RAJASTHAN RAJYA VIDYUT UTPADAN NIGAM LTD., Jaipur V. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-6, Jaipur

ITA 111/JPR/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6869 (ITAT-JAIPUR)
• Duration Of Justice: 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 31-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BK GUPTA
• Keywords: Capital asset; Business income; Depreciation; Cost of acquisition; Wrong claim; Set aside
• Section: 143(3); 32; 147; 148

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENC HE, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRA M SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 111/JP/2019 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR :2011-12 M/S RAJASTHAN RAJYA VIDYUT UTPADAN NIGAM LTD., VIDYUT BHAWAN, JAN PATH, JYOTI NAGAR, JAIPUR CUKE VS. DCIT, CIRCLE-06, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AABCR7436B VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI P. C. PARWAL (CA) JKTLO DH VKSJ LS @ REVENUE BY : SHRI B. K. GUPTA LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 11/07/2019 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 29/07/2019 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A), AJMER DATED 22.11.2018 WHEREIN THE ASSESSEE HAS TAK EN THE FOLLOWING GROUNDS OF APPEAL:- 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN UPHOLDING THE VALIDITY OF THE ORDER PASSED BY AO U/S 147 OF THE I T ACT, 1961. 2. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE OF DEPRECIATION OF RS. 9.31 CORES CLAI MED U/S 32 OF IT ACT, 1961. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS AN UNDERTAKING OF THE GOVERNMENT OF RAJASTHAN AND IS E NGAGED IN GENERATION OF ELECTRICITY. IT FILED ITS RETURN OF INCOME DECLARIN G NIL INCOME ON 27.09.2011 ITA NO. 111/JP/2019 M/S RAJ ASTHAN RAJYA VIDYUT UTPADAN NIGAM LTD., JAIPUR VS . DCIT, JAIPUR 2 WHICH WAS SUBSEQUENTLY REVISED TO LOSS OF RS.2,01,4 0,12,104/-. THE ASSESSMENT U/S 143(3) WAS COMPLETED ON 19.02.2014 AT THE DECLA RED LOSS. THE AO ISSUED NOTICE U/S 148 ON 29.03.2017 BY RECORDING THE FOLLO WING REASONS: THE ASSESSEE FILED ITS RETURN OF INCOME FOR AY 201 1-12 ON 27.09.2011 DECLARING NIL INCOME, THEREAFTER THE ASSESSEE REVIS ED ITS RETURN OF INCOME DECLARING LOSS OF RS2,01,40,12,104/-, WHICH WAS ASS ESSED U/S 143(3) AT THE SAME INCOME VIDE ORDER DATED 19.02.2014. AS PER THE PROVISIONS U/S 32 OF THE IT ACT, 1961, D EPRECIATION ON AN ASSET IS ALLOWED ONLY WHEN THE ASSET IS OWNED WHOLLY & PARTL Y, BY THE ASSESSEE AND USED FOR THE PURPOSE OF THE BUSINESS AND PROFESSION . ON GOING THROUGH THE AUDIT REPORT SUBMITTED BY THE ASSESSEE FOR THE RELEVANT YEAR, IT IS NOTICED THAT THE ASSESSEE COMPANY DID N OT USE THE FIXED ASSETS AMOUNTING TO RS.62.04 CRORE, FOR THE PURPOSE OF BUS INESS AS THE ASSETS WERE NOT PHYSICALLY AVAILABLE WITH THE COMPANY, HOWEVER, CLAIMED DEPRECIATION ON THE SAID ASSETS AND WRONGLY ALLOWED. HENCE, THE INCOME OF RS.9,31,00,000/- (I.E., 15% OF 62.04 CRORE) HAS ESCAPED FROM ASSESSMENT. IN VIEW OF THE ABOVE FACTS, I HAVE THE REASONS TO B ELIEVE THAT INCOME TO THE TUNE OF RS.9,31,00,000/- HAS ESCAPED ASSESSMENT WIT HIN THE MEANING OF PROVISIONS OF SECTION 147 OF THE IT ACT, 1961 FOR T HE A.Y. 2011-12. THE ESCAPEMENT WAS ON ACCOUNT OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ALL MATERIAL FACTS. 