ACIT, Faridabad V. M/s. N.H.P.C. Ltd., Faridabad

ITA 3228/DEL/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81779 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 25-08-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 30-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL
• Assessee Lawyers: RANO JAIN CAS
• Keywords: Business income; Depreciation; Advance ruling
• Section: 143(3); 115JB; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F : NEW DELHI) BEFORE SHRI B.C. MEENA, ACCOUNTANT MEMBER AND SHRI C.M. GARG, JUDICIAL MEMBER ITA NO.3228/DEL./2010 (ASSESSMENT YEAR : 2007-08) ACIT, RANGE II, VS. M/S. NHPC LIMITED, FARIDABAD. SECTOR 33, NHPC COMPLEX, FARIDABAD. (PAN : AAACN0149C) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VED JAIN & MS. RANO JAIN, CAS REVENUE BY : SHRI SANJEEV SABHARWAL, STANDING COUNS EL AND SHRI SUNIL BAJPAI, CIT DR ORDER PER B.C. MEENA, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE REVENUE EMANATES FROM THE ORDER OF THE CIT (APPEALS), FARIDABAD DATED 29.04.2010 FOR THE ASSES SMENT YEAR 2007-08. 2. BRIEF FACTS OF THE CASE ARE AS UNDER :- ASSESSEE IS A PUBLIC SECTOR ENTERPRISE REGISTERED U NDER THE COMPANIES ACT, 1956. ITS ACCOUNTS ARE PREPARED IN ACCORDANCE WITH PARTS II AND III OF SCHEDULE VI TO THE COMPANIES ACT. THE ENTIRE SHARE HOLDING OF THE ASSESSEE IS WITH GOVERNMENT OF INDIA. ITS ACCOUNTS ARE AUDITED BY COMPTROLLER AND AUDITOR GENERAL OF INDIA. THEY ARE LAID BEFORE BOT H THE HOUSES OF PARLIAMENT. ITA NO.3228/DEL/2010 2 ASSESSEE IS REQUIRED TO SELL ELECTRICITY TO STATE ELECTRICITY BOARDS DISCOMS ETC. AT TARIFF RATES NOTIFIED BY CERC. THE TARIFF CONSISTS OF DEPRECIATION, AAD, INTEREST ON LOANS, INTEREST ON W ORKING CAPITAL, OPERATION AND MAINTENANCE EXPENSES, RETURN ON EQUITY. ON 26.5.97, GOI INTRODUCED A MECHANISM TO GENERA TE ADDITIONAL CASH FLOW BY ALLOWING GENERATING COMPANIES TO COLLECT AA D BY WAY OF TARIFF CHARGE. IT WAS DECIDED THAT THE YEAR IN WHICH NORMAL DEPREC IATION FELL SHORT OF ORIGINAL SCHEDULED LOAN REPAYMENT, INSTALLMENT (CAPPED AT 1/ 12 TH OF THE ORIGINAL LOAN) SUCH SHORTFALL WOULD BE COLLECTED AS ADVANCE AGAINS T FUTURE DEPRECIATION. IN OTHER WORDS, ONCE THE LOAN STOOD RE-PAID, THE ADVAN CE SO COLLECTED WOULD GET REDUCED FROM THE NORMAL DEPRECIATION OF THE LATER Y EARS, AND SUCH REDUCED DEPRECIATION WOULD BE INCLUDED IN THE TARIFF, IN TU RN LOWERING THE TARIFF. 3. GROUNDS NO.1 AND 2 ARE WITH REGARD TO DELETION O F ADDITION MADE ON ACCOUNT OF ADVANCE AGAINST DEPRECIATION. THESE GR OUNDS READ AS UNDER:- 1. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS RIGHT IN LAW IN DELETING THE ADD ITION OF RS.21,15,80,69,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ADVANCE AGAINST DEPRECIATION, INSTEAD OF THE HON BLE SUPREME COURTS DECISION DATED 05-01-2010 WHEREIN, IT WAS H ELD THAT THE ADVANCE AGAINST DEPRECIATION IS INCOME RECEIVED IN ADVANCE, THUS MAKING HE SAID INCOME SUBJECT TO CHARGE UNDE R CHAPTER-II, AS BUSINESS INCOME UNDER CHAPTER-IV-D READ WITH SUB CLAUSE (I) OF SUB-SECTION 24 OF SECTION 2 OF THE INCOME TAX AC T? 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT(A) WAS RIGHT IN LAW IN DELETING THE ADD ITION OF RS.2,15,80,69,000/- MADE BY THE ASSESSING OFFICER U NDER SECTION 143(3) [AND NOT UNDER SECTION 115JB] ON ACCOUNT OF ADVANCE AGAINST DEPRECIATION IGNORING THE PROVISIONS OF SE CTION 2(24) READ WITH SECTION 28 OF THE INCOME TAX ACT, 1961, W HICH PROVIDES THAT INCOME INCLUDES PROFITS AND GAINS AND THE PR OFITS AND GAINS ITA NO.3228/DEL/2010 3 OF ANY BUSINESS OR PROFESSION CARRIED ON BY THE ASS ESSEE AT ANY TIME DURING THE PREVIOUS YEAR IS TAXABLE? 3.1 THIS ISSUE HAS COME UP IN EARLIER ASSESSMENT YE ARS 2000-01, 2001-02 AND 2003-04 WHEREIN WE HAVE HELD AS UNDER:- 5. AFTER HEARING BOTH THE SIDES ON THE ISSUE AND CO NSIDERING THE DECISIONS OF HON'BLE SUPREME COURT, WE DECIDE T HE ISSUE AS UNDER. HON'BLE SUPREME COURT HAS GIVEN FINDING AFT ER CONSIDERING THE OBSERVATION OF THE AUTHORITY FOR ADVANCE RULING IN PARA 11 WHICH IS REPRODUCED AS UNDER :- 11. SINCE THE AMOUNT OF ADVANCE AGAINST DEPRECIA TION (AAD) IS REDUCED FROM SALES, THERE IS NO DEBIT IN T HE PROFIT AND LOSS ACCOUNT. THE AMOUNT DID NOT ENTER THE STRE AM OF INCOME FOR THE PURPOSES OF DETERMINATION OF NET PRO FIT AT ALL, , HENCE CLAUSE (B) OF EXPLANATION-I WAS NOT AP PLICABLE. FURTHER, 'RESERVE' AS CONTEMPLATED BY CLAUSE (B) OF THE EXPLANATION-I TO SECTION 115JB OF THE 1961 ACT IS R EQUIRED TO BE CARRIED THROUGH THE PROFIT AND LOSS ACCOUNT. AT THIS STAGE IT MAY BE STATED THAT THERE ARE BROADLY TWO T YPES OF RESERVES, VIZ, THOSE THAT ARE ROUTED THROUGH PROFIT AND LOSS ACCOUNT AND THOSE WHICH ARE NOT CARRIED VIA PROFIT AND LOSS ACCOUNT, FOR EXAMPLE, A CAPITAL RESERVE SUCH AS SHA RE RESERVE. IT IS NOT APPROPRIATION OF PROFITS. AAD I S NOT MEANT FOR AN UNCERTAIN PURPOSE. AAD IS AN AMOUNT TH AT IS UNDER OBLIGATION, RIGHT FROM THE INCEPTION, TO GET ADJUSTED IN THE FUTURE, HENCE, CANNOT BE DESIGNATED AS A RES ERVE. AAD IS NOTHING BUT AN