Dakshin Gujarat Vij Co. Ltd, Surat V. The DCIT Circle-1(1)(1), Vadodara

ITA 554/AHD/2020

AI Insights

The case involves cross appeals by Dakshin Gujarat Vij Co. Ltd. (the Assessee) and the DCIT, Circle-1(1)(1), Vadodara (the Revenue) against the orders passed by the Commissioner of Income Tax (Appeals)-1, Vadodara. The appeals pertain to the assessment years 2013-14 to 2015-16 and involve issues such as the treatment of capital grants and subsidies, classification of income, and disallowance of prior period expenses. The Income Tax Appellate Tribunal Ahmedabad 'C' Bench heard the appeals and decided to remand several issues back to the Assessing Officer for fresh consideration.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 114223 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-02-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: C
• Next Hearing Date: 17-01-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 11-11-2020
• Other Referred Cases: Odisha Power Generation Corporation Ltd. vs. ACIT, Circle-2(2), CIT vs. New India Maritime Agencies (P.) Ltd., Triveni Engg. & Industries Ltd. vs. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Business income; Depreciation; Opportunity of being heard; Initiation of penalty proceedings; Set aside
• Section: 271(1)(c); 143(3); 115JB; 2(A); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “C” BENCH Before: Shri Waseem Ahmed, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member Dakshin Gujarat Vij Co. Ltd. ADD: Urja Sadan, Nana Varachha Road Kaposara, Char Rasta, Surat-395006, Gujarat PAN: AABCD8912C (Appellant) Vs The DCIT, Circle-1(1)(1), Vadodara (Respondent) The DCIT, Circle-1(1)(1), Vadodara (Appellant) Vs Dakshin Gujarat Vij Co. Ltd. ADD: Urja Sadan, Nana Varachha Road Kaposara, Char Rasta, Surat-395006, Gujarat PAN: AABCD8912C (Respondent) ITA Nos: 553 to 555/Ahd/2020 Assessment Years: 2013-14 to 2015-16 ITA Nos: 568 to 570/Ahd/2020 Assessment Years: 2013-14 to 2015-16 I.T.A Nos. 553 to 555/Ahd/2020 and Ors. A.Ya. 2013-14 to 2015-16 Page No Dakshin Gujarat Vij. Co. Ltd. vs. DCIT 2 Assessee Represented : Shri M.K. Patel, Adv. Revenue Represented : Shri A. P. Singh, CIT Date of hearing : 18-01-2023 Date of pronouncement : 17-02-2023 आदेश/ORDER PER BENCH:- These cross appeals are filed by the Assessee and Revenue as against the separate orders dated 10.07.2020 passed by the Commissioner of Income Tax (Appeals)-1, Vadodara arising out of the assessment order passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Years (A.Ys) 2013-14 to 2015-16. Since common issues are involved in all these appeals, the same are disposed of by this consolidated order. 2. We take up ITA No. 553/Ahd/2020 Assessee’s appeal relating to the Assessment Year 2013-14 as the lead case. 2.1. The brief facts of the case is that the assessee is a company engaged in the business of distribution of electricity. The assessee company filed its e-Return of Income declaring a loss under normal provisions of the Act at Rs. 23,92,39,617/- and book profit at Rs. 32,51,65,720/-. The case was selected for scrutiny and assessment order u/s. 143(3) was passed on 08.12.2016 determining the total income at Nil and books profit was assessed at Rs. 93,64,27,720/. I.T.A Nos. 553 to 555/Ahd/2020 and Ors. A.Ya. 2013-14 to 2015-16 Page No Dakshin Gujarat Vij. Co. Ltd. vs. DCIT 3 The A.O. made the following additions/disallowances in the assessment order as follows: 1 Disallowance of Guarantee fees Rs. 66,56,000/- 2 Addition of Extraordinary items Rs. 16,29,000/- 3 Addition on account Capital Grant Rs.59,16,52,000/- 4 Prior Period expenditure Rs.98,05,000/- 5 Prior Period Income Rs. 98,05,000/- 3. Aggrieved against the same, the assessee filed an appeal before Ld. CIT(A) who is partly allowed the assessee appeal. 4. Aggrieved against the appellate order, both Assessee and Revenue are in appeal before us raising the following Grounds of Appeal. 4.1. The Grounds of Appeal are raised by the Assessee in ITA No. 553/Ahd/2020 are as follows: 1.0 The learned Commissioner of Income Tax (Appeals) erred in law and on facts has confirmed the additions of Rs.59,16,52,000/- on account of Capital Grants & Subsidies and Consumers' Contribution on the ground that the appellant should transfer 15% of the total Grants/subsidies/consumer contribution received during the year as against 10% offered by the appellant. 2.0 The learned Commissioner of Income Tax (Appeals) erred in law and on facts has confirmed the additions of the income shown under the head income from other sources in the Profit & loss Account viz., Interest on staff loans and advances and Miscellaneous Receipts amounting to Rs.69,15,000/- and Rs.13,12,40,000/- respectively without considering the nature of each item included under this head. 3.0 The learned Commissioner of Income Tax (Appeals) has confirmed the disallowance of prior period expenses amounting to Rs.98,05,000/- without appreciating the fact that such expenditure crystallized during the year and that the same has never been claimed in earlier years. 4.0 The learned Commissioner of Income Tax (Appeals) erred in law and on facts has dismissed the ground relating to the initiation of penalty proceedings under section 271(1)(c) of the IT Act. I.T.A Nos. 553 to 555/Ahd/2020 and Ors. A.Ya. 2013-14 to 2015-16 Page No Dakshin Gujarat Vij. Co. Ltd. vs. DCIT 4 5.0 The learned Commissioner of Income Tax (Appeals) has erred in law and on facts in confirming the charging of interest under section 234B, 234C and 234D of the Income Tax Act, 1961. 