3. AGAINST THE NOTICE U/S 148, RETURN WAS FILED BY THE ASSESSEE ON 21.04.2017 DECLARING LOSS OF RS.2,01,40,12,104/-. T HEREAFTER, IT FILED OBJECTION ITA NO. 111/JP/2019 M/S RAJ ASTHAN RAJYA VIDYUT UTPADAN NIGAM LTD., JAIPUR VS . DCIT, JAIPUR 3 TO THE NOTICE VIDE LETTER DATED 24.06.2017. THE AO, HOWEVER, REJECTED THE SAME VIDE LETTER DATED 12.07.2017. THEREAFTER, THE AO IS SUED SHOW CAUSE NOTICE DATED 30.11.2017 REQUIRING THE ASSESSEE TO EXPLAIN THE AS TO WHY THE DEPRECIATION ON UNAVAILABLE ASSETS SHOULD BE ALLOWE D. THE ASSESSEE REPLIED VIDE LETTER DATED 22.12.2017 (REPRODUCED AT PAGES 2 & 3 OF THE ASSESSMENT ORDER). 4. THE AO HOWEVER REJECTED THE CONTENTION OF THE AS SESSEE FOR THE FOLLOWING REASONS: I) COMMENTS AT ITEM NO. 6 OF ANNEXURE II OF AUDITOR S REPORT AND ITEM NO. 39 OF NOTES TO THE ACCOUNTS. II) DEPRECIATION IS ALLOWED IF ASSETS WERE USED BUT THE SE ASSETS WERE NOT USED FOR THE PURPOSE OF BUSINESS OR PROFESSION DURI NG ANY PREVIOUS YEAR. III) FROM COMMENT 6(B) OF ANNEXURE-II OF AUDIT REPO R IT CAN BE NOTED THAT THE DEPRECIATION HAS BEEN COMPUTED ON BLOCK OF ASSE TS. THIS MEANS THAT INDIVIDUAL ASSETS WISE WRITTEN DOWN VALUE IS NOT AV AILABLE WITH THE ASSESSEE. THUS, ASSESSEE ITSELF HAS CLAIMED DEPRECIATION ON B LOCK VALUE INSTEAD OF INDIVIDUAL ASSETS WISE WRITTEN DOWN VALUE AS PROVID ED IN THE COMPANIES ACT. IV) IT IS CRYSTAL CLEAR THAT THE ASSESSEE NEVER OWN ED THESE ASSETS SINCE THESE ASSETS WERE NOT AVAILABLE SINCE THEIR TRANSFE R. THERE IS NO EVIDENCE AVAILABLE WITH THE COMPANY REGARDING THE OWNERSHIP OF THESE ASSETS. FROM THE REPLY IT CAN BE NOTED THAT THE ALLOCATION OF AS SETS BETWEEN FIVE COMPANIES ON DEMERGER OF RAJASTHAN STATE ELECTRICIT Y BOARD IS PENDING DUE TO RECONCILIATION. THEREFORE, EVEN UP TO THE DATE O F REPLY IT IS NOT CERTAIN THAT THE ASSETS BELONGED TO THE ASSESSEE OR NOT. V) THIS FACT IS ALSO SUPPORTED BY THE COMMENTS OF THE CA THAT THE VALUE OF THESE ASSETS WAS INCLUDED IN THE OPENING WRITTEN DO WN VALUE AND THE ASSETS ARE NOT IDENTIFIED. THUS, PROVISION OF RS.62.04 CRO RES HAS ALREADY BEEN ITA NO. 111/JP/2019 M/S RAJ ASTHAN RAJYA VIDYUT UTPADAN NIGAM LTD., JAIPUR VS . DCIT, JAIPUR 4 MADE IN THE BOOKS IN THE YEAR 2008-09. THE FINAL AD JUSTMENT IS IN PROCESS. THEREFORE, THESE ASSETS NEVER FORMED PART OF THE BL OCK OF ASSETS. VI) THE ASSETS NEVER FORMED PART OF THE BLOCK OF AS SETS AND ONLY THE OPENING WRITTEN DOWN VALUE WAS OVERSTATED WHICH IS ALREADY PROVIDED FOR AND THE FINAL ADJUSTMENT IS IN PROCESS. THEREFORE, THE ONLY ACTION REQUIRED TO BE TAKEN IS THAT THE OPENING WRITTEN DOWN VALUE SHOULD BE CORRECTLY ADJUSTED AND DEPRECIATION SHOULD BE CHARGED ON THE SAME. IN LIGHT OF THE ABOVE OBSERVATIONS, AO HELD THAT TH E DEPRECIATION ON THESE ASSETS WAS NOT ALLOWABLE AS THE ASSETS WERE NOT USE D FOR THE PURPOSE OF BUSINESS SINCE THEY WERE NOT PHYSICALLY AVAILABLE W ITH THE COMPANY. ACCORDINGLY, HE DISALLOWED THE CLAIM OF DEPRECIATIO N ON THE ABOVE ASSETS OF RS.9,31,00,000/- (I.E., 15% OF RS.62.04 CRORES). 