted. Thus, where the change has been effected by adopting the new changed method for valuing the closing stock of a particular assessment year, the value so arrived at will in its turn, become the value of the opening stock of the subsequent assessment year. In such a case, a procedure cannot be App. No.187/09-10 7 M/s BSES Rajdhani Power Ltd. A.Y.2005-06; u/s 143(3) adopted for changing the value of the opening stock of that particular assessment year as per the changed method, for it will lead to a chain reaction of changes in the sense that the closing value of the stock of the year preceding will also have to change and correspondingly the value of the opening stock of that year and so on. I also find that In the income tax, it has not been prescribed that for arriving at the cost of closing stock of inventory which method is to be taken into consideration whether FIFO, weighted average, LIFO or any other method. But u....
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.... Rs. 130 per Kg and there was no closing stock that resulted in the abnormal gross profit ratio 2054.60 percent in the first year and loss return in the second year. Judgment The opening stock for the first year was computed at the rate of RS. 90 per kg and the closing stock was computed at the rate of Rs. 130 per kg. This was done because there were export sales whereas in the second year there were no export sales . Therefore the entire device was to claim the maximum deduction under section 80 HHC in the first year and in the second year the attempt is to suppress the profits.Thus the entire device adopted by the assessee was to inflate the deduction under section 80 HHC in the first year and to suppress the profit in the second year. 4.5 I find that the ratio of the above case is not applicable to the assessee company in view of the fact that the assessee company is not claiming deduction u/s 80 HHC or under any other section of the Income Tax Act, 1961.Further it can be said that there is intention to reduce the taxable profits by shifting the profits to the next year as it has already brought forward unabsorbed depreciation & losses of the earlier years. Further, the assesse....
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.... onward. We also concur with the view of the Learned CIT(Appeals) that it is for the assessee to decide which method is more correct and hence more appropriate for the valuation of the stores/spares and not for the Assessing Officer to decide as long as the change is bona fide and the assessee is consistently following the same in the subsequent years. We thus do not find infirmity in the First Appellate Order on the issue as there was no any casual departure in regard to the method adopted by the assessee. The same is upheld. The ground No.2 of the appeal preferred by the Revenue is accordingly rejected. 21. Addl. Ground No.2 (assessee): The issue raised is as to whether provisions of section 115JB of the Income-tax Act, 1961 were not applicable during the relevant assessment year and thus the Assessing Officer was not justified in assessing the income of the assessee under sec. 115JB of the Act and not under normal provisions of the Act. The relevant facts are that the assessee is engaged in the business of distribution of electricity and is governed by the provisions of the Electricity Act, 2003. It claims that it prepares its annual account in accordance with the applicable El....
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....statements as under: "Significant Accounting Policies and Notes to the Accounts: 1. Basis of preparation of financial statements The financial statements are prepared under the historical cost convention, on the accrual basis of accounting, and in accordance with the provisions of the Companies Act, 1956 as well as those of the Repealed Electricity (Supply) Act, 1948 and comply with the accounting standards issued by the Institute of Chartered Accountants of India wherever applicable. In addition provisions of the Delhi Electricity Reform (Transfer Scheme) Rules, 2001 (hereinafter referred to as Transfer Scheme) and other relevant documents / agreements have been taken into account while preparing the financial statements" 22.3 Thus, it may be pertinent to note that the books of accounts of the appellant-company are drawn in accordance with the statutory provisions as applicable to an Electricity Company, i.e., the Repealed Electricity (Supply) Act, 1948 and the Delhi Electricity Reform (Transfer Scheme) Rules, 2001(hereinafter referred to as 'Electricity Act/DERC Regulations') and provisions of the Companies Act, 1956, to the extent the same are not inconsistent with the Elec....
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....her Acts as has been held in the following decisions: - TRO v Custodian, Special Court Act, 1934: 293 ITR 369 (SC) - CIT v India Equipment Leasing Ltd: 293 ITR 350 (Mad) - CIT v Elgi Finance Ltd: 293 ITR 357 (Mad) - VasisthChayVyapar Ltd: 330 ITR 440 (Del) - DCIT vs. BhartiyaSamruddhi Finance Ltd.: 58 SOT 141 (Del) 22.10 In view of the above, it is patently clear that the appellant prepares its annual accounts in accordance with the applicable laws, including provisions of the Delhi Electricity Reforms (Transfer Scheme), Rules, 2001 and is not required to and has not been strictly preparing its audited annual accounts as per Parts II and III of Schedule VI of the Companies Act, 1956. 22.11 In the aforesaid context, it may also be pertinent to note that prior to the amendment to sub-section (2) of section 115JB of the Income-tax Act, 1961 ('the Act'), the deeming provisions of the said section were not applicable to companies to which proviso to sub-section (2) of section 211 of the Companies Act applied. 22.12 This is clearly evident from a bare reading of the provisions of section 115JB of the Act, as applicable to the relevant year under consideration. 22.13 The Learned ....
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....s annual accounts in accordance with the applicable Electricity Act/ DERC regulations, which are binding and mandatorily to be followed by the appellant. 22.17 It is was submitted that various Benches of the Tribunal have held that provisions of section 115JB of the Act shall not apply to companies referred in proviso to sub-sections (1) and (2) of Section 211 of the Companies Act, i.e., companies governed by Special Acts viz.,. Banking Regulation Act, 1949, Electricity Act, 2003, Insurance Regulatory Act, 1999 etc. Reference, in this regard, made to the following decisions:- - Kerala State Electricity Board v. DCIT: ITA Nos. 1703/1710 and 1716 of 2009 (Ker) - Maharashtra State Electricity Board v. JCIT: 82 ITD 422 (Mum.) - Reliance Energy Ltd. vs. ACIT: ITA No. 218/Mum/2005 (Mum.) - Krung Thai Bank PCL v. JDIT: 133 TTJ 435 (Mum.) 22.18 Accordingly, the provisions of section 115JB of the Act were, during the relevant year, not applicable to the appellant, contended the Learned AR. 22.19 The Learned AR submitted that the aforesaid contention of the appellant, is fortified by substantive amendments in section 115JB of the Act made by the Finance Act, 2012, with effect from Apr....
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....nies Act to prepare their profit and loss account in accordance with the Schedule VI of the Companies Act, 1956, profit and loss account prepared in accordance with the provisions of their regulatory Acts shall be taken as a basis for computing the book profit under section 115JB. II. It is noted that in certain cases, the amount standing in the revaluation reserve is taken directly to general reserve on disposal of a revalued asset. Thus, the gains attributable to revaluation of the asset is not subject to MAT liability. It is, therefore, proposed to amend section 115JB to provide that the book profit for the purpose of section 115JB shall be increased by the amount standing in the revaluation reserve relating to the revalued asset which has been retired or disposed, if the same is not credited to the profit and loss account. III. It is also proposed to omit the reference of Part III of the Schedule VI of the Companies Act, 1956 from section 115JB in view of omission of Part III in the revised Schedule VI under the Companies Act, 1956. These amendments will take effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-14 and subsequent a....