5. Ground no. 1: Confirming the addition of 15% Capital Grants as against 10% offered by the assessee. The Ld. Assessing Officer made addition of Rs. 17,70,02,500/- on account of Capital Grants and Subsidies and Consumers’ Contribution on the ground that the assessee should transfer 15% of the total Grants/subsidies/consumer contribution received during the year as against 10% offered by the assessee. The Assessing Officer followed the earlier assessment year and thereby made the disallowance which has been confirmed by the Ld. CIT(A). Hence the assessee is in appeal before us. 5.1. At the time of hearing of the appeal, the Ld. Counsel for the assessee submitted before us, the Co-ordinate Bench decision on identical ground in assessee’s own case in ITA No. 2858/Ahd/2015 and 5 Ors. dated 22.07.2022 relating to the Assessment Years 2010-11 to 2012-13 in assessee’s own case held as follows: “...... 16. We find that on the identical issue as submitted by the Ld. A.R. in ITA No. 652/Ahd/2013 for A.Y. 2009-10 the Coordinate Bench has been pleased to set-aside the issue to the file of the Ld. AO for adjudication afresh for verifying the proportionate amount of grant relevant to different asset. The relevant observation of the Coordinate Bench is as follows: “13. The Learned AO finalized the issue by making an addition of Rs.24,17,88,400/- which was, in turn, confirmed by the Learned CIT(A) and added to the total income of the assessee. While confirming the addition, the Learned CIT(A) observed as follows: “6.3 I have considered the submissions. It has been accepted by the appellant that the grants were for capital purpose and for capital projects specified by the Government. In Schedule-3 of the printed balance sheet as on 31.3.2009, it is clearly mentioned that grants were towards cost of capital assets. Appellant's contention that the grants were not actually for meeting cost of assets is therefore not at all tenable. After insertion of Explanation 10 below I.T.A Nos. 553 to 555/Ahd/2020 and Ors. A.Ya. 2013-14 to 2015-16 Page No Dakshin Gujarat Vij. Co. Ltd. vs. DCIT 5 section 43(1) by the Finance (No.2) Act, 1998 w.e.f. 1.4.1999, decisions relied upon by the appellant in the case of P. 3. Chemicals etc. are no longer applicable and cost of assets met directly or indirectly by the Central Government or State Government in the form of subsidy or grant or reimbursement (by whatever name called) is not to be included in the "actual cost of asset" to the assessee. Accordingly, depreciation is to be allowed only after making necessary adjustment in "written down value"/"actual cost" of block of assets in accordance with Explanation 10 below section 43(1). In the case of Dakshin Gujarat Vij Co. Ltd. for A.Y.2006-07 referred to by the Assessing Officer, CIT(A) distinguished the treatment to be meted out to revenue grants and capital grants and held that revenue grants are to be taxed in entirety in the year of receipt and capital grant towards assets are to be reduced from "actual cost" of assets as per Explanation 10 below section 43(1). In the case of Dakshin Gujarat Vij Co. Ltd., after noting that grants were only towards cost of capital assets, CIT(A) had held that such grants ought to have been reduced from the cost of capital assets and by not doing so, extra depreciation @ 15% of grants had been claimed. Since 10% of the grants had already been offered as income by the assessee, in the decision in the case of Dakshin Gujarat Vij Co. Ltd., CIT(A) had directed addition to be made after reducing income already offered from 15% of the grants. The AO has made addition in the present case as per this appellate order. Hence following the same, the addition made by the AO is upheld and this ground of appeal is dismissed.” However, at the vary onset of the proceeding, the Learned AR has taken us to the order passed by the Co-ordinate Bench in ITA No.704/Ahd/2012 for A.Y. 2008-09 in assessee’s own case where we find that the issue has been set aside to the file of the Learned AO for adjudication afresh after verifying proportionate amount of grant relating to different asset. The Learned AR prayed for similar relief. The argument advanced by the Learned AR has been failed to be contradicted by the Learned DR. We find following observation was made by the Hon’ble Co- ordinate Bench while granting relief to the assessee: “15. The ground no.3 of the appeal of the assessee is directed against the order of the CIT(A) in confirming the action of the AO in transferring 15% of the capital grants as income although the disallowance made under this head has been restricted to Rs.18,93,11,850/- as against the disallowance of Rs.30,97,61,800/- made by the AO. 16. The brief facts of the case are that on verification of subsidies and grants, the AO observed that the assessee has shown deferred government grants, subsidies, contribution at Rs.7305.70 lakhs as on 1.4.2007 and the assessee had shown Rs.15941.67 lakhs at the end of the year i.e. as on 31.3.2008. On show cause by the AO to explain the treatment in accounts of the subsidy, grants the assessee stated that during the year capital grant received from Government of Gujarat and other. The assessee submitted that in order to improve