TaxTMI 
TaxTMI 
TaxTMI 
2018 (5) TMI 1434
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....we may record those stated in Special Civil Application No. 22717 of 2017. The petitioner is Madhya Gujarat Vij Company Limited, a company wholly owned by the Government of Gujarat. For the Assessment Year 2010- 2011, the petitioner e-return of income on 14th October 2010 showing nil income after set off of brought forward losses under normal computation and income of Rs. 32.11 Crore [rounded off] for the MAT provisions under Section 115JB of the Income-tax Act, 1961 ["the Act" for short]. The return of the petitioner was taken in scrutiny during which the Assessing Officer raised multiple queries. One of the issues examined was that of the petitioner's treatment to the deferred Government Grants, Subsidies and Contributions. The petitioner had offered 10% of such Government Grants to tax for normal as well as MAT computations. The Assessing Officer however was of the opinion that the depreciation rate applied was 15% and that therefore, 15% of such grant should have been offered to tax. This issue we would advert at a later stage. For the time being, we may record that the Assessing Officer passed the order of assessment under Section 143 [3] of the Act on 10th December 2012. To r....
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....s income to be recognized in the P&L Account in the same proportion as the depreciation. It is noticed that the assessee itself has offered 10% of the subsidy grant as revenue receipt for computation of Book Profit under Section 115JB. However, as per Explanation (1) below, Section 115JB (2) and AS-12 "Accounting for Government Grant's the balance amount of Rs. 26,41,88,950/= [5% of Grant received from Central/State Government] on account of subsidy grant is required to be added to the book profit under Section 115JB of the Act. In the case of the assessee for A.Y 2013-14 and 2014-15, the addition on the same issue has already been made for purpose of computing book profit under Section 115JB of the IT Act, 1961. In view of the above discussion and since Rs. 26,41,88,950/= as per provisions Explanation [1] below, Section 115JB [2] was not added to the Book Profit u/s. 115JB of the I.T Act, I have reasons to believe that income to the tune of Rs. 26,41,88,950/= [Book Profit] which was income chargeable to tax has escaped assessment within the meaning of Section 147 of the I.T Act, 1961. Therefore, I am satisfied that this is a fit case for initiation of proceedings under secti....
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.... would not apply to the Electricity Board or similar bodies which are totally owned by the Government. On the other hand, learned counsel Shri Varun K Patel for the Department opposed the petition contending that the Assessing Officer recorded proper reasons. The assessee, as per the accounting standards, had to offer 15% of the Government grant by way of its income instead of 10% offered by the assessee. The upward adjustment by 5% would reflect not only in the assessee's book profit but also in the ultimate computation under Section 115JB of the Act. The Assessing Officer made additions in the normal computation, however, omitted to do so for the purpose of Section 115JB of the Act. The Assessing Officer has not examined this aspect at all in the original assessment proceedings. This was, therefore, not a case of change of opinion. Counsel submitted that the decision of Supreme Court in the case of Apollo Tyres Limited [Supra] would have no applicability in the facts of the present case. Counsel for the Revenue relied on Division Bench of Delhi High Court in the case of SC Johnson Products [P] Limited v. Assistant Commissioner of Income-tax, Circle 22 [2], New Delhi, reported in....
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.... issue a notice dated 31st August 2012 calling upon the petitioner to supply various details. Relevant details being the following : "[1] Please furnish the complete details of Deferred Government Grants, Subsidies & Contributions of Rs. 437554.08 lacs [Schedule 4]. Whether the same has been credited in P&L Account. [9] Please furnish the complete details of Government Grants- Capital [Deferred amount 10% written back] of Rs. 3577.41 lacs and Consumer Contributions [Deferred amount 10% written back] of Rs. 1706.30 lacs shown under the head "Other Income" at Schedule 19. [23] Please furnish the working of Book Profit according to the provisions of Section 115JB of the Income-tax Act, 1961." Thus, the Assessing Officer asked the assessee to supply three things viz., [a] complete details of deferred Government grants, subsidies and contributions, if the same has been credited in Profit & Loss Account; [b] complete details of Government grants - Capital deferred amount 10% of which is returned back and Consumer contribution, and [c] Assessee's working out of Book Profit for the purpose of Section 115JB of the Act. In response to such queries, the petitioner wrote to the Asse....
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....e of subsidies/grant to the Profit & Loss as its income. The assessee has itself stated that the Consumer's Contribution/Government Grant etc., is being transferred to P&L in accordance with the second method of AS-12. The second method of Accounting Standard-12 says that "grants or contribution related to depreciable assets should be treated as deferred income which is recognized in Profit & Loss on a systematic and rational basis.". Further, Section 43(1) of the Income Tax Act, 1961 and the first method of AS-12 say the same thing that to arrive the actual cost of the assets, the assessee should reduce the amount of subsidies/grant from the cost of the capital assets. After analyzing the methods given in the A.S.12 and Section 43(1), it was found, the ultimate effect of all the method is similar. If the effect of the subsidies/grants would have been given in accordance with provisions of Section 43(1) of the I.T. Act or the first method of A.S.-12, then the assessee has to reduce the year end balance of subsidies/grant from the capital assets on which it is claiming 15% of depredation and thus, the income of the assessee would be increased @ 15% of the year end balance of the sub....
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....uld have to be rectified through the process of revision or suo motu by the Commissioner [Appeals]; if one filed by the assessee. The latter may give rise to reopening of the assessment, subject to fulfillment of other conditions. In the present case, particularly when the assessee itself had carried the issued of upward revision in the normal computation of income, the Commissioner as well could have in such appeal itself suo motu or if so urged by the Revenue, made amends, if there was any error in the order of assessment. This is however not the case where the Assessing Officer has not scrutinized the issue. This Court, in case of Gujarat Power Corporation Limited v. ACIT, reported in 350 ITR 266in the context of Assessing Officer accepting the view point of the assessee, after scrutiny, but without either citing the reasons or mentioning the same in the order of assessment, has made following observations : "41. The powers under section 147 of the Act are special powers and peculiar in nature where a quasi-judicial order previously passed after full hearing and which has otherwise become final is subject to reopening on certain grounds. Ordinarily, a judicial or quasi-judicia....