5. ON APPEAL, THE LD. CIT(A) AT PAGE 3, PARA 4.3 OF HIS ORDER, HELD THAT THE ASSESSEE WAS NOT IN A POSITION TO SHOW THE ASSETS I N RESPECT OF WHICH DEPRECIATION WAS CLAIMED. THUS, THE AO HAS RIGHTLY DISALLOWED THE DEPRECIATION ATTRIBUTABLE TO SUCH ASSETS. HE FURTHER HELD THAT W HEN THE ASSESSEE IS NOT ABLE TO LOCATE THE ASSETS THEN THE QUESTION OF SUCH ASSE TS BEING USED FOR BUSINESS DOES NOT ARISE. THUS, DEPRECIATION U/S 32 CANNOT BE ALLOWED UNLESS THE ASSESSEE SHOWS THE ASSETS ON WHICH DEPRECIATION IS BEING CLAIMED FOR BUSINESS PURPOSE. ACCORDINGLY, HE CONFIRMED THE DISALLOWANCE OF DEPRECIATION OF RS.9,31,00,000/-. AGAINST THE SAID FINDINGS, THE AS SESSEE IS NOW IN APPEAL BEFORE US. 6. DURING THE COURSE OF HEARING, THE LD. AR SUBMITT ED THAT THE ERSTWHILE RAJASTHAN STATE ELECTRICITY BOARD (RSEB) HAS BEEN D EMERGED INTO FIVE COMPANIES NAMELY, RAJASTHAN RAJYA VIDYUT PRASARAN N IGAM LIMITED, RAJASTHAN ITA NO. 111/JP/2019 M/S RAJ ASTHAN RAJYA VIDYUT UTPADAN NIGAM LTD., JAIPUR VS . DCIT, JAIPUR 5 RAJYA VIDYUT UTPADAN NIGAM LIMITED, JAIPUR VIDYUT V ITRAN NIGAM LIMITED, AJMER VIDYUT VITRAN NIGAM LIMITED & JODHPUR VIDYUT VITRAN NIGAM LIMITED. ON DEMERGER OF RSEB, ALL ITS ASSETS HAVE BEEN ALLOCATE D AMONGST THE FIVE COMPANIES AS PER FINANCIAL RESTRUCTURE PLAN (FRP). FINAL RECONCILIATION OF ASSETS TRANSFERRED AS PER FRP AND ITS LOCATION IS STILL PE NDING. ACCORDINGLY, A NOTE IS GIVEN TO CLARIFY THE POSITION. HOWEVER, IT HAS NO I MPACT ON COMPUTATION OF TAXABLE INCOME. WHATEVER DEPRECIATION DEBITED IN PR OFIT & LOSS ACCOUNT HAS BEEN DISALLOWED IN COMPUTATION OF INCOME. FOR THE P URPOSE OF CALCULATION OF ALLOWABLE DEPRECIATION U/S 32 OF THE ACT, WRITTEN D OWN VALUE OF BLOCK OF ASSETS AS PER IT ACT DEPRECIATION CHART OF ERSTWHILE RSEB HAS BEEN BIFURCATED BETWEEN THE FIVE COMPANIES IN PROPORTION OF GROSS BLOCK OF ASSETS HELD BY EACH OF THE COMPANIES. THUS, ALL THESE ELECTRICITY COMPANIES HA VE CLAIMED DEPRECIATION ONLY ON THE WDV ALLOCATED FROM ERSTWHILE RSEB FORMING PA RT OF BLOCK OF ASSETS. HENCE DEPRECIATION HAS BEEN CORRECTLY CLAIMED BY TH ESE COMPANIES. FURTHER IN EARLIER YEAR CLAIM OF DEPRECIATION HAS BEEN ACCEPTE D WHILE COMPLETING ASSESSMENT U/S 143(3) OF THE ACT. 7. IT WAS FURTHER SUBMITTED THAT USE OF ASSETS IS R EQUIRED TO BE CHECKED IN THE YEAR IN WHICH ASSETS FORMS PART OF BLOCK OF ASS ETS. ONCE ASSETS BECOME PART OF BLOCK OF ASSETS THEN IDENTITY OF INDIVIDUAL ASSETS IS LOST AND DEPRECIATION IS ALLOWABLE ON BLOCK OF ASSETS. ADJUSTMENT IN BLOC K OF ASSETS IS REQUIRED TO MADE ONLY IN THE CASES WHERE THERE IS ADDITION OR R EDUCTION BY THE MONEYS PAYABLE IN RESPECT OF ANY ASSETS FALLING WITHIN TH AT BLOCK IS SOLD OR DISCARDED OR DEMOLISHED OR IN CASE OF SLUMP SALE. BESIDES THIS N O ADJUSTMENT ON ACCOUNT OF NON-AVAILABILITY OF ASSETS OR OTHER REASON IS PERMI TTED IN BLOCK OF ASSETS AS MENTIONED IN SECTION 43(6)(C) OF THE ACT. HENCE, TH E ASSESSEE HAS CORRECTLY