DCIT, Shimla V. M/s Jaiprakash Power Ventures Limited, Solan

ITA 208/CHANDI/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5075 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 31-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVI SARANGA L
• Assessee Lawyers: A K GARG
• Keywords: Business income; Depreciation
• Section: 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND SHRI DR. B.R.R. KUMAR, ACCOUNTANT MEMBER ITA NO.741/CHD/2016 ASSESSMENT YEAR: 2011-12 THE DCIT VS. M/S JAIPRAKASH POWER VENTURES CIRCLE, SHIMLA LIMITED, JUIT COMPLEX WAKNAGHAT, DIST: SOLAN PAN NO. AAACJ6297K & ITA NOS.208 TO 210/CHD/2017 ASSESSMENT YEARS: 2012-13 TO 2014-15 THE DCIT VS. M/S JAIPRAKASH POWER VENTURES CIRCLE, SHIMLA LIMITED, JUIT COMPLEX WAKNAGHAT, DIST: SOLAN PAN NO. AAACJ6297K (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI. A.K. GARG DEPARTMENT BY : SHRI. RAVI SARANGAL DATE OF HEARING : 04/07/2017 DATE OF PRONOUNCEMENT : 11/07/2017 ORDER PER BENCH THE PRESENT APPEALS HAVE BEEN PREFERRED BY THE REVE NUE AGAINST THE SEPARATE ORDER OF COMMISSIONER OF INCOME TAX(A), [H EREINAFTER REFERRED TO AS CIT(A)], SHIMLA DT. 23/03/2016 (IN ITA NO. 741/CHD/ 2016) AND 25/11/2016 (IN ITA NOS. 208, 209, 210/CHD/2017). SINCE THE GROUNDS RAISED AND ISSUES INVOLVED IN ALL THE APPEALS ARE IDENTICAL, THE SAME WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. WE SHALL BE TAKING ITA NO. 741/CHD/2016 AS THE LEAD CASE FOR DISPOSING OF ALL THE APPEALS TOGETHER. THE GROUNDS RAISED IN THIS APPEAR ARE AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE CIT(A) ERRED IN HOLDING THAT THE AO WAS NOT RIGHT IN MAKING ADJUSTMENTS FOR WORKING THE BOOK PROFIT UNDER SECTION 115JB OF THE I.T. ACT, 1961 BY ADDING THE A AD TO THE BOOK PROFIT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE CIT(A) ERRED IN HOLDING THAT THERE WAS NO DIMINUTION IN THE ASSETS ON ACCOU NT OF ADVANCE AGAINST DEPRECIATION (AAD) AND THUS, NOT REQUIRED TO ADDED BACK TO THE BOOK PROFIT UNDER CLAUSE(I) OF EXPLANATION (1) TO SECTION 1154J B OF THE INCOME TAX ACT, 1961. 2 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) ERRED IN HOLDING THAT THE PROVISION FOR LEAVE ENCASHMENT IS AN ASCERTAINED LIABILITY AND HENCE NOT TO BE INCLUDED TO BOOK PROFIT. 5. ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE , THE LD. CIT(A) HAS ALSO ERRED IN HOLDING THAT INTEREST RECEIVED FROM HPSEB ON LAT E PAYMENT IS INCOME DERIVED FROM THE BUSINESS ACTIVITY AS ENVISAGED BY SECTION 80-IA AND IS THEREFORE, THE ASSESSEE IS ENTITLED FOR CLAIMING DEDUCTION U/S 80I A OF THE INCOME TAX ACT, 1961. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A0 HAS ALSO ERRED IN HOLDING THAT REIMBURSEMENT OF TARIFF APPLI CATION FEE ARE INCOME DERIVED FROM THE ELIGIBLE BUSINESS OF GENERATION OF POWER A ND HENCE ELIGIBLE FOR CLAIMING DEDUCTION U/S 80IA OF THE INCOME TAX ACT, 1961. 7. IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A) BE SET ASIDE AND THAT OF THE AO BE RESTORED. HOWEVER FOR THE AY 2011-12, 2012-13 GROUND NO. 4 RE ADS AS UNDER: 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ALSO ERRED IN HOLDING THAT EXCESS PROVISIONS FOR BONUS AND STA FF INCENTIVE WRITTEN BACK OF RS. 18 LACS AND SUNDRY BALANCE WRITTEN OF RS. 11 LACS A RE INCOME DERIVED FROM THE ELIGIBLE BUSINESS OF GENERATION OF POWER AND HENCE ELIGIBLE FOR CLAIMING DEDUCTION U/S 80IA OF THE INCOME TAX ACT, 1961. BOTH THE LD. REPRESENTATIVES OF THE PARTIES HAVE SU BMITTED THAT THE FACTS AND THE ISSUES RAISED IN THESE APPEALS ARE SQUARELY COV ERED BY THE DECISION OF THE COORDINATE BENCH OF ITAT CHANDIGARH OF THE TRIBUNAL IN THE CASE OF ACIT VS. JAIPRAKASH POWER VENTURES LTD. IN ITA NO. 594, 595 & 1206/CHDANDI/2012 AND ANOTHER DT. 24/05/2013 HELD IN FAVOUR OF THE ASSESS EE AND DISMISSED THE APPEAL OF THE REVENUE. THE RELEVANT PART OF THE ORDER OF T HE TRIBUNAL FOR THE PURPOSE OF REFERENCE IS REPRODUCED HEREUNDER : REVENUES APPEALS 594,595 & 1206/CHD/2012 2. IN THESE APPEALS THE REVENUE HAS RAISED COMMON I SSUES. 3. FIRST COMMON ISSUE IS REGARDING ALLOWING OF DEDU CTION U/S 80IA OF THE ACT IN RESPECT OF INTEREST INCOME W HICH WAS RECEIVED AGAINST LATE PAYMENT FROM CUSTOMERS AND WA S HELD TO BE DERIVED FROM THE BUSINESS INCOME. 4 AFTER HEARING BOTH THE PARTIES WE FIND THAT DURIN G ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSE SSEE HAD RECEIVED A SUM OF RS. 27,43, 88,709/- WHICH WAS REC EIVED AS INTEREST FROM FDRS, TARIFF FILING FEE FROM HPSEB, D AMAGE OF TRANSFER SALE OF SCRAP, INTEREST RECEIVED FROM STAF F AND INTEREST RECEIVED FROM HPSEB ETC. AND DEDUCTION U/S 80IA OF THE ACT WAS CLAIMED ON THESE AMOUNTS. IT WAS HELD THAT THE SE INCOME ITEMS ARE NOT DERIVED FROM ELIGIBLE UNDERTAKING AND ACCORDINGLY DEDUCTION U/S 80IA WAS DENIED. 5 ON APPEAL IT WAS SUBMITTED THAT AS FAR AS INTERES T AMOUNTING TO RS. 24,18,42,351/- WHICH WAS RECEIVED FROM HPSEB ON LATE PAYMENT OF POWER SALES DUES. IT WAS FURTHER POINTED OUT THAT THE SAID INTEREST ACCRUED FROM CON TRACT OF SALE OF POWER DUES AND NOT FROM OTHER SEPARATE CONT RACT AND THEREFORE, SUCH INTEREST SHOULD BE TREATED AS ADDI TION TO THE SALE REVENUE. SUCH INTEREST HAS A DIRECT NEXUS WIT H THE SALE OF POWER AND THEREFORE, HAS DIRECT NEXUS WITH THE REV ENUE DERIVED FROM ELIGIBLE BUSINESS OF POWER GENERATION. 6 THE LD. CIT(A) AFTER EXAMINING THE SUBMISSIONS OB SERVED THAT THE INTEREST WAS RECEIVED FROM HPSEB ON ACCOUN T OF DELAYED PAYMENTS OF THE POWER BILLS AND THEREFORE, SUCH INTEREST INCOME IS INEXTRICABLE LINKED TO THE SUPPL Y OF POWER TO 3 HPSEB. THEREFORE, THIS RECEIPT IS DISTINCTLY PART OF SALE REVENUE AND IS DIRECTLY DERIVED FROM THE ELIGIBLE BUSINESS OF GENERATION OF POWER. ACCORDINGLY THE RECEIPT OF INTEREST WAS H ELD TO BE ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT. 7 BEFORE US, THE CIT-D.R STRONGLY RELIED ON THE ORD ER OF ASSESSING OFFICER. SHE ALSO RELIED ON THE DECISION OF HON'BLE SUPREME COURT IN CASE OF PANDIAN CHEMICALS LTD. V. CIT (2003) 262 ITR 278 (S.C) WHEREIN IT WAS HELD THAT THE INTE REST EARNED CANNOT BE SAID TO HAVE BEEN DERIVED FROM ELIGIBLE B USINESS. 