ADJUSTMENT BY REDUCING THE NO RMAL DEPRECIATION INCLUDIBLE IN THE FUTURE YEARS IN SUCH A MANNER THAT AT THE END OF USEFUL LIFE OF THE PLANT (WHICH IS NORMALLY 30 YEARS) THE SAME WOULD BE REDUCED TO NIL. THEREF ORE, THE ASSESSEE CANNOT USE THE AAD FOR ANY OTHER PURPOSE ( WHICH IS POSSIBLE IN THE CASE OF A RESERVE) EXCEPT TO ADJ UST THE SAME AGAINST FUTURE DEPRECIATION SO AS TO REDUCE TH E TARIFF IN THE FUTURE YEARS. AS STATED ABOVE, AT THE END OF T HE LIFE OF THE PLANT, AAD WILL BE REDUCED TO NIL. IN FACT, SCH EDULE XII-A TO THE BALANCE SHEET FOR THE YEARS 2004-05 ON WARDS INDICATES RECOUPING. IN OUR VIEW, AAD IS INCOME RECEIVED IN ADVANCE. IT IS A TIMING DIFFERENCE. IT REPRESENTS ADJUSTMENT IN FUTURE WHICH IS IN-BUILT I N THE MECHANISM NOTIFIED ON 26.5.1997. THIS ADJUSTMENT MA Y TAKE PLACE OVER A LONG PERIOD OF TIME. HENCE, WE A RE OF THE VIEW THAT AAD IS NOT A RESERVE. ITA NO.3228/DEL/2010 4 IN THIS PARA, HON'BLE SUPREME COURT HAS HELD THAT A DVANCE AGAINST DEPRECIATION IS NOT MEANT FOR UNCERTAIN PURPOSES. ADVANCE AGAINST DEPRECIATION IS AN AMOUNT THAT IS UNDER OBLIGATION RIGHT FROM THE INCEPTION AS THE SAME SHALL BE ADJUSTED IN FUTURE, HENCE, CANNOT BE DESIGNATED AS RESERVE. HON'BLE SUPREME COURT HAS A LSO HELD THAT ADVANCE AGAINST DEPRECIATION IS NOTHING BUT AN ADJU STMENT BY REDUCING THE NORMAL DEPRECIATION INCLUDING IN THE F UTURE YEARS IN SUCH A MANNER THAT AT THE END OF THE USEFUL LIFE OF THE PLANT THE SAME SHALL BE REDUCED TO NIL. THE HONBLE SUPREME COURT HAS ALSO HELD THAT ASSESSEE CANNOT USE THE ADVANCE AGAI NST DEPRECIATION FOR ANY OTHER PURPOSES EXCEPT TO ADJUST THE SAME AG AINST FUTURE DEPRECIATION SO AS TO REDUCE THE TARIFF IN FUTURE Y EARS. FOR THIS, THE RELEVANT OBSERVATION OF THE HON'BLE SUPREME COURT I S THAT THERE ARE BROADLY TWO TYPES OF RESERVES, VIZ., THOSE THAT ARE ROUTED THROUGH PROFIT AND LOSS ACCOUNT AND THOSE WHICH ARE NOT CARRIED VIDE PROFIT AND LOSS ACCOUNT, FOR EXAMPLE, A CAPITA L RESERVE SUCH AS SHARE PREMIUM ACCOUNT, ADVANCE AGAINST DEPRECIAT ION IS NOT A RESERVE AND IT IS NOT APPROPRIATION OF PROFITS. TH E ABOVE FINDINGS BY THE SUPREME COURT ARE CLEAR AND DECIDE THE ISSUE . IT HAS BEEN HELD THAT AAD IS NOT APPROPRIATION OF PROFIT MEANIN G THEREBY AAD IS NOT TAKEN OUT OF PROFIT. THAT IT IS NOT A D EDUCTION OUT OF PROFIT. THE SUPREME COURT HAS FURTHER HELD THAT AA D IS AN AMOUNT THAT IS UNDER OBLIGATION, RIGHT FROM THE INC EPTION. THUS IT IS A LIABILITY AND HENCE NOT INCOME. WHEN AN AMOUN T IS RECEIVED BY A PERSON FROM