various functions I.T.A Nos. 553 to 555/Ahd/2020 and Ors. A.Ya. 2013-14 to 2015-16 Page No Dakshin Gujarat Vij. Co. Ltd. vs. DCIT 6 associated with the generation, transmission and distribution of electricity, and also because the PSUs connected with power section were making consistent losses, the Government decided to introduce reforms in the direction of State PSUs. Accordingly, under the provision of Gujarat Electricity Industrial (Reorgnisation & Regulation) Act, 2000, the erstwhile GEB was split into seven companies, for the purpose of financial restructuring plan, and the approval was accorded to provide some financial/capital support to GUVNL. The grant was given in terms of the power reforms for the overall development of the power sector. Such grant was not granted to actually meet the cost of assets. Further, the grant was given to the holding company, GUVNL and then it was allocated to the assessee company, one of the subsidiary companies. The assessee was not entitled to an amount beyond a certain limit, even if it is spent large amount on purchase of fixed assets. Further, the grant was not with reference to any particular fixed assets. It was further submitted that the resolution sanctioning the grant no where indicated that the grant was meant to offset the cost of the capital assets purchased by the company. Reliance was placed on the decision of the Hon’ble Supreme Court in the case of CIT Vs. P.J. Chemicals Ltd., 121 CTR 201, wherein the decision of the Gujarat High Court in the case of CIT Grace Paper Industries P. Ltd., 83 CTR 1, which was affirmed by the Hon’ble Supreme Court by observing that the amount of subsidies and grants received by the assessee cannot be reduced from the cost of assets. It was further submitted that the subsidy received under scheme cannot be reduced from the actual cost of the assets by applying the provisions of section 43(1) of the Income Tax Act. The AO did not accept the submission of the assessee and held that the submission of the assessee that the grant was not capital in nature, is factually incorrect, and from the resolution, it was clear that the grant received from the State Government was in the nature of capital grant and it should have been reduced from the capital assets. The decisions quoted by the assessee are not applicable after insertion of Explanation 10 of section 43(1) of the Act, as they pertained to earlier years prior to insertion of Explanation 10 of section 43(1) of the Act. After insertion of Explanation 10 of section 43(1) of the Act, the position of law was very clear. Since the assessee failed to reduce the capital grant against the cost of capital assets, and claimed excess depreciation, which was disallowed and worked out at 15% of the capital assets. 17. On appeal, the CIT(A) held that in assessee’s case, 10% of grant under three heads namely “Subsidy towards cost of capital assets”, “Grants towards cost of capital assets” and “Consumer contribution for capital assets” i.e. the grants appearing in Schedule -3 of the balance sheet as on 31.3.2008 were offered for tax. The amount of grant on which 10% was calculated was on the opening balance of grants of Rs.73,05,70,492/-, and the grants received during the year was Rs.103,56,34,226/-, aggregating to Rs.176,62,04,718/-. As these grants were towards cost of capital assets, 15% of the same should have been reduced from the depreciation claimed on account of making adjustment in the I.T.A Nos. 553 to 555/Ahd/2020 and Ors. A.Ya. 2013-14 to 2015-16 Page No Dakshin Gujarat Vij. Co. Ltd. vs. DCIT 7 ‘actual cost’ of assts as per Explanation 10 below section 43(1). Since the assessee has already offered for tax, 10% of the opening balance of grants plus grants received during the year under these three heads of Schedule-3 grants, such amount offered for tax was to be reduced from the excess depreciation to be disallowed at the rate of 15% of Rs.176,62,04,718/- i.e. Rs.26,49,30,708/-. The net disallowance on this count worked out Rs.26,49,30,708/- minus Rs.17,20,37,655/-, the amount already offered for taxation i.e. Rs.9,28,93,053/-. Since no portion of grant of Rs.6427.94 lakhs being capital grant for capital support appearing in Schedule-2 of the balance sheet as on 31.3.2008 was offered as income nor it was reduced from the cost of assets, 15% of the same i.e. Rs.964.191 lakh needed to be disallowed as excess depreciation claimed in respect of the same. The total disallowance towards excess depreciation, therefore, worked out to Rs.9.289 crores plus Rs.9.641 crores i.e. Rs.18.93 crores. Thus, instead of net addition of Rs.30,97,61,800/- made by the AO, addition of Rs.18.93 crore was directed to be made on this count. 18. Before us, the AR of the assessee argued that uniform rate of 15% cannot be applied for making disallowance. He submitted that the grant should be apportioned according to the value of the asset given in the balance sheet. He argued that the rate of depreciation on land was zero percent, building was 5% and the plant & machinery was 15%, and hence, the disallowance at the uniform rate at 15% is not justified. 19. On the other hand, the DR argued and submitted that the order of the CIT(A) was correct, and he after appreciating the entire facts had reduced the disallowance from Rs.30.97 crores to Rs.18.93 crores. 