CLAIMED THE DEPRECIATION. ITA NO. 111/JP/2019 M/S RAJ ASTHAN RAJYA VIDYUT UTPADAN NIGAM LTD., JAIPUR VS . DCIT, JAIPUR 6 8. IT WAS FURTHER SUBMITTED THAT ISSUE RELATING TO DEMERGER HAS BEEN CLARIFIED IN EXPLANATION 2B TO SECTION 43(6) OF THE ACT WHICH SPECIFICALLY PROVIDES THAT WHERE IN ANY PREVIOUS YEAR ANY ASSET S FORMING PART OF BLOCK OF ASSETS IS TRANSFERRED BY DEMERGED COMPANY TO THE RE SULTING COMPANY, THEN, NOTWITHSTANDING ANYTHING CONTAINED IN CLAUSE (1), T HE WRITTEN DOWN VALUE OF THE BLOCK OF ASSETS IN THE CASE OF THE RESULTING COMPAN Y SHALL BE THE WRITTEN DOWN VALUE OF THE TRANSFERRED ASSETS OF THE DEMERGED COM PANY IMMEDIATELY BEFORE THE DEMERGER. IN THE PRESENT CASE, WRITTEN DOWN VAL UE OF RSEB HAS BEEN ALLOCATED AMONGST THE FIVE RESULTANT COMPANIES, HEN CE THERE IS NO CASE THAT ASSESSEE HAS CLAIMED ANY DEPRECIATION ON THE ASSETS WHICH HAS NOT BEEN PUT TO USE OR NOT IN THE POSSESSION OF ASSESSEE. 9. IT WAS FURTHER SUBMITTED THAT FROM THE ABOVE IT CAN BE NOTED THAT ASSESSEE HAS DISALLOWED THE DEPRECIATION DEBITED IN THE PROFIT & LOSS ACCOUNT IN THE COMPUTATION OF INCOME (IN RESPECT OF WHICH AUDI T QUALIFICATION HAS BEEN MENTIONED IN THE AUDIT REPORT) AND CLAIMED DEPRECIA TION IN ACCORDANCE OF PROVISION OF SECTION 32 ON BLOCK OF ASSETS CONCEPT BASIS. THUS, ASSESSEE COMPANY HAS CORRECTLY CLAIMED DEPRECIATION U/S 32 O F THE ACT. 10. IT WAS FURTHER SUBMITTED THAT SIMILAR MATTER A ROSE BEFORE THE HONBLE ITAT, JAIPUR BENCH IN CASE OF M/S AJMER VIDYUT VITR AN NIGAM LIMITED VS. ACIT WHO VIDE ORDER DATED 31.05.2019 (ITA NO. 283, 284 & 390/JP/2009) AFTER CONSIDERING THE FACTS SET ASIDE THE ORDER OF THE LO WER AUTHORITIES AND ALLOWED THE CLAIM OF ASSESSEE. 11. THE LD DR IS HEARD WHO HAS VEHEMENTLY ARGUED TH E MATTER AND RELIED ON THE ORDER OF THE LOWER AUTHORITIES. ITA NO. 111/JP/2019 M/S RAJ ASTHAN RAJYA VIDYUT UTPADAN NIGAM LTD., JAIPUR VS . DCIT, JAIPUR 7 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PURSUE D THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THIS BENCH IN CASE OF M/S AJMER VIDYUT VITRAN NIGAM LTD., AJMER (SUPRA), WHICH IS ONE OF THE COMPANIES FORMED AFTER UNBUNDLING OF THE RSEB UNDER IDENTICAL SET OF FACTS, HAS DECIDED THE MATTER IN FAVOUR OF THE ASSESSEE COMPANY AND OUR FINDINGS THEREON CONTAINED IN PARA 7 SHALL APPLY EQUALLY IN THE INSTANT CASE AND WHICH READS AS UNDE R: 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS THE RELEVANT MATERIAL ON RECORD. THE LIST OF ASSETS AND LIABILIT IES VESTED TO THE ASSESSEE BY VIRTUE OF THE NOTIFICATION DATED 18.01.2002 IS G IVEN IN SCHEDULE -D PART II OF THE NOTIFICATION AS UNDER:- ITA NO. 111/JP/2019 M/S RAJ ASTHAN RAJYA VIDYUT UTPADAN NIGAM LTD., JAIPUR VS . DCIT, JAIPUR 8 THEREFORE, SO FAR AS THE FIXED ASSETS VESTED TO THE ASSESSEE IN THE PROCESS OF CONVERTING THE RAJASTHAN STATE ELECTRICI TY BOARD INTO 5 DISTRIBUTION COMPANIES AND DIVIDING THE ASSETS AND LIABILITIES AMONG THESE 5 DISTRIBUTION COMPANIES IS CONCERNED THE SAME IS A MATTER OF RECORD. THE ASSESSING OFFICER HAS DISALLOWED THE DEPRECIATI ON ON THE FIXED ASSETS ITA NO. 111/JP/2019 