Gujarat State Electricity Corporation Ltd., Baroda V. The Pr. CIT, Vadodara-1, Baroda

ITA 469/AHD/2016

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0029 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 29-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: J P SHAH
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 143(3); 14A; 115JB; 37; 263

Judgement Text

, C- IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C BEFORE SHRI PRAMOD KUMAR, HONBLE VICE PRESIDENT & MS. MADHUMITA ROY, JUDICIAL MEMBER . ITA NOS. 469/AHD/2016 / ASSTT. YEAR: 2011-12 GUJARAT STATE ELECTRICITY CORP. LTD. VIDYUT BHAVAN, RACE COURSE CIRCLE, BARODA-390007 PAN NO. AAA CG6 864 F VS. COMMISSIONER OF INCOME TAX, BARODA / (APPELLANT) / (RESPONDENT) . ITA NOS. 786/AHD/2018 / ASSTT. YEARS: 2011-12 GUJARAT STATE ELECTRICITY CORP. LTD. VIDUYT BHAVAN, RACE, COURSE CIRCLE, BARODA PAN NO. AAA CG6 864 F VS. DCIT CIRCLE-1(1)(1), BARODA / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI J. P. SHAH, AR & SHRI MANISH SHAH AR REVENUE BY : SHRI O.P. SHARMA CIT DR& L.P. JA IN, SR DR ' #$% /DATES OF HEARING : 29/08/2019 & 20.1 2.2019 &' $% /DATE OF PRONOUNCEMENT: 27/12/2019 () / O R D E R PER MS. MADHUMITA ROY- JM : THESE TWO APPEALS AT THE INSTANCE OF THE ASSESSEE A RE DIRECTED AGAINST THE ORDER DATED 11.01.2016 PASSED BY THE LD. PR. CIT, VA DODARA-1 UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED AS TO THE ACT) ARISING OUT OF THE ITA NOS. 469/AHD/2016 & 786/AHD/2018(GUJARAT STATE ELECTRICITY CORP. LTD. VS. CIT& DCIT) A.Y. 2011-12 2 ORDER DATED 30.01.2014 PASSED BY THE LD. DCIT CIRCLE -I(I), BARODA UNDER SECTION 143(3) OF THE ACT FOR A.Y. 2011-12 AND AGAINST IN O RDER DATED 22.01.2018 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) 1, VAD ODARA UNDER SECTION 143(3) R.W.S. 263 R.W.S. 153(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED AS TO THE ACT) ARISING OUT OF THE ORDER DATED 02.12.2016 PAS SED BY THE DCIT, CRICLE-1(1)(1), VADODARA FOR ASSESSMENT YEAR 2011-12. SINCE BOTH T HE APPEALS RELATE TO THE SAME ASSESSEE THESE ARE HEARD ANALOGOUSLY AND ARE BEING DISPOSED BY A COMMON ORDER. ITA NO. 469/AHD/2016(A.Y. 2011-12):- 2. THE BRIEF FACTS LEADING TO THE ORDER IMPUGNED IS THIS THAT THE ASSESSEE ENGAGED IN THE BUSINESS OF GENERATION OF POWER FILE D ITS RETURN OF INCOME 27.09.2011 DECLARING TOTAL INCOME UNDER NORMAL PROV ISION OF THE ACT AT RS. NIL AFTER SETTING OFF BROUGHT FORWARD LOSSES TO THE EXT ENT OF RS. 1,77,69,81,562/-. THE BOOK PROFIT UNDER SECTION 115JB OF THE ACT WAS DECL ARED AT RS. 1,79,31,09,000/-. THE ASSESSMENT WAS FINALIZED UNDER SECTION 143(3) OF THE ACT ON 30.01.2014 UPON DETERMINING THE TOTAL INCOME AT RS. NIL UNDER NORMAL PROVISION OF THE ACT UPON SETTING OFF BROUGHT FORWARD LOSSES TO THE EXTENT OF RS. 2,69,90,19,726/- AND UNABSORBED DEPRECIATION TO THE EXTENT OF RS. 17,89, 61,000/-. THE BOOK PROFIT UNDER SECTION 115JB OF THE ACT WAS DETERMINED AT RS. 