8 ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSESS EE REITERATED THE SUBMISSIONS MADE BEFORE THE FIRST AP PELLATE AUTHORITY AND RELIED ON THE DECISION OF HON'BLE SUP REME COURT IN CASE OF CIT V. GOVINDA CHOUDHURY AND SONS (1993) 203 ITR 881 (S.C). HE ALSO RELIED ON THE DECISION OF HON'B LE GUJARAT HIGH COURT IN CASE OF 283 ITR 403 (GUJ) AND IN CASE OF PHATELA COTGIN INDUSTRIES P. LTD. V CIT (2008) 303 ITR 411( PH). 9 WE HAVE HEARD THE RIVAL SUBMISSIONS CAREFULLY AN D FIND THAT NO DOUBT IN CASE OF PANDIAN CHEMICALS LTD. V. CIT (SUPRA) HON'BLE SUPREME COURT WAS CONCERNED WITH THE ISSUE WHETHER INTEREST WAS RECEIVED ON DEPOSITS OF ELECTRICITY C AN BE SAID TO HAVE BEEN DERIVED FROM INDUSTRIAL UNDERTAKING AND I T WAS OBSERVED THAT SUCH INTEREST INCOME WAS A STEP REMOV ED FROM THE BUSINESS OF THE INDUSTRIAL UNDERTAKING AND THER EFORE, DEDUCTION WAS DENIED. HOWEVER, THIS ISSUE CAME UP FOR CONSIDERATION BEFORE VARIOUS HIGH COURTS AND IT WAS POINTED OUT THAT WHEN THE INTEREST IS RECEIVED FROM DELAYED PAYMENT FROM CUSTOMERS THEN IT WOULD HAVE DIRECT NEXUS WITH SUCH SALE AND WOULD BE ELIGIBLE FOR DEDUCTION U/S CHAPTER VI. THIS VIEW WAS ACCEPTED BY HON'BLE GUJARAT HIGH COURT IN CASE OF NIRMA INDUSTRIES LTD. VS. CIT (SUPRA). IN THAT CASE IT WA S HELD AS UNDER. HELD, THAT WHEN ONE READS THE OPENING PORTION OF S ECTION 80-I OF THE ACT IT IS CLEAR THAT THE WORDS USED ARE GROSS TOTAL INCOME O F AN ASSESSEE INCLUDES ANY PROFIT AND GAINS DERIVED FROM AN INDUSTRIAL UNDERTA KING. ONCE THIS IS THE POSITION THEN, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE , A DEDUCTION FROM SUCH PROFITS AND GAINS OF AN AMOUNT EQUAL TO THE PRESCRI BED PERCENTAGE IS TO BE ALLOWED. THE SAME ITEM OF RECEIPT COULD NOT BE TREA TED DIFFERENTLY, ONCE WHILE COMPUTING THE GROSS TOTAL INCOME AND SECONDLY, AT T HE TIME OF COMPUTING DEDUCTION UNDER SECTION 80-I. WHEN THE ASSESSEE ENT ERS INTO A CONTRACT FOR SALE OF ITS PRODUCT IT COULD EITHER STIPULATE (A) THAT INTE REST AT THE SPECIFIED RATE WOULD BE CHARGED ON THE UNPAID SALE PRICE AND ADDED TO THE O UTSTANDING TILL THE POINT OF TIME OF REALIZATION, OR (B) THAT IN CASE OF DELAY T HE PAYMENT FOR SALE OF PRODUCTS WORTH RS. 100 TO CARRY THE SALE PRICE OF RS. 102 FO R THE FIRST MONTHS DELAY, RS. 104 FOR THE SECOND MONTHS DELAY, RS. 106 FOR THE THIRD MON THS DELAY AND SO ON. IN SUM AND SUBSTANCE THESE ARE ONLY TWO MODES OF REALIZING SALE CONSIDERATION, THE OBJECT BEING TO REALIZE THE SALE PROCEEDS AT THE EA RLIEST AND WITHOUT DELAY. THE PURCHASER PAYS A HIGHER SALE PRICE IF IT DELAYS PAY MENT OF THE SALE PROCEEDS. IN OTHER WORDS, THIS IS A CONVERSE SITUATION TO OFFERI NG A CASH DISCOUNT. THUS, IN PRINCIPLE, IN REALITY, THE TRANSACTION REMAINS THE SAME AND THERE IS NO DISTINCTION AS TO THE SOURCE. WHILE COMPUTING THE SPECIAL DEDUCTIO N UNDER SECTION 80-I, INTEREST RECEIVED FROM