Ajmer Vidyut Vitran Nigam Limited V. Assistant Commissioner of Income Tax, Circle-2, Ajmer and Principal Commissioner of Income Tax, Ajmer

ITA/298/2016

AI Insights

The case involves multiple appeals by M/s Ajmer Vidyut Vitran Nigam Limited against the Assistant Commissioner of Income Tax and the Principal Commissioner of Income Tax, concerning the computation of depreciation and the treatment of prior period income and expenses. The core legal issues revolved around the applicability of Section 115JB of the Income Tax Act and the correct calculation of the cost of capital assets in light of subsidies and grants. The tribunal had partly allowed the assessee's appeals while dismissing the department's appeals, leading to the current appeals before the High Court. The High Court found that the tribunal had erred in its consideration of the company's governance under the Companies Act, necessitating a reevaluation of the case.

• Counselvise Citation: [2017] 140 COUNSELVISE.COM (IT) 798458 (HC-RAJASTHAN)
• Appeal Type: Others
• Pronouncement Date: 21-12-2017
• Assessment Year: misc
• Laws Referred To: Income Tax Act of 1961, Electricity (Supply) Annual Accounts Rules, 1985
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: PRATEEK KEDAWAT; PRABHANSH SHARMA; R B MATHUR
• Assessee Lawyers: GUNJAN PATHAK; ADITYA BOHRA
• Keywords: Capital asset; Companies Act; Depreciation; Electricity Act; Income tax appeal; Subsidy/Grant
• Section: 32; 115JB