20. We find that in the instant case, the CIT(A) held that excess depreciation claimed on account of capital grant comes to Rs.18.93 crores being 15% of Rs.176,62,04,718/-, i.e. Rs.26,49,30,708/- minus Rs.17,20,37,655/-, which amounts to Rs.9,28,93,053/-, and 15% of Rs.6427.94 lakhs amounting to Rs.964.191 lakh. The submissions of the assessee before us is that the uniform rate of 15% adopted by the CIT(A) is not justified. As per provisions of section 43(1) of the Act, the capital grant should be reduced from the cost/WDV of the relevant asset, and thereafter the depreciation is to be calculated. Thus, the capital grant receipt in respect of asset, on which depreciation is allowable at the rate different from 15% should be worked out as per the applicable rate. The DR could not point out any mistake in the above submission of the assessee, which we find is in accordance with law. We, therefore, set aside the orders of the lower authorities on this issue, and restore the matter back to the file of the AO for adjudication afresh after verifying the proportionate amount of grant relating to different asset, and applying the actual rate of depreciation which relate to these assets. Thus, this ground of appeal of the assessee is allowed for statistical purpose. I.T.A Nos. 553 to 555/Ahd/2020 and Ors. A.Ya. 2013-14 to 2015-16 Page No Dakshin Gujarat Vij. Co. Ltd. vs. DCIT 8 Hence, in the absence of any changed circumstances as it appears from the records, we find no other alternative but to remit the issue to the file of the Learned AO for re-adjudication of the same and to pass order upon verification of the proportionate amount of grant relating to different assets and upon applying the actual date of depreciation relates to those assets. Hence, this ground of appeal preferred by the assessee is allowed for statistical purposes.” 5.2. Respectfully following the decision taken by the Coordinate Bench of this Tribunal, we find it fit and proper to remand the issue to the file of the Ld. AO for re-adjudication of the same and to pass orders upon verification of the proportionate amount of grant relating to different assets and to pass orders accordingly. This ground of appeal preferred by the assessee is allowed for statistical purposes. 6. Ground no. 2(a): Treating interest income of Rs. 69,15,000/- on advances paid to staff as “income from other sources” instead of “business income”. 6.1. The Ld. Counsel fairly submitted that identical issue has been decided against the assessee by the Co-ordinate Bench in the case of Gujarat Transmission Corporation in ITA No. 652/Ahd/2013 for the Assessment Year 2009-10. However the Hon’ble Odisha High Court in the case of Odisha Power Generation Corporation Ltd. vs. ACIT, Circle-2(2) in ITA No. 1 of 2015 and Ors., wherein the Hon’ble High Court held in favour of the assessee as follows: “ ..... 12. The Assessee offered an explanation regarding interest income earned by it, from advances given to its employees as well as provision of electricity and water charges collected from water through its employees and contractors for facilities in the township, receipt from transit hostel, sale of scrap, insurance claim etc. The facilities were given to its employees for better conditions of employment. This was to improve the overall efficiency of the undertaking which is devoted to the single purpose of generation of power. The Court, therefore, has no difficulty in I.T.A Nos. 553 to 555/Ahd/2020 and Ors. A.Ya. 2013-14 to 2015-16 Page No Dakshin Gujarat Vij. Co. Ltd. vs. DCIT 9 accepting the submission of the Assessee that the interest received on advances and loans given to its employees are receipts in normal course of carrying its business and should be considered as income derived from its essential business activities. Likewise, the late payment by GRIDCO for the electricity supplied, is sought to be made up by GRIDCO by issuing bonds on which the Assessee earns interest. This also therefore, has a direct nexus with the essential business activity of the Assessee.” 6.2. The Ld. Counsel further submitted that similar ground was set aside to the A.O. by the Co-ordinate Bench of this Tribunal in ITA No. 2858/Ahd/2015 for the Assessment Year 2010-11. 6.3. The Ld. D.R. has no serious objection in setting aside the matter back to the A.O. for fresh verification. 7. We have heard the rival submissions and perused the relevant material and the judgment of the Odisha High Court in the case of Odisha Power Generation Corporation Ltd. (cited supra). In view of the same, we find it proper to direct the A.O. to consider the issue afresh upon examining the same in regard to the heads of income after considering the facts of each cases. 7.1. Thus this ground raised by the assessee is allowed for statistical purposes. 8. Ground no. 2(b): Treating miscellaneous receipts of Rs. 13,12,40,000/- as “income from other sources” instead of “business income”. 