TaxTMI 
TaxTMI 
TaxTMI 
2018 (9) TMI 790
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....,453/-. 2. The CIT (A) failed to appreciate the fact that contributions received from consumers ought to have been treated as revenue receipts incidental for carrying on the business activity. 3. The CIT (A) failed to appreciate the fact that contributions of Rs. 258,13,84,063 received from the consumers are used for erection of poles, lines etc. and said contributions paid by consumers on demand are neither in the nature of voluntary contributions nor refundable. 4. The CIT (A) erred in ignoring the fact that Revenue's appeal on identical issue in assessee's own case for A.Y 2009-10 is pending before the High Court. 5. Any other ground that may be urged at the time of hearing". 2. At the time of hearing, the learned Counsel f....
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....appellant has submitted that its Accounting Policy, is that the assets so created/constructed, out of the contributions from consumers, will be depreciated as per rates specified under GO No.265 (FE) dt.27.3.1994. The depreciation is debited to P&L account every year and the same is recognized as income and credited to P&L Account, by reducing it from the amount of capital fund received, to reduce the depreciation charged to P&L account on the assets purchased out of consumer contribution. For easy explanation the appellant has given the details of entries passed in its books pertaining to the receipts from consumers. The appellant has stated that the contributions received from consumers are capital contributions and should not be treat....
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....s. Para-14 is reproduced below: "Government grants related to specific fixed assets should be presented in the balance sheet by showing the grant as a deduction from the gross value of the assets concerned in arriving at their book value. Where the grant related to a specific fixed assets equals the whole, or virtually the whole, of the cost of the asset, the asset should be shown in the balance sheet at a nominal value. Alternatively, government grants related to depreciable fixed assets may be treated as deferred income which should be recognized in the Profit and loss statement on a systematic and rational basis over the useful life of the asset, i.e., such grants should be allocated to income over the period and in the proportion in ....
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.... all the assets in respect of or with reference to which the subsidy or grant or reimbursement is so received, shall not be included in the actual cost of the asset to the assessee. The appellant has gone on to state that the Assessing Officer has misunderstood the accounting policy and accounting entries passed in the books and erroneously treated the capital contributions received from consumers as income. Therefore, the amount of Rs. 58,53,98,095/- added to the total income under the normal provisions, is not correct. The appellant has 'placed reliance on the decision in the case of Jodhpur Vidyut Vitran Nigam Vs CIT 321 ITR 18(2010). 2. Ground No.2 is regarding the treatment of subsidy received under Rajiv Gandhi Grameen Vidyu....
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....eet as contributions and subsidies towards cost of capital assets, while cost of the material/capital cost incurred for giving connections to customers was capitalized and shown as additions to fixed assets. The appellant has submitted that while computing depreciation in the books, the appellant calculated depreciation on gross value of assets which included assets purchased contributions received from customers as well as subsidy received. Since, the deprecation debited to the P&L Account included depreciation on the value of assets created out of consumers contributions, as well as out of subsidy received under RGGVY, the depreciation relating to assets credited out such contribution/subsidy was credited to the P&L account under the head....
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....ons/subsidy and had been credited to the P&L account since the P&L account had been debited by gross depreciation and not depreciation as per actual cost. Subsequently, while computing the income, gross depreciation was added back and depreciation as per I.T.Act was reduced. This depreciation as per I.T.Act took into account the provisions of sec.43(1) and expalantion-10 and hence the depreciation was proportionately reduced amount taking into account capital contributions. In view of the same the depreciation on capital contributions credited to the P&L account was also reduced in the computation of income and, correctly so. The accounting method followed by the appellant is not only correct but also as per provisions of the I.T.Act and Ac....