Judgement Text

"HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 298 / 2016 M/s Ajmer Vidyut Vitran Nigam Limited, Vidyut Bhawan, Panchsheel Nagar, Makadwali Road, Ajmer- 305004 ----Appellant Versus Assistant Commissioner of Income Tax, Circle-2, Ajmer ----Respondent Connected With D.B. Income Tax Appeal No. 299 / 2016 M/s Ajmer Vidyut Vitran Nigam Limited, Vidyut Bhawan, Panchsheel Nagar, Makadwali Road, Ajmer-305004 ----Appellant Versus Assistant Commissioner of Income Tax, Circle-2, Ajmer ----Respondent D.B. Income Tax Appeal No. 300 / 2016 M/s Ajmer Vidyut Vitran Nigam Limited, Vidyut Bhawan, Panchsheel Nagar, Makadwali Road, Ajmer-305004 ----Appellant Versus Assistant Commissioner of Income Tax, Circle-2, Ajmer ----Respondent D.B. Income Tax Appeal No. 35 / 2017 Pr. Commissioner of Income Tax, Ajmer ----Appellant Versus M/s Ajmer Vidyut Vitran Nigam Limited, City Power House, Jaipur Road Ajmer Pan AACCA8562E ----Respondent D.B. Income Tax Appeal No. 36 / 2017 Principal Commissioner of Income Tax, Ajmer (2 of 5) [ITA-298/2016] ----Appellant Versus M/s. Ajmer Vidyut Vitran Nigam Limited, City Power House, Jaipur Road, Ajmer, PAN-AACCA 8562 E ----Respondent D.B. Income Tax Appeal No. 37 / 2017 Pr. Commissioner of Income Tax, Ajmer ----Appellant Versus M/s Ajmer Vidyut Vitran Nigam Limited City, Power House Jaipur Road Ajmer Pan -AACCA8562E ----Respondent _____________________________________________________ For Appellant(s) : Mr. Gunjan Pathak with Mr. Aditya Bohra For Respondent(s) : Mr. Prateek Kedawat with Mr. Prabhansh Sharma for Mr. R.B. Mathur _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS Judgment 21/12/2017 1. In all these appeals common question of law and facts are involved hence they are decided by this common judgment. 2. By way of these appeals, the appellant has assailed the judgment and order of the tribunal whereby tribunal has partly allowed the appeals of the assessee and dismissed the appeals of the department. 3. This court while admitting the appeals framed following substantial question of law:- (3 of 5) [ITA-298/2016] 3.1 Appeals No.298/2016, 299/2016 & 300/2016 admitted on 8.2.2017 \"Whether the ld. ITAT was justified in law in uploading the reduction of subsidy/grant from the actual cost of the Capital Asset before computation of depreciation under Section 32 of the Act of 1961 without appreciating that the Appellant is a State Government company governed by the Rajasthan State Electricity Board's rules and regulations and as per the rules framed under the Electricity (supply) Annual Accounts Rules, 1985, wherein the cost of the Capital Asset shall be calculated without considering the contribution, subsidy or grants received towards the cost of the asset is mandatory?\" 3.2 Appeal No.35/2017 admitted on 23.5.2017 \"(i) Whether in the facts and circumstances of the case the ITAT was justified in law in allowing the depreciation claimed even when the physical existence of the assets has not been proved by the assessee company and this has been acknowledged by the Tribunal in para 9.6 of its Order. (ii) Whether in the facts and circumstances of the case the ITAT was justified in law in holding that the provisions of section 115JB of the IT Act are not applicable on the assessee company being a cmpany governed under the Electricity Act and the companies Act, ignoring that section 115JB does not make any exception for any company. (iii) Whether in the facts and circumstances of the case the ITAT was justified in law in confirming the order of the CIT(A) who had deleted the addition of Rs.93266120/- ignoring that the assessee failed to submit vouchers/evidence of such expenditure. 3.3 Appeals No.36/2017 & 37/2017 admitted on 25.1.2017 (4 of 5) [ITA-298/2016] \"(i) Whether in the facts and circumstances of the case the ITAT was justified in law in allowing the depreciation claimed even when the physical existence of the assets has not been proved by the assessee company and this has been acknowledged by the Tribunal in para 9.6 of its Order. (ii) Whether in the facts and circumstances of the case the ITAT was justified in law in holding that the provisions of section 115JB of the IT Act are not applicable on the assessee company being a cmpany governed under the Electricity Act and the companies Act, ignoring that section 115JB does not make any exception for any company. 4. The facts of the case are that the appellant company is a public sector company carrying on business of Sub Transaction, Distribution and Supply of Electricity. The company was formed after re-structuring of RSEB (Rajasthan State Electricity Board) on 19.06.2000, when 5 companies came in to existence. When the company was formed, certain assets and liabilities were transferred from the parent company and income and expenditure was subject to reconciliation. The year under consideration was third year after the company's inception and certain expenses and income being in the nature of prior period were claimed as per normal accounting norms and on the belief that certain expenses though pertaining to the previous years are admissible only in the year in which it crystalized and accounted for on the basis of system of accounting regularly followed by the assessee. During the year the prior period income amounted to Rs.1,99,40,531/- and prior period expenses amounted to Rs.3,54,81,308/-. Thus, (5 of 5) [ITA-298/2016] net expenses were claimed at Rs.1,55,40,777/- (Rs.3,54,81,308 – Rs.1,99,40,531). 5. We have heard both the parties earlier but in view of the Notification which has been issued on 18.1.2002, the present appellant-company is covered by the said notification issued by the State Government. 6. In that view of the matter, the very basis of the consideration by the tribunal considering it to be under the Companies Act is required to be reconsidered. In that view of the matter, the order of the tribunal is required to be quashed and set aside as it is based on wrong presumptions. 7. Hence, we remit back the matters to the tribunal. 8. It will be open for the parties to raise all contentions before the tribunal in all the appeals. The tribunal will reconsider the matters after taking into consideration notification of 2002. The counsel for the assessee will put all the documents before the tribunal by the First week of January, 2018. 9. Both the parties will appear before the tribunal on or before 22.1.2018 and tribunal will hear the matters afresh including all the issues which are admitted by the court. 10. The appeals stand allowed as aforesaid. (VIJAY KUMAR VYAS) J. (K.S. JHAVERI)J. Brijesh 63-68. "