ANOTHER PERSON, IT CAN HAVE TWO NA TURE. IT CAN BE INCOME. IF SO IT HAS TO BE TAKEN TO THE PROFIT AND LOSS ACCOUNT AND FROM PROFIT AND LOSS ACCOUNT IT GOES TO THE BALANCE SHEET AS RESERVE. ALTERNATIVELY IT IS A LIABILITY AND STRAI GHT AWAY GOES TO THE BALANCE SHEET UNDER THE HEAD LIABILITY NOT UNDER THE HEAD RESERVE. THE SUPREME COURT HAS CATEGORICALLY HEL D THAT IT IS AN AMOUNT THAT IS UNDER OBLIGATION RIGHT FROM THE INCE PTION. THE SUPREME COURT HAS FURTHER GONE TO ANALYSE THE NATUR E OF RESERVE. IT HAS HELD THAT THERE ARE TWO TYPES OF RESERVES. ONE WHICH IS CREATED OUT OF PROFIT AND ANOTHER WHICH ARE CAPITAL RESERVE SUCH AS SHARE PREMIUM ACCOUNT. IT HAS HELD THAT AAD IS NOT A RESERVE CREATED OUT OF PROFIT SINCE AAD IS NOT INCOME BUT A LIABILITY. IF THE CONTENTION OF THE REVENUE AS IS BEING ARGUED IS TAKEN TO THE LOGICAL CONCLUSION, THEN AAD WILL BE INCOME AND HEN CE PART OF PROFIT AND LOSS ACCOUNT. THE LIABILITY CREATED WIL L BE A RESERVE BY DEBIT TO THE PROFIT AND LOSS ACCOUNT. THE SUPRE ME COURT HAS CATEGORICALLY HELD THAT AAD IS NOT A RESERVE. ON CE AAD IS CONSIDERED AS INCOME AS IS BEING ALLEGED BY REVENUE THE OBVIOUS IMPLICATION WILL BE THAT SUCH INCOME IN THE BALANCE SHEET IS A RESERVE. IT CANT BE THAT AAD IS AN INCOME AND THE N IT VANISHES. INCOME HAS TO BE CARRIED TO THE BALANCE SHEET AND S UCH INCOME ITA NO.3228/DEL/2010 5 CARRIED TO BALANCE SHEET WILL FORM PART OF THE RES ERVE. SINCE AAD HAS BEEN HELD BY SUPREME COURT IS NOT A RESER VE, THIS CONTENTION OF THE REVENUE CANT BE ACCEPTED. IT IS TO BE FURTHER NOTED THAT SUPREME COURT HAS NOT STOPPED BY JUST SA YING THAT AAD IS NOT A RESERVE. IT HAS GONE FURTHER TO DEFIN E THE NATURE OF AAD AND HELD THAT IT IS A LIABILITY AND IS TO BE DI SCHARGED IN FUTURE AS CAN BE SEEN FROM THE FOLLOWING OBSERVATIONS: AAD IS NOT MEANT FOR AN UNCERTAIN PURPOSE. AAD IS AN AMOUNT THAT IS UNDER OBLIGATION, RIGHT FROM THE INC EPTION, TO GET ADJUSTED IN THE FUTURE, HENCE, CANNOT BE DESIGNATED AS A RESERVE. AAD IS NOTHING BUT AN ADJUSTMENT BY REDUCING THE NORMAL DEPRECIATION INCLUDIBLE IN THE FUTURE YEARS IN SUCH A MANNER THAT AT THE END OF USEFUL LIFE OF THE PLANT (WHICH IS NORMALLY 30 YEARS) THE SAME WOULD BE REDUCED TO NIL . THEREFORE, THE ASSESSEE CANNOT USE THE AAD FOR ANY OTHER PURPOSE (WHICH IS POSSIBLE IN THE CASE OF A RESERVE ) EXCEPT TO ADJUST THE SAME AGAINST FUTURE DEPRECIATION SO A S TO REDUCE THE TARIFF IN THE FUTURE YEARS. IN VIEW OF THE CATEGORICAL FINDING OF THE SUPREME C OURT WE HOLD THAT THE CIT(A) WAS CORRECT IN HOLDING THAT ADVANCE AGAINST DEPRECIATION CANNOT BE ADDED UNDER THE COMPUTATION OF THE NORMAL INCOME. THE ORDER OF CIT(A) IS UPHELD AND THE APPE ALS OF THE REVENUE ARE DISMISSED. 