TRADE DEBTORS TOWARDS LATE PAYMENT OF SALE CONSIDERATION IS TO BE INCLUDED IN THE PROFITS OF THE INDUSTRIAL UNDERTAKI NG. SIMILARLY HON'BLE PUNJAB & HARYANA HIGH COURT HAS O BSERVED IN CASE OF PHATELA COTGIN INDUSTRIES P. LTD. V CIT (SU PRA) HAS OBSERVED IN PARA 10 AS UNDER: THE INTEREST WHICH IS RECEIVED ON DELAYED PAYMENTS ON ACCOUNT OF SALE TO CUSTOMERS OF MANUFACTURED GOODS CAN CLEARLY BE TERM ED TO BE AN INCOME DERIVED FROM THE INDUSTRIAL UNDERTAKING AND DISTINC T FROM THE INCOME ON ACCOUNT OF THE INTEREST WHICH HAS BEEN RECEIVED FROM THE FI XED DEPOSIT. FROM THE ABOVE DECISIONS IT BECOMES CLEAR THAT WHEN INTEREST IS RECEIVED ON ACCOUNT OF DELAYED PAYMENTS FROM CUSTOMERS THEN IT WOULD DEFINITELY CONSTITUTE INCOME FROM ELIGIBLE BUSINESS BECAUSE SUCH INTEREST HAS DIRECT NEXUS WITH THE RECEIPT FROM ELIGIBLE BUSINESS. ACCORDINGLY WE FI ND NOTHING WRONG IN THE ORDER OF THE LD. CIT(A) AND CONFIRM THE SAME. 4 10 ISSUE IS WHETHER THAT THE LD. CIT(A) ERRED IN HO LDING THAT PROVISION OF LEAVE ENCASHMENT IS ASCERTAINED LIABIL ITY AND THEREFORE, NEED NOT TO BE ADDED BACK TO THE BOOK P ROFITS U/S 115 JB OF THE ACT. 11 AFTER HEARING BOTH THE PARTIES WE FIND THAT DURI NG ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSE SSEE HAD MADE PROVISION FOR LEAVE ENCASHMENT AMOUNTING TO RS . 10,29,478/- (TO ASSESSMENT YEAR 2007-08) AND ACCORD INGLY THE ASSESSEE WAS ASKED TO EXPLAIN WHY THIS PROVISION SH OULD NOT BE TREATED AS UNASCERTAINED LIABILITY AND ADDED TO THE BOOK PROFITS U/S 115 JB OF THE ACT. IN RESPONSE IT WAS MAINLY STATED THAT PROVISION WAS MADE AS PER ACTUARIAL VALUATION AND THEREFORE, IT CANNOT BE TREATED AS UNASCERTAINED LI ABILITY. RELIANCE WAS PLACED ON THE DECISION OF HON'BLE SUPR EME COURT IN CASE OF BHARAT EARTH MOVERS V CIT, 245 ITR 428 (S.C) WHEREIN IT WAS OBSERVED THAT LIABILITY FOR LEAVE EN CASHMENT WAS CERTAIN THOUGH PERIOD IN WHICH THE LIABILITY WO ULD INCUR, IS NOT CERTAIN BECAUSE LEAVE ENCASHMENT CAN BE SOUGHT FOR BY THE EMPLOYEE EITHER DURING THE YEARS OF SERVICE OR AT THE END OF THE SERVICE. THE ASSESSING OFFICER DID NOT ACCE PT THE SUBMISSIONS AND ADDED THE AMOUNT TO THE BOOK PROFIT OF THE ASSESSEE U/S 115 JB OF THE ACT. 12 ON APPEAL, SIMILAR SUBMISSIONS WERE MADE BEFORE THE LD. CIT(A) WHO AFTER EXAMINING THE SAME HELD THAT THE P ROVISION FOR LEAVE ENCASHMENT CANNOT BE TREATED AS UNASCERTA INED LIABILITY IN ASSESSMENT YEAR 2004-05. IN THE CURRE NT YEAR, THE LD. CIT(A) FOLLOWING THE ORDER FOR ASSESSMENT YEAR 2004-05 HAD HELD THAT PROVISION FOR LEAVE ENCASHMENT CANNOT BE HELD TO BE FOR UNASCERTAINED LIABILITY. 13 BEFORE US, THE CIT-D.R RELIED ON THE ORDER OF TH E ASSESSING OFFICER. 14 ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSESS EE REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT( A). 