AJMER VIDHYUT VITRAN NIGAM LTD., Ajmer V. ACIT, Ajmer

ITA 362/JPR/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2094 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2004-2005
• Appeal Filed On: 11-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VERINDER MEHTA; R A VERMA CIT LQ
• Keywords: Capital asset; Recovery proceedings; Business income; Depreciation; Rule of consistency; Advance ruling; Question of law; Cost of acquisition; Bad and doubtful debts; Tax effect; Reason to believe
• Section: 143(3); 115JB; 32; 148; 154

Judgement Text

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M/S AJMER VIDYUT VITRAN NIGAM LTD., VIDYUT BHAWAN, PANCHSHEEL NAGAR, MAKARWALI ROAD, AJMER. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO.: AACCA8562E VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT ITA NO. 357 TO 372/JP/16 AJMER VIDYUT VITRAN NIGAM LTD. VS. ACIT, AJMER 2 VK;DJ VIHY LA-@ ITA NO. 358/JP/16 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2005-06 THE DCIT, CIRCLE-2, AJMER. CUKE VS. M/S AJMER VIDYUT VITRAN NIGAM LTD., VIDYUT BHAWAN, PANCHSHEEL NAGAR, MAKARWALI ROAD, AJMER. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO.: AACCA8562E VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 363/JP/16 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2005-06 M/S AJMER VIDYUT VITRAN NIGAM LTD., VIDYUT BHAWAN, PANCHSHEEL NAGAR, MAKARWALI ROAD, AJMER. CUKE VS. THE ACIT, CIRCLE-2, AJMER. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO.: AACCA8562E VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 364/JP/16 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2005-06 M/S AJMER VIDYUT VITRAN NIGAM LTD., VIDYUT BHAWAN, PANCHSHEEL NAGAR, MAKARWALI ROAD, AJMER. CUKE VS. THE ACIT, CIRCLE-2, AJMER. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO.: AACCA8562E VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 365/JP/16 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2005-06 M/S AJMER VIDYUT VITRAN NIGAM LTD., VIDYUT BHAWAN, PANCHSHEEL NAGAR, MAKARWALI ROAD, AJMER. CUKE VS. THE ACIT, CIRCLE-2, AJMER. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO.: AACCA8562E VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT ITA NO. 357 TO 372/JP/16 AJMER VIDYUT VITRAN NIGAM LTD. VS. ACIT, AJMER 3 VK;DJ VIHY LA-@ ITA NO. 359/JP/16 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2007-08 THE DCIT, CIRCLE-2, AJMER. CUKE VS. M/S AJMER VIDYUT VITRAN NIGAM LTD., VIDYUT BHAWAN, PANCHSHEEL NAGAR, MAKARWALI ROAD, AJMER. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO.: AACCA8562E VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 366/JP/16 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2007-08 M/S AJMER VIDYUT VITRAN NIGAM LTD., VIDYUT BHAWAN, PANCHSHEEL NAGAR, MAKARWALI ROAD, AJMER. CUKE VS. THE ACIT, CIRCLE-2, AJMER. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO.: AACCA8562E VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 367/JP/16 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2007-08 M/S AJMER VIDYUT VITRAN NIGAM LTD., VIDYUT BHAWAN, PANCHSHEEL NAGAR, MAKARWALI ROAD, AJMER. CUKE VS. THE ACIT, CIRCLE-2, AJMER. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO.: AACCA8562E VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 360/JP/16 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09 THE DCIT, CIRCLE-2, AJMER. CUKE VS. M/S AJMER VIDYUT VITRAN NIGAM LTD., VIDYUT BHAWAN, PANCHSHEEL NAGAR, MAKARWALI ROAD, AJMER. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO.: AACCA8562E VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT ITA NO. 357 TO 372/JP/16 AJMER VIDYUT VITRAN NIGAM LTD. VS. ACIT, AJMER 4 VK;DJ VIHY LA-@ ITA NO. 368/JP/16 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09 M/S AJMER VIDYUT VITRAN NIGAM LTD., VIDYUT BHAWAN, PANCHSHEEL NAGAR, MAKARWALI ROAD, AJMER. CUKE VS. THE ACIT, CIRCLE-2, AJMER. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO.: AACCA8562E VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 369/JP/16 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09 M/S AJMER VIDYUT VITRAN NIGAM LTD., VIDYUT BHAWAN, PANCHSHEEL NAGAR, MAKARWALI ROAD, AJMER. CUKE VS. THE ACIT, CIRCLE-2, AJMER. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO.: AACCA8562E VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 370/JP/16 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2009-10 M/S AJMER VIDYUT VITRAN NIGAM LTD., VIDYUT BHAWAN, PANCHSHEEL NAGAR, MAKARWALI ROAD, AJMER. CUKE VS. THE ACIT, CIRCLE-2, AJMER. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO.: AACCA8562E VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 371/JP/16 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2010-11 M/S AJMER VIDYUT VITRAN NIGAM LTD., VIDYUT BHAWAN, PANCHSHEEL NAGAR, MAKARWALI ROAD, AJMER. CUKE VS. THE ACIT, CIRCLE-2, AJMER. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO.: AACCA8562E VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT ITA NO. 357 TO 372/JP/16 AJMER VIDYUT VITRAN NIGAM LTD. VS. ACIT, AJMER 5 VK;DJ VIHY LA-@ ITA NO. 372/JP/16 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2011-12 M/S AJMER VIDYUT VITRAN NIGAM LTD., VIDYUT BHAWAN, PANCHSHEEL NAGAR, MAKARWALI ROAD, AJMER. CUKE VS. THE ACIT, CIRCLE-2, AJMER. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO.: AACCA8562E VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRHDH VKSJ LS@ ASSESSEE BY : SHRI SUNIL PORWAL JKTLO DH VKSJ LS@ REVENUE BY : SHRI VERINDER MEHTA (CIT) AND SHRI R.A .VERMA (ADDL.CIT ) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 01/08/2017 ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT: 28/08/2017. VKNS'K@ ORDER PER BENCH: THESE ARE THE CROSS APPEALS FILED BY THE ASSESSEE A ND THE REVENUE DIRECTED AGAINST THE ORDERS OF LD. CIT(A) AJMER FOR A.Y. 2004-05, 2005-06, 2007-08, 2008-09, 2009-10, 2010-11 AND 2011-12 RESP ECTIVELY. GIVEN THE SIMILARITY OF FACTS AND COMMON GROUNDS OF APPEAL IN VOLVED IN ALL THESE YEARS, ALL THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS CONSOLIDATED ORDER. 2. BOTH THE PARTIES SUBMITTED THAT THE APPEAL PERTA INING TO THE ASSESSMENT YEAR 2004-05 MAY BE TAKEN AS A LEAD CASE. ACCORDING LY, FOR APPRECIATING THE FACTS, WE ARE TAKING APPEAL PERTAINING TO A.Y. 2004 -05 AS LEAD CASE AND THE RESPECTIVE GROUNDS OF APPEAL TAKEN AND CONTENTIONS ADVANCED BY BOTH THE PARTIES ARE CONSIDERED IN SUCCEEDING PARAGRAPHS. ASSESSEES GROUNDS OF APPEAL (ITA NO. 362/JP/16) ITA NO. 357 TO 372/JP/16 AJMER VIDYUT VITRAN NIGAM LTD. VS. ACIT, AJMER 6 UNDER THE FACTS & CIRCUMSTANCES OF THE CASE THE LD . CIT(A) HAS ERRED IN CONFIRMING THE:- (1) ADDITION OF RS. 4,64,27,170 SHOW UNDER THE PRIO R PERIOD EXPENSES CLAIMED. (2) ADDITION FOR DISALLOWANCE OF DEPRECIATION OF RS . 12,15,15,004 ON NON- EXISTING ASSETS. (3) ADDITION FOR DISALLOWANCE OF DEPRECIATION OF RS . 