TaxTMI 
TaxTMI 
2009 (11) TMI 20
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....ppeal filed against this impugned order before the Commissioner of Income-tax (Appeals), Jodhpur yielded partly in its favour. Further appeal before the Income Tax Appellate Tribunal, Jodhpur is pending. The assessing authority invoked section 115JB of the Act on the premise that there was book profit and made assessment on notional income under that Section. He disallowed the alleged excess depreciation claimed and made his own calculations on the ground that the accounting standard no. 12 which was required to be followed as per the Companies Act has not been followed, as seen from the auditor's note. On such recalculation by the assessing officer, the book profit got increased by Rs. 12,12,93,578/-. The assessing officer disallowed the adjustment of prior period expenses and added the same to book profit as it was considered to be not allowable for the year in question. Assessing authority also disallowed the interest paid to Rajasthan Rajya Vidyut Prasaran Nigam Ltd. towards the FDR loans raised by it from financial institutions. The total taxable income was determined at Rs. 18,02,78,335/-. The appellate authority confirmed the order of the assessing authority while rejecti....
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....nt of FDR loan raised by RRVPN from financial institutions on behalf of assessee company is allowable to the assessee company. The learned Authorized Representative of the applicant has shown us copies of the statements of April, 2003 onwards sent by Rajasthan Rajya Vidyut Prasaran Nigam Ltd. (for short 'RVPN') showing the receipt and payment on behalf of the applicant wherein against S.No. 38 , 'Interest on loan against FDR' is shown. In the written submissions filed by the applicant and at the time of hearing, it was explained that the entire revenue collection by Jodhpur Discom (applicant) is first transferred to RVPN towards purchase of power from them. Then, RVPN has been providing funds to the applicant for operational activities. Further, it is stated that the erstwhile RSEB was having certain FDRs amounting to Rs. 224.31 crores. Out of this FDRs worth Rs. 194.31 crores were allocated to RVPN and FDRs of Rs. 30 crores were allocated to RVPN. RVPN had availed the demand loan from time to time against the pledge of aforesaid FDRs for working capital requirements of successor entities of RSEB (including the applicant) and paid interest on such demand loan. Interest passed on....
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....ed in the books of account or not); for any period beginning from the date on which the capital was borrowed for acquisition of the asset till the date on which such asset was first put to use, shall not be allowed as deduction.] It is argued by the Revenue that the loan was not raised by the assessee applicant but by the RRPVN and therefore the interest paid by the assessee is rightly disallowed under the provisions of section 36(i)(iii) of the Act. No doubt the applicant did not clarify nor furnish any details before the assessing, appellate authorities to establish that the interest paid by RVPN on FDR loans and passed on to the applicant was for the business purpose of the assessee. However, on the facts presented by the applicant before this Authority with the supporting documents it is prima facie evident that the loans were taken by the RVPN for the business purpose of the applicant and that the applicant was liable to bear the interest liability. Though we are of the view that the deduction claimed deserves to be allowed under section 36(1)(iii) of the Act, on the basis of the case set up by the applicant with supporting documents. We consider it just and proper to leave....
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....N and others through various letters and other communications. All such expenses became known to the assessee during the year after the finalization of financial accounts for the earlier years and could be accounted only for this period. The applicant has given item wise details relating to the disputed expenses /liabilities along with the relevant documents as follows: (i) Rs. 1.29 crores - This expenditure booked under prior year adjustments came to the knowledge of applicant on receipt of letter from RVPN being letter No. 736 dated 6.11.2003 regarding Stamp Duty demand raised by the State Govt. on sale and lease-back agreements executed by erstwhile RSEB during March, 1995 to September 1996. Out of the total stamp duty demand of Rs. 10 crores, the said amount was allocated to the applicant. (i) Rs. 2.05 crores - This expenditure was accounted for in view of the audit memo no. 14 dated 25.8.2003 of the audit party of Accountant General-II Rajasthan towards electricity duty on compounding charges for the year 1993-94 to 2002-03. The demand for such expenses came to the assessee for the first time in financial year 2003-04. Hence the deduction is permissible. (ii) Rs. 1.03....