2,51 ,06,60,100/-. ON 09.10.2015 THE ASSESSEE WAS SERVED UPON A NOTICE UNDER SECTION 263(1) OF THE ACT ISSUED UNDER THE SIGNATURE OF THE LD. PR. CIT, VADODARA INFORMING HIS PRIMA FACIE VIEW IN RESPECT OF THE ORDER OF ASSESSMENT DATED 30.01.2014 FOR THE A.Y. 2011-12 AS ERRONEOUS IN SO FAR AS IT WAS PREJUDICIAL TO THE IN TEREST OF REVENUE ON THE FOLLOWING ACCOUNT:- ON VERIFICATION OF NOTE-6 OF SCHEDULE-20 TO THE P& L ACCOUNT, AN AMOUNT OF RS. 23602.54 LAKH WAS DEBITED ON ACCOUNT OF REPAIRS AND MAINTENANCE EXPENSES ON PLANT & MACHINERY, WHICH INCLUDED RS. 3167.75 LAKH ON ACC OUNT OF PROVISION TOWARDS LONG TERM SERVICE CONTRACT AGREEMENT FOR MAINTENANCE OF 374 MW UTRAN GAS BASED POWER PLANT. THIS BEING ONLY A PROVISION AND THAT, NO ACTUAL EXPENDITURE WAS INCURRED, RS. 3167.75 LAKH WAS REQUIRED TO BE DISAL LOWED U/S 37 OF THE IT ACT. ASSESSEE WAS, THEREFORE, DIRECTED TO EXPLAIN AS TO WHY THE ASSESSMENT ORDER DATED 30.01.2014 SHALL NOT BE ENHANCED AND/OR CANCELLED A ND THEREFORE AS TO WHY THE LD. ITA NOS. 469/AHD/2016 & 786/AHD/2018(GUJARAT STATE ELECTRICITY CORP. LTD. VS. CIT& DCIT) A.Y. 2011-12 3 AO SHOULD NOT BE DIRECTED TO MAKE FRESH ASSESSMENT IN ACCORDANCE WITH THE PROVISION OF LAW. THE SAID ORDER WAS RECEIVED BY THE ASSESSEE ON 14.1 0.2015 AND BY AND UNDER A REPLY DATED 07.12.2015 THE ASSESSEE OBJECTED TO S UCH NOTICE ISSUED UNDER SECTION 263(1) OF THE ACT BY THE LD. PR. CIT. 3. HEARD THE PARTIES AND WE HAVE ALSO PERUSED THE R ELEVANT MATERIALS AVAILABLE ON RECORD. THE CASE OF THE REVENUE IS THIS THAT TH E BROUGHT FORWARD LOSSES HAS BEEN EXCESSIVELY ALLOWED TO THE TUNE OF RS. 2,54,50,03,6 33/-. IT WAS FURTHER NOTICED THAT NO DISALLOWANCE OF RS. 3167.75 LAKH WAS MADE; NO AC TUAL EXPENSE WAS INCURRED BY THE ASSESSEE AGAINST THE PROVISION MADE TOWARDS LON G-TERM SERVICE CONTRACT AGREEMENT UNDER THE HEAD REPAIRS AND MAINTENANCE. THE CASE OF THE ASSESSEE IS THIS THAT THE ASSESSEE COMPANY HAD ENTERED INTO A L ONG-TERM AGREEMENT WITH M/S. ALSTOM POWER O&M LTD., SWITZERLAND FOR 15 YEARS FOR OFFSHORE SUPPLY RELATING TO UTRAN POWER PLANT. IN TERMS OF THE SAID AGREEMENT THE MACHINE IS REQUIRED TO BE INSPECTED BY THE SAID COMPANY OF SWITZERLAND AT SPE CIFIED INTERVAL OF 2 TO 5 YEARS DEPENDING UPON THE WORKING HOURS. IN RESPECT OF TH E SAME THE ASSESSEE COMPANY HAS TO PAY SERVICE CHARGES AND SUPPLY AMOUNT IN TWO PARTS TO THE SAID M/S. ALSTOM POWER O&M LTD., SWITZERLAND. THE TOTAL ESTIMATED EX PENDITURE OF SUCH INSPECTION IS REQUIRED TO BE CARRIED OUT AFTER 3 TO 4 YEARS AN D THEREFORE THE INSPECTION EXPENDITURE HAS BEEN DIVIDED IN THREE PARTS AND ACT UAL PROVISIONS FOR THE EXPENDITURE HAS BEEN MADE. THE COPY OF THE SAID AGR EEMENT ENTERED INTO BY AND BETWEEN THE ASSESSEE AND THE COMPANY OF SWITZERLAND WERE ALSO PLACED BEFORE AUTHORITIES BELOW. THE ASSESSEE CLAIMED SUCH LIABI LITY AS ASCERTAINED ONE AND HENCE ALLOWABLE EXPENDITURE. SUCH CLARIFICATION GI VEN BY THE ASSESSEE SUPPORTED BY THE COGENT