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....(2002) 254 ITR 772 (SC) - Gem Granites vs. CIT (2004) 271 ITR 322 (SC) - Sedco Forex International Drill Inc. vs. CIT (2005) 279 ITR 310 (SC). 22.28 The fundamental principle reiterated in the aforesaid decision is lexprospicit non respicit: i.e., laws look forward and not backward. No section can be interpreted retrospectively unless it is mentioned in the section itself. 22.29 Specific reliance in this regard was placed on the decision of the Delhi Bench of the Tribunal in the case of Bank of Tokyo Mitsubishi UFJ Ltd. vs. ADIT: ITA No.5364 of 2010 wherein the Tribunal was adjudicating the issue regarding applicability of provisions of section 115JB to a foreign bank which was subject to tax in India on income earned by the branch in India (PE)and preparing its accounts as per requirements of Banking Regulation Act. The Tribunal while following the principles laid down by the Supreme Court in Vatika Township (supra) observed that the amendment to section 115JB of the Act by the Finance Act, 2012 was prospective since the same resulted in substantial change in computation provisions. 22.30 To the same effect are the following decisions, wherein amendment to sub-section (2) of ....
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....of the Act, still the assessing officer was under duty to correctly assess income of the appellant in accordance with the provisions of the Act. 23. The learned CIT(DR) on the other hand tried to justify the action of the Assessing Officer in framing the assessment under sec. 115JB of the Act. He submitted that the decisions relied upon by the Learned AR having distinguishable facts are not applicable in the case of the assessee. He pointed out that the assessee itself had declared income under the deeming provisions of sec. 115JB of the Act, thus, the assessee has no grievance in this regard and the issue raised in the additional ground may be decided in favour of the Revenue. 24. We find that in support of the issue that deeming provisions of sec. 115JB of the Act were not applicable in the case of the assessee during the assessment year under consideration, the Learned AR has cited provisions of different laws and has placed reliance on several decisions. We thus prefer to examine provisions of different laws on the issue first. It was claimed that books of account of the assessee are drawn in accordance with the statutory provisions as applied to an electricity company, i.e. ....
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....es engaged in the generation or supply of electricity, except in so far as the said provisions are inconsistent with the provisions of The Indian Electricity Act, 1910, (9 of 1910) or] the Electricity Supply Act, 1948 ; (54 of 1948.) (d) to any other company governed by any special Act for the time being in force, except in so far as the said provisions are inconsistent with the provisions of such special Act; (e) to such body corporate, incorporated by any Act for the time being in force, as the Central Government may, by notification in the Official Gazette, specify in this behalf, subject to such exceptions, modifications or adaptations, as may be specified in the notification.] Application of Act to Government Companies" Further, Section 1(4) of the Companies Act, 2013 reads as under: "1. Short title, extent, commencement and application (1) This Act may be called the Companies Act, 2013. .......................... (4) The provisions of this Act shall apply to- (a) companies incorporated under this Act or under any previous company law; (b) insurance companies, except in so far as the said provisions are inconsistent with the provisions of the Insurance Act, 1938 or th....
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....above provisions, we concur with the submission of the assessee that under the Electricity Act, 2003, the State Commission is empowered to make regulations. In view of the above discussed provisions of Electricity Act, 2003 and Companies Act, it is clear that the very basis of recognition of Revenue and expense is regulated by the DERC and not strictly as per the provisions of the Companies Act. It is also an established position of law that provisions of a specific Act would override the provisions of all other Acts, which is supported by the decisions relied upon by the assessee including the decision so Hon'ble Supreme Court in the case of TRO vs. Custodian - Special Court at - 934 (supra). Thus, it can be safely arrived at a conclusion that the assessee prepares its annual account in accordance with the applicable laws including provisions of the Delhi Electricity Reforms (Transfer Scheme), Rule 2001 and is not required to and has not been strictly preparing its audited annual account as per Parts II and III of Schedule-6 of the Companies Act, 1956. 24.6 Further contention of the Learned AR remained that prior to the amendment to sub-section (2) of sec. 115JB of the Income-tax....
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.... the submission of the Learned AR that the assessee is governed by the provisions of the Electricity Act, 2003 and accordingly supposed to prepare its annual accounts in accordance with the applicable Electricity Act/DERC Regulation, which are binding and mandatory to be followed by the assessee. 24.6 The cited decisions by the Learned AR in the cases of Kerala State Electricity Board, vs. DCIT (supra), Maharashtra State Electricity Board vs. JCIT (supra), Reliance Energy Ltd. vs. ACIT (supra) and Crung Thai Bank PCL vs. JDIT (supra) also support the contention of the assessee that provisions of sec. 115JB of the Act shall not apply to Companies referred in proviso to sub-sections (1) and (2) of sec. 211 of the Companies Act, i.e. companies covered by Special Acts viz. Banking Regulation Act, 1949, Electricity Act, 2003, Insurance Regulatory Act, 1999 etc. We accordingly hold that provisions of sec. 115JB of the Act were not applicable to the assessee during the year under consideration as the same is also fortified by substantive amendments in section 115JB of the Act by the Finance Act, 2012 w.e.f. 01.04.2013. Sub-section (2) to section 115JB of the Act as substituted by the Fin....
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....ided under the Act, were, in no uncertain terms, made in provisions of sec.115JB (2) w.e.f. 01.04.2013. In other words, the deeming provisions are applicable to companies governed by special Act only from assessment year 2013-14 and onwards. The memorandum explaining the provisions of the Finance Bill, 2012- 240 ITR (St.) 288 whereby sub-section (2) of sec. 115JB was substituted provides that the amendment is applicable w.e.f. 01.0.2013 i.e. for the assessment year 2013-14 onwards. The relevant extracts of the memorandum has been reproduced hereinabove in the submissions of the Learned AR. From the aforesaid amendments, it is clear that prior to amendment applicable from the assessment year 2013-14, provisions of sec.115JB of the Act were not applicable to an electricity company such as the assessee up to the assessment year 2012-13. 24.9 The Explanation-3 to section 115JB of the Act which provides an option to prepare its accounts as per Schedule-VI of the Companies Act or the governing law/special Act in respect of assessment year prior to 2013-14, has also been inserted as per the substantive amendments applicable from assessment year 2013-14 and onwards. The amendments to sect....
