Income Tax Appellate Tribunal - Jaipur
Ajmer Vidhyut Vitran Nigam Ltd., Ajmer vs Acit, Ajmer on 28 August, 2017
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YADAV, AM
vk;dj vihy la-@ITA No. 362/JP/16
fu/kZkj.k o"kZ@Assessment Year : 2004-05
M/s Ajmer Vidyut Vitran Nigam Ltd., cuke The ACIT Circle-2
Vidyut Bhawan, Panchsheel Nagar, Vs. Ajmer.
Makarwali Road, Ajmer.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No.: AACCA8562E
vihykFkhZ@Appellant izR;FkhZ@Respondent
vk;dj vihy la-@ITA No. 361/JP/16
fu/kZkj.k o"kZ@Assessment Year : 2004-05
M/s Ajmer Vidyut Vitran Nigam Ltd., cuke The ACIT Circle-2
Vidyut Bhawan, Panchsheel Nagar, Vs. Ajmer.
Makarwali Road, Ajmer.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No.: AACCA8562E
vihykFkhZ@Appellant izR;FkhZ@Respondent
vk;dj vihy la-@ITA No. 357/JP/16
fu/kZkj.k o"kZ@Assessment Year : 2004-05
The DCIT, cuke M/s Ajmer Vidyut Vitran Nigam Ltd.,
Circle-2, Vs. Vidyut Bhawan, Panchsheel Nagar,
Ajmer. Makarwali Road, Ajmer.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No.: AACCA8562E
vihykFkhZ@Appellant izR;FkhZ@Respondent
ITA No. 357 to 372/JP/16
Ajmer Vidyut Vitran Nigam Ltd. Vs. ACIT, Ajmer
vk;dj vihy la-@ITA No. 358/JP/16
fu/kZkj.k o"kZ@Assessment Year : 2005-06
The DCIT, cuke M/s Ajmer Vidyut Vitran Nigam Ltd.,
Circle-2, Vs. Vidyut Bhawan, Panchsheel Nagar,
Ajmer. Makarwali Road, Ajmer.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No.: AACCA8562E
vihykFkhZ@Appellant izR;FkhZ@Respondent
vk;dj vihy la-@ITA No. 363/JP/16
fu/kZkj.k o"kZ@Assessment Year : 2005-06
M/s Ajmer Vidyut Vitran Nigam Ltd., cuke The ACIT,
Vidyut Bhawan, Panchsheel Nagar, Vs. Circle-2,
Makarwali Road, Ajmer. Ajmer.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No.: AACCA8562E
vihykFkhZ@Appellant izR;FkhZ@Respondent
vk;dj vihy la-@ITA No. 364/JP/16
fu/kZkj.k o"kZ@Assessment Year : 2005-06
M/s Ajmer Vidyut Vitran Nigam Ltd., cuke The ACIT,
Vidyut Bhawan, Panchsheel Nagar, Vs. Circle-2,
Makarwali Road, Ajmer. Ajmer.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No.: AACCA8562E
vihykFkhZ@Appellant izR;FkhZ@Respondent
vk;dj vihy la-@ITA No. 365/JP/16
fu/kZkj.k o"kZ@Assessment Year : 2005-06
M/s Ajmer Vidyut Vitran Nigam Ltd., cuke The ACIT,
Vidyut Bhawan, Panchsheel Nagar, Vs. Circle-2,
Makarwali Road, Ajmer. Ajmer.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No.: AACCA8562E
vihykFkhZ@Appellant izR;FkhZ@Respondent
2
ITA No. 357 to 372/JP/16
Ajmer Vidyut Vitran Nigam Ltd. Vs. ACIT, Ajmer
vk;dj vihy la-@ITA No. 359/JP/16
fu/kZkj.k o"kZ@Assessment Year : 2007-08
The DCIT, cuke M/s Ajmer Vidyut Vitran Nigam Ltd.,
Circle-2, Vs. Vidyut Bhawan, Panchsheel Nagar,
Ajmer. Makarwali Road, Ajmer.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No.: AACCA8562E
vihykFkhZ@Appellant izR;FkhZ@Respondent
vk;dj vihy la-@ITA No. 366/JP/16
fu/kZkj.k o"kZ@Assessment Year : 2007-08
M/s Ajmer Vidyut Vitran Nigam Ltd., cuke The ACIT,
Vidyut Bhawan, Panchsheel Nagar, Vs. Circle-2,
Makarwali Road, Ajmer. Ajmer.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No.: AACCA8562E
vihykFkhZ@Appellant izR;FkhZ@Respondent
vk;dj vihy la-@ITA No. 367/JP/16
fu/kZkj.k o"kZ@Assessment Year : 2007-08
M/s Ajmer Vidyut Vitran Nigam Ltd., cuke The ACIT,
Vidyut Bhawan, Panchsheel Nagar, Vs. Circle-2,
Makarwali Road, Ajmer. Ajmer.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No.: AACCA8562E
vihykFkhZ@Appellant izR;FkhZ@Respondent
vk;dj vihy la-@ITA No. 360/JP/16
fu/kZkj.k o"kZ@Assessment Year : 2008-09
The DCIT, cuke M/s Ajmer Vidyut Vitran Nigam Ltd.,
Circle-2, Vs. Vidyut Bhawan, Panchsheel Nagar,
Ajmer. Makarwali Road, Ajmer.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No.: AACCA8562E
vihykFkhZ@Appellant izR;FkhZ@Respondent
3
ITA No. 357 to 372/JP/16
Ajmer Vidyut Vitran Nigam Ltd. Vs. ACIT, Ajmer
vk;dj vihy la-@ITA No. 368/JP/16
fu/kZkj.k o"kZ@Assessment Year : 2008-09
M/s Ajmer Vidyut Vitran Nigam Ltd., cuke The ACIT,
Vidyut Bhawan, Panchsheel Nagar, Vs. Circle-2,
Makarwali Road, Ajmer. Ajmer.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No.: AACCA8562E
vihykFkhZ@Appellant izR;FkhZ@Respondent
vk;dj vihy la-@ITA No. 369/JP/16
fu/kZkj.k o"kZ@Assessment Year : 2008-09
M/s Ajmer Vidyut Vitran Nigam Ltd., cuke The ACIT,
Vidyut Bhawan, Panchsheel Nagar, Vs. Circle-2,
Makarwali Road, Ajmer. Ajmer.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No.: AACCA8562E
vihykFkhZ@Appellant izR;FkhZ@Respondent
vk;dj vihy la-@ITA No. 370/JP/16
fu/kZkj.k o"kZ@Assessment Year : 2009-10
M/s Ajmer Vidyut Vitran Nigam Ltd., cuke The ACIT,
Vidyut Bhawan, Panchsheel Nagar, Vs. Circle-2,
Makarwali Road, Ajmer. Ajmer.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No.: AACCA8562E
vihykFkhZ@Appellant izR;FkhZ@Respondent
vk;dj vihy la-@ITA No. 371/JP/16
fu/kZkj.k o"kZ@Assessment Year : 2010-11
M/s Ajmer Vidyut Vitran Nigam Ltd., cuke The ACIT,
Vidyut Bhawan, Panchsheel Nagar, Vs. Circle-2,
Makarwali Road, Ajmer. Ajmer.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No.: AACCA8562E
vihykFkhZ@Appellant izR;FkhZ@Respondent
4
ITA No. 357 to 372/JP/16
Ajmer Vidyut Vitran Nigam Ltd. Vs. ACIT, Ajmer
vk;dj vihy la-@ITA No. 372/JP/16
fu/kZkj.k o"kZ@Assessment Year : 2011-12
M/s Ajmer Vidyut Vitran Nigam Ltd., cuke The ACIT,
Vidyut Bhawan, Panchsheel Nagar, Vs. Circle-2,
Makarwali Road, Ajmer. Ajmer.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No.: AACCA8562E
vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrhdh vksj ls@Assessee by : Shri Sunil Porwal
jktLo dh vksj ls@Revenue by : Shri Verinder Mehta (CIT) and
Shri R.A.Verma (Addl.CIT)
lquokbZ dh rkjh[k@Date of Hearing : 01/08/2017
?kks"k.kk dh rkjh[k@Date of Pronouncement: 28/08/2017.