DOCUMENT THEREOF WAS NOT QUESTIONED B Y THE LD. PR. CIT ON MERIT BUT THE SAME WAS DIRECTED TO BE VERIFIED IN THE LIGHT O F THE PROVISION OF SEC. 37 OF THE ACT. WE FIND IT DIFFICULT TO UNDERSTAND THAT WHEN THE LD. PR. CIT HAS NOT DISPUTED THE EXPENDITURE AS NOT PAYABLE OR IT IS NOT AN UNAS CERTAINED LIABILITY THEN AS TO HOW ITA NOS. 469/AHD/2016 & 786/AHD/2018(GUJARAT STATE ELECTRICITY CORP. LTD. VS. CIT& DCIT) A.Y. 2011-12 4 THE ORDER IS ERRONEOUS IN SO FAR AS IT WAS PREJUDIC IAL TO THE INTEREST OF REVENUE. THEREFORE, THE ORDER DIRECTING RE-ASSESSMENT BY THE LD. AO U/S. 263 OF THE ACT ISSUED UNDER SIGNATURE OF THE LD. PR. CIT, IN OUR CO NSIDERED VIEW, CANNOT BE SET TO BE JUSTIFIED. HENCE, THE ORDER UNDER CHALLENGE IS BAD SO FAR AS THIS ISSUE IS CONCERNED. IT WAS FURTHER OBSERVED BY THE LD. PCIT THAT WHILE COMPUTING THE BOOK PROFIT UNDER SECTION115JB OF THE ACT, THE AMOUNT OF RS. 34,75,000/- TO BE ADDED BACK AND FURTHER DIRECTION TO THAT EFFECT TO THE LD . AO HAS BEEN MADE WHICH HAS BEEN CONTROVERTED BY THE ASSESSEE AS UNDER AS IT AP PEARS FROM THE ORDER PASSED BY THE LD. PCIT AT PARA 3.3.1; THE RELEVANT PORTION WHER EOF IS AS FOLLOWS:- 3.3.1 ASSESSEE IN ITS SUBMISSION HAS CONTROVERTED THE ISSUE. RELEVANT PART OF ASSESSEES SUBMISSION IS REPRODUCED AS UNDER:- WHILE ISSUING THE NOTICE UNDER SECTION 263 OF THE I T ACT, IT HAS BEEN INDICATED THAT THE ADDITIONS OF RS. 34,75,000/- MADE ON ACCOUNT OF PRIOR PERIOD EXPENDITURE TO THE TOTAL INCOME HAVE NOT BEEN MADE TO THE BOOK PROFITS COMPUTED UNDER SECTION 115JB OF THE I T ACT. IT IS SUBMITTED THAT DURING THE YEAR UNDER CONSIDER ATION THE COMPANY HAD ACCOUNTED VARIOUS PRIOR PERIOD INCOME AMOUNTING TO RS. 34.75 LACS AND PRIOR PERIOD EXPENSES AMOUNTING TO RS.1902.80 LACS AND ACCORDINGLY A NET PRIOR PERIOD EXPENSES OF RS.1868.05 LACS WAS INCLUDED IN THE PROFIT & LOSS A CCOUNT OF THE YEAR UNDER CONSIDERATION. WHILE COMPUTING THE TOTAL INCOME FOR THE PURPOSE OF FILING I T RETURN FOR THE YEAR UNDER CONSIDERATION THE APPELLANT HAD DISALLOWED THE PRIOR PERIOD EXPENSES AMOUNTING TO RS. 1868.05 LACS WHICH IS ALS O CONFIRMED BY THE LEARNED ASSESSING OFFICER. IT IS SUBMITTED THAT THE APPELLA NT DISALLOWED THE NET PRIOR PERIOD EXPENSES AS THE PRIOR PERIOD INCOME WAS ALREADY INC LUDED IN THE NET PROFITS FOR THE YEAR UNDER CONSIDERATION. WHILE COMPLETING THE ASSESSMENT UNDER SECTION 143(3 ) OF THE I T ACT, 1961 ADDITION OF RS.34.75 LACS HAVE BEEN MADE TO THE TOTAL INCOME AN D NOW THE SAME ADDITIONS ARE PROPOSED TO BE MADE TO THE BOOK PROFITS UNDER SECTI ON 115JBOFTHEACT. IN THIS CONTEXT IT IS WELL SETTLED NOW THAT THE NO ADJUSTMENT CAN BE MADE TO THE BOOK PROFITS COMPUTED UNDER SECTION 115JB OF THE ACT ON ACCOUNT OF PRIOR PERIOD EXPENDITURE. REFERENCE IS INVITED TO THE DECISION O F JURISDICTIONAL TRIBUNAL VIZ., ITAT, AHMEDABAD IN CASE OF ACIT VS. GUJARAT STATE ENERGY GENERATION LIMITED WHEREIN THE QUESTION BEFORE THE ITAT WAS WHETHER THE ADJUSTMENT