8.1. The assessee claimed the following miscellaneous receipts: Particulars Amount (Rs.) Income from Rental Staff Quarters 1,31,000 I.T.A Nos. 553 to 555/Ahd/2020 and Ors. A.Ya. 2013-14 to 2015-16 Page No Dakshin Gujarat Vij. Co. Ltd. vs. DCIT 10 Income from Post Offices, Bank, contractors, etc. 35,000 Guest House Charges 21,000 Refund from consumer Authorities 7,000 Income from Water Charges recovered from Employees/Contractors (This income is from dwelling accommodation provided to employees as well as fabrication or civil contractors as the case may be) 2,28,000 Recovery for Transportation and Vehicle Expenses from Other than Staff (This income is received from contractors or outsiders where freight or transport charges is to be boned by contractors) 6,34,000 Cash Discount (This income is for payment made within stipulated time as per accepted tender terms or order terms) 3,79,000 Sale of Tender Forms 61,83,000 Income from Supervision Charges on Sale of Stores 1,000 Income from Supervision Charges on Execution of job/Deposit works 26,67,000 Registration Fees from Suppliers, Contractors 7,96,000 Penalties Recovered from Suppliers/ contractors 7,87,48,000 Penalties Recovered from Employees 19,000 Insurance Premium recovered for House building Advance Loan 1,10,000 Receipt under Right to information (RT) Act, 2005 8,000 Other Miscellaneous Receipts (This income is from other than above all account heads, major amount consists amount in respect of unclaimed security deposit, Earnest Money Deposit and Miscellaneous Deposits from Suppliers or Contractors which is un-disputed and lying pending for more than three years, and which, as per policy of management, not payable, is considered as income. This policy is disclosed at Note No. 1 (4)(v)(d) on page no. 25 to 10 th Annual Report, 2012-13. 4,12,73,000 Total 13,12,40,000 8.2. The assessee claimed that the above income has been arisen in the ordinary course of business and is exclusively attributable to the activities of the business. Therefore the above incidental income received from such activities should be considered as “business income” only. It is for this reason in the computation of total income under the head “Income from other sources”, the assessee claimed Nil income. The assessee further drawn our attention to I.T.A Nos. 553 to 555/Ahd/2020 and Ors. A.Ya. 2013-14 to 2015-16 Page No Dakshin Gujarat Vij. Co. Ltd. vs. DCIT 11 the balance sheet more particularly Schedule-19, Interest on staff loan and advances, Miscellaneous receipts etc were shown. The above receipts of staff quarter charges, guest house charges, water charges from employees, sale Tender forms, supervision charges received forfeiture of earnest money/security deposit, unclaimed deposits of customers, etc. are all related to the business income of the assessee. Therefore the same has to be treated as incidental to the business activity of the assessee and therefore treated as “business income” only. However both the Assessing Officer and the Ld. CIT(A) denied the above claim and held that the miscellaneous receipts have no nexus with the business carried out by the assessee. 8.3. The Ld. Counsel thus submitted that in the light of the judgment rendered in the case of Odisha Power Generation Corporation Ltd., this issue be remanded back to the file of the Assessing Officer for fresh consideration. 8.4. The Ld. D.R. appearing for the Revenue supported the orders of the Lower Authorities and pleaded the lower authorities are correct in holding the miscellaneous receipts as “income from other sources” which does not require any interference. 9. We have given our thoughtful consideration and perused the materials available on record. The Hon’ble Madras High Court in the case of CIT vs. New India Maritime Agencies (P.) Ltd., 124 Taxmann.com 801 wherein it was held that the “company had given the houses owned by it, to its Directors for their residences, it I.T.A Nos. 553 to 555/Ahd/2020 and Ors. A.Ya. 2013-14 to 2015-16 Page No Dakshin Gujarat Vij. Co. Ltd. vs. DCIT 12 is doing so only in the course of his business. The principle is that if the owner of a property carries on business with a property owned by him, the income from that property must be assessed as only “income from business”. Since the Tribunal found that the house property had been used by the assessee as a part of the business and treated as business, the finding of the Tribunal that the income from the property could not be assessed separately as income from house property and included in the assessee’s total income, was correct.” 9.1. Further the Hon’ble Delhi High Court in the case of Triveni Engg. & Industries Ltd., 343 ITR 245 wherein the “loss on account of non-recovery of loan given to employees was treated as loss incidental to business activity, then the interest on such loan falls within the purview of business activity only not “income from other sources”. 9.2. In the light of the above, we find it fit to remand this issue to the file of the Assessing Officer for verification of the facts with proper materials and allow the claim in accordance with law. 9.3. In the result, this ground raised by the Assessee is partly allowed. 