vkns'k@ORDER
PER BENCH:
These are the cross appeals filed by the assessee and the Revenue directed against the orders of ld. CIT(A) Ajmer for A.Y. 2004-05, 2005-06, 2007-08, 2008-09, 2009-10, 2010-11 and 2011-12 respectively. Given the similarity of facts and common grounds of appeal involved in all these years, all these appeals were heard together and are being disposed off by this consolidated order.
2. Both the parties submitted that the appeal pertaining to the assessment year 2004-05 may be taken as a lead case. Accordingly, for appreciating the facts, we are taking appeal pertaining to A.Y. 2004-05 as lead case and the respective grounds of appeal taken and contentions advanced by both the parties are considered in succeeding paragraphs.
Assessee's grounds of appeal (ITA No. 362/JP/16) 5 ITA No. 357 to 372/JP/16 Ajmer Vidyut Vitran Nigam Ltd. Vs. ACIT, Ajmer "Under the facts & circumstances of the case the Ld. CIT(A) has erred in confirming the:-
(1) Addition of Rs. 4,64,27,170 show under the prior period expenses claimed.
(2) Addition for disallowance of depreciation of Rs. 12,15,15,004 on non- existing assets.
(3) Addition for disallowance of depreciation of Rs. 22,05,23,697 u/s 43(1) (Wrongly figure taken by Ld CIT(A) at Rs. 12,61,87,639)."
Assessee's grounds of appeal (ITA No. 361/JP/16) "Under the facts & circumstances of the case, the Ld. CIT(A) has erred in confirming the :-
(1) Addition of Rs. 4,64,27,170 shown under the prior period expenditure.
(2) Disallowance of depreciation of Rs. 23,04,20,000 (Now rectified to Rs. 12,15,15,004 in the assessment order dated 30.12.2009 passed u/sec. 143(3)/148 for assessment year 2004-05)"
Revenue's grounds of appeal (ITA No. 357/JP/16) "In view of the facts and circumstances of the case the Ld. CIT(A), Ajmer has erred in deleting the disallowances of Rs. 22,05,23,697/- made by the AO on account of excess depreciation claimed and added to the MAT income without appreciating the facts that as per provision of section 115JB(2) of the I.T. Act the assessee company has to follow accounting policies and prepare its P&L account for the relevant previous year in accordance with the provisions of part II & III of schedule IV of the Company Act, 1956 which the assessee company has not followed. In such circumstances the same has rightly been taken for calculation of book profit u/s 115JB."
Prior period expenditure
3. This is a common ground which has been taken by the assessee in its appeal No. 362/JP/16 and 361/JP/16 against the orders of ld. CIT(A) who has confirmed the addition of Rs. 4,64,27,170/- towards disallowance of prior 6 ITA No. 357 to 372/JP/16 Ajmer Vidyut Vitran Nigam Ltd. Vs. ACIT, Ajmer period expenses. Appeal No. 362/JP/16 relates to reassessment order passed under 147 read with 143(3) dated 30.12.2009 and appeal No. 361/JP/16 is in respect of original assessment order passed u/s 143(3) dated 27.11.2006.
4. Briefly the facts of the case are that the assessee company has claimed prior period expenses amounting to Rs. 4,64,27,170/-. During the course of assessment proceedings, the assessee company submitted that it is a public sector undertaking carrying on the business of Transmission, Distribution and Supply of electricity. The Company was formed after restructuring of Rajasthan State Electricity Board (RSEB) on 19.06.2000 and at that time, certain assets, liabilities, common expenditure were also transferred from RSEB which were subject to reconciliation. The Assessment year under consideration is fourth year of its operation and certain expenses and income being in the nature of prior period items were claimed as per normal accounting norms and on the belief that these expenses though pertaining to the previous years are admissible only in the year in which it crystallized and accounted for on the basis of system of accounting regularly followed by the assessee. Further details of such income and expenses were submitted during the assessment proceeding. The Assessing Officer did not agree to the submission of the assessee and held that the net prior period expenses of Rs. 4,64,27,170/- debited during the year has distorted the profits of the year as the assessee is following mercantile system of accounting and expenditure not related to the previous year cannot be allowed to be deducted from income of the subject previous year. It was further stated by the AO that this expenditure also does not fall under the provisions of section 35D of the Act. Regarding assessee company's contention that the issue has been decided in its favour by the ld. CIT(A) for A.Y. 2002-03, the Assessing Officer stated that since the Revenue is an appeal before the Tribunal against the said order, he is not in a position to follow the order of the ld. CIT(A). Finally, the Assessing 7 ITA No. 357 to 372/JP/16 Ajmer Vidyut Vitran Nigam Ltd. Vs. ACIT, Ajmer Officer, following the past history of the assessee, disallowed the prior period expenditure amounting to Rs. 4,64,27,170/-.
5. Being aggrieved, the assessee carried the matter in appeal before the ld. CIT(A) and reiterated its submission made before the Assessing Officer. It was further submitted that the issue has since been decided by the Tribunal in assessee's own case in its favour for A.Y. 2002-03 and A.Y. 2003-04. The ld. CIT(A) didn't consider the decision of the Tribunal for the earlier years. Further, the ld. CIT(A) referred to his predecessor order for AY 2002-03 and 2003-04 and stated that in those years, a finding has been given that the liability in respect of these expenses were crystallized in the year in which these expenses have been claimed as deduction. The ld. CIT(A) further held that in the year under consideration, either during the course of assessment proceedings or appellate proceedings, the assessee has not able to prove through documentary evidence that liability in respect of prior period expenses has crystallized in the year under consideration. According, he confirmed the disallowance of the prior period expenditure as done by the Assessing Officer.
