Income Tax Appellate Tribunal - Ahmedabad
Gujarat State Electricity Corporation ... vs The Dcit, Circle-1(1)(1), , Vadodara on 27 December, 2019
आयकरअपील यअ धकरण, अहमदाबाद यायपीठ 'C'- अहमदाबाद।
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD - BENCH 'C'
BEFORE SHRI PRAMOD KUMAR, HON'BLE VICE PRESIDENT
& Ms. MADHUMITA ROY, JUDICIAL MEMBER
आयकरअपीलसं.ITA Nos. 469/Ahd/2016
नधा रणवष /Asstt. Year: 2011-12
Gujarat State Electricity Vs. Commissioner of Income
Corp. Ltd. Tax,
Vidyut Bhavan, Race Course Baroda
Circle, Baroda-390007
PAN No. AAA CG6 864 F
अपीलाथ / (Appellant) तयथ /
् (Respondent)
आयकरअपीलसं.ITA Nos. 786/Ahd/2018
नधा रणवष /Asstt. Years: 2011-12
Gujarat State Electricity Vs. DCIT
Corp. Ltd. Circle-1(1)(1),
Viduyt Bhavan, Race, Course Baroda
Circle, Baroda
PAN No. AAA CG6 864 F
अपीलाथ / (Appellant) तयथ /
् (Respondent)
Assessee by : Shri J . P. Shah, AR & Shri Manish
Shah AR
Revenue by : Shri O.P. Shar ma CIT DR& L.P. J ain,
SR DR
सन
ु वाईक$तार ख/Dates of Hearing : 29/08/2019 & 20.12.2019
घोषणाक$तार ख/Date of Pronouncement: 27/12/2019
आदे श/O R D E R
PER Ms. MADHUMITA ROY- JM:
These two appeals at the instance of the assessee are directed against the
order dated 11.01.2016 passed by the Ld. Pr. CIT, Vadodara-1 under section 263
of the Income Tax Act, 1961 (hereinafter referred as to "the act") arising out of the
ITA Nos. 469/Ahd/2016 & 786/Ahd/2018(Gujarat State Electricity
Corp. Ltd. vs. CIT& DCIT) A.Y. 2011-12 2
order dated 30.01.2014 passed by the Ld. DCIT Circle -I(I), Baroda under section
143(3) of the Act for A.Y. 2011-12 and against in order dated 22.01.2018 passed
by the Commissioner of Income Tax (Appeals) - 1, Vadodara under section 143(3)
r.w.s. 263 r.w.s. 153(3) of the Income Tax Act, 1961 (hereinafter referred as to 'the
Act') arising out of the order dated 02.12.2016 passed by the DCIT, Cricle-1(1)(1),
Vadodara for Assessment Year 2011-12. Since both the appeals relate to the same
assessee these are heard analogously and are being disposed by a common order.
ITA No. 469/Ahd/2016(A.Y. 2011-12):-
2. The brief facts leading to the order impugned is this that the assessee
engaged in the business of generation of power filed its return of income
27.09.2011 declaring total income under normal provision of the Act at Rs. NIL
after setting off brought forward losses to the extent of Rs. 1,77,69,81,562/-. The
book profit under section 115JB of the Act was declared at Rs. 1,79,31,09,000/-.
The assessment was finalized under section 143(3) of the Act on 30.01.2014 upon
determining the total income at Rs. NIL under normal provision of the Act upon
setting off brought forward losses to the extent of Rs. 2,69,90,19,726/- and
unabsorbed depreciation to the extent of Rs. 17,89,61,000/-. The book profit under
section 115JB of the Act was determined at Rs. 2,51,06,60,100/-. On 09.10.2015
the assessee was served upon a notice under section 263(1) of the Act issued under
the signature of the Ld. Pr. CIT, Vadodara informing his prima facie view in
respect of the order of assessment dated 30.01.2014 for the A.Y. 2011-12 as
erroneous in so far as it was prejudicial to the interest of revenue on the following
account:-
"On verification of Note-6 of Schedule-20 to the P&L Account, an amount of Rs.
23602.54 lakh was debited on account of repairs and maintenance expenses on Plant
& Machinery, which included Rs. 3167.75 lakh on account of Provision towards Long
Term Service Contract Agreement for maintenance of 374 MW Utran Gas Based
Power Plant. This being only a provision and that, no actual expenditure was
incurred, Rs. 3167.75 lakh was required to be disallowed u/s 37 of the IT Act."
Assessee was, therefore, directed to explain as to why the assessment order dated
30.01.2014 shall not be enhanced and/or cancelled and therefore as to why the Ld.
ITA Nos. 469/Ahd/2016 & 786/Ahd/2018(Gujarat State Electricity
Corp. Ltd. vs. CIT& DCIT) A.Y. 2011-12 3
AO should not be directed to make fresh assessment in accordance with the
provision of law.
The said order was received by the assessee on 14.10.2015 and by and under
a reply dated 07.12.2015 the assessee objected to such notice issued under section
263(1) of the Act by the Ld. Pr. CIT.