22,05,23,697 U/S 43(1) (WRONGLY FIGURE TAKEN BY LD CIT(A) AT RS. 12, 61,87,639). ASSESSEES GROUNDS OF APPEAL (ITA NO. 361/JP/16) UNDER THE FACTS & CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE :- (1) ADDITION OF RS. 4,64,27,170 SHOWN UNDER THE PRI OR PERIOD EXPENDITURE. (2) DISALLOWANCE OF DEPRECIATION OF RS. 23,04,20,00 0 (NOW RECTIFIED TO RS. 12,15,15,004 IN THE ASSESSMENT ORDER DATED 30.1 2.2009 PASSED U/SEC. 143(3)/148 FOR ASSESSMENT YEAR 2004-05) REVENUES GROUNDS OF APPEAL (ITA NO. 357/JP/16) IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CAS E THE LD. CIT(A), AJMER HAS ERRED IN DELETING THE DISALLOWANCES OF RS . 22,05,23,697/- MADE BY THE AO ON ACCOUNT OF EXCESS DEPRECIATION CL AIMED AND ADDED TO THE MAT INCOME WITHOUT APPRECIATING THE FACTS TH AT AS PER PROVISION OF SECTION 115JB(2) OF THE I.T. ACT THE ASSESSEE CO MPANY HAS TO FOLLOW ACCOUNTING POLICIES AND PREPARE ITS P&L ACCOUNT FO R THE RELEVANT PREVIOUS YEAR IN ACCORDANCE WITH THE PROVISIONS OF PART II & III OF SCHEDULE IV OF THE COMPANY ACT, 1956 WHICH THE ASSE SSEE COMPANY HAS NOT FOLLOWED. IN SUCH CIRCUMSTANCES THE SAME HAS RI GHTLY BEEN TAKEN FOR CALCULATION OF BOOK PROFIT U/S 115JB. PRIOR PERIOD EXPENDITURE 3. THIS IS A COMMON GROUND WHICH HAS BEEN TAKEN BY THE ASSESSEE IN ITS APPEAL NO. 362/JP/16 AND 361/JP/16 AGAINST THE ORDE RS OF LD. CIT(A) WHO HAS CONFIRMED THE ADDITION OF RS. 4,64,27,170/- TOWARDS DISALLOWANCE OF PRIOR ITA NO. 357 TO 372/JP/16 AJMER VIDYUT VITRAN NIGAM LTD. VS. ACIT, AJMER 7 PERIOD EXPENSES. APPEAL NO. 362/JP/16 RELATES TO RE ASSESSMENT ORDER PASSED UNDER 147 READ WITH 143(3) DATED 30.12.2009 AND APP EAL NO. 361/JP/16 IS IN RESPECT OF ORIGINAL ASSESSMENT ORDER PASSED U/S 143 (3) DATED 27.11.2006. 4. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE COMPANY HAS CLAIMED PRIOR PERIOD EXPENSES AMOUNTING TO RS. 4,64,27,170/ -. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE COMPANY SUBMIT TED THAT IT IS A PUBLIC SECTOR UNDERTAKING CARRYING ON THE BUSINESS OF TRAN SMISSION, DISTRIBUTION AND SUPPLY OF ELECTRICITY. THE COMPANY WAS FORMED AFTER RESTRUCTURING OF RAJASTHAN STATE ELECTRICITY BOARD (RSEB) ON 19.06.2 000 AND AT THAT TIME, CERTAIN ASSETS, LIABILITIES, COMMON EXPENDITURE WER E ALSO TRANSFERRED FROM RSEB WHICH WERE SUBJECT TO RECONCILIATION. THE ASSE SSMENT YEAR UNDER CONSIDERATION IS FOURTH YEAR OF ITS OPERATION AND C ERTAIN EXPENSES AND INCOME BEING IN THE NATURE OF PRIOR PERIOD ITEMS WERE CLAI MED AS PER NORMAL ACCOUNTING NORMS AND ON THE BELIEF THAT THESE EXPEN SES THOUGH PERTAINING TO THE PREVIOUS YEARS ARE ADMISSIBLE ONLY IN THE YEAR IN WHICH IT CRYSTALLIZED AND ACCOUNTED FOR ON THE BASIS OF SYSTEM OF ACCOUNTING REGULARLY FOLLOWED BY THE ASSESSEE. FURTHER DETAILS OF SUCH INCOME AND EXPEN SES WERE SUBMITTED DURING THE ASSESSMENT PROCEEDING. THE ASSESSING OF FICER DID NOT AGREE TO THE SUBMISSION OF THE ASSESSEE AND HELD THAT THE NET PR IOR PERIOD EXPENSES OF RS. 4,64,27,170/- DEBITED DURING THE YEAR HAS DISTORTE D THE PROFITS OF THE YEAR AS THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCO UNTING AND EXPENDITURE NOT RELATED TO THE PREVIOUS YEAR CANNOT BE ALLOWED TO B E DEDUCTED FROM INCOME OF THE SUBJECT PREVIOUS YEAR. IT WAS FURTHER STATED BY THE AO THAT THIS EXPENDITURE ALSO DOES NOT FALL UNDER THE PROVISIONS OF SECTION 35D OF THE ACT. REGARDING ASSESSEE COMPANYS CONTENTION THAT THE IS SUE HAS BEEN DECIDED IN ITS FAVOUR BY THE LD. CIT(A) FOR A.Y. 2002-03, THE ASSESSING OFFICER STATED THAT SINCE THE REVENUE IS AN APPEAL BEFORE THE TRIBUNAL AGAINST THE SAID ORDER, HE IS NOT IN A POSITION TO FOLLOW THE ORDER OF THE LD. CIT(A). FINALLY, THE ASSESSING ITA NO. 357 TO 372/JP/16 AJMER VIDYUT VITRAN NIGAM LTD. VS. ACIT, AJMER 8 OFFICER, FOLLOWING THE PAST HISTORY OF THE ASSESSEE , DISALLOWED THE PRIOR PERIOD EXPENDITURE AMOUNTING TO RS. 4,64,27,170/-. 5. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R IN APPEAL BEFORE THE LD. CIT(A) AND REITERATED ITS SUBMISSION MADE BEFOR E THE ASSESSING OFFICER. IT WAS FURTHER SUBMITTED THAT THE ISSUE HAS SINCE BEEN DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN ITS FAVOUR FOR A.Y. 2002-03 AND A.Y. 2003-04. THE LD. CIT(A) DIDNT CONSIDER THE DECISION OF THE TRIBUNAL FOR THE EARLIER YEARS. FURTHER, THE LD. CIT(A) REFERRED TO HIS PREDECESSOR ORDER FOR AY 2002-03 AND 2003-04 AND STATED THAT IN THOSE YEARS, A FINDING H AS BEEN GIVEN THAT THE LIABILITY IN RESPECT OF THESE EXPENSES WERE CRYSTAL LIZED IN THE YEAR IN WHICH THESE EXPENSES HAVE BEEN CLAIMED AS DEDUCTION. THE LD. CIT(A) FURTHER HELD THAT IN THE YEAR UNDER CONSIDERATION, EITHER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OR APPELLATE PROCEEDINGS, THE ASSESSEE HAS NOT ABLE TO PROVE THROUGH DOCUMENTARY EVIDENCE THAT LIABILITY IN RESP ECT OF PRIOR PERIOD EXPENSES HAS CRYSTALLIZED IN THE YEAR UNDER CONSIDE RATION. ACCORDING, HE CONFIRMED THE DISALLOWANCE OF THE PRIOR PERIOD EXPE NDITURE AS DONE BY THE ASSESSING OFFICER. 6. DURING THE COURSE OF HEARING, THE LD. AR SUBMIT TED THAT HONBLE RAJASTHAN HIGH COURT HAS RECENTLY DECIDED THIS PART ICULAR MATTER RELATING TO PRIOR PERIOD EXPENDITURE IN ASSESSEES OWN CASE FOR A.Y. 2003-04 IN ITS FAVOUR BY ITS JUDGEMENT DATED 19.05.2017. 7. IN THIS REGARD, FIRSTLY OUR REFERENCE WAS DRAWN TO THE DECISION OF THE COORDINATE BENCH IN ITA NO. 1019/JP/2007 DATED 17.1 0.2008 FOR AY 2003-04 WHEREIN THE COORDINATE BENCH HAS HELD AS UNDER:- THE LD. CIT(A) WHILE DECIDING THE ISSUE HAS FOLLOW ED THE DECISION OF JAIPUR BENCH OF THE TRIBUNAL ON THE ISSUE IN THE C ASE OF DCIT V/S CHAMBAL FERTILIZERS AND CHEMICALS LTD, 34 TW 59 (JP R.) HOLDING THAT THE ITA NO. 357 TO 372/JP/16 AJMER VIDYUT VITRAN NIGAM LTD. VS. ACIT, AJMER 9 DEDUCTION OF AN EXPENDITURE WILL BE ADMISSIBLE ONLY IN THE YEAR IN WHICH IT CRYSTALLIZED AND ACCOUNTED FOR ON THE BASIS OF S YSTEM OF ACCOUNTING REGULARLY FOLLOWED BY THE ASSESSEE. AN IDENTICAL IS SUE IN THE CASE OF ASSESSEE FOR THE A.Y. 2002-03 HAS ALSO BEEN DECIDED BY JAIPUR BENCH OF THE TRIBUNAL IN FAVOUR OF THE ASSESSEE VIDE ITS ORD ER DATED 31.10.2007 IN ITA NO. 272/JP/2006. UNDER THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE LD. CIT(A) WAS JUSTIFIED IN ACCEPTING THE CASE OF THE ASSESSEE ON THE ISSUE WITH THIS OBSERVATION THAT THE ASSESSE E COMPANY HAVE BEEN FOLLOWING A PARTICULAR SYSTEM OF ACCOUNTING WH ERE PRIOR PERIOD INCOME AND EXPENDITURE ARE CLAIMED ONLY WHEN THE SA ME GETS CRYSTALLIZED. THE COMPANY HAS FOLLOWED THE SYSTEM U NDER THE PECULIAR CIRCUMSTANCES OF THE CASE WHEN THE COMPANY CAME INT O EXISTENCE AFTER RESTRUCTURING OF THE PARENT COMPANY I.E. RSEB. THE FIRST APPELLATE ORDER BEING REASONED ONE IS THUS UPHELD. 