6. During the course of hearing, the ld. AR submitted that Hon'ble Rajasthan High Court has recently decided this particular matter relating to prior period expenditure in assessee's own case for A.Y. 2003-04 in its favour by its judgement dated 19.05.2017.
7. In this regard, firstly our reference was drawn to the decision of the Coordinate Bench in ITA No. 1019/JP/2007 dated 17.10.2008 for AY 2003-04 wherein the Coordinate Bench has held as under:-
"The Ld. CIT(A) while deciding the issue has followed the decision of Jaipur Bench of the Tribunal on the issue in the case of DCIT v/s Chambal Fertilizers and Chemicals ltd, 34 TW 59 (Jpr.) holding that the 8 ITA No. 357 to 372/JP/16 Ajmer Vidyut Vitran Nigam Ltd. Vs. ACIT, Ajmer deduction of an expenditure will be admissible only in the year in which it crystallized and accounted for on the basis of system of accounting regularly followed by the assessee. An identical issue in the case of assessee for the A.Y. 2002-03 has also been decided by Jaipur Bench of the Tribunal in favour of the assessee vide its order dated 31.10.2007 in ITA No. 272/JP/2006. Under these circumstances, we are of the view that the Ld. CIT(A) was justified in accepting the case of the assessee on the issue with this observation that the assessee company have been following a particular system of accounting where prior period income and expenditure are claimed only when the same gets crystallized. The company has followed the system under the peculiar circumstances of the case when the company came into existence after restructuring of the parent company i.e. RSEB. The first appellate order being reasoned one is thus upheld."
8. Further, our reference was drawn to the decision of Hon'ble Rajasthan High Court in DB Appeal No. 333/2009 dated 19.05.2017 for AY 2003-04 wherein the following question of law was raised for its consideration:-
"1. Whether on the facts and circumstances of the case the Tribunal was justified in conforming the deletion of prior period expense of Rs. 1,55,40,777/- made by the Assessing Officer which cannot allowed while following mercantile system of accounting."
The relevant findings of the Hon'ble High Court are contained in para 6 and 7 of its judgement which are reproduced as under:-
"6. Counsel for the respondent contended that the issue is covered by the decision of Delhi High Court in case of SMCC Construction India Ltd. vs. Assistant Commissioner of Income Tax reported in [2013] 38 taxmann.com 146 (Delhi) wherein in para 13 & 14 it has been held as under:-
"13. The prior period expenses are eligible for deduction during the current year provided the liability was determined and crystallized during the relevant year.
14.The reason to believe recorded by the Assessing Officer "that the assessee has debited a sum of Rs. 1,20,765 in the P&L account on account of prior period expenses after netting income 9 ITA No. 357 to 372/JP/16 Ajmer Vidyut Vitran Nigam Ltd. Vs. ACIT, Ajmer of Rs. 30,34,463/- and expenditure of Rs. 31,55,228/- has not been crystallized during the year 2001-02 relevant to the assessment year 2002-03 such prior period expenses should have been disallowed" is not based on any material that had come to the knowledge of the Assessing Officer. The Assessing Officer has placed reliance on the notes to the accounts that were available at the time of the scrutiny assessment. But the notes also states that the prior period expenses had crystallized/settled in the year. The reasons to believe recorded do not show as to on what basis the Assessing Officer has formed a reasonable belief that the said expenditure had not crystallized during the year relevant to the assessment year. It is apparent the Assessing Officer suspects that the income has escaped assessment. But mere suspicion is not enough. The reasons to believe must record reasons, the reading of which should demonstrate, that such a reasonable belief could be formed on some basis/foundation and was in fact formed by the Assessing Officer that income has escaped assessment. No such reasonable belief can be formed from the reasons to believe recorded."
7. Taking into consideration, the issue is required to be answered in favour of the assessee against the department."
9. The ld. DR is heard which has fairly conceded that the issue is covered in favour of the assessee by the decision of the Hon'ble Rajasthan High Court.
10. In light of above discussion, what emerges is that as per the accounting policy followed by the assessee, the prior period expenses as well as the prior period income have been accounted for in its financial statements on a regular basis in the year in which they are crystallized. The assessee has been consistent in following the said accounting policy. The Assessing officer has stated that following the past history of the assessee, the addition on account of prior period expenditure has been made in the year under consideration. This shows that the assessee has been consistent in its accounting policy regarding prior period expenditure and the Revenue is equally consistent in 10 ITA No. 357 to 372/JP/16 Ajmer Vidyut Vitran Nigam Ltd. Vs. ACIT, Ajmer disallowing the same. The Hon'ble Rajasthan High Court in above referred decision for AY 2003-04 has decided the issue in favour of the assessee company. Further, the Coordinate Benches in assessee's own case for AY 2002-03, 2003-04 & 2006-07 has decided the issue in favour of the assessee. Though the principle of res judicata doesn't apply in the income tax proceedings but where the same "fundamental aspect" permeates in different assessment years and the assessee is consistent in its accounting policy, as in the instant case, of accounting for the liabilities in the year in which it is crystallised, the Courts have held that the settled position should not be disturbed unless there are glaring changes in the facts and circumstances of the case or there are change in law which call for a fresh examination. Further, the Courts have held that where the rate of tax remained the same in the present assessment year as well as in the subsequent assessment year, the dispute raised by the Revenue is entirely academic or at best may have a minor tax effect. In the instant case, we have been informed that the assessee is subject to corporate tax rate of 35% and there is no change in the said tax rate in the subsequent assessment year.
11. In the entirety of facts and circumstances of the case and respectfully following the decision of the Hon'ble Rajasthan High Court in assessee's own case, the AO is directed to allow the claim of deduction of the prior period expenses amounting to Rs. 4,64,27,170/-. In the result, the ground of appeal taken by the assessee is allowed.
Disallowance of depreciation on non-existing assets
12. In respect of ground no. 2, briefly the facts of the case are that the Assessing Officer during the course of assessment proceedings noticed that the assets worth Rs. 115.21 Crores could not be physically verified and 11 ITA No. 357 to 372/JP/16 Ajmer Vidyut Vitran Nigam Ltd. Vs. ACIT, Ajmer following the earlier years, he disallowed depreciation on such assets amounting to Rs. 12,15,15,004/-.
13. Being aggrieved, the assessee carried the matter in appeal before the ld. CIT(A) who confirmed the said disallowance. The decision of Tribunal for A.Y. 2003-04 in ITA No. 867/JP/2007 dated 20.06.2008 was brought to the notice of ld. CIT(A). The ld. CIT(A) stated that the order of the Tribunal for A.Y. 2003-04 cannot be interpreted to conclude that depreciation, on the fixed assets worth Rs. 115.21 Crore which are not physically available, is allowed indefinitely, even if the assessee does not prepare the list of fixed assets after physical verification. The assessee should have completed the exercise of physical verification within reasonable time which has not been done. If the assessee cannot find where the assets of Rs 115.21 crore are located, then the question of putting them to use for business purposes doesn't arise. No depreciation u/s 32 can be allowed on non-existing assets and accordingly he confirmed the disallowance of depreciation on the non- existing assets of Rs. 115.21 Crore.
