TaxTMI 
TaxTMI 
2023 (10) TMI 693
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....ed in appeals of the assessee and revenue for both the years. Hence, they are taken up together and disposed of by this common order for the sake of convenience. Let us take appeal for AY 2011-12 first. 3. The assessee has raised the following grounds of appeal in ITA No. 4097/Del/2017 for AY 2011-12: "1. That the order passed by the CIT(A) is bad in law. 2. That in the facts and in circumstances of the case and in law the Ld. CIT(A) erred in sustaining the addition of Rs. 33,94,62,000/- as income of the assessee company, being portion of 'over - achievement of Aggregate Transmission & Commercial Losses (AT & C Losses)' received on behalf of consumers, which is required to be returned to them through adjustment of tariff in future,. (AO para 3 to 3.8 /CIT(A) para 7) 3. (1) That in the facts and circumstances of the case and in law the Ld. CIT(A) erred in sustaining the addition of Rs. 1,92,07,000/- being interest liability on additional consumer security deposits under the normal provisions of the Act. (AO para 4 to 4.3/ CIT (A) para 8) (ii) That the Ld. CIT(Appeal) erred in increasing the book profits by the amount of Rs. 1,92,07,000 under section 115JB of the A....
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....PL are held by the Govt of NCT of Delhi. The assessee is engaged in the business of maintenance and distribution and supply of electricity in the North and North West District of National Capital. Hence, the assessee is bound to maintain accounts in accordance with the provisions of Electricity Act. The assessee had filed its return of income for AY 2011-12 on 30.09.2011 declaring book profit of Rs. 303,91,68,939/- u/s 115JB of the Act and total income of Rs. Nil under normal provisions of the Act after claiming deduction u/s 80IA of the Act. The assessee company w.e.f. 01.07.2002 had undertaken the business of distribution of electricity from the erstwhile Delhi Vidyut Board for distribution and supply of electricity in North Delhi and North West Delhi. Pursuant to the filing of return, the declared book profit u/s 115JB of the Act was accepted by the ld. AO while completing the assessment. The assessee for the first time before us had raised an additional ground that the provisions of section 115JB of the Act per se are not applicable to it. We find that this issue is no longer res integra in view of the decision of this Tribunal in assessee's own case for AY 2007-08, 2008-09 and....
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....in accordance with section 115JB of the Companies Act, 1956. Though the Kerala State Electricity Board, a statutory corporation constituted by virtue of section 5 of the Electricity (Supply) Act, 1948 answers the description of an Indian company and therefore a company within the meaning of section 2(17) of the Income-tax Act, 1961 it is not a company for the purpose of the Companies Act, 1956. It is not obliged to either to convene an annual general meeting or place its profit and loss account in such general meeting. On the other hand, under section 69 of the Electricity (Supply) Act, 1948, the Board is obliged to keep proper accounts, including the profit and loss account, and prepare an annual statement of accounts, balance sheet, etc. in such form as may be prescribed by the Central Government and notified in the Official Gazette. Such accounts of the Board are required to be audited by the Comptroller and Auditor-General of India or such other person duly authorised by the Comptroller and Auditor-General of India. The accounts so prepared along with the audit report are required to be laid annually before the State Legislature and also to be published in the prescribed mann....
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.... dated 16.08.2022. 8. In view of the above, the additional ground raised by the assessee is hereby allowed. 9. The original ground Nos. 1 and 9 are general in nature and does not require any specific adjudication. 10. The original ground No. 2 raised by the assessee is challenging the confirmation of addition of Rs. 33,94,62,000/- as income of the assessee company towards de-recognition of income pertaining to consumer's portion over achievement of minimum target or efficiency gain. 11. We have heard the rival submissions and perused the materials available on record. The assessee is in business of electricity which was transferred to the company in terms of agreement dated 31.05.2002 as per the policy direction issued by GNCTD (Govt. of National Capital Territory) governing the transfer of business of erstwhile Delhi Vidyut Board (DVB) to the company, the company is entitled to an assured return of 14% plus a supply margin up to 2% p.a. on DERC approved Equity subject to achievement of Aggregate Transmission and Commercial (AT&C) loss reduction targets. In the event of over-achievement of AT&C loss reduction targets, the Company is entitled to retain a portion of such addition....
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..... 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. Section 2(c) of the Act defines the commission to mean the Delhi Electricity Regulatory Commission. The Act constitutes the Commission. It empowers the Government to issue directions to the Commission in the matter of policy involving public interest from time of time regulating the discharge of the commission functions. In turn, by virtue of Section 28 of the Act, the holder of the license (1.e. assessee) is under obligation to observe the methodologies and procedure specified by the Commission from time to time in calculating the expected revenue fro....