8. FURTHER, OUR REFERENCE WAS DRAWN TO THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN DB APPEAL NO. 333/2009 DATED 19.05.20 17 FOR AY 2003-04 WHEREIN THE FOLLOWING QUESTION OF LAW WAS RAISED FO R ITS CONSIDERATION:- 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE THE TRIBUNAL WAS JUSTIFIED IN CONFORMING THE DELETION OF PRIOR P ERIOD EXPENSE OF RS. 1,55,40,777/- MADE BY THE ASSESSING OFFICER WHICH CANNOT ALLOWED WHILE FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. THE RELEVANT FINDINGS OF THE HONBLE HIGH COURT ARE CONTAINED IN PARA 6 AND 7 OF ITS JUDGEMENT WHICH ARE REPRODUCED AS UNDER:- 6. COUNSEL FOR THE RESPONDENT CONTENDED THAT THE IS SUE IS COVERED BY THE DECISION OF DELHI HIGH COURT IN CASE OF SMCC CO NSTRUCTION INDIA LTD. VS. ASSISTANT COMMISSIONER OF INCOME TAX REPORTED I N [2013] 38 TAXMANN.COM 146 (DELHI) WHEREIN IN PARA 13 & 14 IT HAS BEEN HELD AS UNDER:- 13. THE PRIOR PERIOD EXPENSES ARE ELIGIBLE FOR DED UCTION DURING THE CURRENT YEAR PROVIDED THE LIABILITY WAS DETERMI NED AND CRYSTALLIZED DURING THE RELEVANT YEAR. 14.THE REASON TO BELIEVE RECORDED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS DEBITED A SUM OF RS. 1,20,765 IN T HE P&L ACCOUNT ON ACCOUNT OF PRIOR PERIOD EXPENSES AFTER N ETTING INCOME ITA NO. 357 TO 372/JP/16 AJMER VIDYUT VITRAN NIGAM LTD. VS. ACIT, AJMER 10 OF RS. 30,34,463/- AND EXPENDITURE OF RS. 31,55,228 /- HAS NOT BEEN CRYSTALLIZED DURING THE YEAR 2001-02 RELEVANT TO THE ASSESSMENT YEAR 2002-03 SUCH PRIOR PERIOD EXPENSES SHOULD HAVE BEEN DISALLOWED IS NOT BASED ON ANY MATERIAL THAT HAD COME TO THE KNOWLEDGE OF THE ASSESSING OFFICER. THE ASSESSI NG OFFICER HAS PLACED RELIANCE ON THE NOTES TO THE ACCOUNTS THAT W ERE AVAILABLE AT THE TIME OF THE SCRUTINY ASSESSMENT. BUT THE NOT ES ALSO STATES THAT THE PRIOR PERIOD EXPENSES HAD CRYSTALLIZED/SET TLED IN THE YEAR. THE REASONS TO BELIEVE RECORDED DO NOT SHOW AS TO O N WHAT BASIS THE ASSESSING OFFICER HAS FORMED A REASONABLE BELIE F THAT THE SAID EXPENDITURE HAD NOT CRYSTALLIZED DURING THE YEAR RE LEVANT TO THE ASSESSMENT YEAR. IT IS APPARENT THE ASSESSING OFFIC ER SUSPECTS THAT THE INCOME HAS ESCAPED ASSESSMENT. BUT MERE SU SPICION IS NOT ENOUGH. THE REASONS TO BELIEVE MUST RECORD REAS ONS, THE READING OF WHICH SHOULD DEMONSTRATE, THAT SUCH A RE ASONABLE BELIEF COULD BE FORMED ON SOME BASIS/FOUNDATION AND WAS IN FACT FORMED BY THE ASSESSING OFFICER THAT INCOME HAS ESC APED ASSESSMENT. NO SUCH REASONABLE BELIEF CAN BE FORMED FROM THE REASONS TO BELIEVE RECORDED. 7. TAKING INTO CONSIDERATION, THE ISSUE IS REQUIRED TO BE ANSWERED IN FAVOUR OF THE ASSESSEE AGAINST THE DEPARTMENT. 9. THE LD. DR IS HEARD WHICH HAS FAIRLY CONCEDED TH AT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HO NBLE RAJASTHAN HIGH COURT. 10. IN LIGHT OF ABOVE DISCUSSION, WHAT EMERGES IS T HAT AS PER THE ACCOUNTING POLICY FOLLOWED BY THE ASSESSEE, THE PRIOR PERIOD E XPENSES AS WELL AS THE PRIOR PERIOD INCOME HAVE BEEN ACCOUNTED FOR IN ITS FINANC IAL STATEMENTS ON A REGULAR BASIS IN THE YEAR IN WHICH THEY ARE CRYSTALLIZED. THE ASSESSEE HAS BEEN CONSISTENT IN FOLLOWING THE SAID ACCOUNTING POLICY. THE ASSESSING OFFICER HAS STATED THAT FOLLOWING THE PAST HISTORY OF THE ASSES SEE, THE ADDITION ON ACCOUNT OF PRIOR PERIOD EXPENDITURE HAS BEEN MADE IN THE YE AR UNDER CONSIDERATION. THIS SHOWS THAT THE ASSESSEE HAS BEEN CONSISTENT IN ITS ACCOUNTING POLICY REGARDING PRIOR PERIOD EXPENDITURE AND THE REVENUE IS EQUALLY CONSISTENT IN ITA NO. 357 TO 372/JP/16 AJMER VIDYUT VITRAN NIGAM LTD. VS. ACIT, AJMER 11 DISALLOWING THE SAME. THE HONBLE RAJASTHAN HIGH C OURT IN ABOVE REFERRED DECISION FOR AY 2003-04 HAS DECIDED THE ISSUE IN FA VOUR OF THE ASSESSEE COMPANY. FURTHER, THE COORDINATE BENCHES IN ASSESSE ES OWN CASE FOR AY 2002-03, 2003-04 & 2006-07 HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THOUGH THE PRINCIPLE OF RES JUDICATA DOESNT APPLY IN THE INCOME TAX PROCEEDINGS BUT WHERE THE SAME 'FUNDAMENTAL ASPECT' PERMEATES IN DIFFERENT ASSESSMENT YEARS AND THE ASSESSEE IS CONSISTENT IN ITS ACCOUNTING POLICY, AS IN THE INSTANT CASE, OF ACCOUNTING FOR THE LIABILITIES IN THE YEAR IN WHICH IT IS CRYSTALLISED, THE COURTS HAVE HELD THAT THE SETTLED POSITION SHOULD NOT BE DISTURBED UNLESS THERE ARE GLARING CHANGES IN THE F ACTS AND CIRCUMSTANCES OF THE CASE OR THERE ARE CHANGE IN LAW WHICH CALL FOR A FRESH EXAMINATION. FURTHER, THE COURTS HAVE HELD THAT WHERE THE RATE O F TAX REMAINED THE SAME IN THE PRESENT ASSESSMENT YEAR AS WELL AS IN THE SUBSE QUENT ASSESSMENT YEAR, THE DISPUTE RAISED BY THE REVENUE IS ENTIRELY ACADE MIC OR AT BEST MAY HAVE A MINOR TAX EFFECT. IN THE INSTANT CASE, WE HAVE BEEN INFORMED THAT THE ASSESSEE IS SUBJECT TO CORPORATE TAX RATE OF 35% AN D THERE IS NO CHANGE IN THE SAID TAX RATE IN THE SUBSEQUENT ASSESSMENT YEAR. 11. IN THE ENTIRETY OF FACTS AND CIRCUMSTANCES OF T HE CASE AND RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE RAJASTHAN HIG H COURT IN ASSESSEES OWN CASE, THE AO IS DIRECTED TO ALLOW THE CLAIM OF DEDU CTION OF THE PRIOR PERIOD EXPENSES AMOUNTING TO RS. 4,64,27,170/-. IN THE RES ULT, THE GROUND OF APPEAL TAKEN BY THE ASSESSEE IS ALLOWED. DISALLOWANCE OF DEPRECIATION ON NON-EXISTING ASSETS 12. IN RESPECT OF GROUND NO. 2, BRIEFLY THE FACTS O F THE CASE ARE THAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT P ROCEEDINGS NOTICED THAT THE ASSETS WORTH RS. 115.21 CRORES COULD NOT BE PHY SICALLY VERIFIED AND ITA NO. 357 TO 372/JP/16 AJMER VIDYUT VITRAN NIGAM LTD. VS. ACIT, AJMER 12 FOLLOWING THE EARLIER YEARS, HE DISALLOWED DEPRECIA TION ON SUCH ASSETS AMOUNTING TO RS. 12,15,15,004/-. 13. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATT ER IN APPEAL BEFORE THE LD. CIT(A) WHO CONFIRMED THE SAID DISALLOWANCE. TH E DECISION OF TRIBUNAL FOR A.Y. 2003-04 IN ITA NO. 867/JP/2007 DATED 20.06.200 8 WAS BROUGHT TO THE NOTICE OF LD. CIT(A). THE LD. CIT(A) STATED THAT TH E ORDER OF THE TRIBUNAL FOR A.Y. 2003-04 CANNOT BE INTERPRETED TO CONCLUDE THA T DEPRECIATION, ON THE FIXED ASSETS WORTH RS. 115.21 CRORE WHICH ARE NOT P HYSICALLY AVAILABLE, IS ALLOWED INDEFINITELY, EVEN IF THE ASSESSEE DOES NOT PREPARE THE LIST OF FIXED ASSETS AFTER PHYSICAL VERIFICATION. THE ASSESSEE SH OULD HAVE COMPLETED THE EXERCISE OF PHYSICAL VERIFICATION WITHIN REASONABLE TIME WHICH HAS NOT BEEN DONE. IF THE ASSESSEE CANNOT FIND WHERE THE ASSETS OF RS 115.21 CRORE ARE LOCATED, THEN THE QUESTION OF PUTTING THEM TO USE F OR BUSINESS PURPOSES DOESNT ARISE. NO DEPRECIATION U/S 32 CAN BE ALLOW ED ON NON-EXISTING ASSETS AND ACCORDINGLY HE CONFIRMED THE DISALLOWANCE OF DE PRECIATION ON THE NON- EXISTING ASSETS OF RS. 115.21 CRORE. 14. THE LD. AR SUBMITTED THAT THE MATTER FOR ASSESS MENT YEAR 2003-04, WHICH HAS BEEN REFERRED TO BY THE LD CIT(A), HAS IN FACT BEEN SET ASIDE BY THE TRIBUNAL TO THE ASSESSING OFFICER IN THE FIRST ROUN D AND IT HAS AGAIN REACHED THE TRIBUNAL IN THE SECOND ROUND WHICH HAS SINCE BE EN DECIDED BY THE TRIBUNAL VIDE ITS CONSOLIDATED ORDER DATED 14.07.20 16 IN ITA NO. 284/JP/2009 AND ITS OTHERS. IT WAS FURTHER SUBMITTED THAT THE M ATTER IN THE SECOND ROUND OF APPELLANT PROCEEDINGS HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL AND THE SAME MAY BE FOLLOWED IN THE INSTAN T YEAR. ITA NO. 357 TO 372/JP/16 AJMER VIDYUT VITRAN NIGAM LTD. VS. ACIT, AJMER 13 15. THE RELEVANT FINDINGS OF THE COORDINATE BENCH I N ITS CONSOLIDATED ORDER DATED 14.07.2016 IN ITA NO. 284/JP/2009 AND OTHERS ARE CONTAINED AT PARAS 9 TO 9.5 WHICH ARE REPRODUCED AS UNDER:- 9. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. WE HA VE HEARD THE MATTER ON 16/6/2016. DURING THE COURSE OF HEARING, IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE THAT THE ERSTWHILE RAJASTHAN STATE ELECTRICITY BOARD WAS NOT ASSESSABLE TO INCOME TAX AND THEREFORE, IT WAS NOT FILING THE INCOME TAX RETURN. HOWEVER, THEREAFTER ON GOING THROUGH TH E RECORD AND THE JUDGMENT PASSED BY THE HON'BLE HIGH COURT AND HON'B LE SUPREME COURT, IT TRANSPIRES THAT THE RAJASTHAN STATE ELECT RICITY BOARD IS AN TAXABLE ENTITY AND THEREFORE THE MATTER WAS FIXED F OR HEARING ON 29/6/2016 FOR THE PURPOSES OF CLARIFICATION. ON 29/ 6/2016, THE LD AR ALONGWITH REPRESENTATIVES OF THE ASSESSEE WERE PRES ENT IN THE COURT. LD AR SUBMITTED THAT THE BOARD HAVE FILED THE RETURN O F INCOME FOR THE ASSESSMENT YEAR 2001-02 AND HAVE ALSO PROVIDED THE CHART FOR DEPRECIATION IN RESPECT OF FIXED ASSETS OF THE ASSE SSEE. 9.1 EVEN OTHERWISE SECTION 80 OF THE ELECTRICITY SU PPLY ACT, 1948 PROVIDES AS UNDER:- 80. PROVISION RELATING TO INCOME TAX AND SUPER TA X.- (1) FOR THE PURPOSES OF THE INDIAN INCOME-TAX ACT, 1922 (XI OF 1922), 4 THE BOARD SHALL BE DEEMED TO BE A COMPANY WITHIN THE MEANING OF THAT ACT AND SHALL BE LIABLE TO INCOME T AX AND SUPER TAX ACCORDINGLY ON ITS INCOME, PROFITS AND GAINS. (2) THE STATE GOVERNMENT SHALL NOT BE ENTITLED TO A NY REFUND OF ANY SUCH TAXES PAID BY THE BOARD. IN VIEW OF THE SPECIFIC PROVISIONS UNDER THE ELECTR ICITY SUPPLY ACT, 1948, A BOARD CONSTITUTED UNDER THE SAID ACT AND THE BOAR D IS LIABLE TO PAY TAX UNDER THE PROVISIONS OF INCOME TAX ACT, 1961 AND TH EREFORE, THE BOARD WAS REQUIRED TO FILE INCOME TAX RETURN AND THE JUDG MENT PASSED BY THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF RAJASTH AN STATE ELECTRICITY BOARD VS. DCIT (1993) 200 ITR 434 CLEARLY DEALS THA T THE RAJASTHAN STATE ELECTRICITY BOARD IS A GOVERNMENT COMPANY ASS ESSABLE UNDER THE I.T. ACT. FURTHER IN THE MATTER OF CIT VS. RAJASTHA N STATE ELECTRICITY BOARD (2007) 160 TAXMAN 19, THE HONBLE JURISDICTIO NAL HIGH COURT HAS DEALT RAJASTHAN STATE ELECTRICITY BOARD AS A GOVERN MENT COMPANY AND IS ITA NO. 357 TO 372/JP/16 AJMER VIDYUT VITRAN NIGAM LTD. VS. ACIT, AJMER 14 ALSO SUBJECT TO THE RIGOROUS OF THE INCOME TAX ACT. THEREFORE, WE ARE OF THE VIEW THAT THE RAJASTHAN STATE ELECTRICITY BOARD WAS A GOVERNMENT COMPANY AND WAS SUBJECT TO THE INCOME TAX ACT. 9.2 SINCE THE RAJASTHAN STATE ELECTRICITY BOARD WAS A GOVERNMENT UNDERTAKING AND WAS AN INCOME TAX ENTITY, THEREFORE , IT WAS HAVING BLOCK OF ASSETS AND FIXED ASSETS. ADMITTEDLY BY THE GAZETTE NOTIFICATION DATED 18/1/2002, THE RAJASTHAN STATE ELECTRICITY BO ARD WAS DIVIDED INTO FIVE UNDERTAKINGS AND THE TOTAL ASSETS OF THE RAJAS THAN STATE ELECTRICITY BOARD WERE DIVIDED IN VARIOUS COMPANIES AND THE GRO SS FIXED ASSETS OF RS. 1029 CRORES CAME TO THE SHARE OF THE ASSESSEE. IT IS THE CONTENTION OF THE LD AR THAT IT IS NOT POSSIBLE FOR THE ASSESS EE TO PHYSICALLY VERIFY THE INDIVIDUAL ASSETS AS SOUGHT BY THE LD ASSESSING OFFICER AS THE FIXED ASSETS TRANSFERRED TO THE ASSESSEE WERE FORMING PAR T OF THE BLOCK OF ASSETS PRIOR TO ITS TRANSFER WITH THE RACB. AS PER THE BALANCE SHEET OF THE RAJASTHAN STATE ELECTRICITY BOARD, THE ALLOWABL E DEPRECIATION UP TO 19/7/2000 WAS MENTIONED AS RS.1,04,82,30,121/-.SINC E BLOCK OF ASSETS WERE TRANSFERRED TO THE ASSESSEE, THEREFORE, THE IN SISTENCE OF THE LD ASSESSING OFFICER FOR PHYSICAL VERIFICATION OF THE ASSETS FOR THE PURPOSES OF DEPRECIATION, IN OUR VIEW, WAS NOT WARRANTED. IN OUR VIEW, ONCE THE ASSETS ARE FORMING PART AND PARCEL OF THE BLOCK OF ASSETS, WHICH WERE TRANSFERRED TO THE ASSESSEE FROM RAJASTHAN STATE EL ECTRICITY BOARD, THE PHYSICAL VERIFICATION FOR THE PURPOSES OF DEPRECIAT ION MAY NOT BE REQUIRED AND THEREFORE, THE ASSESSEE IS ENTITLED TO DEPRECIATION ON THE WRITTEN DOWN VALUE OF THE ASSETS A PER INCOME TAX A CT 1961, SUBSEQUENT TO THE TRANSFER FROM THE ASSETS FROM RAJ ASTHAN STATE ELECTRICITY BOARD. 9.3 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 TRAN SFERRED BY THE RAJASTHAN ELECTRICITY BOARD WITH THE ORIGINAL COST OF ACQUISITION, SHALL BE DETERMINED THE WRITTEN DOWN VALUE FOR THE ASSESSEE COMPANY. THE HONBLE DELHI HIGH COURT IN THE CASE OF DALMIA CERA MIC INDUSTRIES LTD. ITA NO. 357 TO 372/JP/16 AJMER VIDYUT VITRAN NIGAM LTD. VS. ACIT, AJMER 15 VS. CIT (2005) 277 ITR 219 HAS HELD THAT WHAT WOUL D BE THE ACTUAL COST OF THE TRANSFEREE COMPANY ON THE DATE OF TRANS FER IS INDICATED IN SECTION 43(1), EXPLANATION-6, THUS THE ACTUAL COST OF TRANSFEREE COMPANY WILL BE WRITTEN DOWN VALUE OF THE HOLDING C OMPANY. 9.4 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 TRANSFEROR COMPANY (RACB). THE RELEVANT PORTION OF THE JUDGMENT IS REPRODUCED HEREINBELOW: 8. THE ONLY ISSUE BEFORE THIS COURT IS WHETHER THE WRI TTEN DOWN VALUE OF THE HOLDING COMPANY IS TO BE TAKEN AS ACTUAL COS T OF THE ASSESSEE OR THE AMOUNT PAID BY THE ASSESSEE TO THE HOLDING COMPANY? CHAPTER IV OF THE ACT REFERS TO COMPUTATIO N OF BUSINESS INCOME AND SECTION 43 IS REQUIRED TO BE EXAMINED FO R THE PURPOSE OF DECIDING THIS MATTER. SECTION 43(1) OF THE ACT W HICH 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 THEREOF, IF ANY , AS HAS BEEN MET DIRECTLY OR INDIRECTLY BY ANY OTHER PERSON OR AUTHO RITY : PROVIDED THAT WHERE THE ACTUAL COST OF AN ASSET, B EING A MOTOR-CAR WHICH IS ACQUIRED BY THE ASSESSEE AFTER THE 31ST DA Y 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 TOURIS TS, EXCEEDS TWENTY-FIVE THOU SAND RUPEES, THE EXCESS OF THE ACT UAL COST OVER SUCH AMOUNT SHALL BE IGNORED, AND THE ACTUAL COST T HEREOF SHALL BE TAKEN TO BE TWENTY-FIVE THOUSAND RUPEES.' 9. WHAT IS WRITTEN DOWN VALUE IS DEFINED IN CLAUSE (6) OF SECTION 43 WHICH READS AS UNDER : ' ' WRITTEN-DOWN VALUE' MEANS (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 DEPRECIATION A CTUALLY 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 ITA NO. 357 TO 372/JP/16 AJMER VIDYUT VITRAN NIGAM LTD. VS. ACIT, AJMER 16 ORDERS ISSUED WHEN THE INDIAN INCOME-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 THE ASS ESSMENT YEAR 1975-76. SUB- CLAUSE (B) CLEARLY INDICATES THAT THE WRITTEN DOWN VALUE MEANS THE ACTUAL COST TO THE ASSESSEE LESS AL L DEPRECIATION ACTUALLY ALLOWED TO HIM UNDER THE ACT. IN THE INSTA NT CASE EXPLANATION 2 TO CLAUSE (6) OF SECTION 43 IS RELEVA NT 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 SUBSI DIARY COMPANY TO ITS HOLDING COMPANY, THEN, IF THE CONDITIONS OF CLAUSE (IV), OR, AS THE CASE MAY BE, OF CLAUSE (V) OF SECTION 47, ARE S ATISFIED, THE WRITTEN DOWN VALUE OF THE TRANSFERRED CAPITAL ASSET TO THE TRANSFEREE-COMPANY SHALL BE TAKEN TO BE THE SAME AS IT WOULD HAVE BEEN IF THE TRANSFEROR-COM PANY HAD CONTINUED TO HO LD 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 WOU LD BE THE WRITTEN DOWN VALUE OF THE TRANSFEROR-COMPANY. THIS ASPECT I S REQUIRED TO BE BORNE IN MIND WHILE CONSIDERING THE QUESTION. WE WILL NOW HAVE TO TURN TO EXPLANATION 6 TO SECTION 43(1) WHICH REA DS AS UNDER : ' EXPLANATION 6.WHEN ANY CAPITAL ASSET IS TRANSFE RRED BY A HOLD ING COMPANY TO ITS SUBSIDIARY COMPANY, OR BY A SUBS IDIARY COMPANY TO ITS HOLDING COMPANY, THEN, IF THE CONDITIONS OF CLAUSE (IV) OR, AS THE CASE MAY BE, OF CLAUSE (V) OF SECTION 47 ARE SA TISFIED, THE ACTUAL COST OF THE TRANSFERRED CAPITAL ASSET TO THE TRANSFEREE- COMPANY SHALL BE TAKEN TO BE THE SAME AS IT WOULD H AVE BEEN IF THE TRANSFEROR-COMPANY HAD CONTINUED TO HOLD THE CA PITAL ASSET FOR THE PURPOSES 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 (TRANSFEROR-COMPA NY). 