14. The ld. AR submitted that the matter for assessment year 2003-04, which has been referred to by the ld CIT(A), has infact been set aside by the Tribunal to the Assessing Officer in the first round and it has again reached the Tribunal in the second round which has since been decided by the Tribunal vide its consolidated order dated 14.07.2016 in ITA No. 284/JP/2009 and its others. It was further submitted that the matter in the second round of appellant proceedings has been decided in favour of the assessee by the Tribunal and the same may be followed in the instant year.
12ITA No. 357 to 372/JP/16 Ajmer Vidyut Vitran Nigam Ltd. Vs. ACIT, Ajmer
15. The relevant findings of the Coordinate Bench in its consolidated order dated 14.07.2016 in ITA No. 284/JP/2009 and others are contained at paras 9 to 9.5 which are reproduced as under:-
"9. We have heard the rival contentions of both the parties and perused the material available on the record. We have heard the matter on 16/6/2016. During the course of hearing, it was submitted on behalf of the assessee that the erstwhile Rajasthan State Electricity Board was not assessable to income tax and therefore, it was not filing the income tax return. However, thereafter on going through the record and the judgment passed by the Hon'ble High Court and Hon'ble Supreme Court, it transpires that the Rajasthan State Electricity Board is an taxable entity and therefore the matter was fixed for hearing on 29/6/2016 for the purposes of clarification. On 29/6/2016, the ld AR alongwith representatives of the assessee were present in the court. Ld AR submitted that the Board have filed the return of income for the assessment year 2001-02 and have also provided the chart for depreciation in respect of fixed assets of the assessee. 9.1 Even otherwise Section 80 of the Electricity Supply Act, 1948 provides as under:-
"80. Provision relating to Income Tax and Super Tax.- (1) For the purposes of the Indian Income-tax Act, 1922 (XI of 1922), 4 the Board shall be deemed to be a company within the meaning of that Act and shall be liable to income tax and super tax accordingly on its income, profits and gains. (2) The State Government shall not be entitled to any refund of any such taxes paid by the Board.
In view of the specific provisions under the Electricity Supply Act, 1948, a Board constituted under the said Act and the Board is liable to pay tax under the provisions of Income Tax Act, 1961 and therefore, the Board was required to file income tax return and the judgment passed by the Hon'ble Rajasthan High Court in the case of Rajasthan State Electricity Board Vs. DCIT (1993) 200 ITR 434 clearly deals that the Rajasthan State Electricity Board is a government company assessable under the I.T. Act. Further in the matter of CIT Vs. Rajasthan State Electricity Board (2007) 160 taxman 19, the Hon'ble Jurisdictional High Court has dealt Rajasthan State Electricity Board as a government company and is 13 ITA No. 357 to 372/JP/16 Ajmer Vidyut Vitran Nigam Ltd. Vs. ACIT, Ajmer also subject to the rigorous of the Income Tax Act. Therefore, we are of the view that the Rajasthan State Electricity Board was a government company and was subject to the Income Tax Act.
9.2 Since the Rajasthan State Electricity Board was a government undertaking and was an income tax entity, therefore, it was having block of assets and fixed assets. Admittedly by the gazette notification dated 18/1/2002, the Rajasthan State Electricity Board was divided into five undertakings and the total assets of the Rajasthan State Electricity Board were divided in various companies and the gross fixed assets of Rs. 1029 crores came to the share of the assessee. It is the contention of the ld AR that it is not possible for the assessee to physically verify the individual assets as sought by the ld Assessing Officer as the fixed assets transferred to the assessee were forming part of the block of assets prior to its transfer with the RACB. As per the balance sheet of the Rajasthan State Electricity Board, the allowable depreciation up to 19/7/2000 was mentioned as Rs.1,04,82,30,121/-.Since block of assets were transferred to the assessee, therefore, the insistence of the ld Assessing Officer for physical verification of the assets for the purposes of depreciation, in our view, was not warranted. In our view, once the assets are forming part and parcel of the block of assets, which were transferred to the assessee from Rajasthan State Electricity Board, the physical verification for the purposes of depreciation may not be required and therefore, the assessee is entitled to depreciation on the written down value of the assets a per Income Tax Act 1961, subsequent to the transfer from the assets from Rajasthan State Electricity Board.
9.3 It is an admitted case that the assessee company was constituted under the Act of Rajasthan and under the statutory transfer scheme, therefore, in view of Section 43 of the Act, transfer of assets had been fall within the realm of transfer as envisaged under the Act. As per explanation-6 of Section 43(1), the actual basis of transferee company would have to be written down value of the transferor company meaning thereby the block of assets, which was transferred by the Rajasthan Electricity Board with the original cost of acquisition, shall be determined the written down value for the assessee company. The Hon'ble Delhi High Court in the case of Dalmia Ceramic Industries Ltd.
14ITA No. 357 to 372/JP/16 Ajmer Vidyut Vitran Nigam Ltd. Vs. ACIT, Ajmer Vs. CIT (2005) 277 ITR 219 has held that "what would be the actual cost of the transferee company on the date of transfer is indicated in Section 43(1), explanation-6, thus the actual cost of transferee company will be written down value of the holding company."
9.4 Since the original cost of acquisition of the transferor company, is determined, similarly, the written down value of the transferor company is also available with the Assessing Officer, therefore, the ld Assessing Officer was only required to allow the application depreciation on the written down value of the assets acquired by the assessee from the transferor company (RACB). The relevant portion of the judgment is reproduced hereinbelow:
"8. The only issue before this court is whether the written down value of the holding company is to be taken as actual cost of the assessee or the amount paid by the assessee to the holding company? Chapter IV of the Act refers to computation of business income and section 43 is required to be examined for the purpose of deciding this matter. Section 43(1) of the Act which defines actual cost reads as under:
" (1) ' actual cost' means the actual cost of the assets to the assessee, reduced by that portion of the cost thereof, if any, as has been met directly or indirectly by any other person or authority :
Provided that where the actual cost of an asset, being a motor-car which is acquired by the assessee after the 31st day of March, 1967 but before the 1st day of March, 1975, and is used otherwise than in a business of running it on hire for tourists, exceeds twenty-five thou sand rupees, the excess of the actual cost over such amount shall be ignored, and the actual cost thereof shall be taken to be twenty-five thousand rupees."
9. What is written down value is defined in clause (6) of section 43 which reads as under :
" ' written-down value' means--
(a) in the case of assets acquired in the previous year, the actual cost to the assessee ;
(b) in the case of assets acquired before the previous year, the actual cost to the assessee less all depreciation actually allowed to him under this Act, or under the Indian Income-tax Act, 1922 (11 of 1922), or any Act repealed by that Act, or under any executive 15 ITA No. 357 to 372/JP/16 Ajmer Vidyut Vitran Nigam Ltd. Vs. ACIT, Ajmer orders issued when the Indian Income-tax Act, 1886 (2 of 1886), was in force."