CAN BE MADE IN THE BOOK PROFIT UNDER SECTION 115JB FOR THE ITEMS WHICH ARE NOT MEN TIONED SPECIFICALLY IN THE EXPLANATION TO SECTION 115JB. IN THIS CASE THE CIT( A) HAD ALLOWED THE ASSESSEES ITA NOS. 469/AHD/2016 & 786/AHD/2018(GUJARAT STATE ELECTRICITY CORP. LTD. VS. CIT& DCIT) A.Y. 2011-12 5 APPEAL CONSEQUENT TO WHICH REVENUE PREFERRED AN APP EAL BEFORE TRIBUNAL. AFTER DETAILED DISCUSSION THE ITAT HAS HELD AS UNDER: WITH REGARD TO CONTROVERSY INVOLVED IN GROUND NOS. 4,5 AND 6, BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS), IT WAS CONTENDED BY THE LD. COUNSEL FOR THE ASSESSEE THAT WHILE COMPUTING THE B OOK PROFIT UNDER SECTION 115JB, AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF APOLLO TYRES REPORTED IN 255 ITR 273, THE ADDITIONS MADE (A) ON ACCOUNT OF DISALLOWANCE U/S.14A -RS.6,00,000/-, (B) INTEREST ON INVESTMENT IN BONDS RS.1,30,000/- AND (C) PRIOR PERIOD EXPENSES RS.19,29,184/- ARE BEYON D THE SCOPE OF EXPLANATION TO SECTION 115JB. WITHOUT PREJUDICE TO THIS, IT WAS ALSO CONTENDED THAT INTEREST ON INVESTMENT IN BONDS AMOUNTING TO RS. 1,30,000/- STOOD ALREADY INCLUDED IN THE BOOK PROFIT AS COMPUTED IN PROFIT & LOSS A/C. AND HENCE COULD NOT HAVE BEEN COMPUTED IN THE BOOK PROFIT. AFTER CONSIDERING BOTH THE SIDES, IN THE IMPUGNED ORDER, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) TOOK THE VIEW THAT DISALLOWANCE UNDER SECTION 14A AND ADDITION OF RS.1,30,000/ TO THE BOOK PROFIT CANNOT BE MADE F OR THE DETAILED REASONS GIVEN IN PARA 7.2, WHICH READS AS UNDER: 7.2 THE MATTER HAS BEEN CONSIDERED. THE DECISION O F HON'BLE SUPREME COURT IN THE CASE OF APOLLY TYRES (SUPRA) IS QUITE UNAMBI GUOUS. ONLY SUCH ITEMS WHICH ARE SPECIFICALLY MENTIONED IN THE EXPLANATION TO SECTION 115JB NEED TO BE EXCLUDED OR INCLUDED, AS THE CASE BE, AND NOTHIN G MORE CAN BE BROUGHT IN. ALL THE THREE ITEMS LISTED ABOVE DO NOT FEATURE IN THE EXPLANATION. OTHERWISE, THE DISALLOWANCE U/S.14A WOULD BE MATERIAL IN COMPU TATION OF THE NORMAL PROCESS OF INCOME WHILE THE SECOND ITEM INTEREST ON INVESTMENT IN BONDS STANDS ALREADY INCLUDED IN THE BOOK PROFIT. AS FAR AS THE PRIOR PERIOD EXPENSES ARE CONCERNED, THERE IS NO SUCH MENTION IN THE EXPLANATION. THE ASSESSMENT ORDER ON THE OTHER HAND IS SILENT AS TO UNDER WHICH CATEGORY IT IS BEING INCLUDED FOR THE MATTER TO BE FURTHER ANALYSED. THEREFORE, AS THE MATTER STANDS, NONE OF THE THREE ITEMS CAN BE ADDED FOR COMPUTATION OF BOOK PROFIT. 11. AT THE TIME OF HEARING BEFORE US, THE LD. D.R. COULD NOT POINTED OUT HOW THE VIEW TAKEN BY THE LEARNED COMMISSIONER OF INCOME TA X(APPEALS) IS NOT ACCEPTABLE. WE ARE, THEREFORE, INCLINED TO UPHOLD T HE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). THUS, GROUND N OS. 4, 5 AND 6 OF THE REVENUE'S APPEAL ARE REJECTED. IN VIEW OF ABOVE, IT CAN BE SEEN BE THAT THE FACTS IN THE ABOVE CASE ARE EXACTLY IDENTICAL TO THE COMPANY'S CASE. THE COPY OF THE JU DGEMENT IS ENCLOSED IN ANNEXURE-X FOR IMMEDIATE REFERENCE. ACCORDINGLY THE ABOVE JUDG EMENT OF THE JURISDICTIONAL TRIBUNAL IS SQUARELY APPLICABLE. IT MAY NOT BE OUT OF PLACE TO MENTION THAT BASED ON THE ABOVE JUDGEMENT THE HON'BLE COMMISSIONER (APPEALS) HAS DELETED THE SIMILAR ADJU STMENT IN OUR OWN CASE FOR THE SUBSEQUENT YEAR VIZ., ASST. YEAR 2012-13. THE COPY OF THE RELEVANT EXTRACTS OF THE ITA NOS. 469/AHD/2016 & 786/AHD/2018(GUJARAT STATE ELECTRICITY CORP. LTD. VS. CIT& DCIT) A.Y. 2011-12 6 CIT(A)S ORDER PASSED FOR THE ASST. YEAR 2012-13 IS ENCLOSED IN ANNEXURE-II FOR IMMEDIATE REFERENCE. 4. IN FACT, THIS ISSUE IS ALREADY BEEN TAKEN CARE O F IN THE JUDGMENT REPORTED IN SPECIAL BENCH OF ITAT AT DELHI IN THE MATTER OF ACIT, CIRCLE 17(1)-VS- VIREET INVESTMENT (P.) LTD. IN FAVOUR OF THE ASSESSEE AND T HUS RELYING UPON THE SAME WE DO NOT FIND ANY JUSTIFICATION IN MAKING SIMILAR ADJ USTMENT UNDER SECTION 115JB OF THE ACT AND TO THIS EXTENT THE DIRECTION UPON THE LD . AO BY THE LD. PCIT BY AND UNDER THE ORDER DATED 11.01.2016 UNDER SECTION 263 OF THE ACT IS NOT SUSTAINABLE AND THUS THE SAME IS HEREBY QUASHED. 5. HENCE, TAKING INTO CONSIDERATION THE ENTIRE ASPE CT OF THE MATTER WE DO NOT FIND ANY MERIT IN DIRECTING THE ISSUES TO BE VERIFI ED BY THE AO BY AND UNDER ORDER ISSUED BY THE LD. PCIT UNDER SECTION 263 OF THE ACT. THE SAME, SINCE, FOUND TO BE DEVOID OF ANY MERIT HENCE QUASHED. 6. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ITA NO. 786/AHD/2018(A.Y. 2011-12):- 7. THE IMPUGNED ORDER IS THE OUTCOME OF THE ORDER DA TED 11.01.2016 PASSED BY THE LD. PCIT, VADODARA UNDER SECTION 263 OF THE ACT W HICH HAS ALREADY BEEN QUASHED BY US HEREINBEFORE IN ITA NO. 469/AHD/2016. THUS, THIS APPEAL BECOMES INFRUCTOUS. HENCE, DISMISSED AS INFRUCTUOUS. 8. IN THE RESULT, ASSESSEES APPEALS ARE PARTLY ALL OWED. [ORDER PRONOUNCED IN THE COURT ON 27.12.20 19.] SD/- SD/- ( PRAMOD KUMAR ) ( MADHUMITA ROY ) VICE PRESIDENT JUDICIAL MEMBER AHMEDABAD; DATED 27/12/2019 TANMAY, SR. PS T TRUE COPY UE COPY ITA NOS. 469/AHD/2016 & 786/AHD/2018(GUJARAT STATE ELECTRICITY CORP. LTD. VS. CIT& DCIT) A.Y. 2011-12 7 ()$*+,(+ /COPY OF THE ORDER FORWARDED TO : () ' / BY ORDER - / . (DY./ASSTT. REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION : 18-06- 2019&26.06.2019 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER. : 26-11-2019 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P.S./P.S : 11-12-2019 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT. : -12-2019 5. DATE ON WHICH FAIR ORDER PLACED BEFORE OTHER MEMBER : 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P.S./P.S. : -12-2019 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK. : 02-01-2020 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK. : 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER. : 10. DATE OF DESPATCH OF THE ORDER : 1. / THE APPELLANT 2. / / THE RESPONDENT. 3. ' 0 / CONCERNED CIT 4. ' 0 ( ) / THE CIT(A) 5. +12 , / DR, ITAT, 6. 234# / GUARD FILE.