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 ITA NO. 357 TO 372/JP/16 AJMER VIDYUT VITRAN NIGAM LTD. VS. ACIT, AJMER 17 (GUJ). IT IS REQUIRED TO BE NOTED THAT THE REVENUE AS WELL AS THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THE APE X COURT IN THE CASE OF SAHARANPUR ELECTRIC SUPPLY CO. LTD. V. CIT [1992] 194 ITR 294 . THE APEX COURT CONSIDERED THE DECISIONS IN MAHARA NA MILLS P. LTD. V. ITO [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 PROVISIONS 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 INVOLVED IN THE TRANSFER, FOR THE PURPOSES OF THIS CLAUSE, HAS TO BE DETERMIN ED AS AT THE TIME OF THE TRANSFER OF THE ASSET AND WILL NOT BE A WOBB LING OR FLUCTUATING ONE AS SUGGESTED BY COUNSEL FOR THE ASS ESSEE. . .' 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 FOR THE PROP ERTY HAS BEEN TAXED IN THE HANDS OF THE HOLDING COMPANY IN THE RE LEVANT ASSESSMENT YEARS AND THERE IS NO DISPUTE ON THIS IS SUE. 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 EVASION 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 THE ASSE SSING OFFICER TO EXAMINE THE CASE AND RE-DETERMINE THE ACTUAL COS T. IN FACT THE APEX COURT HAS CONSIDERED THIS ASPECT AT PAGE 306 A ND POINTED OUT INSTANCES. THE APEX COURT AT PAGE 309 (SEE [1992] 1 94 ITR) AS UNDER: 'IN PRINCIPLE, THEREFORE, WE ARE UNABLE TO ACCEPT THE 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.' 9.5 IN VIEW THEREOF, THIS GROUND OF THE ASSESSEES APPEAL IS ALLOWED. ITA NO. 357 TO 372/JP/16 AJMER VIDYUT VITRAN NIGAM LTD. VS. ACIT, AJMER 18 16. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. UNDISPUTEDLY, THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. NO CONTRARY AUTHORITY HAS BEEN BROUGHT T O OUR NOTICE SUBSEQUENT TO THE ABOVE REFERRED DECISION OF THE COORDINATE BENCH . IN LIGHT OF THE SAME, FOLLOWING THE DECISION OF THE COORDINATE BENCH, THE GROUND IS ALLOWED IN FAVOUR OF THE ASSESSEE COMPANY. DISALLOWANCE OF DEPRECIATION U/S 32 R/W SEC 43(1), EXPLANATION 10 17. IN RESPECT OF GROUND NO. 3, BRIEFLY THE FACTS O F THE CASE ARE THAT THE ASSESSING OFFICER AFTER GOING THROUGH THE SCHEDULE- 2 OF THE BALANCE SHEET OF THE ASSESSEE COMPANY NOTICED THAT THERE IS AN INCRE ASE IN CONTRIBUTION, GRANTS AND SUBSIDIES TOWARDS COST OF CAPITAL ASSETS DURING THE YEAR WHICH HAS NOT BEEN REDUCED FROM THE COST OF THE ASSETS FOR THE PU RPOSE OF CALCULATION OF DEPRECIATION. IN VIEW OF SECTION 32(1)(III) READ W ITH SECTION 43(1) AND EXPLANATION 10 THERETO AND AFTER GOING THROUGH THE SUBMISSION OF THE ASSESSEE, HE REDUCED SUCH CONTRIBUTION, GRANTS AND SUBSIDIES FROM THE COST OF CAPITAL ASSETS AND RECALCULATED THE DEPRECIATION AL LOWABLE TO THE ASSESSEE COMPANY AND DISALLOWED THE AMOUNT OF RS. 22,05,23,6 97/- AS EXCESS DEPRECIATION CLAIMED BY THE ASSESSEE COMPANY. ON APPEAL, THE LD. CIT(A) CONFIRMED THE SAID DISALLOWANCE OF EXCESS DEPRECIAT ION. 18. DURING THE COURSE OF HEARING, THE LD. AR FAIRLY CONCEDED THAT THE ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE BY THE COORDI NATE BENCH IN ITS CONSOLIDATED DECISION DATED 14.07.2016. THE RELEVAN T FINDING OF THE COORDINATE BENCH IS CONTAINED AT PARA 14 WHICH IS R EPRODUCED AS UNDER:- 14. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. DURIN G THE COURSE OF ARGUMENT, A POINTED QUERY WAS ASKED FROM THE LD AR, TO WHICH IT WAS FAIRLY STATED THAT THE CONTRIBUTION / GRANT IN THE FORM OF SUBSIDY WERE ITA NO. 357 TO 372/JP/16 AJMER VIDYUT VITRAN NIGAM LTD. VS. ACIT, AJMER 19 RECEIVED FROM THE STATE GOVT./OTHER DEPARTMENT TOWA RDS THE COST OF CAPITAL ASSET AND FOR REPLACEMENT OF THE ASSETS. EX PLANATION 10 TO SECTION 43 OF THE ACT PROVIDES AS UNDER:- [EXPLANATION 10.- WHERE A PORTION OF THE COST OF A N ASSET ACQUIRED BY THE ASSESSEE HAS BEEN MET DIRECTLY OR INDIRECTLY B Y THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT OR ANY AUTHORITY ESTABLISHED UNDER ANY LAW OR BY ANY OTHER PERSON, IN THE FORM OF A SUBSIDY OR GRANT OR REIMBURSEMENT (BY WHATEVER NAME CALLED), THEN, SO MUCH OF THE COST AS IS RELATABLE TO SUCH SUBSIDY OR GRANT OR REIMBURSEMENT SHALL NOT BE INCLUDED IN THE ACTUA L COST OF THE ASSET TO THE ASSESSEE : PROVIDED THAT WHERE SUCH SUBSIDY OR GRANT OR REIMBURSEMENT IS OF SUCH NATURE THAT IT CANNOT BE DIRECTLY RELATABLE TO THE ASSET ACQUIRED SO MUCH OF THE AMOUNT WHICH BEARS TO THE TOTAL SUBSIDY OR REIMBURSEMENT OR GRANT THE SAME PROPORTION AS SUCH ASSET BEARS TO ALL THE ASSETS IN RESPECT OF OR WITH REFERENCE TO WHICH THE SUBSIDY OR GRANT OR REIMBURSEMENT IS SO RECEIVED, SHALL NOT BE INCLUDED IN THE ACTUAL COST OF THE ASSET TO THE ASSESSEE.] A BARE READING OF THE EXPLANATION 10 OF SECTION 43 OF THE ACT, WHICH CLEARLY PROVIDES THAT WHERE A PORTION OF THE COST O F AN ASSET ACQUIRED BY THE ASSESSEE HAS BEEN MET DIRECTLY OR INDIRECTLY BY THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT IN THE FORM OF A S UBSIDY OR GRANT OR REIMBURSEMENT, THEN, SO MUCH OF THE SUBSIDY OR GRAN T OR REIMBURSEMENT SHALL NOT BE INCLUDED IN THE ACTUAL C OST OF THE ASSET TO THE ASSESSEE. ADMITTEDLY, THE AMOUNT HAS BEEN RECEI VED BY THE ASSESSEE IN THE FORM OF GRANT/REIMBURSEMENT/SUBSIDY FROM THE STATE GOVERNMENT THEREFORE, IN OUR VIEW, THE ORDER PASSE D BY THE LD CIT(A) IS REQUIRED TO BE UPHELD AND THE VALUE OF THE ASSET S SHALL BE TAKEN BY THE LD ASSESSING OFFICER AFTER ADJUSTING THE SUBSIDY/GRANT/REIMBURSEMENT FROM THE STATE GOVT. OR THE OTHER GOVERNMENT DEPARTMENTS. ACCORDINGLY, THIS ISSUE IS DECIDED AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE. ITA NO. 357 TO 372/JP/16 AJMER VIDYUT VITRAN NIGAM LTD. VS. ACIT, AJMER 20 19. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. UNDISPUTEDLY, THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. FOLLOWING THE DECISION OF THE COORDINATE BENCH REFERRED SUPRA, THE GROUND TAKEN BY THE ASSESSEE COMPANY IS DISMISSED. APPLICABILITY OF MAT PROVISIONS U/S 115JB OF THE AC T 20. AT THE OUTSET, THE LD. AR SUBMITTED THAT THE CO ORDINATE BENCH IN ASSESSEES OWN CASE IN ITS CONSOLIDATED ORDER DATED 14.07.2016 HAS DECIDED AGAINST THE APPLICABILITY OF THE MAT PROVISIONS TO THE ASSESSEE COMPANY. IT WAS ACCORDINGLY SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE COORDINATE BENCH WHICH MAY K INDLY BE FOLLOWED. 21. THE RELEVANT FINDINGS OF THE COORDINATE BENCH I N ITS CONSOLIDATED ORDER DATED 14.07.2016 IS CONTAINED AT PARA 19 WHICH ARE REPRODUCED AS UNDER:- 19. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH TH E PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. WE HA VE ALSO GONE THROUGH THE CONTENTION RAISED BY THE ASSESSEE AS WE LL AS THE ORDER PASSED BY THE ADVANCE RULINGS (INCOME TAX), NEW DEL HI. ADVANCE RULINGS (INCOME TAX), NEW DELHI EVEN IN THE MATTER OF JODHPUR VIDYUT VITRAN NIGAM LIMITED, WHICH IS SITUATED ON THE SAME PEDESTAL AS THAT OF THE ASSESSEE, HAVE BEEN ACCEPTED BY THE REVENUE AND THE REVENUE HAS NOT INSISTED FOR APPLICATION OF PROVISIONS OF MAT U /S 115JB OF THE ACT. THEREFORE RESPECTFULLY FOLLOWING THE ORDER PASSED B Y THE ADVANCE RULINGS (INCOME TAX), NEW DELHI AND APPLYING THE SA ME TO THE PRESENT FACTS AND CIRCUMSTANCE OF THE CASE, WE DECIDE THE I SSUES IN FAVOUR OF THE ASSESSEE. WE ALSO HELD THAT THE BENEFIT AS HAS BEEN GIVEN TO JODHPUR VIDYUT VITRAN NIGAM LIMITED UNDER THE PROVI SIONS OF THE ELECTRICITY ACT AND THE COMPANIES ACT BE ALSO EXTEN D IT TO THE ASSESSEE WITHOUT INSISTING FOR THE APPLICATION OF SECTION 11 5JB OF THE ACT IN THE LIGHT OF THE ABOVE, THE ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. ACCORDINGLY, THIS GROUND OF AP PEAL OF THE ASSESSEE IS ALLOWED. ITA NO. 357 TO 372/JP/16 AJMER VIDYUT VITRAN NIGAM LTD. VS. ACIT, AJMER 21 22. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. UNDISPUTEDLY, THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES OF THE CASE OR IN THE LEGAL POSITION. NO CONTRARY AUT HORITY HAS BEEN BROUGHT TO OUR NOTICE SUBSEQUENT TO THE ABOVE REFERRED DECISIO N OF THE COORDINATE BENCH. IN LIGHT OF THE SAME, FOLLOWING THE DECISION OF THE COORDINATE BENCH, THE PROVISIONS OF SECTION 115JB ARE HELD NOT APPLICABLE TO THE ASSESSEES COMPANY AND THE GROUND IS THUS ALLOWED IN FAVOUR OF THE ASS ESSEE COMPANY. ITA. NO. 361/JP/16 23. THIS APPEAL IS ARISING OUT OF THE ORDER PASSED BY THE LD CIT(A) PURSUANT TO ASSESSMENT ORDER U/S 143(3) OF THE ACT FOR AY 20 04-05 WHEREIN THE ASSESSEE HAS CHALLENGED THE ADDITION OF RS. 4,64,27 ,170/- TOWARDS PRIOR PERIOD EXPENDITURE AND DISALLOWANCE OF DEPRECIATION OF RS 23,04,20,000 SINCE RECTIFIED TO RS 12,15,15,004. IN ITA NO. 362/JP/16 FOR AY 2004-05 ARISING OUT OF THE ORDER PASSED BY THE LD CIT(A) PURSUANT TO RE ASSESSMENT UNDER SECTION 147 READ WITH SECTION 143(3) OF THE ACT, WE HAVE AL READY EXAMINED BOTH THESE ISSUES IN DETAIL. OUR FINDINGS AND DIRECTION S CONTAINED IN ITA NO. 362/JP/2016 SHALL APPLY MUTATIS MUTANDIS TO THIS APPEAL AS WELL. IN THE RESULT, BOTH THE GROUNDS TAKEN BY THE ASSESSEE ARE ALLOWED. ITA. NO. 357/JP/16 24. IN THIS APPEAL FOR AY 2004-05, THE REVENUE HAS CHALLENGED THE ACTION OF LD CIT(A) IN DELETING THE DISALLOWANCE OF EXCESS DE PRECIATION CLAIMED BY THE ASSESSEE COMPANY AMOUNTING TO RS. 22,05,23,697/- WHILE WORKING OUT THE BOOK PROFITS AS PER PROVISIONS OF SECTION 115JB OF THE ACT. 25. IN ITA NO. 362/JP/16 (SUPRA), WE HAVE ALREADY TAKEN A VIEW THAT THE PROVISIONS OF SECTION 115JB ARE NOT APPLICABLE TO T HE ASSESSEE COMPANY. IN VIEW OF THE SAME, THE SUBJECT GROUND OF APPEAL RELA TING TO EXCESS DEPRECIATION ITA NO. 357 TO 372/JP/16 AJMER VIDYUT VITRAN NIGAM LTD. VS. ACIT, AJMER 22 RELATING TO COMPUTATION OF BOOK PROFITS BECOMES ACA DEMIC AND WE DONOT THINK IT IS NECESSARY TO EXAMINE THE SAME IN DETAIL. IN THE RESULT, THE GROUND OF THE REVENUES APPEAL IS DISMISSED BEING INFRUCTIOUS. ASSESSMENT YEAR 2005-06 (ITA NO. 364/363/365/JP/16 & ITA NO. 358/JP/16) 26. FOR AY 2005-06, THERE ARE THREE APPEALS FILED B Y THE ASSESSEE. IN ITA NO. 364/JP/2016, THE ASSESSEE HAS CHALLENGED THE OR DER OF LD CIT(A) DATED 22.01.2016 PASSED PURSUANT TO THE ASSESSMENT ORDER U/S 143(3) OF THE ACT. IN ITA NO. 363/JP/2016, THE ASSESSEE HAS CHALLENGED THE ORDER OF LD CIT(A) DATED 22.01.2016 PASSED PURSUANT TO THE REASSESSMEN T ORDER DATED 30.12.2009 U/S 147 R/W SECTION 143(3) OF THE ACT. IN ITA NO. 365/JP/2016, THE ASSESSEE HAS CHALLENGED THE ORDER OF LD CIT(A) DATED 22.01.2016 PASSED PURSUANT TO THE REASSESSMENT ORDER DATED 21.01.2013 U/S 147 R/W SECTION 143(3) OF THE ACT. IN EACH OF THESE THREE APPEALS, THE ASSESSEE HAS TAKEN COMMON GROUNDS OF APPEAL RELATING TO DISALLOWANCE O F PRIOR PERIOD EXPENSES, DISALLOWANCE OF DEPRECIATION ON NON-EXISTING ASSETS AND DISALLOWANCE OF DEPRECIATION UNDER SECTION 32 R/W SECTION 43(1) OF THE ACT. IN ITA NO. 363/JP/16 AND ITA NO. 365/JP/16, THE ASSESSEE HAS A LSO TAKEN GROUNDS CHALLENGING ISSUE OF NOTICE U/S 148 OF THE ACT AS W ELL AS APPLICABILITY OF MAT PROVISIONS UNDER SECTION 115JB OF THE ACT. IN ITA NO. 358/JP/16, THE REVENUE HAS CHALLENGED THE ACTION OF LD CIT(A) IN D ELETING THE DISALLOWANCE OF EXCESS DEPRECIATION CLAIMED BY THE ASSESSEE COMPANY AMOUNTING TO RS. 30,84,28,063/- WHILE WORKING OUT THE BOOK PROFITS AS PER PROVISIONS OF SECTION 115JB OF THE ACT. 27. WE HAVE EXAMINED THE SUBJECT ISSUES IN DETAIL I N ITA NO. 362/JP/16 FOR AY 2004-05 RELATING TO DISALLOWANCE OF PRIOR PERIOD EXPENSES, DISALLOWANCE OF ITA NO. 357 TO 372/JP/16 AJMER VIDYUT VITRAN NIGAM LTD. VS. ACIT, AJMER 23 DEPRECIATION ON NON-EXISTING ASSETS, DISALLOWANCE O F DEPRECIATION UNDER SECTION 32 R/W SECTION 43(1) OF THE ACT AND APPLICA BILITY OF MAT PROVISIONS UNDER SECTION 115JB OF THE ACT. UNDISPUTEDLY, BOTH THE PARTIES AGREED THAT THE FACTS AND CIRCUMSTANCES OF THE CASE ARE IDENTIC AL. OUR FINDINGS AND DIRECTIONS CONTAINED IN ITA NO. 362/JP2016 SHALL AC CORDINGLY APPLY MUTATIS MUTANDIS TO THESE MATTERS. 28. REGARDING ASSESSEES GROUND CHALLENGING ISSU E OF NOTICE U/S 148 OF THE ACT, THE SAME WAS NOT PRESSED. HENCE, THE SAME IS DISMISSED AS NOT PRESSED. 29. REGARDING REVENUES GROUND CHALLENGING THE D ELETING THE DISALLOWANCE OF EXCESS DEPRECIATION CLAIMED BY THE ASSESSEE COMP ANY WHILE WORKING OUT THE BOOK PROFITS AS PER PROVISIONS OF SECTION 115JB OF THE ACT, AS WE HAVE HELD ABOVE THAT THE PROVISIONS OF SECTION 115JB ARE NOT APPLICABLE, THE SUBJECT GROUND OF APPEAL BECOMES ACADEMIC AND IS DISMISSED BEING INFRUCTIOUS. 30. WITH THE ABOVE DIRECTIONS, THE GROUNDS OF APP EAL FOR AY 2005-06 ARE DISPOSED OFF. ASSESSMENT YEAR 2007-08 (ITA NO. 366/367/JP/16 & ITA NO. 359/JP/16) 31. FOR AY 2007-08, THERE ARE TWO APPEALS FILED BY THE ASSESSEE. IN ITA NO. 366/JP/2016, THE ASSESSEE HAS CHALLENGED THE OR DER OF LD CIT(A) DATED 22.01.2016 PASSED PURSUANT TO THE ASSESSMENT ORDER U/S 143(3) OF THE ACT AND HAS TAKEN GROUNDS OF APPEAL RELATING TO DISALLO WANCE OF PRIOR PERIOD EXPENSES, DISALLOWANCE OF DEPRECIATION ON NON-EXIST ING ASSETS, DISALLOWANCE OF DEPRECIATION UNDER SECTION 32 R/W SECTION 43(1) OF THE ACT AND APPLICABILITY OF MAT PROVISIONS UNDER SECTION 115JB OF THE ACT. IN ITA NO. 367/JP/2016, THE ITA NO. 357 TO 372/JP/16 AJMER VIDYUT VITRAN NIGAM LTD. VS. ACIT, AJMER 24 ASSESSEE HAS CHALLENGED THE ORDER OF LD CIT(A) DATE D 22.01.2016 PASSED PURSUANT TO THE REASSESSMENT ORDER U/S 147 R/W SECT ION 143(3) OF THE ACT, THE ASSESSEE HAS TAKEN GROUNDS OF APPEAL CHALLENGING IS SUE OF NOTICE U/S 148 OF THE ACT, APPLICABILITY OF MAT PROVISIONS UNDER SECT ION 115JB OF THE ACT AND DISALLOWANCE OF DEPRECIATION AMOUNTING TO RS 8,50,9 9,110 SINCE RECTIFIED TO RS 2,00,13,600 WHILE COMPUTING BOOK PROFITS UNDER S ECTION 115JB OF THE ACT. IN ITA NO. 359/JP/16, THE REVENUE HAS CHALLENGED TH E ACTION OF LD CIT(A) IN DELETING THE DISALLOWANCE OF EXCESS DEPRECIATION CL AIMED BY THE ASSESSEE COMPANY AMOUNTING TO RS. 22,71,05,598/- WHILE WOR KING OUT THE BOOK PROFITS AS PER PROVISIONS OF SECTION 115JB OF THE A CT. 32. WE HAVE EXAMINED THE SUBJECT ISSUES IN DETAIL I N ITA NO. 362/JP/16 FOR AY 2004-05 RELATING TO DISALLOWANCE OF PRIOR PERIOD EXPENSES, DISALLOWANCE OF DEPRECIATION ON NON-EXISTING ASSETS, DISALLOWANCE O F DEPRECIATION UNDER SECTION 32 R/W SECTION 43(1) OF THE ACT AND APPLICA BILITY OF MAT PROVISIONS UNDER SECTION 115JB OF THE ACT. UNDISPUTEDLY, BOTH THE PARTIES AGREED THAT THE FACTS AND CIRCUMSTANCES OF THE CASE ARE IDENTIC AL. OUR FINDINGS AND DIRECTIONS CONTAINED IN ITA NO. 362/JP2016 SHALL AP PLY MUTATIS MUTANDIS TO THIS APPEAL AS WELL. 33. REGARDING ASSESSEES GROUND CHALLENGING ISSU E OF NOTICE U/S 148 OF THE ACT, THE SAME WAS NOT PRESSED. HENCE, THE SAME IS DISMISSED AS NOT PRESSED. 