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.... intent is clearly to give the enactment a retrospective effect; unless the legislation is for purpose of supplying an obvious omission in a former legislation or to explain a former legislation. We need not note the cornucopia of case law available on the subject because aforesaid legal position clearly emerges from the various decisions and this legal position was conceded by the counsel for the parties. In any case, we shall refer to few judgments containing this dicta, a little later. ............................. .......................................... Thus, the rule against retrospective operation is a fundamental rule of law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act, or arises by necessary and distinct implication. Dogmatically framed, the rule is no more than a presumption, and thus could be displaced by out weighing factors. 35. Let us sharpen the discussion a little more. We may note that under certain circumstances, a particular amendment can be treated as clarificatory or declaratory in nature. Such statutory provisions are labeled as "declaratory statutes". The circ....
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....while considering the nature of amendment to Section 29(2) of the Bombay Rents, Hotel and Lodging House Rates Control Act as amended by Gujarat Act 18 of 1965, observed as follows: "The amending clause does not seek to explain any pre-existing legislation which was ambiguous or defective. The power of the High Court to entertain a petition for exercising revisional juris-diction was before the amendment derived from s. 115, Code of Civil Procedure, and the legislature has by the amending Act attempted to explain the meaning of that provision. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act." 36. It would also be pertinent to mention that assessment creates a vested right and an assessee cannot be subjected to reassessment unless a provision to that effect inserted by amendment is either expressly or by necessary implication retrospective. (See Controller of Estate Duty Gujarat-I v. M.A. Merchant 1989 Supp (1) SCC 499. We would also like to reproduce hereunder the following observations made by this Court in the case of Govinddasv. Income-tax Officer (1976) 1 SCC 906, while holding Section 171 (6) of ....
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....antial change in computation provisions. In that case, the ITAT was adjudicating the issue regarding applicability of provisions of sec. 115JB of the Act to a foreign bank which was subject to tax in India on income earned by the Branch in India (P.E) and preparing its accounts as per requirements of Banking Regulation Act. The relevant finding in that case are being reproduced hereunder: "74..........In our opinion this explanation cannot be held to be retrospective in operation because it has brought in a substantial change in the computation provision. Till the insertion of this amendment, various decisions clearly held that in case of Banking Companies, Electricity Companies and Insurance Companies, since they were governed by Special Acts and the profit and loss account was not prepared as per part II of schedule VI to the Companies Act, therefore, the computation provisions failed. Accordingly, in view of the decision of Supreme Court in the case of B.C. Srinivasa Setty (supra), the law till the insertion of this explanation was that the provisions of section 115JB were not applicable on account of impossibility of computation as the accounts were not prepared in accordance....
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.... 14 of the said order and also in the order for A.Y. 2004-05. Respectfully following the precedents, we accept the assessee's claim and hold that the provisions of sec. 115JB cannot be upheld." Again the Bangalore Bench of the ITAT in the case of Syndicate Bank vs. DCIT (supra) has decided the issue in favour of the assessee, a banking company. Relevant para Nos. 98 & 99 thereof are being reproduced hereunder: "98. We have considered the rival submissions of the learned counsel for the assessee. We find that this issue was considered by the Mumbai Bench of the Tribunal in the case of Krung Thai Bank PCL (supra) and on the above issue held as follows: "5. Learned counsel for the assessee, however, contends that the provisions of MAT do not apply to the assessee, and, for this reason, very foundation of impugned reassessment proceedings is devoid of legally sustainable merits. His line of reasoning is this. The provisions of MAT can come into play only when the assessee prepares its profit and loss account in accordance with Schedule VI to the Companies Act. It is pointed out that, in terms of the provisions of sec. 115JB(2), every assessee is required to prepare its profit and l....
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....led deliberation and referring the CBDT understanding (Circular No. 762 dated 18.2.1998 - 230 ITR (Statute) - 12 ) that companies engaged in the business of generation and distribution of electricity and enterprises engaged in developing, maintaining and operating infra-structure facility as a matter of policy, are not brought within the purview of the amendment (115JA) for the reason that such a policy would promote the infra-structural development of the country and that such an understanding of the CBDT is binding on the department, has also been pleased to arrive at a conclusion, relevant paragraphs thereof are being reproduced hereunder: " 11. Before we examine the first question a brief survey of the history of section 115JB is necessary. Chapter XII-B was inserted by the Finance Act of 1987 in the Income-tax Act. Section 115J was introduced for the first time by the said Chapter. The relevant portion of the said section reads as follows: "Section 115J. Special provisions relating to certain companies.-(1) Notwithstanding anything contained in any other provision of this Act, where in the case of an assessee being a company (other than a company engaged in the business of ....
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....or the relevant previous year prepared as per the prescription under sub-section (1A) and either increased or decreased by various amounts specified in the various subsequent sub-clauses appended to the Explanation, the details of which are not necessary for the purpose of this case. However, the operation of section 115J came to an end with 1991- 92 assessment year onwards. 12. Subsequently, section 115JA came to be inserted in the Income-tax Act by Finance Act 2 of 1996, with effect from 1-4-1997. The scheme of section 115JA is almost similar to the scheme of section 115J. Two major points of difference are that the new section is applicable with reference to the previous year relevant to the assessment year commencing from 1-4-1997 and ending with 1-4-2001. Secondly, the express exclusion of the Companies engaged in the business of either generation or distribution of electricity is absent under section 115JA. The third and most important change is that two provisos are added to sub-section (2) stipulating that : "Provided that while preparing profit and loss account, the depreciation shall be calculated on the same method and rates which have been adopted for calculating th....
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....opts the financial year under the Companies Act, 1956 (1 of 1956), which is different from the previous year under this Act,- (i) the accounting policies; (ii) the accounting standards adopted for preparing such accounts including profit and loss account; (iii)the method and rates adopted for calculating the depreciation, shall correspond to the accounting policies, accounting standards and the method and rates for calculating the depreciation which have been adopted for preparing such accounts including profit and loss account for such financial year or part of such financial year failing within the relevant previous year". The scheme of the section 115JB is similar to section 115J and section 115JA. The difference insofar as it is relevant for the present purpose between section 115JB and its fore-runners (Sections 115J and 115 JA) is as follows: All the 3 sections (Ss.115J, 115JA and 115JB) create legal fictions regarding the 'total income' (a defined expression under section 2(45) of the Act) of the Companies. While the earlier two sections mandate the department to make the assessment on a fictitious amount of 'total income' where the actual amount of total income com....