2.2 SINCE THE ISSUE IS SAME, ADOPTING THE AFORESAID REASONING, WE HOLD THAT THE CIT(A) WAS RIGHT IN DELETING THE ADDITION MADE BY THE AO. ACCORDINGLY THESE GROUNDS ARE DISMISSED. 3. GROUND NO.3 READS AS UNDER:- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS RIGHT IN LAW IN DELETING THE ADDITIO N OF RS.32,85,48,457/- MADE BY THE ASSESSING OFFICER IN COMPUTING THE BOOK PROFIT U/S 115JB IN RESPECT OF PROVISION M ADE FOR GRATUITY, LEAVE ENCASHMENT AND POST RETIREMENT BENE FITS? ITA NO.3228/DEL/2010 6 3.1 ON THIS ISSUE, IT WAS SUBMITTED BY THE LD. AR T HAT THE ISSUE IS COVERED BY THE JUDGMENT OF THE ITAT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2002- 03 IN ITA NO. 1105/DEL/2006. 3.2 FURTHER THE LD. AR HAS ALSO PLACED RELIANCE ON THE FOLLOWING DECISIONS :- (I) BHARAT EARTH MOVERS VS. CIT (2000) 245 ITR 428 (SC) (II) DCIT VS. LUMAX IND. LTD. (DEL-TRIB) (III) ACIT VS. JAIPRAKASH HYDRO POWER LTD. (CHD-TRI B) - ITA NO. 592/CHD/2012 DT. 11.6.2013 (IV) GUJARAT STATE FERTILIZER & CHEMICAL LTD. VS. D CIT (AHM), ITA NO. 401/AHD/2010, DT. 21.6.2013 (V) RELYING ON THE JUDGMENT OF METAL BOX COMPANY OF INDIA LTD. (1969) 73 ITR 53 (SC) 3.3 IN THIS REGARD WE NOTICE THAT IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2002-03 IN ITA NO. 1105/DEL/2006, THE ITAT HAS HELD AS UNDER:- 24. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THIS CASE THE ASSESSEE HAS MADE PROVISION ON ACCOUNT OF GRATUITY, LEAVE ENCASHMENT AND POST R ETIREMENT MEDICAL BENEFIT ON ACTUARIAL BASIS. UNDER SECTION 115-JB OF THE ACT WHERE IN THE CASE OF AN ASSESSEE, BEING A COMPA NY, INCOME- TAX, PAYABLE ON THE TOTAL INCOME AS COMPUTED UNDER THIS ACT IN RESPECT OF ANY PREVIOUS YEAR IN RELEVANT TO THE ASS ESSMENT YEAR COMMENCING ON OR AFTER 1 ST APRIL, 2001 IS LESS THAN SEVEN AND ONE HALF PER CENT OF ITS BOOK PROFIT, THE TAX PAYABLE F OR THE RELEVANT PREVIOUS YEAR SHALL BE DEEMED TO BE SEVEN AND ONE H ALF PER CENT OF SUCH BOOK PROFIT. EXPLANATION TO SECTION 115-JB OF THE ACT DEFINES THE TERM BOOK PROFIT AND MEANS THE NET PR OFIT AS SHOWN IN THE PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PRE VIOUS YEAR PREPARED IN ACCORDANCE WITH THE PROVISIONS OF PART II AND III OF SCHEDULE VI OF THE COMPANIES ACT, 1956, AS INCREASE D BY THE AMOUNTS MENTIONED IN CLAUSE (A) TO (G), IF ANY