TaxTMI 
TaxTMI 
2024 (8) TMI 1242
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....r otherwise deal with generation, transformer, insulation, material, boiler, pumps, etc. During the assessment proceedings, the Assessing Officer observed that the assessee has not carried any business activities during the current assessment year. In order to verify the same, the show cause notice issued to the assessee calling for information. In response, the assessee submitted as under:- "Magnum Power Gen. Ltd has entered into a Power Purchase Agreement with HPGCL for supply of electricity. The MPGL plant situated at Gurgaon commenced its operation from the year 1998. As per the PPA the consideration was paid in two parts Viz Variable tariff which was to be on the basis of monthly average cost of fuel and fixed Tariff @ Rs. 1.29 per unit. The PPA provides that the fixed tariff has to be reimbursed to magnum even if no electricity was supplied. The fact that the company is a power plant and which power plant has been used to generate electricity, which has been purchased by HSEB is not a dispute. The HSEB through power purchase agreement have specified that for the time they do not buy electricity they will pay the charges for the deemed generation because the company is inc....
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....ing thereto and should be allowed. S.32 of the Income Tax Act, 1961 provides for depreciation allowance. As per 5.32(1), two requisites for depreciation allowance are (i)that the depreciable asset is owned, wholly or partly, by the assessee; and (ii) that it is used for the purposes of business or profession. Therefore an assessee on satisfaction of these to primary conditions can clam allowance for depreciation. The Bombay High Cout in CIT v. Vishwanath Bhaskar sathe, (1937) 5 ITR 621 (Bom.)held that the word 'used' should be understood in a wider sense so as to give a wider meaning and embrace passive as well as active user. The said decision was followed by the patna High Court in CIT v. Dalmia Cement Ltd., (1945) 13 ITR 415 (Pat.) wherein it was held that depreciation should be allowed even though machinery was not in use or was kept idle. Further in the case of Whittle Anderson Ltd. V.CIT, (1971) 79 ITR 613 (Bom.), Bombay High Court held that when the machinery is kept ready for use it will be said to be used for the purpose of business. On the basis of various judicial pronouncements as discussed above, it can be stated that word 'used in S.32(1) has been in....
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....ection of the Tribunal both parties have held a meeting to reconcile the accounts but due to difference in interpretation of HERC order by either side the meeting never concluded and both parties agreed to seek a clarification order from HERC upon its earlier order. HERC has passed a clarification order after hearing both the arties but MPGL having disagreed with the clarification order of HERC has filed an appeal in January 2011. Respondent HPPC had also filed appeal against HERC impugned order dtd.23.3.2010 to Appellate after a delay of 335 days of order for condonation of delay, but Appellate having not satisfied had dismissed the appeal of HPPC. The HPPC has field appeal in Supreme Court against dismissal of appeal for condonation of delay by Appellate Further judgment against MPGL appeal in Apptel came in March 2012, which rejected deemed generation dues and kept the HERC order intact. The assessee company is in appeal in Supreme Court against the order of Appellate. Matching Principle requires that expenses incurred by the assessee must be charged to the Profit and Loss account in the financial year in which the revenue, to which those expenses relate, is earned. ....
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....neration) has accrue to the company since then. Against the said non payment of fixed tariff both the parties i.e. the appellant company and the HPGCL/HPPC have filed a suit in the Supreme Court and which is pending as on date. Therefore the objection of the AO that appellant has not accounted for revenue is mis founded. The AO also objects that there is no business activity during the previous year and therefore expenses are not allowable which the AR has explained in detail above that the company was engaged in the business of power generation and supplying electricity to Haryana Power Generation Corporation, however, commercial production was temporarily suspended due to differences with them in interpretation of various clauses of agreement. The AR has referred to para 9.4.1. of paper book which gives the details of expenses claimed and which I have perused. The AO in AY 2009-10 u/s 143(3) has allowed the expenses claimed in the Profit & Loss Account and there is no change in the facts and circumstances of the case to deviate from this view. Copy of assessment order u/s 143(3), audited Annual Accounts and Computation of Income has been filed at page 60 to 91 of Paper Book. ....