10. Ground no. 3: Disallowance of prior period expenses of Rs. 98,05,000/-. The Ld. Counsel submitted that this issue has been set aside to the file of the ld. A.O. in assessee’s own case which is not disputed by the Ld. D.R. I.T.A Nos. 553 to 555/Ahd/2020 and Ors. A.Ya. 2013-14 to 2015-16 Page No Dakshin Gujarat Vij. Co. Ltd. vs. DCIT 13 11. We have heard both the parties and perused the materials available on record. We find that the Co-ordinate Bench on identical issue following ITA No. 996/Ahd/2011 and ITA No. 2858/Ahd/2015, on identical issue disposed of the ground by remitting the same to the file of the Ld. A.O. by adjudicating the issue afresh as follows: “6. We have carefully heard the rival submissions and perused the orders of the authorities as well the case-laws referred. The assessee is aggrieved by the disallowance of prior period expenses of Rs.53.53crores as per Ground No.4 of its appeal. The disallowance has been made on the ground that the expenses under various heads as noted in the assessment order pertained to earlier years and the assessee which is following system of accounting should have made provision for expenses in those respective years and claimed them as deduction. We have gone through the break-up of the expenses as noted in para-8 of the assessment order and observe that certain expenses declared under the head 'other adjustments Rs.30.75 crores'; 'other charges Rs.79.34 lakhs'; 'depreciation under provided Rs.7.86 crores' etc. are ostensibly vague and does not/indicate the nature of claim with sufficient particularity obscure. We simultaneously note that assessee is a Slate Government Undertaking and its accounts are subjected to review by CAG and therefore it cannot be postulated that there was any deliberateness in not furnishing relevant, details before the revenue authorities. The bonafides of the Assessee is also augmented by the facts that the Assessee has reported staggering carry forward losses in its returned income. Thus, there is no immediate tax advantage accrued to the assessee by the claim of impugned prior period expenses per se. We therefore deem it expedient to restore the issue back to the file of AO for examining the issue de novo after verifying facts as may be considered necessary and expedient in accordance with law. The AO shall bear in mind the ratio laid down by the Hon'ble Gujarat High Court in the case of Adani Enterprises Ltd. (supra) while adjudicating the issue. Needless to say, reasonable opportunity shall be provided to the assessee while adjudicating the issue. Hence, all the contentions of the assessee are kept open. The issue raised as per Ground No.4 is thus set aside to the file of AO in terms of directions noted above. As a result, Ground No.4 is allowed for statistical purposes.” 11.1. Respectfully following the same, we hereby set aside the matter to the file of the Assessing Officer for fresh consideration by giving proper opportunity to the assessee. 11.2. Thus this ground raised by the Assessee is allowed for statistical purposes. I.T.A Nos. 553 to 555/Ahd/2020 and Ors. A.Ya. 2013-14 to 2015-16 Page No Dakshin Gujarat Vij. Co. Ltd. vs. DCIT 14 12. Ground No. 4 is Initiation of penalty u/s. 271(1)(c) and Ground no. 6 is general ground which are not pressed by the assessee. 12.1. Hence both the grounds no. 4 & 6 raised by the assessee are dismissed as not pressed. 13. Ground no. 5 is charging of interest u/s. 234B, 234C and 234D of the Act which were consequential in nature the same is also not pressed by the assessee and therefore no separate adjudication is required on this ground. ITA No. 554/Ahd/2020 (Assessee’s appeal for A.Y. 2014-15) 14. Ground no. 1 is identical ground has already been considered by us in ITA No. 553/Ahd/2020 for Assessment Year 2013-14 in Paragraph 5 of this order. As similar issue is being involved herein the issue are set aside to the Ld. Assessing Officer for fresh consideration. 15. Ground No. 2(a) is identical ground has already been considered by us in ITA No. 553/Ahd/2020 for Assessment Year 2013-14 in Paragraphs 6 & 7 of this order. As similar issue is being involved herein the issue are set aside to the Ld. Assessing Officer for fresh consideration. 16. Ground No. 2(b) is identical ground has already been considered by us in ITA No. 553/Ahd/2020 for Assessment Year 2013-14 in Paragraphs 8 & 9 of this order. As similar issue is being I.T.A Nos. 553 to 555/Ahd/2020 and Ors. A.Ya. 2013-14 to 2015-16 Page No Dakshin Gujarat Vij. Co. Ltd. vs. DCIT 15 involved herein the issue are set aside to the Ld. Assessing Officer for fresh consideration. 17. Ground no. 3 is identical ground has already been considered by us in ITA No. 553/Ahd/2020 for Assessment Year 2013-14 in Paragraph 10 of this order. As similar issue is being involved herein the issue are set aside to the Ld. Assessing Officer for fresh consideration. 18. Ground no. 4 & 6 are identical ground has already been considered by us in ITA No. 553/Ahd/2020 for Assessment Year 2013-14 in Paragraph 12 of this order. The same are dismissed as not pressed. 19. Ground no. 5 is identical ground has already been considered by us in ITA No. 553/Ahd/2020 for Assessment Year 2013-14 in Paragraph 13 of this order. Charging of interest u/s. 234B, 234C and 234D are consequential in nature, therefore no separate adjudication is required on this ground. ITA No. 555/Ahd/2020 (Assessee’s appeal for A.Y. 2015-16) 20. Ground no. 1 is identical ground has already been considered by us in ITA No. 553/Ahd/2020 for Assessment Year 2013-14 in Paragraph 5 of this order. As similar issue is being involved herein the issue are set aside to the Ld. Assessing Officer for fresh consideration. I.T.A Nos. 553 to 555/Ahd/2020 and Ors. A.Ya. 2013-14 to 2015-16 Page No Dakshin Gujarat Vij. Co. Ltd. vs. DCIT 16 21. Ground No. 2(a) is identical ground has already been considered by us in ITA No. 553/Ahd/2020 for Assessment Year 2013-14 in Paragraphs 6 & 7 of this order. As similar issue is being involved herein the issue are set aside to the Ld. Assessing Officer for fresh consideration. 