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....eral of India and also the State Governments. Such accounts of the appellant are required to be audited by the Comptroller and Auditor-General of India or such other person duly authorised by the Comptroller and Auditor-General of India. The accounts so prepared along with the audit report is required to be laid annually before the State Legislature and also to be published in the prescribed manner and copies of such publication shall be made available for sale at a reasonable price, obviously for the benefit of the general public who wish to scrutinise the accounts. 16. Thus, it can be seen that coming to the maintenance of the accounts, the appellant though is deemed to be a "Company" - both by virtue of operation of section 80 of the Income-tax Act for the purpose of Income-tax Act and by virtue of the definition of the expression "Company" under the Income-tax Act (which is already examined earlier) - the appellant is required to keep and maintain its accounts in a manner specified by the Central Government, but not in the manner specified in the Companies Act. Therefore, the question is whether the legal fiction contemplated under section 115JB can be pressed into service whi....
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....luding the bodies like the appellant from the operation of the said section. Though under the normal rules of interpretation of statutes the omission of a clause which existed in the statute at some point of time by a subsequent amendment would indicate that the legislature intended not to give the benefit of such clause any more to those who were getting the benefit of such exclusion clause, in our opinion, it is not an absolute rule. The other attendant circumstances, the context, the history and the mischief sought to be remedied by the amendment are all required to be examined before reaching at definite conclusion. 19. The Circular No. 762 not only is binding on the respondents, but also explains the purpose in introducing section 115JA. The relevant portion reads as follows:- "46.1 In recent times, the number of zero-tax companies and companies paying marginal tax has grown. Studies have shown that in spite of the fact that companies have earned substantial book profits and have paid handsome dividends, no tax has been paid by them to the exchequer. 46.2 The Finance Act has inserted a new section 115JA of the Incometax Act, so as to levy a minimum tax on companies who ar....
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....e loophole in the law. However, the CBDT understood that Companies engaged in the business of generation and distribution of electricity and Enterprises engaged in developing, maintaining and operating infrastructure facilities, as a matter of policy, are not brought within the purview of the amendment (Section 115JA) for the reason that such a policy would promote the infrastructural development of the country. Such an understanding of the CBDT is binding on the department. 20. If that is the background in which section 115JA is introduced into the Income-tax Act, section 115JB, which is substantially similar to section 115JA, in our opinion, cannot have a different purpose and need not be interpreted in a manner different from the understanding of the CBDT of section 115JA." 24.8 Under the above facts and circumstances, we thus hold that even though the assessee, under a misconception of law, had declared income under the deeming provisions of sec. 115JB of the Act, still the Assessing Officer was under its duty bound to make correct assessment of income of the assessee in accordance with the provisions of the Act. As per above discussion and the ratios laid down in the cited....
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.... account during the year amounting to Rs. 16,39,25,174 (as per the Company's policy of offering the service line deposit for Revenue over a period of three years) while computing the total income after holding that entire receipts by way of service line deposit is capital in nature". 2. That on the facts and circumstances of the case and in law, the Assessing Officer erred in assessing the income of the appellant under sec. 115JB and not under the normal provisions of the Income-tax Act, 1961 (The Act) without appreciating that the deeming provisions of sec. 115JB of the Act were not applicable during relevant assessment year." 25.2 Similar arguments have been advanced by the parties as advanced by them on the allowability of the similar additional grounds in the assessment year 2005-06 hereinabove. Following the decision taken therein, we allow the present application and admit the above stated additional grounds for our adjudication. 26. On the issues raised in the additional grounds regarding the issues of (i) not directing the Assessing Officer to reduce the amount of service line deposit credited to the profit and loss account during the year by the Learned CIT(Appeals) whi....
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....r statistical purposes. 28. Ground No2 (assessee): It is regarding the disallowance of depreciation to the tune of Rs. 20,69,729 upheld by the Learned CIT(Appeals). 28.1 The facts in brief are that during the year the assessee had received grant-in-ad of Rs. 18.63 crores from the Ministry of Power under the accelerated power development reforms program for the purpose of upgradation of sub-transmission and distribution in densely electrified zones in the Urban and Industrial Areas and improvement in the commercial viability of the S.E.Vs/Discom. 28.2 The aforesaid aid primarily had two main components as under: i) investment component for strengthening and up-gradation of the sub-transmission and distribution system; ii) incentive components to encourage/motivate utilities to reduce cash losses. 28.3 The expenditure incurred on up-gradation of the system was duly capitalized by the assessee under the head "plant and machinery" and the grant/aid received under the said scheme was reduced from the block of such assets (s). 28.4 The Assessing Officer held that since the grant in aid received by the assessee could not be directly attributed to the specific assets acquired during....
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....actual cost of the assets to the assessee. For a ready reference, the said Explanation-10 to sec. 43(1) of the Act is being reproduced hereunder: "Explanation 10- Where a portion of the cost of an assets acquired by the assessee has been met directly or indirectly by the Central Government or a State Government or any authority established under any law or by any other person, in the form of a subsidy or grant or reimbursement (by whatever name called), then, so much of the cost as is related to such subsidy or grant or reimbursement shall not be included in the actual cost of the assets to the assessee." 31.1 In view of the above discussion, we set aside the matter to the file of the Assessing Officer to verify the contents of page No. 78 of the supplementary paper book i.e. the relevant extracts of the tax audit report of the assessee for the assessment year 2006-07 reflecting the grant in aid reduced from the respective "cost of assets" and allow the claimed relief after affording opportunity of being heard to the assessee to this effect that the aid received by the assessee was rightly adjusted against the cost of acquisition of plant and machinery and not against meters. The....
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....e. h) Further the co. has not submitted any reasoning whatsoever as to why it has treated specifically 1/3rd of these receipts as revenue receipts and not ½ or 1/4th or some other proportion as revenue receipts. i) Lastly, the assessee co. has not provided the details of these receipts including their reconciliation with its books even though specific query was raised in this regard vide note sheet entry dt. 21.11.2008. However a sample voucher of receipt was submitted which reveals that apart from service line charges, the co. is levying development charges from the customers for a new connection. Thus the co. is already collecting funds for incurring capital expenditure. j) The service line receipts simply cannot be treated as capital receipts because their nature would not depend upon how the assessee co. is utilizing them but in what capacity they have been received by the company. And the fact is that they have been received by the co. in the course of running its regular business operations. k) The assessee company also not provided the information in the tabular form inspite of specifically asked for by the AO during the Assessment proceedings. 3. The Ld. CIT....