15 AFTER HEARING BOTH THE PARTIES WE FIND THAT THE HON'BLE SUPREME COURT IN CASE OF BHARAT EARTH MOVERS V CIT (SUPRA) WHEREIN THE COURT WAS CONSIDERING THE ISSUE WHERE P ROVISION FOR LEAVE ENCASHMENT WAS ALLOWABLE AS ADMISSIBLE DE DUCTION REFERRED TO THE ANOTHER DECISION OF HON'BLE APEX CO URT IN CASE OF METAL BOX COMPANY OF INDIA LTD. V THEIR WORKMEN (1969) 73 ITR 53 (S.C) AND EXTRACTED THE FOLLOWING PRINCIPLES : (I) FOR AN ASSESSEE MAINTAINING HIS ACCOUNTS ON T HE MERCANTILE SYSTEM, A LIABILITY ALREADY ACCRUED, THOUGH TO BE D ISCHARGED AT A FUTURE DATE, WOULD BE A PROPER DEDUCTION WHILE WORKING OUT THE P ROFITS AND GAINS OF HIS BUSINESS, REGARD BEING HAD TO THE ACCEPTED PRINCIPL ES OF COMMERCIAL PRACTICE AND ACCOUNTANCY. IT IS NOT AS IF SUCH DEDUCTION IS PERMISSIBLY ONLY IN THE CASE OF AMOUNTS ACTUALLY EXPENDED OR PAID; (II) JUST AS RECEIPTS, THOUGH NOT ACTUAL RECEIPTS B UT ACCRUED DUE ARE BROUGHT IN FOR INCOME-TAX ASSESSMENT, SO ALSO LIABILITIES A CCRUED DUE WOULD BE TAKEN INTO ACCOUNT WHILE WORKING OUT THE PROFITS AND GAINS OF THE BUSINESS; (III) A CONDITION SUBSEQUENT THE FULFILLMENT OF WHI CH MAY RESULT IN THE REDUCTION OR EVEN EXTINCTION OF THE LIABILITY, WOULD NOT HAVE THE EFFECT OF CONVERTING THAT LIABILITY INTO A CONTINGENT LIABILITY; (IV) A TRADED COMPUTING HIS TAXABLE PROFITS FOR A P ARTICULAR YEAR MAY PROPERLY DEDUCT NOT ONLY THE PAYMENTS ACTUALLY MADE TO HIS E MPLOYEES BUT ALSO THE PRESENT VALUE OF ANY PAYMENTS IN RESPECT OF THEIR S ERVICES IN THAT YEAR TO BE MADE IN A SUBSEQUENT YEAR IF IT CAN BE SATISFACTORY ESTIMATED. NO DOUBT THE ABOVE DECISION WAS RENDERED IN THE CON TEXT WHETHER SUCH PROVISION WAS ALLOWABLE AS DEDUCTION U NDER NORMAL PROVISIONS, HOWEVER, THE PRINCIPLES LAID DOW N ABOVE ARE RELEVANT FOR OUR PURPOSE TO UNDERSTAND WHETHER SUCH PROVISION FOR LEAVE ENCASHMENT WOULD CONSTITUTE ASC ERTAINED LIABILITY OR NOT. ABOVE PRINCIPLES CLEARLY SHOW TH AT THE PROVISION FOR LEAVE ENCASHMENT WOULD CONSTITUTE A L IABILITY AND IF THE SAME HAS BEEN DETERMINED ON THE BASIS OF ACTUARIAL 5 VALUATION THEN SAME CANNOT BE CONSIDERED AS UNASCER TAINED LIABILITY. ACCORDINGLY WE FIND NOTHING WRONG IN T HE ORDER OF THE LD. CIT(A) AND CONFIRM THE SAME. 16 COMMON ISSUE IS WHETHER PROVISION FOR STAFF INCE NTIVE IS UNASCERTAINED LIABILITY OR NOT. 17 AFTER HEARING BOTH THE PARTIES WE FIND THAT DURI NG ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASS ESSEE HAS MADE PROVISION FOR INCENTIVE TO STAFF AMOUNTING TO RS. 20,44,086/- (ASSESSMENT YEAR 2007-08) AND OUT OF TH E OPENING BALANCE OF RS. 16,19,073/- A SUM OF RS. 13,18,356/- WAS INCURRED DURING THE YEAR. ACCORDING TO THE ASSESSI NG OFFICER THE LIABILITY WAS UNASCERTAINED AND THEREFORE, THE ASSESSEE WAS ASKED TO EXPLAIN WHY THE SAME SHOULD NOT BE ADD ED TO THE BOOK PROFIT U/S 115 JB OF THE ACT. IN RESPONSE IT WAS MAINLY SUBMITTED THAT THE LIABILITY IS ACCRUED LIAB ILITY BECAUSE IT PERTAINED TO THE WORK DONE DURING THE YEAR IN RE SPECT OF WHICH THE COMPANY HAS DECLARED ITS INTENTION TO PAY BY MAKING THE PROVISION IN ACCORDANCE WITH EXISTING PO LICY AND SCHEME. THE LIABILITY IS NOT CONTINGENT BECAUSE TH E PAYMENT DID NOT DEPEND ON HAPPENING OF ANY FURTHER EVENT. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THE EXPLANATIO N AND HELD THAT THIS LIABILITY IS UNASCERTAINED LIABILITY AND ACCORDINGLY THE SAME WAS ADDED TO THE BOOK PROFITS. 18 ON APPEAL BEFORE THE LD. CIT(A), IT WAS MAINLY S UBMITTED THAT STAFF INCENTIVE IS MAINLY GIVEN IN RESPECT OF THE SERVICES RENDERED BY THE EMPLOYEES AND FLOWS FROM THE CONTRA CT OF SERVICE BETWEEN THE EMPLOYEES AND EMPLOYERS. 19 THE LD. CIT(A) AFTER EXAMINING THE SUBMISSIONS O BSERVED THAT (IN ASSESSMENT YEAR 2004-05) THAT STAFF INCENT IVE IS DECLARED IN ACCORDANCE WITH EXISTING POLICIES AND D IRECTLY RELATES TO THE WORK DONE BY THE EMPLOYEES DURING TH E YEAR AND ACCORDINGLY THE SAME WAS HELD TO BE ASCERTAINE D LIABILITY DURING THE YEAR. THE LD. CIT(A) FOLLOWING THE ORDE R FOR ASSESSMENT YEAR 2004-05 HELD THAT THIS AMOUNT PERTA INS TO ASCERTAIN LIABILITY AND CANNOT BE ADDED TO THE BOOK PROFITS U/S 115 JB OF THE ACT. 20 BEFORE US, THE LD. DR FOR THE REVENUE SUBMITTED THAT THE FINDINGS HAVE BEEN GIVEN BY THE LD. CIT(A) WITHOUT EXAMINING AND SPECIFYING WHAT WAS THE POLICY IN RESPECT OF S TAFF INCENTIVES. 21 ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSESS EE SUBMITTED THAT INCENTIVE HAS BEEN PAID ON PRE-DETER MINED SCHEME FORMULATED BY THE GOVERNMENT. STAFF INCENTIV E IS PAID IN ADDITION TO NORMAL BONUS PAID BY THE COMPANY. T HIS AMOUNT IS PAID TO INCREASE THE EFFICIENCY OF EMPLOY EES. HOWEVER, IN RESPONSE TO QUESTION FROM THE BENCH HE ADMITTED THAT COPY OF SCHEME WAS NOT ASKED BY THE ASSESSING OFFICER AND WAS NOT FILED BEFORE HIM OR THE LD. CIT(A). 22 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT NO EVIDENCE HAS BEEN FILED BEFORE ASSESSING OFFICER IN RESPECT OF PARTICULAR POLICY FOLLOWED BY THE ASSESSEE-COMPANY IN RESPECT OF STAFF INCENTIVE. THE COPY OF SCHEME HAS ALSO N OT BEEN FILED BEFORE US. HOWEVER, AT THE SAME TIME THE ASS ESSING OFFICER ALSO REJECTED THE ISSUE SUMMARILY WITHOUT A SKING FOR THE SCHEME FOR INCENTIVE CLAIMED FROM THE ASSESSEE AND THE LD. CIT(A) HAS ALLOWED THE RELIEF WITHOUT EXAMINING THE SCHEME. THEREFORE, IN THE INTEREST OF JUSTICE, WE SET ASID E THE ORDER OF THE LD. CIT(A) AND REMAND THE MATTER BACK TO THE FI LE OF ASSESSING OFFICER WITH A DIRECTION TO RE-EXAMINE TH E ISSUE AFTER OBTAINING THE SCHEME OF STAFF INCENTIVE FROM THE AS SESSEE. 23 ONE MORE ISSUE HAS BEEN RAISED IN ASSESSMENT YEA R 2009- 10 BY THE REVENUE. THE ISSUE PERTAINS TO THE ACTIO N OF THE LD. CIT(A) IN HOLDING THAT THE ASSESSING OFFICER WAS NO T RIGHT IN MAKING ADJUSTMENTS FOR WORKING THE BOOK PROFIT U/S 115 JB OF 6 THE ACT BY ADDING ADVANCE AGAINST DEPRECIATION (FOR SHORT AAD) TO THE BOOK PROFITS. 