22. Ground No. 2(b) is identical ground has already been considered by us in ITA No. 553/Ahd/2020 for Assessment Year 2013-14 in Paragraphs 8 & 9 of this order. As similar issue is being involved herein the issue are set aside to the Ld. Assessing Officer for fresh consideration. 23. Ground no. 3 is identical ground has already been considered by us in ITA No. 553/Ahd/2020 for Assessment Year 2013-14 in Paragraph 10 of this order. As similar issue is being involved herein the issue are set aside to the Ld. Assessing Officer for fresh consideration. 24. Ground no. 4 & 6 are identical ground has already been considered by us in ITA No. 553/Ahd/2020 for Assessment Year 2013-14 in Paragraph 12 of this order. The same are dismissed as not pressed. 25. Ground no. 5 is identical ground has already been considered by us in ITA No. 553/Ahd/2020 for Assessment Year 2013-14 in Paragraph 13 of this order. Charging of interest u/s. 234B, 234C and 234D are consequential in nature, therefore no separate adjudication is required on this ground. I.T.A Nos. 553 to 555/Ahd/2020 and Ors. A.Ya. 2013-14 to 2015-16 Page No Dakshin Gujarat Vij. Co. Ltd. vs. DCIT 17 ITA No. 568/Ahd/2020 (Revenue’s appeal for A.Y. 2013-14) 26. The Grounds of appeal raised by the Revenue are as follows: i. Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the addition of Rs.16,29,000/- made under the head 'extraordinary items' being losses due to flood, cyclone, fire etc., ignoring the facts that in AY 2008-09 in assessee's own case ld. CIT(A) allowed the appeal of the assessee as AO called for the details with regard to such extraordinary items and the assessee produced the such details before the AO, whereas in- the year under consideration the assessee failed to produce the such details with regard to such extraordinary items, ii. Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the addition made on account of prior period income. iii. Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the addition/adjustments made to the Book Profit computed u/s 115JB of the IT Act on account of Prior Period expenses. iv. Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the addition/adjustments made to the Book Profit computed u/s. 115JB of the IT Act on account of prior period income. v. Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the addition/adjustments made to the Book Profit computed u/s 115JB of the I.T. Act on account of Capital Grants & Subsidies claimed at Rs.59,16,52,000/-. 27. Ground no. 1: Deleting the addition of Rs. 16,29,000/- losses due to flood, cyclone, fire etc., under the head extraordinary items. 27.1. During the course of hearing of the appeal, the Ld. D.R. relied upon the order passed by the Lower Authorities and requested to uphold the same. 27.2. Per contra, the Ld. Counsel appearing for the assessee submitted before us. Thus this issue is covered in favour of the assessee in assessee’s own case in ITA No. 2789/Ahd/2015 relating to the Assessment Year 2010-11 vide order dated 22.07.2022 I.T.A Nos. 553 to 555/Ahd/2020 and Ors. A.Ya. 2013-14 to 2015-16 Page No Dakshin Gujarat Vij. Co. Ltd. vs. DCIT 18 wherein the Co-ordinate Bench considered assessee’s own case in ITA No. 3111/Ahd/2011 relating to the earlier Assessment Year 2008-09 and produced a copy of the above decision. 28. We have heard the rival submissions and perused the order passed by the Co-ordinate Bench of this Tribunal in assessee’s own case wherein it is held as follows: “.....49. We have carefully considered the order passed by the Coordinate Bench in ITA No. 3111/Ahd/2011 for A.Y. 2008-09. While dealing with the ground the Coordinate Bench has been pleased to observe as follows: “5. The Revenue’s second substantive ground assails correctness of the lower appellate order deleting addition of Rs. 124.8 lacs made on account of disallowance of extra ordinary items being losses due to cyclone, flood and fire etc made for want of supportive evidence. We find that the CIT(A)’s order under challenges deals with Assessing officer’s observations and assessee’s arguments as under:- “6. Ground No. 5 of appeal is regarding disallowance of extra-" 4 ordinary items amounting to Rs.1,24,28,000/-. Assessing Officer disallowed loss on account of flood, cyclone, fire etc. of Rs.124.28 lakh claimed under the head "Extra-ordinary items" on the ground that appellant had not submitted details such as nature of loss, how it was quantified etc. 6.1 In appeal, submissions as under were made:- ''Ground No.5: Disallowance out of Extra-ordinary items. The learned Assessing Officer has disallowed Extra-ordinary Items amounting to Rs.1,24,28,000/- without any cogent reasons whatsoever. During the course of assessment proceedings, the learned Assessing Officer had called for the information relating to Extraordinary items vide item No.29 of the notice dated 18-08-2010 issued under section 14291) of the I T Act. The learned Assessing Officer had asked to give details and justification for allowability of the expenses. In response to the same, complete details of the expenses were filed vide letter No. DGVCL/GM(F&A)/10/15523 dated 15-12-2010. It was explained at the time of assessment proceedings that this expenditure has been incurred on account of expenses incurred for rehabilitation and repairs works undertaken due to floods/cyclones at various Divisions of the Company. The division-wise breakup of the expenditure