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.... Court. 36. The Learned AR on the other hand placed reliance on the First Appellate Order with the submission that the aforesaid purchases were made by the assessee through a competitive bid, wherein tenders were floated to eight vendors which included REL. However, out of eight vendors, only four vendors qualified on technical valuation and ultimately the contract was awarded to REL, considering that REL had provided the lowest bid meeting all the technical requirement. Thus, the energy meters were procured from REL at the most competitive price and superior technical specification meeting the delivery schedule of the assessee. He contended that while arriving at the conclusion that the price at which the energy meters were purchased from REL was not at arm's length and that REL had sold the said product at an exorbitant price, the Assessing Officer failed to bring on record any independent corroborative evidence to substantiate that the price at which the energy meters were sold by REL to the assessee was not at fair market value. The Learned AR submitted that there is no stay of operation of the order passed by ATE (on the basis of which relief has been allowed to the assessee)....
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....eceipt of internal purchase requisition along with technical specifications from user groups, tenders are floated to approved vendors who are registered with the Company; − Commercial bids are received from such vendors, which are then compared with the technical requirements of the users; − On evaluation, vendors are approved on fulfillment of technical specifications; − On commercial discussions, the best bidder is approved by the management after considering various factors such as price, delivery schedule, warranty etc. 36.8 With respect to the purchase of electric energy meters from REL, the assessee-company adopted the same standard procurement procedure, which involved competitive bidding with the participation of all major vendors like L&T, Genus, Emco Ltd, Secure Ltd, etc. 36.9 On enquiry floated by the Company, bids were received from 8 vendors, out of which 4 bidders were technically qualified, since the meters to be supplied were required to meet technical specifications as per the CEA Regulations. 36.10 Out of these 4 bidders, the bid quoted by REL was observed, as most competitive in terms of technical specifications, price and delivery schedul....
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....isales Ltd.: ITA No. 559/2009 (Guj.) − CIT v. Gopala Polyplast Ltd. : ITA NO. 265/2009 (Guj.) − JCIT v. ITC Ltd.: 112 ITD 57 (Kol.)(SB) − Jagdamba Rollers Flour Mill Ltd. vs ACIT: 117 ITD 260(tm) (Nag.) − Aradhana Beverages & Foods Co. (P.) Ltd vs. DCIT:51 SOT 426 (Del) − S.K. Engg vs. JCIT: 103 ITD 97 (Bang.) − Rangoon Chemical Works (P) Limited: 100 Taxman163 (Ahd.) (Mag) − Kinetic Honda Motor Ltd V. JCIT 77 ITD 393 − Shyam Oil Cake Ltd V. ACIT: 83 TTJ 414 (Jd.) − Vikshara Trading & Investment (P) Limited: 61 TTJ 6 (Ahd.) − Beta Naphthol (P) Limited: 50 TTJ 375 (Ind.) 36.17 In the instant case, the assessing officer has failed to bring on record any corroborative evidence to establish that the price paid to REL for purchase of energy meters was unreasonable and excessive. Further, even in the DERC order, merely bald allegations have been made by the authorities, without any supporting evidence with respect to excessiveness of the payments made as compared to the 'market value'. 36.18 In order to determine whether expenditure is excessive or unreasonable, reliance must be placed on the test of commercial expedienc....
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....e fair market value of the goods or legitimate need of the business. In the present case, the Assessing Officer has failed to bring on record any corroborative evidence to establish that the price paid to REL for purchase of energy meters was unreasonable and excessive. And above all the said DERC order on the basis of which the Assessing Officer came to the conclusion that excessive price has been paid to REL has already been set aside by the ATE and operation of that order giving relief to the assessee has not been stayed by any appellate authority as per the Learned AR. We also concur with the submissions of the assessee that capital expenditure payments eligible for depreciation are not covered under sec. 40A(2) of the Act by virtue of the fact that deprecation is not a deduction but only an allowance. Considering all these material aspects of the issue, we are of the view that the Learned CIT(Appeals) has rightly deleted the addition of Rs. 2,94,24,126 made on account of disallowance of depreciation on energy meters purchased from REL. The same is upheld. The ground No.1 is accordingly rejected. 38. Ground No.2: It is regarding the deletion of addition of Rs. 1,91,29,36,254 m....
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.... such assets. 3805. Further, in respect of service line deposits, the Learned CIT(Appeals) held that since the assessee was following a consistent accounting principles of recognizing the same as income over a period of three years, no interference was required since the entire exercise was Revenue neutral. 39. In support of the ground, the learned CIT(DR) placed reliance on the assessment order. He contended that considering this aspect that service line deposit and consumer contribution are in the nature of non-refundable deposits and, therefore, not in the nature of liability, the Assessing Officer has rightly held that the aforesaid deposits were taxable as Revenue receipts keeping in view that the assessee is a service provider and the amount was received in the course of rendering of services. 40. The Learned AR on the other hand tried to justify the relief given by the First Appellate Authority. He submitted that the service line deposits and consumer contributions received by the assessee in the assessment year under consideration are in the nature of capital receipt, as elaborated hereunder: 40.1 Re: Service Line Deposits: The assessee in the year under consideration re....
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....Taxman 116 (Del) − Ranchi Electric Supply Co. Ltd. vs. CIT: 16 Taxman 213 (Pat.) − CIT vs. Cochin Electric Co: 57 ITR 82 (Ker.) − CIT vs. Poona Electric Supply Co. Ltd.: 14 ITR 622 (Bom) − Monghyr Electric Supply Co. vs. CIT: 26 ITR 15 (Orissa.) 40.7 Further, even in the impugned assessment order, the assessing officer has merely emphasized on the point that since the assessee-company is primarily a service provider, the charges received from consumers were revenue in nature, without appreciating that the said charges were actually received as reimbursement towards incurring capital expenditure and not for rendering of any service per se. 40.8 It may also be pertinent to note that it is not even the case of the assessing officer, that the deposits/charges were not utilized for undertaking 'capital works'. 40.9 In this regard, it was further submitted, that merely because the assessee followed the erroneous principle of recognizing service line deposits as income, though over a period of three years, the said fact, by itself, could not have been the basis of bringing to tax the entire amount received as trading receipt, notwithstanding the mandate of E....
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....eceipts incidental to nor carrying on of the assessee's business, are receipts for bringing into existence capital of lasting value. Since the contributions made were not made merely for services rendered and to be rendered, but for installation of capital equipment, the same constituted capital receipts. It was further held that even the balance amount retained by the assessee which had not been expended could not also be considered to be a revenue receipts. Similar view has been expressed by Hon'ble Bombay High Court in the case of CIT vs. Electric Supply Co. Ltd. (supra) and by the Hon'ble Kerala High Court in the case of CIT vs. Coching Electric Co. (supra). The service line deposits received by the assessee from the consumers for connecting line which links the supply system to the premises of the consumers and utilized for the purpose of supplying electricity and are charged from the consumers only at the time of providing new connections to recover the capital expenditure incurred on setting up of such lines, in our view, has rightly been held by the Learned CIT(Appeals) as capital in nature. The same has also been capitalized by the assessee under the head "plant and machin....