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.... 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 gain shall be counted as revenue for the purpose of tariff fixation. (c) Distribution licensees earn at least, 16% return on the issued and paid up capital and free reserves (d) The amount agreed to be made available by the Government to TRANSCO will be as a loan for the particular year. 20. In deference to this Notification, the DERC in its order passed in July 2005 at paragraph 4.2 observed that for the Asstt. Year 2004-05, the assessee had achieved AT&C loss level lower than the minimum bid level specified by the GNCTD, accordingly the provisions of the policy directigns and the GNCID's clar....
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....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 this decision was brought to the notice of the learned CIT(A) but he distinguished the same stating that in such case the assessee was crediting the excess amount in a separate account called "Consumer Benefit Reserve Account" and they were part of the excess amount paid to it and reserve to be returned to the consumers; whereas in the case of the assessee, the assessee is not required to return the excess amount to the consumers and on the contrary, the assessee is the beneficial owner of the amount which it could use the way it likes. On this premise, learned CIT(A) held that the decision in the case of Puna Electricity Supply ....
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....ade by the AO by disallowing appellant's claim of interest amounting to Rs. 1,92,07,000/- in respect of additional consumer security deposits brought on record by the assessee as a result of validation exercise carried out through an independent agency as per which consumer security deposits to the tune of Rs. 6244 lakhs were brought on record as against security deposits of Rs. 1000 lakhs transferred to the assessee from the erstwhile Delhi Vidyut Board (DVB) as per the transfer scheme. It was submitted that as and when a consumer applies for an electric connection, he is required to make a refundable security deposit with the assessee company. In accordance with the transfer scheme, the opening balance sheet of the assessee company prepared as on 1.7.2002 recognized the liability towards 'refundable consumer security deposit' to the tune of Rs. 1000 lakhs. The said sum of Rs. 1000 lakhs represents the 'refundable consumer security deposit' collected by the erstwhile Delhi Vidyut Board (DVB), which pursuant to the transfer scheme stood transferred to the assessee company on the ground that the consumers has also been taken over by the assessee company. However,....
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.... security deposit'. Moreover, if the assessee company's contention is upheld by the Hon'ble Delhi High Court, then whole of the interest recoverable from DPCL would be offered for tax as income in that year itself. 16. Further, it was submitted that the assessee company was bound to pay and has actually paid such interest (as per the DERC regulations) to the consumers by way of giving its credit in the next month's electricity bill. Appropriate tax has been deducted from such interest and has been duly deposited with the central government. 17. The ld AR also drew our attention to section 47 of Electricity Act, 2003 more especially to section 47(4) thereon, wherein, it was mandated to pay interest on additional security deposit to the consumers. For the sake of convenience, the relevant section 47 of the Electricity Act are reproduced hereunder:- "Section 47. (Power to require security): (1) Subject to the provisions of this section, a distribution licensee may require any person, who requires a supply of electricity in pursuance of section 43, to give him reasonable security, as may be determined by regulations, for the payment to him of all monies which may become....
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....essee and hence, allowable as deduction. Accordingly, ground Nos. 3(1) and 3(2) raised by the assessee are allowed. 19. Ground No. 4 raised by the assessee is challenging the confirmation of addition of Rs. 7,66,51,000/- in respect of late payment of surcharge which is offered to tax consistently on receipt basis by the assessee but subjected to tax by revenue on accrual basis. 20. We have heard the rival submissions and perused the materials available on record. Late payment of surcharge (LPSC) is the additional amount levied on the customers for default in payment of electricity bill by due date. The same is levied to motivate the customers to pay the electricity bill on time. The same is levied in the next billing cycle when the customer defaults in earlier bill payment. However, the same is recognized in the books of account on collection basis. The assessee company has consistently recognized LPSC as and when recovered from the consumer, because of the uncertainty attached to its collection/recoverability. The same is in tune with Accounting Standard 9 - Revenue Recognition issued by the Institute of Chartered Accountants of India (ICAI). 21. It was also submitted that gene....
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....ement of profit of the eligible unit and hence consequentially would be eligible for deduction u/s 80IA of the Act. Respectfully following the aforesaid CBDT Circular and the decision of the Hon'ble Delhi High Court referred (supra), we direct the ld AO to grant enhanced deduction u/s 80IA of the Act for the additions made in the sum of Rs. 2499.84 lakhs. Accordingly, original ground no. 5 raised by assessee is allowed. 25. Original ground No. 6 raised by the assessee is challenging the initiation of penalty proceedings u/s 271(1)(c) of the Act, which would be premature for adjudication at this stage, hence, dismissed. 26. Ground No. 7 raised by the assessee is regarding short credit of TDS granted by the AO. This matter requires factual verification and hence, the ld AO is hereby directed to grant credit of TDS in accordance with the law after due verification. Accordingly, ground No. 7 raised by the assessee is allowed for statistical purposes. 27. Ground No. 8 raised by the assessee is regarding chargeability of interest u/s 234B of the Act which would be consequential in nature. As far as interest u/s 234C of the Act is concerned, we make it clear that the same should be....