10. It may be noted that sub-clause (a) of clause (6) would not apply in the instant case as that would apply for the assessment year 1975-76. Sub- clause (b) clearly indicates that the written down value means the actual cost to the assessee less all depreciation actually allowed to him under the Act. In the instant case Explanation 2 to clause (6) of section 43 is relevant and is reproduced hereunder :
" Explanation 2.--When any capital asset is transferred by a hold ing company to its subsidiary company or by a subsidiary company to its holding company, then, if the conditions of clause (iv), or, as the case may be, of clause (v) of section 47, are satisfied, the written down value of the transferred capital asset to the transferee-company shall be taken to be the same as it would have been if the transferor-com pany had continued to hold the capital asset for the purpose of its business."
11. There is no dispute that the case falls under clause (iv) of section
47. Therefore, it is clear that the actual cost would be the written down value of the transferor-company. This aspect is required to be borne in mind while considering the question. We will now have to turn to Explanation 6 to section 43(1) which reads as under :
" Explanation 6.--When any capital asset is transferred by a hold ing company to its subsidiary company, or by a subsidiary company to its holding company, then, if the conditions of clause (iv) or, as the case may be, of clause (v) of section 47 are satisfied, the actual cost of the transferred capital asset to the transferee- company shall be taken to be the same as it would have been if the transferor-company had continued to hold the capital asset for the purposes of its business."
12. It is clear that what would be the actual cost to the transferee company on the date of transfer is indicated in section 43(1), Explanation 6. Thus, the actual cost to the transferee-company will be the WDV of the holding company (transferor-company).
13. The assessee based its submission relying on Maharana Mills P. Ltd. v. ITO [1959] 36 ITR 350 (SC) and Saharanpur Electric Supply Co. Ltd. v. CIT [1992] 194 ITR 294 (SC). The assessee has also relied on Ciba of India Ltd. v. CIT [1993] 202 ITR 1 (Bom) as also on CIT v. Hides and Leather Products P. Ltd. [1975] 101 ITR 61 16 ITA No. 357 to 372/JP/16 Ajmer Vidyut Vitran Nigam Ltd. Vs. ACIT, Ajmer (Guj). It is required to be noted that the Revenue as well as the assessee placed reliance on the decision of the apex court in the case of Saharanpur Electric Supply Co. Ltd. v. CIT [1992] 194 ITR
294. The apex court considered the decisions in Maharana Mills P. Ltd. v. ITO [1959] 36 ITR 350 (SC) and CIT v. Hides and Leather Products P. Ltd. [1975] 101 ITR 61 (Guj) amongst other cases. The apex court after examining the provisions in detail pointed out at page 315 as under :
" Explanation 6 offers no difficulty as the relationship of ' parent' and ' subsidiary' between the companies involved in the transfer, for the purposes of this clause, has to be determined as at the time of the transfer of the asset and will not be a wobbling or fluctuating one as suggested by counsel for the assessee. . ."
14. Thus in view of Explanation 6 the written down value of the holding company is required to be taken into consideration.
15. Learned counsel for the assessee submitted that the difference between the WDV and the price received for the property has been taxed in the hands of the holding company in the relevant assessment years and there is no dispute on this issue. In view of this, it was submitted that the Revenue cannot have tax benefit at both the places, namely, in the hands of the parent company and at the hands of the assessee. It was thus submitted that there is no evasion of tax.
16. On behalf of the assessee it was contended that actual cost is not static and it is required to be determined year to year. No doubt there may be a situation which may require the Assessing Officer to examine the case and re-determine the actual cost. In fact the apex court has considered this aspect at page 306 and pointed out instances. The apex court at page 309 (see [1992] 194 ITR) as under:
"In principle, therefore, we are unable to accept the contention that the actual cost cannot be determined year after year on the factual or legal position applicable for the relevant previous year and that the actual cost once determined cannot be altered except in the three situations outlined by counsel where the original figure itself requires a modification."
9.5 In view thereof, this ground of the assessee's appeal is allowed."
17ITA No. 357 to 372/JP/16 Ajmer Vidyut Vitran Nigam Ltd. Vs. ACIT, Ajmer
16. We have heard the rival submissions and perused the material available on record. Undisputedly, there is no change in the facts and circumstances of the case. No contrary authority has been brought to our notice subsequent to the above referred decision of the Coordinate Bench. In light of the same, following the decision of the Coordinate Bench, the ground is allowed in favour of the assessee company.
Disallowance of depreciation u/s 32 r/w sec 43(1), Explanation 10
17. In respect of ground no. 3, briefly the facts of the case are that the Assessing officer after going through the schedule-2 of the balance sheet of the assessee company noticed that there is an increase in contribution, grants and subsidies towards cost of capital assets during the year which has not been reduced from the cost of the assets for the purpose of calculation of depreciation. In view of section 32(1)(iii) read with section 43(1) and Explanation 10 thereto and after going through the submission of the assessee, he reduced such contribution, grants and subsidies from the cost of capital assets and recalculated the depreciation allowable to the assessee company and disallowed the amount of Rs. 22,05,23,697/- as excess depreciation claimed by the assessee company. On appeal, the ld. CIT(A) confirmed the said disallowance of excess depreciation.
18. During the course of hearing, the ld. AR fairly conceded that the issue has been decided against the assessee by the Coordinate Bench in its consolidated decision dated 14.07.2016. The relevant finding of the Coordinate Bench is contained at para 14 which is reproduced as under:-
"14. We have heard the rival contentions of both the parties and perused the material available on the record. During the course of argument, a pointed query was asked from the ld AR, to which it was fairly stated that the contribution / grant in the form of subsidy were 18 ITA No. 357 to 372/JP/16 Ajmer Vidyut Vitran Nigam Ltd. Vs. ACIT, Ajmer received from the State Govt./other department towards the cost of capital asset and for replacement of the assets. Explanation 10 to Section 43 of the Act provides as under:-
"[Explanation 10.- Where a portion of the cost of an asset acquired by the assessee has been met directly or indirectly by the Central Government or a State Government or any authority established under any law or by any other person, in the form of a subsidy or grant or reimbursement (by whatever name called), then, so much of the cost as is relatable to such subsidy or grant or reimbursement shall not be included in the actual cost of the asset to the assessee :
Provided that where such subsidy or grant or reimbursement is of such nature that it cannot be directly relatable to the asset acquired so much of the amount which bears to the total subsidy or reimbursement or grant the same proportion as such asset bears to all the assets in respect of or with reference to which the subsidy or grant or reimbursement is so received, shall not be included in the actual cost of the asset to the assessee.] A bare reading of the Explanation 10 of Section 43 of the Act, which clearly provides that where a portion of the cost of an asset acquired by the assessee has been met directly or indirectly by the Central Government or a State Government in the form of a subsidy or grant or reimbursement, then, so much of the subsidy or grant or reimbursement shall not be included in the actual cost of the asset to the assessee. Admittedly, the amount has been received by the assessee in the form of grant/reimbursement/subsidy from the state Government therefore, in our view, the order passed by the ld CIT(A) is required to be upheld and the value of the assets shall be taken by the ld Assessing Officer after adjusting the subsidy/grant/reimbursement from the State Govt. or the other government departments. Accordingly, this issue is decided against the assessee and in favour of the revenue."19
ITA No. 357 to 372/JP/16 Ajmer Vidyut Vitran Nigam Ltd. Vs. ACIT, Ajmer
19. We have heard the rival submissions and perused the material available on record. Undisputedly, there is no change in the facts and circumstances of the case. Following the decision of the Coordinate Bench referred supra, the ground taken by the assessee company is dismissed.