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.... expenditure amounting to Rs. 44,71,064 with this finding that the said expenditure is penal in nature hence is not allowable under the provisions of the Act. 42.2 Before the Learned CIT(Appeals), the assessee mainly contended that the Assessing Officer has not been able to point out any specific expense incurred by the assessee to be penal in nature but has summarily made an ad hoc disallowance @ 25% without any cogent reason. The Learned CIT(Appeals) has deleted the disallowance. 43. In support of the ground, the learned CIT(DR) has basically placed reliance on the assessment order and has reiterated that the claimed expenditure was penal in nature, hence, it was not allowable under the provisions of the Income-tax Act, 1961. 44. The learned AR on the other hand tried to justify the First Appellate Order on the issue and submitted that the assessee-company, in the course of its business, incurred routine expenditure for settlement of legal claims amounting to Rs. 1.78 crores. 44.1 The aforesaid payments, it was submitted, were made by the assessee in pursuance of settlement of certain claims made by consumers, in the regular course of business and did not involve any penal el....
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....pheral. During the year, the assessee has purchased certain computers accessories and peripheral in the nature of scanner, printer, input and output processing units, etc. aggregating to Rs. 28,32,502, which were capitalized under the head "computer" and depreciation thereon was claimed at the prescribed rate of 60%. The Assessing Officer held that computer accessories and peripheral could not be classified under the head "computer" and therefore, disallowed depreciation claimed @ 60% and restricted the same @ 15%, disallowing the claim of depreciation to the tune of Rs. 12,11,462. The Learned CIT(Appeals) has, however, deleted the disallowance relying upon the decision of Hon'ble jurisdictional High Court of Delhi in the case of BSES Rajdhani Powers Ltd., ITA No. 1266 of 2010 - judgment dated 31.8.2010. Against this action of the Learned CIT(Appeals), the Revenue is in appeal. 47. In support of the ground, the learned CIT(DR) has basically placed reliance on the assessment order. 48. The learned AR on the contrary has supported the First Appellate Order. He submitted that the claimed deprecation @ 60% on computer accessories and peripheral is as per the law. He drew our attentio....
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....4. The Ld.CIT(A)- VI has wrongly upheld that the " Energy Meters " are eligible for depreciation @ 15 % as against the claims @ 80 % . In this regard she has ignored the facts that these meters are for measuring electric energy which has been specifically mentioned as eligible for 80% depreciation in the depreciation schedule of the Income Tax Rules 1961. Further these meters also has the characteristics of energy saving device which is subject to depreciation @ 80%. In view of the above, depreciation allowed @ 15 % as against the 80% claim on energy meters resulting in a disallowance of Rs. 32,54,73,974 is wrong, against the facts of the case and unsustainable in the eyes of law". 51. The issues raised in the above grounds are covered by the decision taken on identical issues in the above appeals for the assessment years 2005- 06 and 2006-07. 51.1 In ground No.1, the issue raised is regarding validity of the First Appellate Order upholding service line deposits from the consumers as taxable over a period of three years. We have dealt with this issue in the appeals for the assessment years 2005-06 and 2006-07 hereinabove and held that the Learned CIT(Appeals) was not justified ....
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....gether incorrect. c) Further the assessee co. is engaged in selling electricity to the consumers from whom it charges fees in the name of energy charges. These energy charges are undisputedly in the nature of revenue receipts. d) The assessee co. is a service provider co. and is engaged in the business of distribution of electricity to different categories of customers as per their requirements. Hence it is in the nature of service provider. e) Since the assessee co. is engaged in selling the energy, therefore for this purpose it has to provide service line connections to the consumers for which it charges service line deposits. Hence it can be seen that these service line receipts are received by the co. during the course of its regular business/commercial operations. Hence, they are in the nature of revenue receipts. f) The reasoning given by the assessee co. that it incurs capital expenditure for extending service lines to the consumers and these receipts are utilized for this purpose does not explain that how these receipts are capital receipts in its hands. g) The fact that the assessee co itself treated 1/3rd of these receipts as revenue receipts impliedly, goes on ....
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.... was justified in treating the 'service line deposits' received by the assessee from the consumers as capital in nature and the Assessing Officer has been directed to reduce the amount of service deposits credited to the profit and loss account during the year as per the assessee's policies of offering the service line deposits for revenue over a period of three years, while computing the total income after holding that entire receipts by way of service line deposits is capital in nature. The action of the Learned CIT(Appeals) in treating "consumers' contribution" for capital work as capital in nature has also been justified and upheld. The ground No.1 is decided accordingly. The same is thus rejected. 55. In ground No.2, the issue raised is as to whether the Learned CIT(Appeals) has erred in deleting the addition of Rs. 32,59,746 made on account of disallowance of legal claims ignoring that payments made by the assessee are penal in nature and hence not allowable. An identical issue has been decided hereinabove in the appeal preferred by the Revenue for the assessment year 2006-07. Following the same, we uphold the finding of the Learned CIT(Appeals) as justified. The ground No.2....
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....ity of being heard to the assessee. The ground No.1 is accordingly allowed for statistical purposes. 60. Ground No.2: This ground is consequential to issue No.1 of the appeal preferred by the Revenue questioning the action of the Learned CIT(Appeals) in deleting the addition made on account of service line deposits treating the same as capital in nature. We will thus deal with the issue raised in ground No.2 of the appeal along with issue No.1 of the appeal preferred by the Revenue in the succeeding paragraph. 61. In result, the appeal is partly allowed. ITA No. 5075/Del/2013 - Revenue (A.Y. 2008-09): 62. The Revenue has impugned First Appellate Order on the following issues: 1. "Whether on the facts& circumstances of the case, the learned CIT (A) has erred in deleting the addition of Rs. 1,21,47,44,450/- made by the AO on account of service line deposit without taking into account the fact that the amount received from service line is essentially revenue in nature received from the customers against selling of electricity to the customers for whom the services lines are to be provided and such received during the course of regular business operation. 2. Whether on the facts&....
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...., the appeals preferred by the assessee are partly allowed and that preferred by the revenue is dismissed. ITA No. 3689/Del/2011 (Assessee) (A.Y. 2005-06): 68. The assessee has impugned First Appellate Order on the following grounds: 1. Depreciation on energy meters wrongly allowed at 25% as against 80% resulting in a disallowance of Rs. 22,65,50,211 (subsequently reduced to Rs. 20,36,82,454 by way of rectification order dated 23.07.2010 u/s 154 of Income Tax Act, 1961). The Ld. CIT(A)- V has wrongly upheld that the " Energy Meters " are eligible for depreciation @ 25 % as against the claims @ 80 %. In this regard she has ignored the facts that these meters are for measuring electric energy which has been specifically mentioned as eligible for 80% depreciation in the depreciation schedule of the Income Tax Rules 1962. Further these meters also have the characteristics of energy saving device which is subject to depreciation @ 80%. In view of the above, depreciation allowed @ 25% as against the 80% claim on energy meters resulting in a disallowance of Rs. 20,36,82,454, is wrong, against the facts of the case and unsustainable in the eyes of law. 2. The appellant craves to lea....
