TaxTMI 
TaxTMI 
2018 (6) TMI 1857
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....ted 08.05.2018 are contained at para 9 to 11 of our order which are reproduced as under:- "9. In order to appreciate the rival contentions, firstly, we refer the decision of Hon'ble Supreme Court in the case of NHPC Vs. CIT (Supra). In the facts before the Hon'ble Supreme Court, the assessee company was a public sector enterprise engaged in generation of electricity and selling the same to State Electricity Board(s), Discoms etc. at tariff rates notified by CERC. The tariff consists of depreciation, AAD, interest on loans, interest on working capital, operation and maintenance expenses, return on equity. As per the Government of India policy, notified on 26th May, 1997, the Govt. of India introduced a mechanism to generate additional cash flow by allowing generating companies to collect AAD by way of tariff charge. It was decided that the year in which normal depreciation fell short of original scheduled loan repayment installment (capped at 1/12th of the original loan) such shortfall would be collected as advance against future depreciation. In other words, once the loan stood repaid, the advance so collected would get reduce from the normal depreciation of the later yea....
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....s not a reserve. 12. For the foretasted reasons, we hold that AAD is a timing difference, it is not a reserve, it is not carried through the profit and loss account and that it is " income received in advance" subject to adjustment in future and, therefore, clause (b) of Explanation 1 to section 115JB is not applicable. Accordingly, the impugned ruling is set aside and the civil appeal filed by the assessee stands allowed with no order as to costs." 10. Further, we refer to the decision of the Coordinate Bench in the case of ACIT Vs. NHPC (in ITA No. 3013 to 3015/Del/2010 order dated September, 20, 2014), the issue for consideration before the Coordinate Bench was whether the ld. CIT (A) was right in law in deleting the addition of Rs. 1,40,58,00,000/- made by the Assessing Officer U/s 143(3) on account of advance against deprecation ignoring the provisions of Section 2(24) read with Section 28 of the Act. The Coordinate Bench relying on the decision of the Hon'ble Supreme Court in the case of NHPC Vs. CIT (supra) has held that advance against depreciation cannot be added under the computation of the normal income. The relevant findings of the Coordinate Bench a....
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.... inception as the same shall be adjusted in future, hence, cannot be designated as reserve. Hon'ble Supreme Court has also held that advance against depreciation is nothing but an adjustment by reducing the normal depreciation including in the future years in such a manner that at the end of the useful life of the plant the same shall be reduced to nil. The Hon'ble Supreme Court has also held that assessee cannot use the advance against depreciation for any other purposes except to adjust the same against future depreciation so as to reduce the tariff in future years. For this, the relevant observation of the Hon'ble Supreme Court is that there are broadly two types of reserves, viz., those that are routed through profit and loss account and those which are not carried vide profit and loss account, for example, a Capital Reserve such as Share Premium Account, advance against depreciation is not a reserve and it is not appropriation of profits. The above findings by the Supreme Court are clear and decide the issue. It has been held that AAD is not appropriation of profit meaning thereby AAD is not taken out of profit. That it is not a deduction out of profit. The Supreme....
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....to nil. Therefore, the assessee cannot use the AAD for any other purpose (which is possible in the case of a reserve) except to adjust the same against future depreciation so as to reduce the tariff in the future years." In view of the categorical finding of the Supreme Court we hold that the CIT (A) was correct in holding that advance against depreciation cannot be added under the computation of the normal income. The order of CIT (A) is upheld and the appeals of the Revenue are dismissed." 11. We have heard the rival contentions of both the parties and perused the material available on the record. We find that the facts of the present case are pari-materia to the facts before the Hon'ble Supreme Court as well as before the Coordinate Bench referred supra and the latter decision has been rendered in the context of taxability of Advance against depreciation under the normal provisions of the Act. The ld CIT (A) has rightly followed the ratio laid down in the said decisions. We do not find any infirmity in the order of the ld CIT (A) and the same is hereby confirmed. The ground taken by the Revenue is thus dismissed." 5. In light of above, given that there are no changes in ....