24 AFTER HEARING BOTH THE PARTIES WE FIND THAT DURI NG ASSESSMENT PROCEEDINGS THE AO ASKED TO EXPLAIN THE TREATMENT OF ADD AND WHY THE SAME SHOULD NOT BE ADD ED TO THE BOOK PROFIT. IN RESPONSE FOLLOWING REPLY WAS G IVEN BY THE ASSESSEE-COMPANY: JAI PRAKASH HYDRO POWER REPLIED THAT IN TERMS OF SUB SECTION (2) OF SECTION 115JB READ WITH THE EXPLANATION TO THE SAID SECTION , THE BOOK PROFIT OF THE ASSESSEE MEANS THE NET PROFIT AS SHOWN IN THE ACCOU NTS PREPARED IN ACCORDANCE WITH THE PROVISIONS OF PARTS II & III OF SCHEDULE V I OF THE COMPANIES ACT, 1956. THE NET PROFIT SHOWN IN THESE ACCOUNTS CANNOT BE DISTUR BED EXCEPT TO THE EXTENT SPECIFIED IN THE EXPLANATION. THE ADVANCE AGAINST D EPRECATION NEITHER REPRESENTS AN AMOUNT CARRIED TO A RESERVE, NOT A PROVISION FOR MEETING AN UN-ASCERTAINED LIABILITY. IT REPRESENTS AS ASCERTAINED LIABILITY W HICH IS SHOWN AS DEFERRED REVENUE FOR THE REASON THAT IT IS REQUIRED TO BE ADJUSTED I N FUTURE AGAINST THE CLAIM FOR DEPRECIATION IN THE YEARS AFTER THE REPAYMENT PERIO D OF THE LOANS IS OVER. HENCE, THE ADVANCE-AGAINST-DEPRECIATION CAN NEITHER BE ADD ED BACK IN COMPUTING THE BOOK PROFIT OF THE ASSESSEE NOR IN COMPUTING ITS TO TAL INCOME. THE ISSUE HAS ALREADY BEEN DEALT WITH AND DETERMINE D BY THE HONBLE SUPREME COURT IN THE CASE OF NATIONAL HYDRO POWER CORPORATI ON LTD. VS. CIT 320 ITR 374 (S.C). THE APEX COURT HAS IN THE ABOVE CASE OBSERVE D THAT IN ORDER TO MAKE AN ADDITION UNDER CLAUSE (B) OF EXPLANATION 1 TO SECTI ON 115JB, TWO CONDITIONS MUST BE JOINTLY SATISFIED: (A) THERE MUST BE A DEBIT OF THE AMOUNT TO THE PROFIT AND LOSS ACCOUNT; AND (B) THE AMOUNT SO DEBITED MUST BE CARR IED TO THE RESERVE. SINCE THE AMOUNT OF AAD IS REDUCED FROM SALES, THERE IS N OT DEBIT TO THE PROFIT AND LOSS ACCOUNT AND THE AMOUNT DID NOT ENTER THE STREAM OF INCOME FOR THE PURPOSE OF DETERMINATION OF NET PROFIT AT ALL. HENCE, CLAUSE ( B) OF THE EXPLANATION 1 IS NOT APPLICABLE TO AAD. HOWEVER, THE ASSESSING OFFICER DID NOT AGREE WITH T HE SAME AND HE REFERRED TO THE LATTER DECISION OF HON'BLE S UPREME COURT IN CASE OF DYNAMIC ORTHOPEDIC S (P) LTD V CIT , 321 ITR 300 AND ALSO TO THE DECISION OF SPECIAL BENCH OF TH E TRIBUNAL AT HYDERABAD IN RAIN COMMODITIES LTD. V DCIT, ITA N O. 673/HYD/2009 DATED 2.7.2010 WHEREIN IT WAS HELD TH AT IF THE ACCOUNTS WERE NOT PREPARED IN ACCORDANCE WITH PROVI SION OF PARTS II & III OF SCHEDULE VI OF COMPANIES ACT THEN SOME ADJUSTMENT CAN BE MADE AND ON THAT BASIS HE ADDED T HIS AMOUNT TO THE BOOK PROFITS. 25 ON APPEAL THE ISSUE WAS DECIDED IN FAVOUR OF TH E ASSESSEE BY FOLLOWING THE DECISION OF HON'BLE SUPRE ME COURT IN CASE OF NATIONAL HYDRO ELECTRIC POWER CORPORATIO N V CIT, 320 ITR 374. 26 BEFORE US, THE LD. DR FOR THE REVENUE RELIED ON THE ORDER OF ASSESSING OFFICER. 27 ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSES SEE NATIONAL HYDRO ELECTRIC POWER CORPORATION V CIT (SU PRA). 