Applicability of MAT provisions u/s 115JB of the Act
20. At the outset, the ld. AR submitted that the Coordinate Bench in assessee's own case in its consolidated order dated 14.07.2016 has decided against the applicability of the MAT provisions to the assessee company. It was accordingly submitted that the issue is covered in favour of the assessee by the decision of the Coordinate Bench which may kindly be followed.
21. The relevant findings of the Coordinate Bench in its consolidated order dated 14.07.2016 is contained at para 19 which are reproduced as under:-
"19. We have heard the rival contentions of both the parties and perused the material available on the record. We have also gone through the contention raised by the assessee as well as the order passed by the Advance Rulings (Income Tax), New Delhi. Advance Rulings (Income Tax), New Delhi even in the matter of Jodhpur Vidyut Vitran Nigam Limited, which is situated on the same pedestal as that of the assessee, have been accepted by the revenue and the revenue has not insisted for application of provisions of MAT U/s 115JB of the Act. Therefore respectfully following the order passed by the Advance Rulings (Income Tax), New Delhi and applying the same to the present facts and circumstance of the case, we decide the issues in favour of the assessee. We also held that the benefit as has been given to Jodhpur Vidyut Vitran Nigam Limited under the provisions of the Electricity Act and the Companies Act be also extend it to the assessee without insisting for the application of Section 115JB of the Act In the light of the above, the issue is decided in favour of the assessee and against the revenue. Accordingly, this ground of appeal of the assessee is allowed."20
ITA No. 357 to 372/JP/16 Ajmer Vidyut Vitran Nigam Ltd. Vs. ACIT, Ajmer
22. We have heard the rival submissions and perused the material available on record. Undisputedly, there is no change in the facts and circumstances of the case or in the legal position. No contrary authority has been brought to our notice subsequent to the above referred decision of the Coordinate Bench. In light of the same, following the decision of the Coordinate Bench, the provisions of section 115JB are held not applicable to the assessee's company and the ground is thus allowed in favour of the assessee company.
ITA. No. 361/JP/1623. This appeal is arising out of the order passed by the ld CIT(A) pursuant to assessment order u/s 143(3) of the Act for AY 2004-05 wherein the assessee has challenged the addition of Rs. 4,64,27,170/- towards prior period expenditure and disallowance of depreciation of Rs 23,04,20,000 since rectified to Rs 12,15,15,004. In ITA No. 362/JP/16 for AY 2004-05 arising out of the order passed by the ld CIT(A) pursuant to reassessment under section 147 read with section 143(3) of the Act, we have already examined both these issues in detail. Our findings and directions contained in ITA No. 362/JP/2016 shall apply mutatis mutandis to this appeal as well. In the result, both the grounds taken by the assessee are allowed.
ITA. No. 357/JP/1624. In this appeal for AY 2004-05, the Revenue has challenged the action of ld CIT(A) in deleting the disallowance of excess depreciation claimed by the assessee company amounting to Rs. 22,05,23,697/- while working out the book profits as per provisions of section 115JB of the Act.
25. In ITA No. 362/JP/16 (supra), we have already taken a view that the provisions of section 115JB are not applicable to the assessee company. In view of the same, the subject ground of appeal relating to excess depreciation 21 ITA No. 357 to 372/JP/16 Ajmer Vidyut Vitran Nigam Ltd. Vs. ACIT, Ajmer relating to computation of book profits becomes academic and we donot think it is necessary to examine the same in detail. In the result, the ground of the revenue's appeal is dismissed being infructious.
Assessment Year 2005-06 (ITA No. 364/363/365/JP/16 & ITA No. 358/JP/16)
26. For AY 2005-06, there are three appeals filed by the assessee. In ITA No. 364/JP/2016, the assessee has challenged the order of ld CIT(A) dated 22.01.2016 passed pursuant to the assessment order u/s 143(3) of the Act. In ITA No. 363/JP/2016, the assessee has challenged the order of ld CIT(A) dated 22.01.2016 passed pursuant to the reassessment order dated 30.12.2009 u/s 147 r/w section 143(3) of the Act. In ITA No. 365/JP/2016, the assessee has challenged the order of ld CIT(A) dated 22.01.2016 passed pursuant to the reassessment order dated 21.01.2013 u/s 147 r/w section 143(3) of the Act. In each of these three appeals, the assessee has taken common grounds of appeal relating to disallowance of prior period expenses, disallowance of depreciation on non-existing assets and disallowance of depreciation under section 32 r/w section 43(1) of the Act. In ITA No. 363/JP/16 and ITA No. 365/JP/16, the assessee has also taken grounds challenging issue of notice u/s 148 of the Act as well as applicability of MAT provisions under section 115JB of the Act. In ITA No. 358/JP/16, the Revenue has challenged the action of ld CIT(A) in deleting the disallowance of excess depreciation claimed by the assessee company amounting to Rs. 30,84,28,063/- while working out the book profits as per provisions of section 115JB of the Act.
27. We have examined the subject issues in detail in ITA No. 362/JP/16 for AY 2004-05 relating to disallowance of prior period expenses, disallowance of 22 ITA No. 357 to 372/JP/16 Ajmer Vidyut Vitran Nigam Ltd. Vs. ACIT, Ajmer depreciation on non-existing assets, disallowance of depreciation under section 32 r/w section 43(1) of the Act and applicability of MAT provisions under section 115JB of the Act. Undisputedly, both the parties agreed that the facts and circumstances of the case are identical. Our findings and directions contained in ITA No. 362/JP2016 shall accordingly apply mutatis mutandis to these matters.
28. Regarding assessee's ground challenging issue of notice u/s 148 of the Act, the same was not pressed. Hence, the same is dismissed as not pressed.
29. Regarding Revenue's ground challenging the deleting the disallowance of excess depreciation claimed by the assessee company while working out the book profits as per provisions of section 115JB of the Act, as we have held above that the provisions of section 115JB are not applicable, the subject ground of appeal becomes academic and is dismissed being infructious.