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....r of the assessee with this finding that the Learned CIT(Appeals) while treating the service line deposits received from the consumers are of capital nature, should have directed the Assessing Officer to reduce the amount of service line deposits credited to the profit and loss account during the year as per the assessee's policy of offering the service line deposits for Revenue over a period of three yearts while computing the total income after holding that the entire receipt by way of service line deposit is capital in nature (Additional ground No.1) and it has been held that the Assessing Officer was not justified in assessing the income of the assessee under sec. 115JB and not under the normal provisions of the Income-tax Act, 1961 ( additional ground No.2 ). Following these decisions therein on identical issues, the issues raised in additional grounds in the present appeal are decided in favour of the assessee. The additional grounds are accordingly allowed. The appeal is partly allowed. 73. ITA No. 3660/Del/2011 (Revenue) - (A.Y. 2005-06): The Revenue has questioned First Appellate Order on the following grounds: 1. The Ld. CIT(A) has erred on facts and in law in deleting....
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....ddition on account of valuation of closing stock. e) The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal." 74. Ground No.1: In this ground, the validity of the First Appellate Order whereby the Learned CIT(Appeals) has deleted the addition of Rs. 10,94,42,155 (subsequently reduced to Rs. 1,30,33, 059) made on account of service line deposits from customers has been questioned. Under similar set of facts, an identical issue has been decided against the Revenue hereinabove in the appeal preferred by the Revenue in this case of BSES Rajdhani Power Ltd. for the assessment year 2005-06. Following the same, we decide the issue raised in this ground No.1 in favour of the assessee while upholding the First Appellate Order in this regard. It is also made clear that as per the decision taken in the additional ground No.1 hereinabove, the Assessing Officer is directed to reduce the amount of service line deposits credited to the profit and loss account during the year as per the assessee's policy of offering the service line deposits for Revenue over a period of three years....
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....VII had wrongly upheld that adjustment of grants in aid for fixed assets is to be made in the ratio of addition to plant and machinery which is (subject to depreciation @ 15%) and addition to energy meters which is (subject to depreciation @ 80%) resulting in disallowance of depreciation to the tune of Rs. 3,03,32,909. 4. The appellant craves to leave, add, alter, modify, rectify, and amend all or any of the grounds before or at the time of hearing." 78. Besides above, the assessee has also moved application for admission of the following additional ground: "That on the facts and circumstances of the case and in law, the Assessing Officer erred in assessing the income of the appellant under sec. 115JB and not under the normal provisions of the Income-tax Act, 1961 (The Act), without appreciating that the deeming provisions of sec. 115JB of the Act were not applicable during relevant assessment year. 78.1. Similar arguments have been advanced by the parties on the allowability of the present application for admission of the above additional ground as advanced by them on a similar application in the appeal of the assessee hereinabove for the assessment year 2005-06. Following the....
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....s held that the assessee is eligible to claim depreciation on energy meters @ 80% and accordingly direct the Assessing Officer to allow the same on the basis of the expenditure incurred on electronic meters/energy meters reflected in the audit report. The ground No.2 is accordingly allowed for statistical purposes. 81. Ground No. 3: It is regarding disallowance of deprecation to the tune of Rs. 3,03,32,909. The facts in brief are that during the year, the assessee had received grant in aid of Rs. 18.63 crores from the Ministry of Power under the Accelerated Power Development Reforms Program (APRBRP) for the purpose of up-gradation of sub-transmission and distribution in Densely Electrified Zone in the urban and industrial area and improvement in the commercial viability of the SEVS/DISCOM. The expenditure incurred on up-gradation of the system was duly capitalized by the assessee under the head "plant and machinery" and the grant/aid received under the said scheme was reduced from the block of such asset(s). The Assessing Officer held that since the grant in aid received by the assessee could not be directly attributed to the specific assets acquired during the assessment year und....
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....im on energy meters resulting in a disallowance of Rs. 33,28,96,938 is wrong, against the facts of the case and unsustainable in the eyes of law. 3. Based upon the provisions of Section 2(18) of the Income Tax Act, 1961, applicability of the provisions of Section 2(22)(e) (pertaining to the taxability of deemed dividend of Rs. 59,27,00,000) has not been decided in the hands of the appellant company. The CIT(A)-VI erred in not deciding the applicability of Section 2(22)(e) (pertaining to the taxability of deemed dividend in the hands of the appellant) based upon the provisions of Section 2(18) of the Income Tax Act, 1961. In this regard it has been mentioned in the CIT(A) order that since the addition on account of deemed dividend had been deleted in the hands of the appellant (based upon the fact that appellant is not a shareholder of BRPL which provided loan to the appellant), the other arguments regarding the non-applicability of Section 2(22)(e) are only of academic nature and did not require specific adjudication. As BSES Rajdhani Power Ltd. (BRPL), a company which has provided the loan to the appellant company, is a company in which public is substantially interested by vir....
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.... its appeal for the assessment year 2005-06 in favour of the assessee. Following the same, we hold that the assessee is eligible for claiming depreciation @ 80% on energy meters and direct the Assessing Officer to allow depreciation accordingly on the expenditure incurred on electronic/energy meters reflected in audit report of the assessee. The ground No.2 is accordingly allowed for statistical purposes. 86. Ground No.3: The facts in brief are that during the year, the Assessing Officer made an addition of Rs. 59,27,00,000 on account of deemed dividend under sec. 2(22)(e) relating to loans advanced to the company by BSES Rajdhani Power Ltd. Before the Learned CIT(Appeals), the assessee contended that since it was a company in which public was substantially interested by virtue of sec. 2(18)(b) (B) and therefore, the provisions of sec. 2(22)(e) of the Act were not applicable to it. The Learned CIT(Appeals) while deleting the addition made by the Assessing Officer however, held that since the assessee is not a shareholder in BRPL(BSES Rajdhani Power Ltd.), the provisions of sec. 2(22)(e) will not be applicable by virtue of the decision of Special Bench of the ITAT in the case of AC....