M/S RAJ ASTHAN RAJYA VIDYUT UTPADAN NIGAM LTD., JAIPUR VS . DCIT, JAIPUR 9 OF RS. 115.21 CRORES ON THE GROUND OF NOT PHYSICALL Y VERIFIABLE. WE FIND THAT THE WRITTEN DOWN VALUE OF THESE ASSETS IS ADDE D TO THE BLOCK OF ASSETS AND CORRESPONDING SHARES WERE ISSUED TO THE GOVERNMENT THEN THE ASSET TO THE TUNE OF RS. 115.21 CRORES TRANSFER RED THROUGH FINANCIAL RESTRUCTURE PLAN (FRP) WHEREBY THE CAPITALIZATION O F INTEREST AND FINANCIAL CHARGES WERE MOUNTED ON THE FIXED ASSETS VALUE. THESE ASSETS WERE ACQUIRED BY THE ASSESSEE IN THE PROCESS OF DIV ISION AND TRANSFER OF THE ASSETS AND LIABILITIES OF THE ERSTWHILE OF RAJA STHAN STATE ELECTRICITY BOARD BETWEEN 5 DISTRIBUTION COMPANIES AND THEREFOR E, IT CANNOT BE A CASE OF MAKING BOGUS CLAIM ON NON EXISTING ASSETS B UT THE ASSETS WERE DULY TRANSFERRED BY THE GAZETTE NOTIFICATION. IT IS CLEARED FROM THE SCHEDULE-D THAT GROSS FIXED ASSETS OF RS. 1029 CROR ES WERE VESTED TO THE ASSESSEE AND THE TRANSFERRED ASSETS WERE PART OF BL OCK OF ASSETS OF THE RSEB PRIOR TO THE SAID TRANSFER AS SHOWN IN THE BAL ANCE SHEET OF THE RSEB. ONCE THE ASSETS WHICH WERE VESTED TO THE ASSE SSEE COMPANY WERE ALREADY PART OF THE BLOCK ASSETS OF THE RSEB THEN T HE DEPRECIATION ON SUCH ASSETS IN CASE OF DEMERGER OR SUCCESSION CAN B E RESTRICTED ONLY IN TERMS OF 5 TH PROVISIONS TO SECTION 32(1) OF THE ACT WHICH REA DS AS UNDER:- [ PROVIDED ALSO THAT THE AGGREGATE DEDUCTION, IN RESPECT OF DEPRECIATION OF BUILDINGS, MACHINERY, PLANT OR FURN ITURE, BEING TANGIBLE ASSETS OR KNOW-HOW, PATENTS, COPYRIGHTS, T RADEMARKS, LICENCES, FRANCHISES OR ANY OTHER BUSINESS OR COMME RCIAL RIGHTS OF SIMILAR NATURE, BEING INTANGIBLE ASSETS ALLOWABLE T O THE PREDECESSOR AND THE SUCCESSOR IN THE CASE OF SUCCESSION REFERRE D TO IN 25 [CLAUSE (XIII), CLAUSE (XIIIB) AND CLAUSE (XIV)]OF TRANSACT IONS NOT REGARDED AS TRANSFER SECTION 47 OR SECTION 170 OR TO THE AMALGAMATING ITA NO. 111/JP/2019 M/S RAJ ASTHAN RAJYA VIDYUT UTPADAN NIGAM LTD., JAIPUR VS . DCIT, JAIPUR 10 COMPANY AND THE AMALGAMATED COMPANY IN THE CASE OF AMALGAMATION, OR TO THE DEMERGED COMPANY AND THE RE SULTING COMPANY IN THE CASE OF DEMERGER, AS THE CASE MAY BE , SHALL NOT EXCEED IN ANY PREVIOUS YEAR THE DEDUCTION CALCULATE D AT THE PRESCRIBED RATES AS IF THE SUCCESSION OR THE AMALGA MATION OR THE DEMERGER, AS THE CASE MAY BE, HAD NOT TAKEN PLACE, AND SUCH DEDUCTION SHALL BE APPORTIONED BETWEEN THE PREDECES SOR AND THE SUCCESSOR, OR THE AMALGAMATING COMPANY AND THE AMAL GAMATED COMPANY, OR THE DEMERGED COMPANY AND THE RESULTING COMPANY, AS THE CASE MAY BE, IN THE RATIO OF THE NUMBER OF D AYS FOR WHICH THE ASSETS WERE USED BY THEM. THEREFORE, THE ONLY RIDER FOR ALLOWING THE AGGREGAT E DEDUCTION IN RESPECT OF DEPRECIATION ON THE ASSETS OF THE SUCCESSOR OR D EMERGER COMPANY RESULTING IN THE CASE OF DEMERGER IS THAT IT SHALL NOT EXCEED IN ANY PREVIOUS YEAR THE DEDUCTION CALCULATED AT THE PRESC RIBED RATE AS IF THE SUCCESSION OR THE DEMERGER ETC. AS THE CASE MAY BE, HAD NOT TAKEN PLACED. IN OTHER WORDS THE CLAIM OF DEPRECIATION IN AGGREGATE SHALL NOT EXCEED THE ELIGIBLE