28 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT THIS ISSUE WAS DECIDED BY THE LD. CIT(A) IN THE FOLLOWIN G PARAS: THE ISSUE REGARDING THE NATURE OF RECEIPT IN THE F ORM OF AAD HAS ALREADY BEEN DECIDED BY THE HONBLE SUPREME COURT IN THE CASE OF NHPC VS. CIT 320 ITR 374, WHEREIN IT HAS BEEN HELD BY THE HONBLE COURT THAT AAD IS INCOME RECEIVED IN ADVANCE. IT IS A TIMING DIFFERENCE. IT HAS BEEN FU RTHER HELD BY THE HONBLE SUPREME COURT THAT IN ORDER TO MAKE AN ADDITION UND ER CLAUSE (B) OF EXPLANATION 1 TO SECTION 115 JB, TWO CONDITIONS MUST BE JOINTLY SATISFIED: (A) THERE MUST BE A DEBIT OF THE AMOUNT TO THE PROFIT AND LOSS ACCOUNT, AND (B) THE AMOUNT SO DEBITED MUST BE CARRIED TO THE RESERVE. SINCE THE A MOUNT OF AAD IS REDUCED FROM SALES, THERE IS NO DEBIT TO THE PROFIT AND LOSS ACC OUNT AND THE AMOUNT DID NOT ENTER THE STREAM OF INCOME FOR THE PURPOSES OF DETE RMINATION OF NET PROFIT AT ALL. HENCE CLAUSE (B) OF THE EXPLANATION 1 IS NOT APPLIC ABLE TO AAD. THUS THE HONBLE COURT HAS CLEARLY ENDORSED THE METHOD OF ACCOUNTING OF THE AAD BY WHICH IT HAS BEEN REDUCED FROM SALES AND REPRESENTED AS DEFERRE D REVENUE. IT IS THUS ACCEPTED AS AN AMOUNT THAT IS UNDER OBLIGATION, RIG HT FROM INCEPTION, TO GET ADJUSTED IN FUTURE. THE HONBLE COURT HAS ALSO ACKN OWLEDGED THE FACT THAT THE ASSESSEE CANNOT USE THE AAD FOR ANY OTHER PURPOSE E XCEPT BY WAY OF ITS 7 ADJUSTMENT AGAINST FUTURE DEPRECIATION RESULTING IN THE REDUCTION OF TARIFF IN FUTURE YEARS. WITH THE HONBLE SUPREME COURT HAVING ACCEPT ED THE POSITION IN PRINCIPLE REGARDING THE EXCLUSION OF THE AAD FROM THE SALES, THE A.O. DOES NOT APPEAR TO BE JUSTIFIED IN STILL INSISTING THAT THE NON-INCLUS ION OF AAD IN THE SALE RECEIPTS VITIATES THE AUDITED ACCOUNTS OF HE ASSESSEE. THIS INSISTENC E OF THE A.O. IS IN CLEAR CONTRADICTION OF THE RULING OF THE SUPREME COURT (S UPRA) AND HENCE HIS ACTION OF ALTERING THE NET PROFIT AS PER THE AUDITED ACCOUNTS OF THE ASSESSEE BY PLACING RELIANCE ON THE DECISION OF THE APEX COURT IN THE C ASE OF DYNAMIC ORTHOPEDIC (P) LTD. VS. CIT 321 ITR 300 IS NOT FOUND TO BE IN ORDER. THE ABOVE CLEARLY SHOWS THAT THE ISSUE HAS BEEN DEC IDED ON THE BASIS OF THE DECISION OF HON'BLE SUPREME COURT IN CASE OF NATIONAL HYDRO ELECTRIC POWER CORPORATION V CIT (SU PRA). THE DECISION IS DIRECTLY ON THE ISSUE OF ADVANCE AGAINS T DEPRECIATION AND WHETHER THE SAME IS REQUIRED TO BE ADDED U/S 115 JB OF THE ACT TO THE BOOK PROFITS. SINCE T HE DECISION (OR THE LAW LAID DOWN) OF HON'BLE SUPREME COURT IS THE LAW OF LAND AND THEREFORE, WE ARE BOUND TO FOLLOW THE SAME . ACCORDINGLY WE FIND NOTHING WRONG WITH THE ORDER O F THE LD. CIT(A) WHICH HAS BEEN RENDERED ON THE BASIS OF ABO VE DECISION. A PERUSAL OF THE IMPUGNED ORDER OF THE LD. CIT(A) A LSO REVEALS THAT THE LD. CIT(A) HAS ALSO FOLLOWED THE DECISIONS OF THE ITAT CHANDIG ARH BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. JAIPRAKASH POWER VENTURES LTD. THERE BEING NO CONTRARY DECISION BROUGHT TO OUR KNOWLEDGE, WE DO NOT FIND A NY JUSTIFICATION TO INTERFERE IN THE WELL REASONED ORDER OF CIT(A). HENCE, ALL TH E FOUR APPEALS PREFERRED BY THE REVENUE ARE HEREBY DISMISSED. THE ORDER IS PRONOUNCED ON 11/07/2017 IN THE OPEN COURT. SD/- SD/- (DIVA SINGH) (DR. B.R.R. KU MAR) JUDICIAL MEMBER ACCOUNTANT MEMBER AG COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DEPARTMENTAL REPRESENTATIVE