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....that Reliance Energy Ltd. (REL) is one of the common-shareholder in the assessee as well as BRPL and held more than 26% shares in each of the companies in the assessment year under consideration. It may, however, be pertinent to note that the assessee did not have any direct shareholding in BRPL. 86.4 It may also be observed that 49% of the shares of BRPL are held by Delhi Power Co. Ltd., which is a Corporation set up under the Delhi Electricity Reform Act, 2000 (Delhi Act No2 of 2001), i.e. a State Act. 86.5 The assessing officer, in the impugned assessment order, held that the transaction of loan advanced by BRPL to the assessee was in the nature of 'deemed dividend' as defined under section 2(22)(e) of the Act. 86.6 In the impugned assessment order the assessing officer, despite admitting the fact that 49% of the shares of BRPL was held by Delhi Power Co. Ltd., which is a corporation set up under a State Act, proceeded to treat the amount of loan advanced as 'deemed dividend' by merely holding that there was no evidence to prove that the shares held by Delhi Power Co. Ltd. were allotted or acquired 'unconditionally'. 86.7 On appeal against the aforesaid order of the assessin....
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....ntially interested- (a) if it is a company owned by the Government or the Reserve Bank of India or in which not less than forty per cent of the shares are held (whether singly or taken together) by the Government or the Reserve Bank of India or a corporation owned by that bank; or ....................... (b) if it is a company which is not a private company as defined in the Companies Act, 19569 (1 of 1956 ), and the conditions specified either in item (A) or in item (B) are fulfilled, namely:- (A) shares in the company (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) were, as on the last day of the relevant previous year, listed in a recognised stock exchange in India in accordance with the Securities Contracts (Regulation) Act, 1956 1 (42 of 1956 ), and any rules made thereunder; (B) shares in the company (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) carrying not less than fifty per cent of the voting power have been allotted unconditionally to, or acquired unconditionally by, and were throughout the relevant previous year benef....
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....ccordingly provisions of section 2(22)(e) of the Act are not attracted at the threshold. 87.9 The assessing officer has, in the impugned assessment order, nowhere disputed the fact that 49% shares of BRPL are held by Delhi Power Co. Ltd., which is a Corporation set under a State Act, but has merely made a bald allegation that there was no evidence to prove that 49% shares of BRPL held by Delhi Power Co. Ltd. were allotted or acquired 'unconditionally' 87.10 In making the aforesaid observation, the assessing officer has not brought anything on record to establish that the aforesaid shares were not allotted or acquired 'unconditionally'. 87.11 Without prejudice to the aforesaid, it is of utmost importance to note that section 2(22)(e) of the Act only deals with a payment to the shareholder directly and the payment by a Company not to a shareholder but to a third party on behalf of or for the individual benefit of the shareholder. 87.12 Thus, on the date of advancement of loan/advance, the recipient should be a shareholder and if it is not so established, the provisions of section 2(22)(e) of the Act are not applicable. Reliance in this regard is placed on the following decisions....
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....e Company's Act, 1956 and, therefore, qualifies as a company in which the public has substantial interest, since the below two conditions are also satisfied: (a) 40% of its shares are held by DPCL, a company to which section 2(18)(b)(B) applies, and (b) The above mentioned shareholding of BRPL was unconditionally allotted to and acquired by DPCL and was beneficially held by it throughout the relevant year. 89.3 Without prejudice to the above, the second contention of the assessee remained that the assessee company is not a shareholder in BRPL and accordingly cannot be taxed under sec. 2(22)(e) of the Act. 89.4 In support, reliance was placed on the decisions in the cases of ACIT vs. Bhaumik Colour (P) Ltd. (2009) - 313 ITR (AT) 146 (S.B) and DCIT vs. National Travel Services - 31 SOT 76. In view of the above cited decisions on the issue, the Learned CIT(Appeals) agreed with the alternative submissions of the assessee and held that the provisions of sec. 2(22)(E) will not be applicable in this case and directed the Assessing Officer to delete the addition. The Special Bench in the above cited decisions in the case of ACIT vs. Bhaumik Colour (P) Ltd. (supra) has held that deemed ....
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....d by the assessee co. m) Once these receipts have been accepted as non-refundable receipts they are no more a liability on the company. Hence the treatment given by the assessee co. to service line deposit by treating them as loan funds and accordingly as liabilities is all together incorrect. n) Further the assessee co. is engaged in selling electricity to the consumers from whom it charges fees in the name of energy charges. These energy charges are undisputedly in the nature of revenue receipts. o) The assessee co. is a service provider co. and is engaged in the business of distribution of electricity to different categories of customers as per their requirements. Hence it is in the nature of service provider. p) Since the assessee co. is engaged in selling the energy, therefore for this purpose it has to provide service line connections to the consumers for which it charges service line deposits. Hence it can be seen that these service line receipts are received by the co. during the course of its regular business/commercial operations. Hence, they are in the nature of revenue receipts. q) The reasoning given by the assessee co. that it incurs capital expenditure for exten....
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....sue in ground No.1 of its appeal for the same assessment year questioning the First Appellate Order upholding the service line deposit from consumers as taxable over a period of three years. While deciding this issue hereinabove in the appeal of the assessee for the assessment year 2006-07, we have already dealt with both the connected grounds. Following the same, the finding of the Learned CIT(Appeals) that service line deposits and consumers contribution for capital works are capital in nature is upheld. The ground No.1 preferred by the Revenue is thus rejected. 93. Ground No.2: It is regarding deletion of addition of Rs. 22,74,094 made on account of disallowance of legal claims. Under similar set of facts, this issue has been decided in favour of the assessee in ground No.3 of the appeal preferred by the Revenue for the assessment year 2006-07. Following the same, we do not find reason to interfere with the action of the Learned CIT(Appeals) in deleting the addition of Rs. 22,74,094 with this finding that payments made on account of legal claims by the assessee are not penal in nature. The ground No.2 is accordingly rejected. 94. Ground No.3: It is regarding the deletion of add....
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.... for capital works are capital receipts, in case authorities decide these issue otherwise, the additional depreciation on assets created out of service line deposits and consumer contribution should be allowed. 4. The appellant craves to leave, add, alter, modify, rectify, and amend all or any of the grounds before or at the time of hearing." 98. Besides above, the assessee has also moved application for admission of the following additional ground: "That on the facts and circumstances of the case and in law, the Assessing Officer erred in assessing the income of the appellant under sec. 115B and not under the normal provisions of the Income-tax Act, 1961 ("the Act"), without appreciating that the deeming provisions of section 115JB of the Act were not applicable during relevant assessment year." 98.1 The parties have adopted similar arguments as advanced by them on similar application in the appeal of the assessee hereinabove for the assessment year 2007-08. Following the same, the application is allowed. The parties have also advanced a similar arguments on the issue raised on the additional ground as advanced by them in the assessment year 2007-08 in the appeal of the assess....