30. With the above directions, the grounds of appeal for AY 2005-06 are disposed off.
Assessment Year 2007-08 (ITA No. 366/367/JP/16 & ITA No. 359/JP/16)
31. For AY 2007-08, there are two appeals filed by the assessee. In ITA No. 366/JP/2016, the assessee has challenged the order of ld CIT(A) dated 22.01.2016 passed pursuant to the assessment order u/s 143(3) of the Act and has taken grounds of appeal relating to disallowance of prior period expenses, disallowance of depreciation on non-existing assets, disallowance of depreciation under section 32 r/w section 43(1) of the Act and applicability of MAT provisions under section 115JB of the Act. In ITA No. 367/JP/2016, the 23 ITA No. 357 to 372/JP/16 Ajmer Vidyut Vitran Nigam Ltd. Vs. ACIT, Ajmer assessee has challenged the order of ld CIT(A) dated 22.01.2016 passed pursuant to the reassessment order u/s 147 r/w section 143(3) of the Act, the assessee has taken grounds of appeal challenging issue of notice u/s 148 of the Act, applicability of MAT provisions under section 115JB of the Act and disallowance of depreciation amounting to Rs 8,50,99,110 since rectified to Rs 2,00,13,600 while computing book profits under section 115JB of the Act. In ITA No. 359/JP/16, the Revenue has challenged the action of ld CIT(A) in deleting the disallowance of excess depreciation claimed by the assessee company amounting to Rs. 22,71,05,598/- while working out the book profits as per provisions of section 115JB of the Act.
32. We have examined the subject issues in detail in ITA No. 362/JP/16 for AY 2004-05 relating to disallowance of prior period expenses, disallowance of depreciation on non-existing assets, disallowance of depreciation under section 32 r/w section 43(1) of the Act and applicability of MAT provisions under section 115JB of the Act. Undisputedly, both the parties agreed that the facts and circumstances of the case are identical. Our findings and directions contained in ITA No. 362/JP2016 shall apply mutatis mutandis to this appeal as well.
33. Regarding assessee's ground challenging issue of notice u/s 148 of the Act, the same was not pressed. Hence, the same is dismissed as not pressed.
34. Regarding assessee's and revenue's ground relating to depreciation adjustment while working out the book profits as per provisions of section 115JB of the Act, as we have held above in ITA No. 362/JP/16 that the provisions of section 115JB are not applicable, the subject grounds of appeal becomes academic and are dismissed being infructious.
24ITA No. 357 to 372/JP/16 Ajmer Vidyut Vitran Nigam Ltd. Vs. ACIT, Ajmer
35. With the above directions, the grounds of appeal for AY 2007-08 are disposed off.
Assessment Year 2008-09 (ITA No. 369/368/JP/16 & ITA No. 360/JP/16)
36. For AY 2008-09, there are two appeals filed by the assessee. In ITA No. 369/JP/2016, the assessee has challenged the order of ld CIT(A) dated 20.01.2016 passed pursuant to the assessment order u/s 143(3) of the Act and has taken grounds of appeal relating to disallowance of depreciation on non-existing assets, disallowance of depreciation under section 32 r/w section 43(1) of the Act and applicability of MAT provisions under section 115JB of the Act. In ITA No. 368/JP/2016, the assessee has challenged the order of ld CIT(A) dated 20.01.2016 passed pursuant to the rectification order u/s 154 of the Act and has taken grounds of appeal challenging action of AO invoking provisions of section 154 on issues which are not mistake apparent from record, applicability of MAT provisions under section 115JB of the Act, disallowance of depreciation on stolen fixed assets worth Rs 1.49 Crores, on non-existence assets, on assets lying idle and excess depreciation under section 32 r/w section 43(1) of the Act. In ITA No. 360/JP/16, the Revenue has challenged the action of ld CIT(A) in deleting the disallowance of excess depreciation claimed by the assessee company amounting to Rs. 12,61,87,639/- while working out the book profits as per provisions of section 115JB of the Act.
37. We have examined the subject issues in detail in ITA No. 362/JP/16 for AY 2004-05 relating to disallowance of depreciation on non-existing assets, disallowance of excess depreciation under section 32 r/w section 43(1) of the Act and applicability of MAT provisions under section 115JB of the Act.
25ITA No. 357 to 372/JP/16 Ajmer Vidyut Vitran Nigam Ltd. Vs. ACIT, Ajmer Undisputedly, both the parties agreed that the facts and circumstances of the case are identical. Our findings and directions contained in ITA No. 362/JP2016 shall apply mutatis mutandis to this appeal as well.
38. In ITA No. 368/JP/2016, the assessee has challenged the action of the AO where he has carried out various adjustments relating to depreciation while working out the book profits for the purposes of computing the MAT liability under section 115JB of the Act and passed an order under section 154 of the Act. Similarly, Revenue in its appeal in ITA No. 360/JP/16 has raised ground relating to depreciation adjustment while working out the book profits as per provisions of section 115JB of the Act. As we have held above in ITA No. 362/JP/16 that the provisions of section 115JB are not applicable to the assessee company, the subject grounds of appeal becomes academic and are dismissed being infructious.
39. With the above directions, the grounds of appeal for AY 2008-09 are disposed off.
Assessment Year 2009-10 (ITA No. 370/JP/16)
40. For AY 2009-10, the assessee has challenged the order of ld CIT(A) dated 25.01.2016 passed pursuant to the assessment order u/s 143(3) of the Act and has taken grounds of appeal relating to disallowance of depreciation on non-existing assets and disallowance of excess depreciation under section 32 r/w section 43(1) of the Act.
41. We have examined the subject issues in detail in ITA No. 362/JP/16 for AY 2004-05. Undisputedly, both the parties agreed that the facts and 26 ITA No. 357 to 372/JP/16 Ajmer Vidyut Vitran Nigam Ltd. Vs. ACIT, Ajmer circumstances of the case are identical. Our findings and directions contained in ITA No. 362/JP2016 shall apply mutatis mutandis to this appeal as well.
42. With the above directions, the grounds of appeal for AY 2009-10 are disposed off.
Assessment Year 2010-11(ITA No. 371/JP/16)
43. For AY 2010-11, the assessee has challenged the order of ld CIT(A) dated 21.01.2016 passed pursuant to the assessment order u/s 143(3) of the Act and has taken grounds of appeal relating to disallowance of prior period expenditure, depreciation on non-existing assets and disallowance of provision for doubtful debts.
44. We have examined the subject issues relating to disallowance of prior period expenditure and depreciation on non-existing assets in detail in ITA No. 362/JP/16 for AY 2004-05. Undisputedly, both the parties agreed that the facts and circumstances of the case are identical. Our findings and directions contained in ITA No. 362/JP2016 shall apply mutatis mutandis to this appeal as well.
45. Regarding disallowance of provision for doubtful debts, the AO on verification of profit/loss account observed that the assessee company has claimed provision for bad and doubtful debt of Rs 30,63,23,038. The AO stated that any provision for uncertain liability is to be added back to the book profits. He accordingly added back the subject provision while computing the total income as per normal provisions of the Act and also for the purposes of computing the book profits under section 115JB of the Act.
