DCIT, New Delhi V. M/s. NTPC Ltd., New Delhi

ITA 4867/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4594 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 29-06-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 05-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Additional depreciation; Question of law
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E NEW DELHI BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER & SHRI K.N. CHARRY, JUDICIAL MEMBER ITA NO.-4867/DEL/2014 ( ASSESSMENT YEAR: 2005-06) DCIT CIRCLE 13(1) NEW DELHI. VS NTPC LTD. NTPC BHAWAN, CORE-7, SCOPE COMPLEX, LODHI ROAD, NEW DELHI. AAACN0255D ASSESSEE BY MS. RANO JAIN, ADV. REVENUE BY MS. SHEFALI SWAROOP, CIT DR SH. S.P.GUPTA, SR. DR ORDER PER SHRI K.N. CHARY, JUDICIAL MEMBER REVENUE PREFERRED THIS APPEAL CHALLENGING THE ORDER DATED 25.06.2014 IN APPEAL NO. 166/2009-10 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-XVIII, NEW DEL HI (HEREINAFTER FOR SHORT CALLED AS THE LD. CIT (A)) . 2. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS A PUBLIC SECTOR UNDERTAKING UNDER THE ADMINISTRATIVE CONTROL OF THE MINISTRY OF POWER, GOVT. OF INDIA AND DERIVES ITS INCOME MAINLY BY GENERATION DATE OF HEARING 13.09.2017 DATE OF PRONOUNCEMENT 19.09.2017 2 ITA NO. 4867/DEL/2014 OF POWER AND RENDERING OF CONSULTANCY SERVICES. FO R THE AY 2005- 06 THE ASSESSEE FILED THEIR RETURN OF INCOME ON 24. 10.2005 DECLARING AN INCOME OF RS. 13,30,17,92,000/- AND TH E ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT BY ORDER DATED 27.11.2006 ASSESSING THE TAXABLE INCOME AT RS. 3736.19 CRORES. ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT (A), NEW DEL HI. WHILE THE MATTER STOOD THUS, LD. CIT, DELHI-V INITIATED PROCE EDINGS U/S 263 OF THE ACT BY WAY OF NOTICE DATED 19.10.2007 AND AF TER HEARING THE ASSESSEE HE PASSED AN ORDER DATED 20.02.2009 HOLDIN G THAT THE ASSESSMENT ORDER PASSED IN THIS MATTER WAS ERRONEOU S AND PREJUDICIAL TO THE INTEREST OF THE REVENUE IN SO FA R AS THE ALLOWANCE OF CLAIM OF ADDITIONAL DEPRECIATION U/S 32(1)(IIA) OF THE ACT AND ON ACCOUNT OF SALES OF 928.30 CRORES PENDING FINALIZAT ION OF TARIFF BY CERC. PURSUANT TO THE SAID ORDER AO PROCEEDED AND WHILE REJECTING THE SUBMISSIONS MADE BY THE ASSESSEE MADE ADDITION OF RS. 187.56CRORES ON ACCOUNT OF ADDITIONAL DEPRECIAT ION CLAIMED BY THE ASSESSEE AND 928.30 CRORES ON ACCOUNT OF REVISI ON OF SALES. 3. ASSESSEE CARRIED THE MATTER IN APPEAL AGAINST TH E ORDER DATED 24.03.2009 PASSED U/S 143(3)/263 OF THE ACT AND THE LD. 3 ITA NO. 4867/DEL/2014 COMMISSIONER OF INCOME TAX ALLOWED THE APPEAL, AND, THEREFORE, THE REVENUE IS IN APPEAL BEFORE US. 4. IT IS THE ARGUMENT OF THE LD. DR THAT THE BENEFI T OF ADDITIONAL DEPRECIATION IS NOT AVAILABLE TO THE UNDERTAKINGS E NGAGED IN GENERATION OF POWER AND THE REVISION OF SALES AT TH E END OF THE YEAR IS NOT IN ACCORDANCE WITH THE MERCANTILE LAW OR INC OME TAX ACT, AS SUCH, THE ORDER OF THE LD. CIT (A) SUFFERS SERIOUS ERROR IN HOLDING OTHERWISE AND DELETING THE TWO ADDITIONS MADE BY TH E AO. PER CONTRA, IT IS THE SUBMISSION OF THE LD. AR THAT THE ASSESSEE CLAIMED ADDITIONAL DEPRECIATION OF RS. 187.56 CRORE S IN RESPECT OF NEW PLANT AND MACHINERY U/S 32(1)(IIA) OF THE INCOM E TAX ACT AND AS A MATTER OF FACT A COORDINATE BENCH OF THIS TRIB UNAL IN ITA NO. 1438/DEL/2009, AFTER A REVIEW OF THE ENTIRE CASE LA W ON THIS ASPECT HELD THAT THE ADMISSIBILITY OF THE ADDITIONAL DEPRE CIATION CANNOT BE DENIED TO THE ASSESSEE MERELY ON THE GROUND THAT EL ECTRICITY IS NOT AN ARTICLE OR THING. SO ALSO IN RESPECT OF THE REV ISION OF SALES FOLLOWING THE CERC GUIDELINES, LD. COUNSEL PLACED R ELIANCE ON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT I N ASSESSEES OWN 4 ITA NO. 4867/DEL/2014 CASE IN ITA NO. 507/DEL/2013, WHEREIN THIS ISSUE WA S HELD IN FAVOUR OF THE ASSESSEE. 5. WE HAVE CAREFULLY GONE THROUGH THE RECORD IN THE LIGHT OF THE SUBMISSIONS MADE BY THE PARTIES. IN SO FAR AS GROU NDS NO. 1 TO 3 ARE CONCERNED, RECORDS SHOWS THAT AS AGAINST THE BI LLS RAISED ON STATE ELECTRICITY BOARDS AND OTHERS FOR A SUM OF RS . 23066.30 CRORES, THE ASSESSEE HAD ACCOUNTED SALES OF ELECTRI CITY FOR RS. 22138.0 CRORES AND DIFFERENCE OF RS. 928.30 CRORES IS EXPLAINED AS NOT THE REAL INCOME IN AS MUCH AS ON FINALIZATION O F TARIFF BY CERC DURING THE FY 2006-07, OUT OF RS. 928.30 CRORES, TH E ASSESSEE HAD TO REFUND RS. 737.80 CRORES AND THE BALANCE OF RS. 190.50 CRORES WAS OFFERED FOR TAX DURING THE AY 2007-08 AND 2008- 09. BASING ON THIS THE SUBMISSION OF THE LD.AR IS THAT THE HUG E REDUCTION OF RS. 737.76 CRORES THAT HAD TAKEN PLACE SUGGESTS THA T THERE WAS WRONG ASSESSMENT OF INCOME. FURTHER, THE HONBLE J URISDICTIONAL HIGH COURT IN ITA NO. 507/DEL/2013 VIDE PARAGRAPH N OS. 20 TO 23 HELD AS FOLLOWS: .NTPC THUS HAD NO CHOICE IN THE MATTER BUT TO C ARRY ON BILLING IN TERMS OF THE PREVIOUS NOTIFICATION ON A PROVISIO NAL BASIS UP TO 31.03.2005 OR TILL THE APPROVAL OF TARIFFS; SUCH BI LLING FIGURES WERE TO BE SUBJECT TO ADJUSTMENT AFTER FINAL TARIFF DETERMI NATION. THUS, 5 ITA NO. 4867/DEL/2014 INHERENTLY THERE WAS A DEGREE OF UNCERTAINTY AND IN COMPLETENESS IN THE PROCESS. THIS WAS REFLECTED IN THE RETURN WHEN THE ADJUSTMENT OF THE BILLING BECAME NECESSARY ON ACCOUNT OF THE A PPLICATION OF THE CERC NOTIFICATION. NTPC'S ARGUMENT THAT THE TARIFF FOR POWER PLANTS FROM 2004-09 WAS LOWER THAN THE TARIFF NORMS FOR 20 00-04 HAS NOT BEEN DISPUTED BY THE REVENUE. EVEN A BARE LOOK AT T HE LATER TARIFF REGULATIONS SHOWS THAT THE RATE OF RETURN WAS REVIS ED DOWNWARDS. NTPC SUBMITS THAT IT ACCOUNTED SALES FOR ELECTRICIT Y FOR `2212.8 CRORES BASED UPON THE PREVIOUS EXPERIENCE IN TARIFF FIXATION ORDERS OF CERC. THIS WAS EVEN THOUGH THE BILLED AMOUNT WAS ` 2306.6 CRORES. THIS ESTIMATE WAS BONA FIDE AND MADE ON A R EALISTIC ASSESSMENT OF SALES ESTIMATION THAT COULD BE ITA 50 7/2013 PAGE 19 REALIZED IN TERMS OF ACCEPTED TARIFF NOTIFICATIO NS. THERE WAS NOTHING ERRONEOUS OR PREJUDICIAL TO REVENUE'S INTER EST IN SUCH ESTIMATE. 21. THIS COURT FINDS THAT POWER GENERATION COMPANI ES OWNED OR CONTROLLED BY THE CENTRAL GOVERNMENT ARE A SUB-SPEC IES OF BUSINESS ENTITIES FOR WHICH A SEPARATE PROVISION HAS BEEN EN ACTED BY THE ACT. THERE IS NO DISPUTE THAT THE INCOME OF UTILITIES, E SPECIALLY ONES SUBJECT TO STRINGENT PUBLIC CONTROL, ARE TIGHTLY RE GULATED IN TERMS OF WHAT ARE THE ACCOUNTING METHODS TO BE ADOPTED, HOW DEPRECIATION IS TO BE CLAIMED, ALLOWANCES RATE OF RETURN ON CAPI TAL, ETC. ALL THESE ASPECTS ARE SUBJECT TO CERC REGULATIONS. AT THE REL EVANT TIME, I.E. THE TRANSITION BETWEEN THE OLD (2001) CERC REGULATI ONS, AND THE LATER ONES (2004-2009), HAD NOT BEEN FULLY WORKED O UT BY THE CERC AS TO WHAT HAD TO BE RECOVERED BY NTPC AND OTHER EN TITIES. IT THEREFORE DIRECTED THAT THE PREVIOUS REGIME BE FOLL OWED. APPARENTLY FOR A PORTION OF PREVIOUS ACCOUNTING PERIODS, PROVI SIONAL FIGURES WERE BEING INDICATED AS INCOME ESTIMATES, AND DEPEN DING ON HOW THE FINAL FIGURES WERE WORKED OUT AT TIMES, HIGHER FIGURES WOULD BE OFFERED AS AMOUNTS RECEIVED IN EXCESS OF THE SUM ES TIMATED AND REPORTED DURING OTHER PERIODS. AN EXAMPLE CITED IS ONE FOR 2006- 2007 WHEN AN EXCESS FIGURE OF OVER RS. 46 CRORE WAS REPORTED AND BROUGHT TO TAX. FURTHERMORE, THE REVISION DOWNWARD - IN THE PRESENT INSTANCE - WAS BASED ON PAST EXPERIENCE, WHENEVER R EVISION OF TARIFF HAD TAKEN PLACE. IF DOWNWARD REVISION WERE NOT UNDE RTAKEN, THERE WOULD HAVE BEEN A ITA 507/2013 PAGE 20 LIKELIHOOD O F THE HIGHER FIGURE NOT BEING REALIZED AFTER TARIFF FINALIZATION . 22. THERE IS AUTHORITY, IN THE FORM OF SUPREME COU RT JUDGMENTS IN SHREE SAJJAN MILLS LTD V. CIT , (1985) 156 ITR 585, BHARAT EARTH MOVERS LTD V. CIT , (2000) 245 ITR 428 AND METAL BOX COMPANY OF INDIA LTD V. THEIR WORKMEN , (1969) 73 ITR 53, THAT A PROVISION MADE ON A REASONABLE BASIS, IT WOULD BE IN THE NATU RE OF AN ASCERTAINED LIABILITY AND THAT IN A MERCANTILE SYST EM OF ACCOUNTING, PROVISION FOR LIABILITY ASCERTAINED DURING THE COUR SE OF THE RELEVANT ACCOUNTING PERIOD, WHICH IS PAYABLE AT A FUTURE IS PERMISSIBLE. 6 ITA NO. 4867/DEL/2014 23. THE EXPRESSION 'ERROR OF LAW' RESULTING IN PRE JUDICE TO THE INTERESTS OF THE REVENUE ARE NOT TO BE GIVEN WIDE C ONNOTATION, AS IS SOUGHT TO BE URGED BY THE REVENUE HERE. WHERE TWO V IEWS ARE POSSIBLE, THE COMMISSIONER SHOULD NOT EXERCISE HIS POWER UNDER SECTION 263 ; LEISURE WEAR (SUPRA) APTLY SUMMARIZES THIS POWER AS NOT ENABLING A REVISIONAL INTERDICT ON THE MERE EXISTENCE OF ANOTHER VIEW WHICH CONFLICTS WITH WHAT WAS ADOPTED BY THE INCOME TAX OFFICER; SO LONG AS THE LATTER'S OPINION IS A P LAUSIBLE ONE, EXERCISE OF POWER WOULD BE UNWARRANTED. THE FULFILL MENT OF BOTH PRECONDITIONS, I.E. ERROR OF LAW, AND PREJUDICE TO REVENUE IS ESSENTIAL, ELSE THE REVENUE WOULD HAVE WIDE RANGING POWERS TO OVERSEE AND RE-OPEN ALMOST EVERY ASSESSMENT ORDER. IN THE PRESENT CASE, THE COURT IS SATISFIED THAT THE AO'S ORDER WA S MADE AFTER APPROPRIATE INQUIRY; THE ABSENCE OF DISCUSSION REGA RDING DOWNWARD ITA 507/2013 PAGE 21 REVISION OF SALES FIGURES IN T HIS CASE DID NOT MAKE IT ANY LESS VULNERABLE TO CORRECTION UNDER SECTION 263 . THE VIEW TAKEN BY HIM IS ONE WHICH IS ENDORSED BY LAW, AS THE CERC REGULATIONS LEFT THE NTPC WITH LITTLE CHOICE TO MAK E SUCH REVISION AWAITING A FINAL DETERMINATION IN REGARD TO THE WHO LE PERIOD AFTER THE EXPIRY OF THE ASSESSMENT IN THAT INSTANCE. 24. THIS COURT IS OF THE OPINION THAT THE QUESTION OF LAW FRAMED IN THIS APPEAL HAS TO BE ANSWERED IN FAVOUR OF THE ASS ESSEE. THE COMMISSIONER ACTED ERRONEOUSLY IN EXERCISING REVISI ONAL POWER UNDER SECTION 263 . THE ORDERS OF THE COMMISSIONER AND THE ITAT ARE HEREBY SET ASIDE. 6. LD. CIT (A) IN THE IMPUGNED ORDER REFERRED TO TH ESE OBSERVATIONS OF THE HONBLE HIGH COURT AND WHILE FO LLOWING THE SAME HE REACHED THE CONCLUSION THAT THE GROUND OF A PPEAL OF THE ASSESSEE DESERVES TO BE ALLOWED. IN VIEW OF THE FA CT THAT THE LD. CIT (A) IN HIS ORDER FOLLOWED THE BINDING PRECEDENT IN ASSESSEES OWN CASE, ITS NOT POSSIBLE TO ENTERTAIN ANY ARGUMEN T TO THE CONTRARY BY THE REVENUE, AS SUCH, WE DISMISS GROUND S NO. 1 TO 3 OF REVENUES APPEAL. 7 ITA NO. 4867/DEL/2014 7. NOW COMING TO GROUNDS NO. 4 & 5, LD. CIT (A) IN HIS ORDER FOLLOWED THE OBSERVATIONS OF A COORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 1438/DEL/2009, AND W HILE REFERRING TO PARAGRAPHS NO. 22 TO 23 HE HELD THAT ADDITIONAL DEPRECIATION CANNOT BE DENIED TO THE ASSESSEE. ITA NO. 1438/DEL /2009 IS ASSESSEES OWN CASE, PREFERRED BY THE ASSESSEE, WHE REAS THIS APPEAL IS PREFERRED BY THE REVENUE FOR THE VERY SAM E ASSESSMENT YEAR. HENCE, WHILE RESPECTFULLY FOLLOWING THE SAME , WE DISMISSED GROUND NOS. 4 & 5 ALSO. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19.09.2017 SD/- SD/- (N.K. SAINI) (K.N. CHAR Y) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 19.09.2017 *KAVITA ARORA COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI 8 ITA NO. 4867/DEL/2014 DRAFT DICTATED ON 13.09.2017 DRAFT PLACED BEFORE AUTHOR 14.09.2017 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 19.9.17 APPROVED DRAFT COMES TO THE SR.PS/PS 19.9.17 KEPT FOR PRONOUNCEMENT ON 19.9.17 FILE SENT TO THE BENCH CLERK 19.9.17 DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.