CLAIM IN THE HANDS OF THE ERSTW HILE COMPANY I.E. RAJASTHAN STATE ELECTRICITY BOARD. IT IS PERTINENT TO NOTE THAT THE HONBLE JURISDICTION HIGH COURT IN CASE OF CIT VS. RAJASTHAN STATE ELECTRICITY BOARD 160 TAXMAN 19 HAS HELD THAT RSEB IS A GOVERNMENT CO MPANY AND IS SUBJECT TO RIGOROUS OF INCOME TAX ACT THEREF ORE, THE ERSTWHILE RSEB WAS ENTITY SUBJECT TO INCOME TAX ACT. ONCE THE FIXED ASSETS VESTED WITH THE ASSESSEES WERE PART OF THE BLOCK OF ASSETS OF THE ERSTWHILE RSEB THEN THE DEPRECIATION ON SUCH ASSETS CANNOT BE DISA LLOWED ON THE GROUND THAT SOME OF THE ASSETS WERE NOT PHYSICAL VERIFIABL E. THE ASSESSEE RECEIVED THESE ASSETS UNDER THE PROCESS OF DISTRIBU TION OF THE ASSETS OF THE RSEB VIDE NOTIFICATION DATED 18.01.2002 AND THE REFORE, THE ASSESSEE ITA NO. 111/JP/2019 M/S RAJ ASTHAN RAJYA VIDYUT UTPADAN NIGAM LTD., JAIPUR VS . DCIT, JAIPUR 11 CLAIMED DEPRECIATION ON THE ASSETS WHICH WERE VESTE D TO THE ASSESSEE AS PER THE WRITTEN DOWN VALUE OF BLOCK OF ASSETS SHOWN IN THE BALANCE SHEET OF THE RSEB. EVEN OTHERWISE, THE COST OF THESE ASSE TS AS PER THE WRITTEN DOWN VALUE AS EXISTED IN THE BALANCE SHEET OF THE R SEB WAS PAID BY THE ASSESSEE BY ISSUING THE SHARES TO THE STATE GOVERNM ENT AND HENCE THIS CLAIM OF DEPRECIATION IS BASED ON THE WRITTEN DOWN VALUE AS EXISTED IN THE RECORD OF THE RSEB AS WELL AS IN THE BOOKS OF T HE ASSESSEE AND IN CASE IF SOME OF THE ASSETS ARE NOT PHYSICALLY VERIF IABLE OR NOT FOUND TO BE PHYSICALLY EXISTED THE OVERALL COST OF FIXED ASSET REMAINS THE SAME. 7.1 IT IS AN ADMITTED CASE THAT THE ASSESSEE COMPAN Y WAS CONSTITUTED UNDER THE ACT OF RAJASTHAN AND UNDER THE STATUTORY TRANSFER SCHEME, THEREFORE, IN VIEW OF SECTION 43 OF THE ACT, TRANSF ER OF ASSETS HAD BEEN FALL WITHIN THE REALM OF TRANSFER AS ENVISAGED UNDE R 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 TRANSFER OR COMPANY MEANING THEREBY THE BLOCK OF ASSETS, WHICH WAS TRANSFERRED BY THE RAJASTHAN ELECTRICITY BOARD WITH THE ORIGINAL COST OF ACQUISI TION, SHALL BE DETERMINED THE WRITTEN DOWN VALUE FOR THE ASSESSEE COMPANY. TH E HONBLE DELHI HIGH COURT IN THE CASE OF DALMIA CERAMIC INDUSTRIES LTD. 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 INDIC ATED IN SECTION 43(1), EXPLANATION-6, THUS THE ACTUAL COST OF TRANSFEREE C OMPANY WILL BE WRITTEN DOWN VALUE OF THE HOLDING COMPANY. 7.2 SINCE THE ORIGINAL COST OF ACQUISITION OF THE T RANSFEROR COMPANY, IS DETERMINED, SIMILARLY, THE WRITTEN DOWN VALUE OF TH E TRANSFEROR COMPANY IS ALSO AVAILABLE WITH THE ASSESSING OFFICER, THERE FORE, THE LD ASSESSING OFFICER WAS ONLY REQUIRED TO ALLOW THE APPLICATION DEPRECIATION ON THE WRITTEN DOWN VALUE OF THE ASSETS ACQUIRED BY THE AS SESSEE FROM THE ITA NO. 111/JP/2019 M/S RAJ ASTHAN RAJYA VIDYUT UTPADAN NIGAM LTD., JAIPUR VS . DCIT, JAIPUR 12 TRANSFEROR COMPANY (RACB). THE RELEVANT PORTION OF THE JUDGMENT IN CASE OF DALMIA CERAMIC INDUSTRIES LTD. VS. CIT(SUPRA) IS REPRODUCED HEREINBELOW: 8. THE ONLY ISSUE BEFORE THIS COURT IS WHETHER TH E WRITTEN DOWN VALUE OF THE HOLDING COMPANY IS TO BE TAKEN AS ACTU AL COST OF THE ASSESSEE