27ITA No. 357 to 372/JP/16 Ajmer Vidyut Vitran Nigam Ltd. Vs. ACIT, Ajmer
46. Being aggrieved, the assessee carried the matter in appeal before the ld CIT(A) who has confirmed the said disallowance. The relevant findings of ld CIT(A) are contained at para 6.3 of his order which is reproduced as under:-
"6.3 I have gone through the assessment order, statement of facts, grounds of appeal and written submission carefully. The provision for doubtful debt is not a deduction admissible in view of the specific provision of clause (vii) of sub-section 1 of section 36. Under no other provisions of the Act, unascertained liability can be allowed as deduction for the purpose of computing business income. Here it would be pertinent to mention that in the A.Y. 2011-12, the assessee itself has treated the provision for doubtful debt as inadmissible deduction and added back to the profit as per P&L accounts for purpose of computing income under the head 'profit and gains from business and profession'. Accordingly, the disallowance made by the AO is hereby confirmed. Hence, this ground of appeal is dismissed".
47. During the course of hearing, the ld AR submitted that this sum has been debited as bad & doubtful provision for dues from consumer. Actually it is write off of outstanding of permanent disconnected consumer. However as per accounting norms of Electricity companies it is not directly debited to customers account for future recovery and thus the term provision is being used whereas it is actually "write off" and the year of realization of the same is considered as income and thus it is actually write off of bad debts. On going through schedule 25 heading 1(c) other debits of audited accounts, a sum of Rs. 12,70,67,973.00 has been shown as recovery from the customers as income against bad debits written off of Rs. 30,63,23,038/- and thus a net write off of Rs. 17,92,55,065.00 (30,63,23,038-12,70,67,973). Thus this is also a regular practice of accounting procedures of such companies to present the accounts. Thus actually it is a "write off" of bad debts but as a "accounting procedure" the procedure has been adopted not to individually write off account of connection holder as a matter of recovery procedure & as 28 ITA No. 357 to 372/JP/16 Ajmer Vidyut Vitran Nigam Ltd. Vs. ACIT, Ajmer & when the recovery made in succeeding years; it has been shown as "income".
Further as decided in case of CIT V/s Hotel Ambassador (2002) 253 ITR 430 (Kerala) that writing off of bad debts, without charging the same in the profit and loss account, is not a writ-off at all, because assessment is made based on the audited accounts and the profit and loss account/balance sheet filed along with the returns. It is not enough if the assessee Write off the debut in some of the books maintained by it (like personal account of debtors), which do not form part of the audited accounts including the profit and loss account based on which assessment is made.
Accounts of debtors need not be squared-up-it is not necessary that the assessee must also post corresponding entries in the ledger account of the concerned parties and should close those accounts-Vithaldas H. Dhanjibhai Bardanwala V. CIT(1981) 130ITR 95(Guj.) Entries in profit and loss account and debt reserve account will suffice-it the assessee has posted entries in the profit and loss account and the corresponding entries are posted in the bad debut reserve account, it would be sufficient compliance with the provisions of the statutory requirement for writing off as irrecoverable the concerned debut in the books of the assessee- CIT V. GIC of India (No.2)(2002) 254 ITR 204 (Bom/(2001)114 Taxman 13 (Bom.) The Ld. CIT(A) while rejecting assessee's claim has stated the provision for doubtful debut is not a deduction admissible in view of the specific provision of clause (vii) of sub-section 1 of section 36. Under no other provisions of the act, unascertained liability can be allowed as deduction for the purpose of 29 ITA No. 357 to 372/JP/16 Ajmer Vidyut Vitran Nigam Ltd. Vs. ACIT, Ajmer computing business income. Whereas it is not terminology but the intention & act of assessee is important to justify the act of "write off".
48. We have heard the rival submissions and purused the material available on record. The assessee company has contended that it is not a provision but an actual write off. It was submitted that as per accounting procedure/guidelines prescribed for the electricity companies, it is not directly debited to the customer account for the purposes of determining the amount to be recovered in future. It was further submitted that as and when the amount is realised in future, the same will be offered to tax. There is however nothing on record to demonstrate what accounting treatment, the assessee company has done in its books of accounts under the double entry accounting system, if the amounts in individual accounts of the customers are not written off. Unless and until, the accounting treatment in the books of accounts is clear and through which it can be demonstrated that the assessee company has actually write off the bad debts in its books of accounts, merely contending that the intention is to write off the bad debts would not be sufficient enough to claim a deduction under the provisions of the Act. The provisions of section 36(1)(vii) read with explanation 1 are clearly attracted and the assessee has not able to demonstrate how the said provisions are not applicable in the instant case. Further, ld CIT(A) has given a finding that in AY 2011-12, the assessee company itself has added back the provision for doubtful debts for the purposes of computing the income under the normal provisions of the Act. The rule of consistency therefore equally applies to the assessee company. In the entirety of facts and circumstances of the case, we are of the view that the AO has rightly disallowed the provision for doubtful debts and which has rightly been confirmed by the ld CIT(A). In the result, the ground of the assessee is dismissed.
30ITA No. 357 to 372/JP/16 Ajmer Vidyut Vitran Nigam Ltd. Vs. ACIT, Ajmer
49. With the above directions, the grounds of appeal for AY 2010-11 are disposed off.
Assessment Year 2011-12 (ITA No. 372/JP/16)
50. For AY 2011-12, the assessee company has challenged the order of ld CIT(A) dated 25.01.2016 passed pursuant to the assessment order u/s 143(3) of the Act and has taken grounds of appeal relating to disallowance of prior period expenditure and depreciation on non-existing assets.
51. We have examined the subject issues relating to disallowance of prior period expenditure and depreciation on non-existing assets in detail in ITA No. 362/JP/16 for AY 2004-05. Undisputedly, both the parties agreed that the facts and circumstances of the case are identical. Our findings and directions contained in ITA No. 362/JP2016 shall apply mutatis mutandis to this appeal as well.
52. With the above directions, the grounds of appeal for AY 2011-12 are disposed off.
Order pronounced in the open court on 28/08/2017.
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(Kul Bharat) (Vikram Singh Yadav)
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Jaipur
Dated:- 28/08/2017
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vkns'k dh izfrfyfi vxzsf"kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- M/s Ajmer Vidyut Vitran Nigam Ltd., Vidyut Bhawan, Panchsheel Nagar, Makarwali Road, Ajmer.31
ITA No. 357 to 372/JP/16 Ajmer Vidyut Vitran Nigam Ltd. Vs. ACIT, Ajmer
2. izR;FkhZ@The Respondent- ACIT/ DCIT, Circle-2, Ajmer
3. vk;dj vk;qDr@CIT
4. vk;dj vk;qDr¼vihy½@The CIT(A)
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT,
6. xkMZ QkbZy@Guard File (ITA No. 357 to 372 /JP/2016) vkns'kkuqlkj@ By order, lgk;d iathdkj@ Assistant Registrar.
32