34. REGARDING ASSESSEES AND REVENUES GROUND REL ATING TO DEPRECIATION ADJUSTMENT WHILE WORKING OUT THE BOOK PROFITS AS P ER PROVISIONS OF SECTION 115JB OF THE ACT, AS WE HAVE HELD ABOVE IN ITA NO. 362/JP/16 THAT THE PROVISIONS OF SECTION 115JB ARE NOT APPLICABLE, THE SUBJECT GROUNDS OF APPEAL BECOMES ACADEMIC AND ARE DISMISSED BEING INFRUCTIOU S. ITA NO. 357 TO 372/JP/16 AJMER VIDYUT VITRAN NIGAM LTD. VS. ACIT, AJMER 25 35. WITH THE ABOVE DIRECTIONS, THE GROUNDS OF APPEA L FOR AY 2007-08 ARE DISPOSED OFF. ASSESSMENT YEAR 2008-09 (ITA NO. 369/368/JP/16 & IT A NO. 360/JP/16) 36. FOR AY 2008-09, THERE ARE TWO APPEALS FILED BY THE ASSESSEE. IN ITA NO. 369/JP/2016, THE ASSESSEE HAS CHALLENGED THE OR DER OF LD CIT(A) DATED 20.01.2016 PASSED PURSUANT TO THE ASSESSMENT ORDER U/S 143(3) OF THE ACT AND HAS TAKEN GROUNDS OF APPEAL RELATING TO DISALLO WANCE OF DEPRECIATION ON NON-EXISTING ASSETS, DISALLOWANCE OF DEPRECIATION U NDER SECTION 32 R/W SECTION 43(1) OF THE ACT AND APPLICABILITY OF MAT PROVISION S UNDER SECTION 115JB OF THE ACT. IN ITA NO. 368/JP/2016, THE ASSESSEE HAS CHALLENGED THE ORDER OF LD CIT(A) DATED 20.01.2016 PASSED PURSUANT TO THE RECT IFICATION ORDER U/S 154 OF THE ACT AND HAS TAKEN GROUNDS OF APPEAL CHALLENGING ACTION OF AO INVOKING PROVISIONS OF SECTION 154 ON ISSUES WHICH ARE NOT M ISTAKE APPARENT FROM RECORD, APPLICABILITY OF MAT PROVISIONS UNDER SECTI ON 115JB OF THE ACT, DISALLOWANCE OF DEPRECIATION ON STOLEN FIXED ASSETS WORTH RS 1.49 CRORES, ON NON-EXISTENCE ASSETS, ON ASSETS LYING IDLE AND EXC ESS DEPRECIATION UNDER SECTION 32 R/W SECTION 43(1) OF THE ACT. IN ITA NO . 360/JP/16, THE REVENUE HAS CHALLENGED THE ACTION OF LD CIT(A) IN DELETING THE DISALLOWANCE OF EXCESS DEPRECIATION CLAIMED BY THE ASSESSEE COMPANY AMOUNT ING TO RS. 12,61,87,639/- WHILE WORKING OUT THE BOOK PROFITS AS PER PROVISIONS OF SECTION 115JB OF THE ACT. 37. WE HAVE EXAMINED THE SUBJECT ISSUES IN DETAIL I N ITA NO. 362/JP/16 FOR AY 2004-05 RELATING TO DISALLOWANCE OF DEPRECIATION ON NON-EXISTING ASSETS, DISALLOWANCE OF EXCESS DEPRECIATION UNDER SECTION 3 2 R/W SECTION 43(1) OF THE ACT AND APPLICABILITY OF MAT PROVISIONS UNDER SECTI ON 115JB OF THE ACT. ITA NO. 357 TO 372/JP/16 AJMER VIDYUT VITRAN NIGAM LTD. VS. ACIT, AJMER 26 UNDISPUTEDLY, BOTH THE PARTIES AGREED THAT THE FACT S AND CIRCUMSTANCES OF THE CASE ARE IDENTICAL. OUR FINDINGS AND DIRECTIONS CO NTAINED IN ITA NO. 362/JP2016 SHALL APPLY MUTATIS MUTANDIS TO THIS APPEAL AS WELL. 38. IN ITA NO. 368/JP/2016, THE ASSESSEE HAS CHALL ENGED THE ACTION OF THE AO WHERE HE HAS CARRIED OUT VARIOUS ADJUSTMENTS REL ATING TO DEPRECIATION WHILE WORKING OUT THE BOOK PROFITS FOR THE PURPOSES OF COMPUTING THE MAT LIABILITY UNDER SECTION 115JB OF THE ACT AND PASSED AN ORDER UNDER SECTION 154 OF THE ACT. SIMILARLY, REVENUE IN ITS APPEAL IN ITA NO. 360/JP/16 HAS RAISED GROUND RELATING TO DEPRECIATION ADJUSTMENT WHILE WO RKING OUT THE BOOK PROFITS AS PER PROVISIONS OF SECTION 115JB OF THE ACT. AS WE HAVE HELD ABOVE IN ITA NO. 362/JP/16 THAT THE PROVISIONS OF SECTION 115JB ARE NOT APPLICABLE TO THE ASSESSEE COMPANY, THE SUBJECT GROUNDS OF APPEAL BEC OMES ACADEMIC AND ARE DISMISSED BEING INFRUCTIOUS. 39. WITH THE ABOVE DIRECTIONS, THE GROUNDS OF APPEA L FOR AY 2008-09 ARE DISPOSED OFF. ASSESSMENT YEAR 2009-10 (ITA NO. 370/JP/16) 40. FOR AY 2009-10, THE ASSESSEE HAS CHALLENGED THE ORDER OF LD CIT(A) DATED 25.01.2016 PASSED PURSUANT TO THE ASSESSMENT ORDER U/S 143(3) OF THE ACT AND HAS TAKEN GROUNDS OF APPEAL RELATING TO DIS ALLOWANCE OF DEPRECIATION ON NON-EXISTING ASSETS AND DISALLOWANCE OF EXCESS D EPRECIATION UNDER SECTION 32 R/W SECTION 43(1) OF THE ACT. 41. WE HAVE EXAMINED THE SUBJECT ISSUES IN DETAIL I N ITA NO. 362/JP/16 FOR AY 2004-05. UNDISPUTEDLY, BOTH THE PARTIES AGREED THAT THE FACTS AND ITA NO. 357 TO 372/JP/16 AJMER VIDYUT VITRAN NIGAM LTD. VS. ACIT, AJMER 27 CIRCUMSTANCES OF THE CASE ARE IDENTICAL. OUR FINDI NGS AND DIRECTIONS CONTAINED IN ITA NO. 362/JP2016 SHALL APPLY MUTATIS MUTANDIS TO THIS APPEAL AS WELL. 42. WITH THE ABOVE DIRECTIONS, THE GROUNDS OF APPE AL FOR AY 2009-10 ARE DISPOSED OFF. ASSESSMENT YEAR 2010-11(ITA NO. 371/JP/16) 43. FOR AY 2010-11, THE ASSESSEE HAS CHALLENGED THE ORDER OF LD CIT(A) DATED 21.01.2016 PASSED PURSUANT TO THE ASSESSMENT ORDER U/S 143(3) OF THE ACT AND HAS TAKEN GROUNDS OF APPEAL RELATING TO DIS ALLOWANCE OF PRIOR PERIOD EXPENDITURE, DEPRECIATION ON NON-EXISTING ASSETS AN D DISALLOWANCE OF PROVISION FOR DOUBTFUL DEBTS. 44. WE HAVE EXAMINED THE SUBJECT ISSUES RELATING TO DISALLOWANCE OF PRIOR PERIOD EXPENDITURE AND DEPRECIATION ON NON-EXISTING ASSETS IN DETAIL IN ITA NO. 362/JP/16 FOR AY 2004-05. UNDISPUTEDLY, BOTH THE P ARTIES AGREED THAT THE FACTS AND CIRCUMSTANCES OF THE CASE ARE IDENTICAL. OUR FINDINGS AND DIRECTIONS CONTAINED IN ITA NO. 362/JP2016 SHALL APPLY MUTATIS MUTANDIS TO THIS APPEAL AS WELL. 45. REGARDING DISALLOWANCE OF PROVISION FOR DOUBTFU L DEBTS, THE AO ON VERIFICATION OF PROFIT/LOSS ACCOUNT OBSERVED THAT T HE ASSESSEE COMPANY HAS CLAIMED PROVISION FOR BAD AND DOUBTFUL DEBT OF RS 3 0,63,23,038. THE AO STATED THAT ANY PROVISION FOR UNCERTAIN LIABILITY I S TO BE ADDED BACK TO THE BOOK PROFITS. HE ACCORDINGLY ADDED BACK THE SUBJECT PRO VISION WHILE COMPUTING THE TOTAL INCOME AS PER NORMAL PROVISIONS OF THE ACT AN D ALSO FOR THE PURPOSES OF COMPUTING THE BOOK PROFITS UNDER SECTION 115JB OF T HE ACT. ITA NO. 357 TO 372/JP/16 AJMER VIDYUT VITRAN NIGAM LTD. VS. ACIT, AJMER 28 46. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R IN APPEAL BEFORE THE LD CIT(A) WHO HAS CONFIRMED THE SAID DISALLOWANCE. TH E RELEVANT FINDINGS OF LD CIT(A) ARE CONTAINED AT PARA 6.3 OF HIS ORDER WHICH IS REPRODUCED AS UNDER:- 6.3 I HAVE GONE THROUGH THE ASSESSMENT ORDER, STAT EMENT OF FACTS, GROUNDS OF APPEAL AND WRITTEN SUBMISSION CAREFULLY. THE PROVISION FOR DOUBTFUL DEBT IS NOT A DEDUCTION ADMISSIBLE IN VIEW OF THE SPECIFIC PROVISION OF CLAUSE (VII) OF SUB-SECTION 1 OF SECTI ON 36. UNDER NO OTHER PROVISIONS OF THE ACT, UNASCERTAINED LIABILITY CAN BE ALLOWED AS DEDUCTION FOR THE PURPOSE OF COMPUTING BUSINESS INC OME. HERE IT WOULD BE PERTINENT TO MENTION THAT IN THE A.Y. 2011-12, T HE ASSESSEE ITSELF HAS TREATED THE PROVISION FOR DOUBTFUL DEBT AS INADMISS IBLE DEDUCTION AND ADDED BACK TO THE PROFIT AS PER P&L ACCOUNTS FOR P URPOSE OF COMPUTING INCOME UNDER THE HEAD PROFIT AND GAINS FROM BUSINE SS AND PROFESSION. ACCORDINGLY, THE DISALLOWANCE MADE BY THE AO IS HER EBY CONFIRMED. HENCE, THIS GROUND OF APPEAL IS DISMISSED. 