SUCH AMOUNT REFERRED TO IN CLAUSES (A) TO (G) IS DEBITED TO THE PROFIT AND LOSS ACCOUNT AND REDUCED BY THE AMOUNT SPECIFIED IN CLAU SE (I) TO (VII) OF THE EXPLANATION. CLAUSE (C) OF THE EXPLANATION TALKS ABOUT THE AMOUNT OR AMOUNTS SET ASIDE TO PROVISIONS MADE FOR MEETING LIABILITIES, OTHER THAN ASCERTAINED LIABILITIES. T HE ASSESSEE HAD ITA NO.3228/DEL/2010 7 MADE PROVISIONS IN RESPECT OF GRATUITY, LEAVE ENCAS HMENT AND POST RETIREMENT MEDICAL BENEFITS BASED ON ACTUARIAL VALU ATION. HONBLE SUPREME COURT IN THE CASE OF BHARAT EARTH MOVERS (S UPRA) HAS HELD THAT IF A BUSINESS LIABILITY HAS DEFINITELY AR ISEN IN THE ACCOUNTING YEAR, THE DEDUCTION SHOULD BE ALLOWED AL THOUGH THE LIABILITY MAY HAVE TO BE QUANTIFIED AND DISCHARGED AT A FUTURE DATE. WHAT SHOULD BE CERTAIN IS THE INCURRING OF THE LIAB ILITY. IT SHOULD ALSO BE CAPABLE OF BEING ESTIMATED WITH REASONABLE CERTAINTY THOUGH THE ACTUAL QUANTIFICATION MAY NOT BE POSSIBL E. IF THESE REQUIREMENTS ARE SATISFIED THE LIABILITY IS NOT A C ONTINGENT ONE. THE LIABILITY IS IN PRESENT THOUGH IT WILL BE DISCHARGE D AT A FUTURE DATE. IT DOES NOT MAKE ANY DIFFERENCE IF THE FUTURE DATE ON WHICH THE LIABILITY SHALL HAVE TO BE DISCHARGED IS NOT CERTAI N. IN THE CASE BEFORE US THE LIABILITY ON ACCOUNT OF GRATUITY, LEA VE ENCASHMENT POST RETIREMENT MEDICAL BENEFIT HAVE BEEN ESTIMATED ON ACTUARIAL BASIS. THEREFORE, THE LIABILITY SO ESTIMATED CAN B E SAID TO HAVE BEEN ESTIMATED WITH REASONABLE CERTAINTY AND, THERE FORE, SUCH AN ESTIMATE IS NOT A CONTINGENT ONE. 25. HONBLE BOMBAY HIGH COURT IN THE CASE OF ECHJAY FORGINGS P. LTD. (SUPRA) HAS HELD THAT WHERE THE AS SESSEE HAS MADE A PROVISION FOR GRATUITY ON THE BASIS OF ACTUARIAL CALCULATIONS, IT CANNOT BE SAID THAT PROVISION FOR GRATUITY WAS NOT ASCERTAINED LIABILITY. LIKEWISE IN THE CASE OF VINITECH CORP. P. LTD. (SUPRA) HONBLE JURISDICTIONAL HIGH COURT HAS HELD THAT WHE RE A LIABILITY WHICH WAS CAPABLE OF BEING CONSTRUED IN DEFINITE TE RMS, WHICH HAD ARISEN IN THE ACCOUNTING YEAR, ALTHOUGH ITS ACTUAL QUANTIFICATION AND DISCHARGE MIGHT BE DEFERRED TO A FUTURE DATE. ONCE THE ASSESSEE IS MAINTAINING HIS ACCOUNTS ON MERCANTILE SYSTEM, A LIABILITY ACCRUED THOUGH TO BE DISCHARGED AT A FUTU RE DATE WOULD BE A PROPER DEDUCTION WHILE WORKING OUT THE PROFITS AN D GAINS OF BUSINESS, REGARD BEING HAD TO BE ACCEPTED PRINCIPLE S OF COMMERCIAL PRACTICE AND ACCOUNTANCY. IF THE FACTS OF THE CASE ARE VIEWED IN THE LIGHT OF THE DECISIONS REFERRED TO AB OVE, WE FIND THAT THE PROVISION