2018 (3) TMI 1589

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....t in its decision dated 05.01.2010 has held that the 'advance against depreciation' is 'income received in advance', thus making the said income subject to 'Charge under Chapter-II, as business income under Chapter-IV-D read with sub-clause (i) of subsection 24 of section 2 of the Income Tax Act?" 2. Whether, on the facts and in circumstances of the case and in law, the Hon'ble ITAT was right in law in deleting the addition of Rs. 47,88,00,000/- made by the Assessing Officer under section 143(3) (and not under section 115JB) on account of "Advance Against Depreciation" ignoring the provisions of section 2(24) read with section 28 of the Income Tax Act, 1961, which provides that "income" includes profits and gains and the profits and gains of any business or profession carried on by the assessee at any time during the previous year is taxable? 3. Whether, on the facts and in circumstances of the case and in law, the Hon'ble ITAT was right in law in confirming the order of Ld. CIT(A) in deleting the addition of Rs. 51,80,00,000/- made by AO in normal income as well as book profit computed u/s 115JB on a/c of tariff adjustments being unascertained liability? ....

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....eclaring a loss of about Rs. 225.31 crores. The case was selected for scrutiny and the proceedings pursuant thereto ensued. The assessee computed book profit under section 115JB at about Rs. 58 crores in the original return. The Assessing Officer, upon examining the computation of book profit, noticed that the provision for tariff adjustment of about Rs. 51.80 crores was not considered for addition while computing the book profit under section 115JB. The assessee answered the notice issued by the Assessing Officer under section 143(2). 6. The facts are admitted. For the purpose of answering these questions, it is sufficient to note that the assessee received an amount of Rs. 1713.79 crores for the relevant Assessment Year 2006-07. The assessee, however, adjusted tariff in the sum of Rs. 51.80 crores. The assessee did so on account of the manner in which it is required to compute the tariff for the sale of electricity during the financial year in question viz. 2005-06. It is initially or provisionally charged at the immediately previous rate. The tariff was fixed for the period 01.04.2001 to 31.03.2004. That is not the final tariff that would be charged for the subsequent period.....

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....stallized or attained certainty and is, therefore, liable to be added back to the assessee's income. 9. As we noted earlier, the assessee is not entitled to fix the tariff. It is the CERC which fixes the tariff, albeit upon the assessee's application. Upon completion of the period for which tariff is fixed, the assessee is bound to make an application to the CERC for fixing the future tariff. This application is made after the completion of the earlier period for which the tariff is fixed. There is, therefore, a time-lag between the expiry of the period for which the tariff is fixed and the date on which the CERC fixes the tariff for the subsequent period. In the present case, the earlier period came to an end on 31.03.2004 and the tariff was fixed for the subsequent period i.e. 01.04.2004 to 31.03.2009 on 29.05.2006 and 31.05.2006. On account thereof, there was a difference in the tariff collected to the extent of Rs. 51.80 crores for the assessment year. During this period, namely, 01.04.2004 onward, the assessee made an adjustment towards tariff charged as per its application filed with the CERC. The assessee has been following this accounting practice consistently in acco....

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....tional liability incurred by it on the employees putting in every additional year of service. The gratuity was payable on the termination of an employee's service either due to retirement, death or termination of service - the exact time of occurrence of the latter two events being not determinable with exactitude beforehand. A few principles were laid down by this Court, the relevant of which for our purpose are extracted and reproduced as under: (i) for an assessee maintaining his accounts on mercantile system, a liability already accrued, though to be discharged at a future date, would be a proper deduction while working out the profits and gains of his business, regard being had to the accepted principles of commercial practice and accountancy. It is not as if such deduction is permissible only in case of amounts actually expended or paid; (ii) just as receipts, though not actual receipts but accrued due are brought in for income tax assessment, so also liabilities accrued due would be taken into account while working out the profits and gains of the business; (iii) a condition subsequent, the fulfilment of which may result in the reduction or eve....