47. DURING THE COURSE OF HEARING, THE LD AR SUBM ITTED THAT THIS SUM HAS BEEN DEBITED AS BAD & DOUBTFUL PROVISION FOR DUES F ROM CONSUMER. ACTUALLY IT IS WRITE OFF OF OUTSTANDING OF PERMANENT DISCONNECT ED CONSUMER. HOWEVER AS PER ACCOUNTING NORMS OF ELECTRICITY COMPANIES IT IS NOT DIRECTLY DEBITED TO CUSTOMERS ACCOUNT FOR FUTURE RECOVERY AND THUS THE TERM PROVISION IS BEING USED WHEREAS IT IS ACTUALLY WRITE OFF AND THE YEA R OF REALIZATION OF THE SAME IS CONSIDERED AS INCOME AND THUS IT IS ACTUALLY WRI TE OFF OF BAD DEBTS. ON GOING THROUGH SCHEDULE 25 HEADING 1(C) OTHER DEBITS OF AU DITED ACCOUNTS, A SUM OF RS. 12,70,67,973.00 HAS BEEN SHOWN AS RECOVERY FROM THE CUSTOMERS AS INCOME AGAINST BAD DEBITS WRITTEN OFF OF RS. 30,63, 23,038/- AND THUS A NET WRITE OFF OF RS. 17,92,55,065.00 (30,63,23,038-12,7 0,67,973). THUS THIS IS ALSO A REGULAR PRACTICE OF ACCOUNTING PROCEDURES OF SUCH COMPANIES TO PRESENT THE ACCOUNTS. THUS ACTUALLY IT IS A WRITE OFF OF BAD DEBTS BUT AS A ACCOUNTING PROCEDURE THE PROCEDURE HAS BEEN ADOPT ED NOT TO INDIVIDUALLY WRITE OFF ACCOUNT OF CONNECTION HOLDER AS A MATTER OF RECOVERY PROCEDURE & AS ITA NO. 357 TO 372/JP/16 AJMER VIDYUT VITRAN NIGAM LTD. VS. ACIT, AJMER 29 & WHEN THE RECOVERY MADE IN SUCCEEDING YEARS; IT HA S BEEN SHOWN AS INCOME. FURTHER AS DECIDED IN CASE OF CIT V/S HOTEL AMBASSA DOR (2002) 253 ITR 430 (KERALA) THAT WRITING OFF OF BAD DEBTS, WITHOUT CHA RGING THE SAME IN THE PROFIT AND LOSS ACCOUNT, IS NOT A WRIT-OFF AT ALL, BECAUSE ASSESSMENT IS MADE BASED ON THE AUDITED ACCOUNTS AND THE PROFIT AND LOSS ACC OUNT/BALANCE SHEET FILED ALONG WITH THE RETURNS. IT IS NOT ENOUGH IF THE ASS ESSEE WRITE OFF THE DEBUT IN SOME OF THE BOOKS MAINTAINED BY IT (LIKE PERSONAL A CCOUNT OF DEBTORS), WHICH DO NOT FORM PART OF THE AUDITED ACCOUNTS INCLUDING THE PROFIT AND LOSS ACCOUNT BASED ON WHICH ASSESSMENT IS MADE. ACCOUNTS OF DEBTORS NEED NOT BE SQUARED-UP-IT IS NO T NECESSARY THAT THE ASSESSEE MUST ALSO POST CORRESPONDING ENTRIES IN TH E LEDGER ACCOUNT OF THE CONCERNED PARTIES AND SHOULD CLOSE THOSE ACCOUNTS-V ITHALDAS H. DHANJIBHAI BARDANWALA V. CIT(1981) 130ITR 95(GUJ.) ENTRIES IN PROFIT AND LOSS ACCOUNT AND DEBT RESERVE ACCOUNT WILL SUFFICE-IT THE ASSESSEE HAS POSTED ENTRIES IN THE PROFIT AND LOSS ACCOUNT AND THE CORRESPONDING ENTRIES ARE POSTED IN THE BAD DEBUT R ESERVE ACCOUNT, IT WOULD BE SUFFICIENT COMPLIANCE WITH THE PROVISIONS OF THE STATUTORY REQUIREMENT FOR WRITING OFF AS IRRECOVERABLE THE CONCERNED DEBUT IN THE BOOKS OF THE ASSESSEE- CIT V. GIC OF INDIA (NO.2)(2002) 254 ITR 204 (BOM/( 2001)114 TAXMAN 13 (BOM.) THE LD. CIT(A) WHILE REJECTING ASSESSEES CLAIM HAS STATED THE PROVISION FOR DOUBTFUL DEBUT IS NOT A DEDUCTION ADMISSIBLE IN VIE W OF THE SPECIFIC PROVISION OF CLAUSE (VII) OF SUB-SECTION 1 OF SECTION 36. UND ER NO OTHER PROVISIONS OF THE ACT, UNASCERTAINED LIABILITY CAN BE ALLOWED AS DEDU CTION FOR THE PURPOSE OF ITA NO. 357 TO 372/JP/16 AJMER VIDYUT VITRAN NIGAM LTD. VS. ACIT, AJMER 30 COMPUTING BUSINESS INCOME. WHEREAS IT IS NOT TERMIN OLOGY BUT THE INTENTION & ACT OF ASSESSEE IS IMPORTANT TO JUSTIFY THE ACT OF WRITE OFF. 48. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PUR USED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE COMPANY HAS CONTENDED THAT IT IS NOT A PROVISION BUT AN ACTUAL WRITE OFF. IT WAS SUBMITTED THAT AS PER ACCOUNTING PROCEDURE/GUIDELINES PRESCRIBED FOR THE ELECTRICITY COMPANIES, IT IS NOT DIRECTLY DEBITED TO THE CUSTOMER ACCOUNT FOR THE PURPOSES OF DETERMINING THE AMOUNT TO BE RECOVERED IN FUTURE. IT WAS FURTHER SUBMITTE D THAT AS AND WHEN THE AMOUNT IS REALISED IN FUTURE, THE SAME WILL BE OFFE RED TO TAX. THERE IS HOWEVER NOTHING ON RECORD TO DEMONSTRATE WHAT ACCOU NTING TREATMENT, THE ASSESSEE COMPANY HAS DONE IN ITS BOOKS OF ACCOUNTS UNDER THE DOUBLE ENTRY ACCOUNTING SYSTEM, IF THE AMOUNTS IN INDIVIDUAL ACC OUNTS OF THE CUSTOMERS ARE NOT WRITTEN OFF. UNLESS AND UNTIL, THE ACCOUNTING TREATMENT IN THE BOOKS OF ACCOUNTS IS CLEAR AND THROUGH WHICH IT CAN BE DEMON STRATED THAT THE ASSESSEE COMPANY HAS ACTUALLY WRITE OFF THE BAD DEBTS IN ITS BOOKS OF ACCOUNTS, MERELY CONTENDING THAT THE INTENTION IS TO WRITE OFF THE B AD DEBTS WOULD NOT BE SUFFICIENT ENOUGH TO CLAIM A DEDUCTION UNDER THE PR OVISIONS OF THE ACT. THE PROVISIONS OF SECTION 36(1)(VII) READ WITH EXPLANAT ION 1 ARE CLEARLY ATTRACTED AND THE ASSESSEE HAS NOT ABLE TO DEMONSTRATE HOW TH E SAID PROVISIONS ARE NOT APPLICABLE IN THE INSTANT CASE. FURTHER, LD CIT(A) HAS GIVEN A FINDING THAT IN AY 2011-12, THE ASSESSEE COMPANY ITSELF HAS ADDED B ACK THE PROVISION FOR DOUBTFUL DEBTS FOR THE PURPOSES OF COMPUTING THE IN COME UNDER THE NORMAL PROVISIONS OF THE ACT. THE RULE OF CONSISTENCY THE REFORE EQUALLY APPLIES TO THE ASSESSEE COMPANY. IN THE ENTIRETY OF FACTS AND CIR CUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE AO HAS RIGHTLY DISALLOWED THE PROVISION FOR DOUBTFUL DEBTS AND WHICH HAS RIGHTLY BEEN CONFIRMED BY THE L D CIT(A). IN THE RESULT, THE GROUND OF THE ASSESSEE IS DISMISSED. ITA NO. 357 TO 372/JP/16 AJMER VIDYUT VITRAN NIGAM LTD. VS. ACIT, AJMER 31 49. WITH THE ABOVE DIRECTIONS, THE GROUNDS OF APPE AL FOR AY 2010-11 ARE DISPOSED OFF. ASSESSMENT YEAR 2011-12 (ITA NO. 372/JP/16) 50. FOR AY 2011-12, THE ASSESSEE COMPANY HAS CHALLE NGED THE ORDER OF LD CIT(A) DATED 25.01.2016 PASSED PURSUANT TO THE ASSE SSMENT ORDER U/S 143(3) OF THE ACT AND HAS TAKEN GROUNDS OF APPEAL RELATING TO DISALLOWANCE OF PRIOR PERIOD EXPENDITURE AND DEPRECIATION ON NON-EXISTING ASSETS. 51. WE HAVE EXAMINED THE SUBJECT ISSUES RELATING TO DISALLOWANCE OF PRIOR PERIOD EXPENDITURE AND DEPRECIATION ON NON-EXISTING ASSETS IN DETAIL IN ITA NO. 362/JP/16 FOR AY 2004-05. UNDISPUTEDLY, BOTH THE P ARTIES AGREED THAT THE FACTS AND CIRCUMSTANCES OF THE CASE ARE IDENTICAL. OUR FINDINGS AND DIRECTIONS CONTAINED IN ITA NO. 362/JP2016 SHALL APPLY MUTATIS MUTANDIS TO THIS APPEAL AS WELL. 52. WITH THE ABOVE DIRECTIONS, THE GROUNDS OF A PPEAL FOR AY 2011-12 ARE DISPOSED OFF. ORDER PRONOUNCED IN THE OPEN COURT ON 28/08/2017. SD/- SD/- DQY HKKJR FOE FLAG ;KNO (KUL BHARAT) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 28/08/2017 SANTOSH* VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT - M/S AJMER VIDYUT VITRAN NIGAM LTD., VIDYUT BHAWAN, PANCHSHEEL NAGAR, MAKARWALI ROAD, AJMER. ITA NO. 357 TO 372/JP/16 AJMER VIDYUT VITRAN NIGAM LTD. VS. ACIT, AJMER 32 2. IZR;FKHZ@ THE RESPONDENT- ACIT/ DCIT, CIRCLE-2, AJMER 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDRVIHY@ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 357 TO 372 /JP/2016) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT REGISTRAR.