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....icant before the assessing authority in this regard was quite vague. Even before the appellate authority, the relevant details were not furnished. At the same time, the applicant has clarified the position before this Authority and filed the relevant communications and orders from RVPN and other concerned authorities raising the demands on account of statutory dues etc.. The details in this regard have been set out earlier. Prima facie, it appears that the applicant is entitled to relief and the addition of this amount to the book profit cannot be sustained, if the factual position as stated by the applicant is correct. We are however of the view that the assessing authority should re-examine the claim in the light of the materials placed for the first time before this Authority and in the light of observations made herein. Accordingly, this Authority answers question no. 4 in the negative, subject to verification of factual details by the AO. 11. Question 3 Whether audited accounts can be disturbed by the A.O. for the purpose of calculation of MAT u/s 115JB. Question No. 5 Whether amount of depreciation which is no where debited in the books of accounts but derived during as....
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....nd rates adopted for calculating the depreciation, shall correspond to the accounting policies, accounting standards and the method and rates for calculating the depreciation which have been adopted for preparing such accounts including profit and loss account for such financial year or part of such financial year falling within the relevant previous year. Explanation: For the purposes of this section, "book profit" means the net profit as shown in the profit and loss account for the relevant previous year prepared under sub-section (2) as increased by - (a) the amount of income-tax paid or payable, and the provision therefor, or (b) the amounts carried to any reserves, by whatever name called [other than a reserve specified under section 33AC]; or (c) the amount or amounts set aside to provisions made for meeting liabilities, other than ascertained liabilities; or (d) ........................... 13. The Section pre-supposes that there is a book profit which means the net profit as shown in the profit and loss account prepared under sub-section (2) as increased by the various amounts specified in clauses (a) to (g). If any amount referred to in clauses (a) to (....
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....se of the applicant that the claim of depreciation by the applicant was perfectly in order as per the Accounting principles contained in Electricity (Supply) Annual Accounts Rules, 1985. Para 2.36 of Annexure III to the rules dealing with "Basic accounting principles and policies" lays down the manner of accounting for cost of capital asset and basis of claiming depreciation. Para 2.36 occurs under the heading "Contribution, Grants and Subsidies towards cost of Capital assets". Following paras in Annexure III to the said rules are reproduced below: 2.33. "Contributions, Grants and Subsidies towards cost of capital Assets shall be treated in accordance with the policies laid down in the following paragraphs." 2.36. "Accounting for cost of a capital asset shall be done in the normal course without considering any contribution, subsidy or grants towards the cost of the asset. Depreciation shall also be charged in the normal course on the 'full cost' of the asset." 14. The assessing officer in rejecting the claim of depreciation by the assessee was mainly guided by the fact that as per the audit note, Accounting Standard No. 12 issued by ICAI which is one of the principles to ....
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....levant rules in Annexure III of Electricity Supply Annual Accounts Rules [para 2.33 and 2.36] have already been referred to above. Contrary to the said provision by which the applicant is bound, the assessing officer had imported the concept of cost as found in the Income-tax Act and Companies Act and gave primacy to accounting standard-12. The learned counsel has then brought to our notice the relevant provisions in the Companies Act itself which allow the application of the accounting rules and Principles under the Electricity (Supply) Annual Accounts Rules. Section 211(1) of the Companies Act which specifies the form and contents of balance-sheet and P&L account of Companies has this important proviso which reads : "provided that nothing contained in this sub-section shall apply to any insurance or banking company or any company engaged in the generation or supply of electricity or to any other class of company for which a form of balance sheet has been specified in or under the Act governing such class of Company." Added to this, section 616(c ) of the Companies Act provides: S.616 - The provisions of this Act shall apply: (a) ........................... (b) ........