3. Heard the parties and we have also perused the relevant materials available
on record. The case of the Revenue is this that the brought forward losses has been
excessively allowed to the tune of Rs. 2,54,50,03,633/-. It was further noticed that
no disallowance of Rs. 3167.75 lakh was made; no actual expense was incurred by
the assessee against the provision made towards Long-Term Service Contract
Agreement under the head repairs and maintenance. The case of the assessee is
this that the assessee company had entered into a long-term agreement with M/s.
Alstom Power O&M Ltd., Switzerland for 15 years for offshore supply relating to
Utran Power Plant. In terms of the said agreement the machine is required to be
inspected by the said company of Switzerland at specified interval of 2 to 5 years
depending upon the working hours. In respect of the same the assessee company
has to pay service charges and supply amount in two parts to the said M/s. Alstom
Power O&M Ltd., Switzerland. The total estimated expenditure of such inspection
is required to be carried out after 3 to 4 years and therefore the inspection
expenditure has been divided in three parts and actual provisions for the
expenditure has been made. The copy of the said agreement entered into by and
between the assessee and the company of Switzerland were also placed before
authorities below. The assessee claimed such liability as ascertained one and
hence allowable expenditure. Such clarification given by the assessee supported
by the cogent document thereof was not questioned by the Ld. Pr. CIT on merit but
the same was directed to be verified in the light of the provision of Sec. 37 of the
Act. We find it difficult to understand that when the Ld. Pr. CIT has not disputed
the expenditure as not payable or it is not an unascertained liability then as to how
ITA Nos. 469/Ahd/2016 & 786/Ahd/2018(Gujarat State Electricity
Corp. Ltd. vs. CIT& DCIT) A.Y. 2011-12 4
the order is erroneous in so far as it was prejudicial to the interest of revenue.
Therefore, the order directing re-assessment by the Ld. AO u/s. 263 of the Act
issued under signature of the Ld. Pr. CIT, in our considered view, cannot be set to
be justified. Hence, the order under challenge is bad so far as this issue is
concerned.
It was further observed by the Ld. PCIT that while computing the book
profit under section115JB of the Act, the amount of Rs. 34,75,000/- to be added
back and further direction to that effect to the Ld. AO has been made which has
been controverted by the assessee as under as it appears from the order passed by
the Ld. PCIT at Para 3.3.1; the relevant portion whereof is as follows:-
"3.3.1 Assessee in its submission has controverted the issue. Relevant part of
assessee's submission is reproduced as under:-
"While issuing the notice under section 263 of the I T Act, it has been indicated that
the additions of Rs. 34,75,000/- made on account of prior period expenditure to the
total income have not been made to the Book Profits computed under section 115JB of
the I T Act.
It is submitted that during the year under consideration the company had accounted
various Prior Period Income amounting to Rs. 34.75 lacs and Prior Period Expenses
amounting to Rs.1902.80 lacs and accordingly a net Prior Period Expenses of
Rs.1868.05 lacs was included in the Profit & Loss Account of the year under
consideration. While computing the total income for the purpose of filing I T Return
for the year under consideration the appellant had disallowed the Prior Period
Expenses amounting to Rs. 1868.05 lacs which is also confirmed by the learned
Assessing Officer. It is submitted that the appellant disallowed the net prior period
expenses as the prior period income was already included in the Net Profits for the
year under consideration.
While completing the assessment under section 143(3) of the I T Act, 1961 addition of
Rs.34.75 lacs have been made to the total income and now the same additions are
proposed to be made to the book profits under section 115JBoftheAct.
In this context it is well settled now that the no adjustment can be made to the book
profits computed under section 115JB of the Act on account of Prior Period
Expenditure. Reference is invited to the decision of jurisdictional Tribunal viz., ITAT,
Ahmedabad in case of ACIT vs. Gujarat State Energy Generation Limited wherein the
question before the ITAT was whether the adjustment can be made in the book profit
under section 115JB for the items which are not mentioned specifically in the
explanation to section 115JB. In this case the CIT(A) had allowed the assessee's
ITA Nos. 469/Ahd/2016 & 786/Ahd/2018(Gujarat State Electricity
Corp. Ltd. vs. CIT& DCIT) A.Y. 2011-12 5
appeal consequent to which Revenue preferred an appeal before Tribunal. After
detailed discussion the ITAT has held as under:
"With regard to controversy involved in ground nos.4,5 and 6, before the
Learned Commissioner of Income Tax(Appeals), it was contended by the ld.
Counsel for the assessee that while computing the book profit under section
115JB, as held by the Hon'ble Supreme Court in the case of Apollo Tyres
reported in 255 ITR 273, the additions made (a) on account of disallowance
u/s.14A -Rs.6,00,000/-, (b) interest on investment in bonds Rs.1,30,000/- and
(c) prior period expenses Rs.19,29,184/- are beyond the scope of Explanation
to section 115JB. Without prejudice to this, it was also contended that interest
on investment in bonds amounting to Rs. 1,30,000/- stood already included in
the book profit as computed in profit & loss a/c.