MADE BY THE ASSESSEE IN RESPECT OF GR ATUITY, LEAVE ENCASHMENT AND POST RETIREMENT MEDICAL BENEFIT ON A CTUARIAL BASIS CANNOT BE SAID PROVISIONS FOR UNASCERTAINED LIABILI TY SO AS TO FALL IN CLAUSE (C) OF THE EXPLANATION TO SECTION 115-JB (2) OF THE ACT. ACCORDINGLY THE LD. CIT (APPEALS) AND THE ASSESSING OFFICER ERRED IN HOLDING THE PROVISIONS MADE BY THE ASSESSEE WERE ON ACCOUNT OF UN-ASCERTAINED LIABILITY TO BE ADDED BACK UNDER CLA USE (C) OF THE EXPLANATION TO SECTION 115-JB (2) OF THE ACT. ACCO RDINGLY, WE SET ASIDE THE ORDER OF THE AUTHORITIES BELOW AND DIRECT THE ASSESSING OFFICER TO ALLOW THE CLAIM OF THE ASSESSEE. ITA NO.3228/DEL/2010 8 3.4 THE FACTS ARE SAME, THEREFORE, RESPECTFULLY FOL LOWING THE DECISION OF ITAT IN ASSESSEES OWN CASE, WE DISMISS THIS GROUND OF REVENUES APPEAL. 4. GROUND NO.4 OF REVENUES APPEAL READS AS UNDER:- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) WAS RIGHT IN DELETING THE ADDITION OF RS .1,00,19,424/- MADE BY THE ASSESSING OFFICER IN COMPUTING THE BOOK PROFIT U/S 115JB IN RESPECT OF DEPRECIATION CLAIMED ON LAND AF TER AMORTIZATION OF LAND BY THE ASSESSEE DISREGARDING T HE FACT THAT THERE IS NO DEPRECIATION ALLOWABLE ON LAND UNDER CO MPANIES ACT AND NO RATE OF DEPRECIATION IS PROVIDED IN SCHEDULE XIV OF COMPANIES ACT? 4.1 THIS ISSUE IS ALSO THE SAME AS IN THE ASSESSMEN T YEAR 2004-05 WHEREBY ON THE ISSUE OF AMORTIZATION OF LAND WE HAVE HELD A S UNDER:- WE HAVE HEARD BOTH THE PARTIES. FROM THE FACTS WE NOTICE, AS POINTED OUT BY THE LD. AR THAT THIS LAND IS NOT A L AND WHICH IS OWNED BY THE ASSESSEE COMPANY. THIS IS A LAND TAKE N FOR USE FROM THE STATE GOVERNMENT WITHOUT TRANSFERRING THE TITLE FOR RELIEF AND REHABILITATION FOR LAND EVACUEES BECAUSE OF SUBMERG ES AND WHERE CONSTRUCTION OF SUCH ALTERNATIVE FACILITY IS A COND ITION FOR SETTING UP A PROJECT. THE COST SO INCURRED BY THE ASSESSEE COMPANY IS AMORTIZED OVER USEFUL LIFE OF THE PROJECT. THE ABO VE POLICIES HAVE BEEN APPROVED BY THE AUDITORS OF THE COMPANY AS WEL L AS THE C&AG. THE ACCOUNTS OF THE ASSESSEE COMPANY ARE SUB JECT TO AUDIT NOT ONLY BY THE STATUTORY AUDITORS BUT ALSO B Y THE C&AG ALSO. FURTHER THE ACCOUNTS SO PREPARED HAS BEEN AP PROVED AND ADOPTED BY THE COMPANY IN THE ANNUAL GENERAL MEETIN G AND FILED WITH THE REGISTRAR OF COMPANIES. THE SUPREME COURT IN THE CASE OF APOLLO TYRES LTD. (SUPRA) HAS HELD THAT THE AO UNDER THE INCOME-TAX ACT HAS TO AC CEPT THE AUTHENTICITY OF THE ACCOUNTS WITH REFERENCE TO THE PROVISIONS OF THE COMPANIES ACT