TaxTMI 
TaxTMI 
2020 (3) TMI 719
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....n the Tata group and the Delhi Government and is in the business of distribution of electricity in north and north-west area of Delhi. An assessment order was passed under Section 143(3) of the Act whereby the total income of the Respondent was computed at Rs. 139,21,95,000/- and additions were made inter alia on the ground of (a) de-recognition of revenue: Rs. 78,91,50,000 and (b) disallowance under Section 80 IA of Rs. 35,71,77,686/-. In the appeal preferred before the Commissioner of Income Tax (hereinafter referred to as "CIT(A)"), the Respondent succeeded and vide order dated 30th July, 2013 the above noted additions were deleted. Thereafter, the assessee and the appellant preferred appeals before the ITAT. The common issues pertaining to abovenoted additions were identified and decided. The issues were decided in favour of the Respondent-assessee vide impugned order dated 14th June, 2019. The Appellant/ Revenue has preferred the present appeal impugning the order passed by the Tribunal qua the aforenoted issues. 3. Ms. Adeeba Mujahid, learned standing counsel for the Revenue argues that the order passed by the Tribunal is not in accordance with law and the additions made o....
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....n the strength of this reasoning, the Tribunal has relied upon the decision of the Coordinate Bench in Assessment Year 200607 and held that since the Respondent-assessee has no right to appropriate the efficiency gain amount and that such amount is at the disposal of DERC, the amount has to be reduced from the profits and loss account. The observations of the Tribunal on this aspect are as under: "15. We find that similar facts were considered by the coordinate bench in assessment year 2006-07 in ITA No. 4848/DEL/2010 and 5026/DEL/2010. The relevant findings of the co-ordinate bench read as under: "17. It is, therefore, clear from the arguments advanced before us that the question involved in this matter is whether the disputed Rs. 91.13 crores could be brought to tax by treating it as the application of the income after its accrual. This aspect requires a reading of the provisions of the Delhi Electricity Reforms Act, 2000 with the notifications issued and the orders passed by the DERC. As could be seen from the Delhi Electricity Reforms Act, 2000, it received the assent of the President of India on 6.3.2001 and promulgated by way of Notification dated 8.3.2001. ....
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....0% of additional revenue from such better performance shall be counted for the purpose of tariff fixation. Para 13 of such Notification provides that all expenses that shall be permitted by the Commission, tariffs shall be determined in such a way that the distribution licensees earn, at least, 16% return on the issued and paid up capital and free reserves (excluding consumer contribution and revaluation reserves but including share premium and retained profits outstanding at the end of any particular year) provided that such share capital and free reserves have been invested into fixed or any other assets etc. 19. Para 16 of this Notification sums up the mandate in this Notification in the following terms: (a) The AT&C loss programme is to be as per the bid submitted by the purchaser (selected bidder) as per para 11 above. (b) Distributin licensees shall be entitled to retain 50% of the additional revenues from any AT&C loss reduction over and above then level proposed in the bid by the Purchaser (selected bidder) and this shall not be counted as revenue for the purpose of tariff fixation for the succeeding years. The balance 50% of the excess efficiency....
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....ose of tariff fixation and the assessee is under obligation to follow the mechanism of fixation of tariff by the DERC. 22. In Puna Electricity Supply Company Ltd. vs. CIT (1965) 56 ITR 521 (SC), the Hon'ble Apex Court considered a similar situation where the licensee like the assessee was obligation to set apart some amount and transfer it to the consumer benefit reserve account which represents a rebate to the customers of the excess amount collected from them. Hon'ble Apex Court held that there are two types profits in such cases i.e. Commercial profits and clear profits governed by two different enactments. Commercial profits are arrived at on commercial principle whereas the other is regulated by the statute. The clear profits could be determined only after excluding the amount statutorily transferred to represent the rebate to the customers of the excess amount collected from them. Finally the Hon'ble Apex Court held that the amount. transferrable for the benefit of the consumers do not form part of the assessee's real profit; and for the purpose of calculating the taxable income, such amount have to be deducted from its total income. 23. Record speaks that t....
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....is wholly justified and does not call for any interference. Accordingly the ground of challenge urged by the revenue on this aspect is rejected. 6. With respect to the deductions under Section 80 IA of the Act, the Tribunal has referred to the circular no. 37/2016 dated 2nd November, 2016 issuesd by the Central Board of Direct Taxes (hereinafter referrerd to as "CBDT"). On the basis of the said circular, the Tribunal has observed that the issue has become redundant and academic in nature. The relevant portion of the impugned order is extracted herein below: "22. In our considered opinion, the issue is now well settled by the Circular No. 37/2016 dated 02.11.2016 issued by the Central Board of Direct Taxes, which reads as under: "Chapter VI-A of the Income-tax Act, 1961 ("the Act"), provides for deductions in respect of certain incomes. In computing the profits and gains of a business activity, the Assessing Officer may make certain disallowances, such: as disallowances pertaining to sections 32, 40(a)(ia), 40A(3), 43B etc*, of. the Act. At times disallowance out of specific 'expenditure claimed may also be made. The effect of such disallowances is an increase i....