And hence could not have been computed in the book profit. After considering
both the sides, in the impugned order, the Learned Commissioner of Income
Tax(Appeals) took the view that disallowance under section 14A and addition
of Rs.1,30,000/ to the book profit cannot be made for the detailed reasons
given in para 7.2, which reads as under:
"7.2 The matter has been considered. The decision of Hon'ble Supreme Court
in the case of Apolly Tyres (supra) is quite unambiguous. Only such items
which are specifically mentioned in the Explanation to section 115JB need to
be excluded or included, as the case be, and nothing more can be brought in.
All the three items listed above do not feature in the Explanation. Otherwise,
the disallowance U/S.14A would be material in computation of the normal
process of income while the second item interest on investment in bonds stands
already included in the book profit.
As far as the prior period expenses are concerned, there is no such mention in
the explanation. The assessment order on the other hand is silent as to under
which category it is being included for the matter to be further analysed.
Therefore, as the matter stands, none of the three items can be added for
computation of book profit.
11. At the time of hearing before us, the ld. D.R. could not pointed out how the
view taken by the Learned Commissioner of Income Tax(Appeals) is not
acceptable. We are, therefore, inclined to uphold the order of the Learned
Commissioner of Income Tax(Appeals). Thus, ground nos. 4, 5 and 6 of the
Revenue's appeal are rejected."
In view of above, it can be seen be that the facts in the above case are exactly
identical to the company's case. The copy of the judgement is enclosed in Annexure-X
for immediate reference. Accordingly the above judgement of the jurisdictional
Tribunal is squarely applicable.
It may not be out of place to mention that based on the above judgement the Hon'ble
Commissioner (Appeals) has deleted the similar adjustment in our own case for the
subsequent year viz., Asst. Year 2012-13. The copy of the relevant extracts of the
ITA Nos. 469/Ahd/2016 & 786/Ahd/2018(Gujarat State Electricity
Corp. Ltd. vs. CIT& DCIT) A.Y. 2011-12 6
CIT(A)'s order passed for the Asst. Year 2012-13 is enclosed in Annexure-II for
immediate reference."
4. In fact, this issue is already been taken care of in the judgment reported in
Special Bench of ITAT at Delhi in the matter of ACIT, Circle 17(1)-vs- Vireet
Investment (P.) Ltd. in favour of the assessee and thus relying upon the same we
do not find any justification in making similar adjustment under section 115JB of
the Act and to this extent the direction upon the Ld. AO by the Ld. PCIT by and
under the order dated 11.01.2016 under section 263 of the Act is not sustainable
and thus the same is hereby quashed.
5. Hence, taking into consideration the entire aspect of the matter we do not
find any merit in directing the issues to be verified by the AO by and under order
issued by the Ld. PCIT under section 263 of the Act. The same, since, found to be
devoid of any merit hence quashed.
6. In the result, the assessee's appeal is allowed.
ITA No. 786/Ahd/2018(A.Y. 2011-12):-
7. The impugned order is the outcome of the order dated 11.01.2016 passed by
the Ld. PCIT, Vadodara under section 263 of the Act which has already been
quashed by us hereinbefore in ITA No. 469/Ahd/2016. Thus, this appeal becomes
infructous. Hence, dismissed as infructuous.
8. In the result, assessee's appeals are partly allowed.
[Order pronounced in the Court on 27.12.2019.]
Sd/- Sd/-
(PRAMOD KUMAR) (MADHUMITA ROY)
VICE PRESIDENT JUDICIAL MEMBER
Ahmedabad; Dated 27/12/2019
T ANM AY , Sr . P S T TRUE COPY
UE COPY
ITA Nos. 469/Ahd/2016 & 786/Ahd/2018(Gujarat State Electricity
Corp. Ltd. vs. CIT& DCIT) A.Y. 2011-12 7
आदे शक$ त*ल+पअ,े+षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. /यथ / The Respondent.
3. संबं धतआयकरआयु0त/ Concerned CIT
4. आयकरआयु0त(अपील) / The CIT(A)
5. +वभागीय त न ध, आयकरअपील यअ धकरण/ DR, ITAT,
6. गाड फाईल / Guard file.
आदे शानुसार/ BY ORDER
उप/सहायकपंजीकार (Dy./Asstt. Registrar) आयकरअपील यअ धकरण, अहमदाबाद / ITAT, Ahmedabad
1. Date of dictation : 18-06- 2019&26.06.2019
2. Date on which the typed draft is placed before the : 26-11-2019 Dictating Member.
3. Date on which the approved draft comes to the : 11-12-2019 Sr.P.S./P.S
4. Date on which the fair order is placed before the : -12-2019 Dictating Member for pronouncement.
5. Date on which fair order placed before Other :
Member
6. Date on which the fair order comes back to the : -12-2019 Sr.P.S./P.S.
7. Date on which the file goes to the Bench Clerk. : 02-01-2020
8. Date on which the file goes to the Head Clerk. :
9. The date on which the file goes to the Assistant :
Registrar for signature on the order.
10. Date of Despatch of the Order :