OR THE AMOUNT PAID BY THE ASSESSEE TO THE HOLDING COMPANY? CHAPTER IV OF THE ACT REFERS TO CO MPUTATION 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 A SSETS TO THE ASSESSEE, REDUCED BY THAT PORTION OF THE COST THERE OF, IF ANY, AS HAS BEEN MET DIRECTLY OR INDIRECTLY BY ANY OTHER PERSON OR AUTHORITY : PROVIDED THAT WHERE THE ACTUAL COST OF AN ASSET, B EING A MOTOR-CAR WHICH IS ACQUIRED BY THE ASSESSEE AFTER T HE 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 IGNORE D, AND THE ACTUAL COST THEREOF SHALL BE TAKEN TO BE TWENTY-FIV E THOUSAND RUPEES.' 9. WHAT IS WRITTEN DOWN VALUE IS DEFINED IN CLAUSE (6) OF SECTION 43 WHICH READS AS UNDER : ' ' WRITTEN-DOWN VALUE' MEANS ITA NO. 111/JP/2019 M/S RAJ ASTHAN RAJYA VIDYUT UTPADAN NIGAM LTD., JAIPUR VS . DCIT, JAIPUR 13 (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 PREV IOUS YEAR, THE ACTUAL COST TO THE ASSESSEE LESS ALL DEPRECIATI ON 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 ORDERS ISSUED WHEN THE INDIAN I NCOME- 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 T HE ASSESSMENT YEAR 1975-76. SUB- CLAUSE (B) CLEARLY IN DICATES THAT THE WRITTEN DOWN VALUE MEANS THE ACTUAL COST T O THE ASSESSEE LESS ALL DEPRECIATION ACTUALLY ALLOWED TO HIM UNDER THE ACT. IN THE INSTANT CASE EXPLANATION 2 TO CLAUS E (6) OF SECTION 43 IS RELEVANT AND IS REPRODUCED HEREUNDER : ' EXPLANATION 2.WHEN ANY CAPITAL ASSET IS TRANSFE RRED BY A HOLD ING COMPANY TO ITS SUBSIDIARY COMPANY OR BY A SUBSIDIARY COMPANY TO ITS HOLDING COMPANY, THEN, IF THE CONDIT IONS OF CLAUSE (IV), OR, AS THE CASE MAY BE, OF CLAUSE (V) OF SECTION 47, ARE SATISFIED, THE WRITTEN DOWN VALUE OF THE TRANSF ERRED CAPITAL ASSET TO THE TRANSFEREE-COMPANY SHALL BE TAKEN TO B E THE SAME AS IT WOULD HAVE BEEN IF THE TRANSFEROR-COM PA NY 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. T HIS ITA NO. 111/JP/2019 M/S RAJ ASTHAN RAJYA VIDYUT UTPADAN NIGAM LTD., JAIPUR VS . DCIT, JAIPUR 14 ASPECT IS REQUIRED TO BE BORNE IN MIND WHILE CONSID ERING 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 TRANSFE RRED 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, O F CLAUSE (V) OF SECTION 47 ARE SATISFIED, THE ACTUAL COST OF THE TRANSFERRED CAPITAL ASSET TO THE TRANSFEREE-COMPANY SHALL BE TA KEN TO BE THE SAME AS IT WOULD HAVE BEEN IF THE TRANSFEROR-CO MPANY HAD CONTINUED TO HOLD THE CAPITAL ASSET FOR THE PURPOSE S 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 SEC TION 43(1), EXPLANATION 6. THUS, THE ACTUAL COST TO THE TRANSFE REE- COMPANY WILL BE THE WDV OF THE HOLDING COMPANY (TRA NSFEROR- COMPANY). 13. THE ASSESSEE BASED ITS SUBMISSION RELYING ON M AHARANA 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 (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 SAHARANPU R ELECTRIC SUPPLY CO. LTD. V. CIT [1992] 194 ITR 294 . THE APEX COURT CONSIDERED THE DECISIONS IN MAHARANA MILLS P. LTD. V. ITO ITA NO. 111/JP/2019 M/S RAJ ASTHAN RAJYA VIDYUT UTPADAN NIGAM LTD., JAIPUR VS . DCIT, JAIPUR 15 [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 PROVISION S IN DETAIL POINTED OUT AT PAGE 315 AS UNDER : ' EXPLANATION 6 OFFERS NO DIFFICULTY AS THE RELATI ONSHIP OF ' PARENT' AND ' SUBSIDIARY' BETWEEN THE COMPANIES INV OLVED IN THE TRANSFER, FOR THE PURPOSES OF THIS CLAUSE, HAS TO BE DETERMINED AS AT THE TIME OF THE TRANSFER OF THE AS SET AND WILL NOT BE A WOBBLING OR FLUCTUATING ONE AS SUGGESTED B Y 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 CONSID ERATION. 15. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THA T THE DIFFERENCE BETWEEN THE WDV AND THE PRICE RECEIVED F OR THE PROPERTY HAS BEEN TAXED IN THE HANDS OF THE HOLDING COMPANY IN THE RELEVANT ASSESSMENT YEARS AND THERE IS NO DI SPUTE 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 EV ASION OF TAX. 16. ON BEHALF OF THE ASSESSEE IT WAS CONTENDED THA T 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 TH E ASSESSING OFFICER TO EXAMINE THE CASE AND RE-DETERM INE THE ACTUAL COST. IN FACT THE APEX COURT HAS CONSIDERED THIS ASPECT ITA NO. 111/JP/2019 M/S RAJ ASTHAN RAJYA VIDYUT UTPADAN NIGAM LTD., JAIPUR VS . DCIT, JAIPUR 16 AT PAGE 306 AND POINTED OUT INSTANCES. THE APEX COU RT AT PAGE 309 (SEE [1992] 194 ITR) AS UNDER: 'IN PRINCIPLE, THEREFORE, WE ARE UNABLE TO ACCEPT T HE CONTENTION THAT THE ACTUAL COST CANNOT BE DETERMINED YEAR AFTE R YEAR ON THE FACTUAL OR LEGAL POSITION APPLICABLE FOR THE RELEVA NT PREVIOUS YEAR AND THAT THE ACTUAL COST ONCE DETERMINED CANNOT BE ALTERED EXCEPT IN THE THREE SITUATIONS OUTLINED BY COUNSEL WHERE T HE ORIGINAL FIGURE ITSELF REQUIRES A MODIFICATION.' IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE WHEN THE ASSESSEE HAS RECEIVED THESE ASSETS BEING TRANSFERRE D FROM RSEB AT WRITTEN DOWN VALUE AND THEREFORE, WHEN THE EXISTENC E OF THESE ASSETS WERE NOT IN DISPUTE AT THE HAND OF THE RSEB AS PART OF THE BALANCE SHEET OF THE BOARD THEN THE ASSETS TRANSFERRED UNDER THE STATUTORY TRANSFER SCHEME TO THE ASSESSEE AT THE WRITTEN DOWN VALUE UN DER THE BLOCK OF ASSETS WERE ELIGIBLE FOR DEPRECIATION IN THE HANDS OF THE SUCCESSOR/TRANSFEREE. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE AUTHORITY BELOW ON THIS ISSUE AND ALLOW THE CLAIM OF THE ASSE SSEE. 13. FOLLOWING OUR DECISION IN CASE OF M/S AJMER VID YUT VITRAN NIGAM LTD., AJMER (SUPRA), THE MATTER IS DECIDED IN FAVOUR OF T HE ASSESSEE COMPANY AND AGAINST THE REVENUE. IN THE RESULT, GROUND NO. 2 OF THE ASSESSEES APPEAL IS ALLOWED 14. SINCE WE HAVE DECIDED THE MATTER ON MERITS IN FAVOUR OF THE ASSESSEE COMPANY, WE DO NOT PROPOSE TO ADJUDICATE GROUND NO. 1 OF ASS ESSEES APPEAL. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ITA NO. 111/JP/2019 M/S RAJ ASTHAN RAJYA VIDYUT UTPADAN NIGAM LTD., JAIPUR VS . DCIT, JAIPUR 17 ORDER PRONOUNCED IN THE OPEN COURT ON 29/07/2019. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 29/07/2019 * GANESH KR. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S RAJASTHAN RAJYA VIDYUT UTPADAN N IGAM LTD, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- THE DCIT, CIRCLE-06, JAIPUR 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 111/JP/2019} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR