TaxTMI 
TaxTMI 
TaxTMI 
2019 (6) TMI 1112
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.... to two appeals each for the assessment years 2004-05, 2007-08 and 2008-09. 2. All these appeals were earlier disposed off by this Tribunal by various orders and on further appeals by the assessee as well as by the Department the Hon'ble High Court vide judgments dated 21.12.2017, 03.04.2018 & 21.01.2019 has set aside the orders of the Tribunal and remanded these appeals back to the record of the Tribunal for deciding the same afresh except the issue of prior period expenses which was decided in favour of the assessee. Hence, these group of appeals have been placed before us for fresh hearing and adjudication. Since, common issues are arising in these appeals for all these assessment years therefore, for the sake of convenience these appeals are clubbed together for the purpose of hearing and are being disposed off by this composite order. The ld. AR as well as ld. DR has pointed that the grounds and issues raised in the cross appeals for the assessment year 2006-07 cover all the issues raised in the rest of the appeals. Therefore, for the purpose of recording facts and grounds the cross appeal in ITA No. 390/JP/2016 and 549/JP/2009 for the assessment year 2006-07 are taken as le....
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....T Act on 23.12.2008 and disallowed various expenses and claim of depreciation as well as tax was charged on the book profit U/s 115JB of the Act being Minimum Alterative Tax (MAT). The assessee challenged the action of the AO before the ld. CIT(A) and the ld. CIT(A) has granted part relief to the assessee in respect of disallowance of depreciation and by deleting the addition on account of prior period of expenses as well as cost of acquisition/written down value of the asset for the purpose of depreciation but confirmed the other addition made by the AO on account of depreciation on non existing asset and disallowance of depreciation U/s 43(1) of the Act as well as applicability of provisions of Section 115JB. Therefore, both the assessee and Revenue have challenged the impugned order of the ld. CIT(A). 4. Ground no. 1 of the assessee's appeal is regarding disallowance of depreciation on non existing assets. The Assessing Officer has disallowed the depreciation on the fixed assets worth Rs. 115.21 crores considering the same as not physically available. Since these assets are appearing in list the fixed assets but the physical verification was yet to be finalized by the assessee....
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....21 crores were not found physically existed and the assessee has also not produced any material to show that these assets are physically verifiable. He has relied upon the orders of the authorities below and submitted that once the assets are not physically verifiable then the depreciation on such assets is not allowable as these assets are not used for the assessee business. 7. We have considered the rival submissions as well as the relevant material on record. The list of assets and liabilities vested to the assessee by virtue of the notification dated 18.01.2002 is given in schedule -D part II of the notification as under:- Therefore, so far as the fixed assets vested to the assessee in the process of converting the Rajasthan State Electricity Board into 5 distribution companies and dividing the assets and liabilities among these 5 distribution companies is concerned the same is a matter of record. The Assessing Officer has disallowed the depreciation on the fixed assets of Rs. 115.21 crores on the ground of not physically verifiable. We find that the written down value of these assets is added to the block of assets and corresponding shares were issued to the Government the....
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....erger is that it shall not exceed in any previous year the deduction calculated at the prescribed rate as if the succession or the demerger etc. as the case may be, had not taken placed. In other words the claim of depreciation in aggregate shall not exceed the eligible claim in the hands of the erstwhile company i.e. Rajasthan State Electricity Board. It is pertinent to note that the Hon'ble jurisdiction High Court in case of CIT vs. Rajasthan state Electricity Board 160 Taxman 19 has held that RSEB is a Government Company and is subject to rigorous of Income Tax Act therefore, the erstwhile RSEB was entity subject to Income Tax Act. Once the fixed assets vested with the assessees were part of the block of assets of the erstwhile RSEB then the depreciation on such assets cannot be disallowed on the ground that some of the assets were not physical verifiable. The assessee received these assets under the process of distribution of the assets of the RSEB vide notification dated 18.01.2002 and therefore, the assessee claimed depreciation on the assets which were vested to the assessee as per the written down value of block of assets shown in the balance sheet of the RSEB. Even otherwi....
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....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 : Provided that where the actual cost of an asset, being a motor-car which is acquired by the assessee after the 31st day of March, 1967 but before the 1st day of March, 1975, and is used otherwise than in a business of running it on hire for tourists, exceeds twenty-five thou sand rupees, the excess of the actual cost over such amount shall be ignored, and the actual cost thereof shall be taken to be twenty-five thousand rupees." 9. What is written down value is defined in clause (6) of section 43 which reads as under : " ' written-down value' means- (a) in the case of assets acquired in the previous year, the actual cost to the assessee ; (b) in the case of assets acquired before the previous year, the actual cost to the assessee less all depreciation actually allowed to him under this Act, or under the Indian Income- tax Act, 1922 (11 of 1922), or any Act repealed by that Act, or under any executive orders issued when the Indian Income-tax Act, 1886 (2 of 1886), was in force." 10. It may be noted t....
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....on the decision of the apex court in the case of Saharanpur Electric Supply Co. Ltd. v. CIT [1992] 194 ITR 294. The apex court considered the decisions in Maharana Mills P. Ltd. v. ITO [1959] 36 ITR 350 (SC) and CIT v. Hides and Leather Products P. Ltd. [1975] 101 ITR 61 (Guj) amongst other cases. The apex court after examining the provisions in detail pointed out at page 315 as under : " Explanation 6 offers no difficulty as the relationship of ' parent' and ' subsidiary' between the companies involved in the transfer, for the purposes of this clause, has to be determined as at the time of the transfer of the asset and will not be a wobbling or fluctuating one as suggested by counsel for the assessee. . ." 14. Thus in view of Explanation 6 the written down value of the holding company is required to be taken into consideration. 15. Learned counsel for the assessee submitted that the difference between the WDV and the price received for the property has been taxed in the hands of the holding company in the relevant assessment years and there is no dispute on this issue. In view of this, it was submitted that the Revenue cannot have tax benefit at both the p....
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....relief was granted to the extent of standard cost taken by the assessee in the books of accounts as against the exact/actual cost of the each of the asset. 9. Before us, the ld. AR of the assessee has submitted that since the assessee is receiving some part of the cost of the assets as contribution from consumers and the said amount is taken to the reserve and therefore, the assessee showing the asset at the actual cost. He has further contended that the provisions of Section 43(1) r.w. explanation 10 of the I.T Act is not applicable in the case of the assessee as the cost of the asset is fully incurred by the assessee and it is only under the scheme of providing supply to the consumers the assessee is receiving the part of the estimated expenditure from the consumer. As regards the variation in the actual cost and standard cost the ld. AR has submitted that since at the time of receiving part of the expenditure from the consumer it is only estimated expenditure based on the standard cost apply by the assessee. It is standard formula for the purpose of issuing the material from head office circle and recovering part of the same from the consumer. The difference between the standa....
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....e in the said reserve material cost of variance manifest the fact that the standard rates are not always more than the actual cost but it is only for convenience and smooth functioning and execution of work to avoid the delay in ascertaining the actual cost of a particular material at the time of issuing from this stores. This practice has been consistently followed then in longer run it is Revenue neutral and not a device or modus-opprendi to avoid the tax. Hence, to that extent we decide this issue in favour of the assessee and against the Revenue. 11.1 As regards the deduction received from the consumers, we find that the said amount is nothing but reimbursed of the cost of acquisition of the asset which is used by the assessee for providing the supply to the consumer and therefore, to that extent the provision of Section 43(1) r.w. explanation 10 are application hence, to that extent the order of the authorities below are upheld. 11.2. As regards the subsidy/grants received from the State Government though the AO has stated the same is to meet the cost of assets directly or indirectly by the Government in terms of explanation 10 however, in the absence of the scheme of the ....
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....y the power of examining whether the books of accounts are certified by the Authorities under the companies Act as having being properly maintain in accordance with the Companies Act and the AO has no jurisdiction to tinker with net profit shown in the profit and loss account except to the extent of adjustment provided U/s 115JB of the Act. The assessee has been maintaining the accounts as per Electricity (Supply) Act read with Electricity (Supply) Annual Accounts Rules 1985 and therefore, when the books are not prepared as schedule VI of the Company Act then the provisions of Section 115JB of the Act are not applicable. 14. On the other hand, ld. DR has submitted that as per provisions of Section 115JB of the Act there is no exclusion of the assessee from the applicability of the said provision and further as per the Circular no. 762 dated 18.02.1998 issued by the CBDT only companies engaged in the business of generation and distribution of power and those enterprises engaged in developing, maintaining and operating infrastructure facilities under Sub-section (4A) of Section 80IA are exempted from the levy of MAT, so that the incentives given to infrastructure development is not....
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.... we note that this issue is common in all the appeal and the Hon'ble High Court in the case of the assessee has already decided this issue in favour of the assessee vide decision dated 29.05.2017 in ITA No. 333/2009. The issue was again considered by the Hon'ble High court in the subsequent assessment years including the assessment year 2007-08 and vide judgment dated 03.04.2018 in D.B. Income Tax Appeal no. 25/2018 it has been held in para 04 and 5 as under:- "4 The facts of the case are that the assessee company has claimed prior period expenses amounting to Rs. 4,64,27,170/-. During the course of assessment proceedings, the assessee company submitted that it is a public sector undertaking carrying on the business of Transmission, Distribution and Supply of electricity. The company was formed after restructuring of Rajasthan State Electricity Board (RSEB) on 19.06.2000 and at that time, certain assets, liabilities, common expenditure were also transferred from RSEB which were subject to reconciliation. The assessment year under consideration is fourth year of its operation and certain expenses and income being in the nature of prior period items were claimed as per normal acco....