WHICH OBLIGATES THE COMPANY TO MAINTA IN ITS ACCOUNT IN A MANNER PROVIDED BY THE COMPANIES ACT A ND THE SAME TO BE SCRUTINISED AND CERTIFIED BY THE STATUTORY AU DITORS AND WILL HAVE TO BE APPROVED BY THE COMPANY IN ITS GENERAL M EETING AND THEREAFTER TO BE FILED BEFORE THE REGISTRAR OF COMP ANIES WHO HAS A STATUTORY OBLIGATION ALSO TO EXAMINE AND SATISFY TH AT THE ACCOUNTS OF THE COMPANY ARE MAINTAINED IN ACCORDANCE WITH TH E REQUIREMENTS OF THE COMPANIES ACT. THE SUPREME COU RT HAS ITA NO.3228/DEL/2010 9 FURTHER HELD THAT THE AO WHILE COMPUTING THE INCOME UNDER SECTION 115J HAS ONLY THE POWER OF EXAMINING WHETHE R THE BOOKS OF ACCOUNT ARE CERTIFIED BY THE AUTHORITIES UNDER T HE COMPANIES ACT AS HAVING BEEN PROPERLY MAINTAINED IN ACCORDANC E WITH THE COMPANIES ACT. THE ASSESSING OFFICER THEREAFTER HAS THE LIMITED POWER OF MAKING INCREASES AND REDUCTIONS AS PROVIDE D FOR IN THE EXPLANATION TO THE SAID SECTION (115J). THE SUPREME COURT HAS FURTHER WENT ON TO HOLD TO PUT IT DIFFERENTLY, THE ASSESSING OFFICER DOES NOT HAVE THE JURISDICTION TO GO BEHIND THE NET PROFIT SHOWN IN THE PROFIT AND LOSS ACCOUNT EXCEPT TO THE EXTENT PROVIDED IN THE EXPLANATION TO SECTION 115J. IT IS NOT THE CASE OF THE REVENUE HERE THAT THE AD JUSTMENT MADE BY THE AO IS UNDER EXPLANATION TO SECTION 115J. THE C ONTENTION OF THE REVENUE HERE IS THAT LAND IS NOT A DEPRECIABLE ASSET AND DEPRECIATION CHARGED IN THE PROFIT AND LOSS ACCOUNT WHICH IS NOT IN ACCORDANCE WITH THE PROVISIONS OF THE COMPANIES ACT READ WITH ACCOUNTING STANDARD 6. AS STATED HEREINABOVE, THE CONTENTION OF THE REVENUE THAT THE LAND IN QUESTION OF THE ASSESS EE COMPANY IS NOT A DEPRECIABLE ASSET IS FACTUALLY INCORRECT AND AS HELD BY THE SUPREME COURT NO ADJUSTMENT CAN BE MADE TO NET PROF IT AS CERTIFIED BY THE STATUTORY AUDITORS. ACCORDINGLY WE HOLD THAT THE CIT(A) IS JUSTIFIED IN DELETING THE SAID ADDITION AND THIS GROUND OF APPEAL OF THE REVE NUE IS REJECTED. 4.2 SINCE THE FACTS OF THE CASE ARE IDENTICAL AND T HE ISSUE IS SAME, FOLLOWING THE JUDGMENT IN THE CASE OF APOLLO TYRES LIMITED (S UPRA), THIS GROUND OF REVENUES APPEAL IS DISMISSED. 5. GROUND NO.5 IS GENERAL IN NATURE AND NEEDS NO AD JUDICATION. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 30 TH DAY OF SEPTEMBER, 2014. SD/- SD/- (C.M. GARG) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 30 TH DAY OF SEPTEMBER, 2014/TS ITA NO.3228/DEL/2010 10 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A), FARIDABAD. 5.CIT(ITAT), NEW DELHI. AR/ITAT