of 124.28 lakhs as submitted before the learned Assessing Officer is enclosed herewith. It is clarified that due to unforeseen cyclone -and flood in F.Y 2007- 08, the distribution network in and around particularly Surat area was affected adversely and hence, the company had to incur expenditure towards restoration of Line networks in the jurisdiction of the company. The repairs are in the nature of line maintenance network involving replacement of I.T.A Nos. 553 to 555/Ahd/2020 and Ors. A.Ya. 2013-14 to 2015-16 Page No Dakshin Gujarat Vij. Co. Ltd. vs. DCIT 19 conductors, repairs carried out to transformers, replacement of cables, replacement of meter and meter boxes, etc. In this regard, as an illustration, it is submitted that out of the total expenditure of '56.83 lakhs incurred by Surat (O & M ) division, the major expenditure related to the following :- Sr no Particulars of item Amt(’) 1. Replacement of alluminium alloy conductors of different sizes 14.37 lacs 2. Replacement of PVC Unarmoured Cables of different sizes 2.53 lacs 3. Replacement of RSJ Girder 116x100x11 mtr long 16.21 lacs 4. Repair charges of transformers of different sizes 12.44 lacs 5. Other expenditure (related to replacement of GI stay wires, Meters, meter boxes, Shackle Insulators, Kit kat fuses, Pin Insulators, Stay Clamps for Poles, etc). 11.28 lacs It is further submitted that at the time of natural calamity like earthquakes, cyclone, floods, fire etc., the company being a public utility undertaking has to incur expenditure immediately for restoration of power. For the purpose the loss incurred due to the' calamity as well as the expenditure on repairs etc., is estimated. On the basis of estimate, the company represent to the Government of Gujarat for subsidy/grant against the loss on account of flood, cyclone, fire, etc. It can be seen from the Annual Accounts that the company had received a grant/subsidy from the Government amounting to '1789.94 lacs against losses on account of Floods in the immediately preceding year in which heavy floods were there. The said subsidy was shown by the company as other income in Schedule -20 of the Annual Accounts. Thus it is submitted that the subsidy received for losses -is shown as income and the expenses incurred for repairs, restoration work are shown as extra-ordinary items. In view of the facts and circumstances, it is submitted that the entire expenditure is incurred out of business expediency is of revenue nature and is fully allowable. It is only the accounting treatment that the said expenditure is shown as extra-ordinary items. The appellant, therefore, prays that the .disallowances made on this count may be deleted. The appellant also invites your honour's kind attention to the fact that the similar issue has been decided favourably by the Hon'ble Commissioner (Appeals) in the case of Gujarat Energy Transmission Corp. Ltd., a sister concern of the appellant company, for the Asst. Year 2006-07 and 2007- 08. The copy of the CIT(A)'s order passed for the Asst, Year 2006-07 is enclosed in Annexure-III." 6.2. I have considered facts of the case and appellant's submissions. Similar issue was considered by my learned predecessor CIT(A)-I, Baroda in case of Gujarat Energy Transmission Corporation Ltd., sister concern of the appellant in CAB-I/333/08-09 through order dated 30.3.2010 for A.Y.2006-07 deciding the issue in favour of the concerned assessee. In appellant's case also, the expenditure incurred was less than the subsidy received from the Government on account of floods and the excess was offered for taxation. Appellant also filed Division wise details of expenses I.T.A Nos. 553 to 555/Ahd/2020 and Ors. A.Ya. 2013-14 to 2015-16 Page No Dakshin Gujarat Vij. Co. Ltd. vs. DCIT 20 towards flood related damages through letter dated 15.12.2010 before the Assessing Officer. Further, being an undertaking wholly owned by the Government of Gujarat, appellant's accounts were audited by the auditors appointed by C & A G. In this situation and following my learned predecessor CIT(A)-I, Baroda's order in case of Gujarat Energy Transmission Corporation Ltd. in A.Y.2006-07, disallowance of Rs. 1,24,28,000/- is cancelled.” 6. We have considered the Revenue’s contentions and perused the record. The Assessing Officer stated the sole ground for rejecting the claim in question to lack of evidence. The lower appellate order mentions very clearly that the assessee had duly filed a letter dated 15-12-2012 comprising of all necessary details; division-wise on expenses towards flood related damages. The Revenue does not produce on record copy of the above stated letter so as to dispel the above said specific findings. The CIT(A) further relies on an identical order dealing with the very claim. The same has also gone unrebutted in course of hearing before us. We decide this ground as well against the Revenue. Its appeal ITA 3111/Ahd/2011 is rejected.” 28.1. In the absence of any changed circumstances, the grounds of appeal raised by the Revenue is devoid of merits and the same is liable to be dismissed. 29. Ground no. 2: Deleting the addition of Rs. 98,05,000/- of prior period expenditure. 29.1. The Ld. Counsel for the assessee submitted that this addition was deleted by the Ld. CIT(A), as the A.O. has made double addition on the same amount while computing the assessed income at page 16 of the assessment order. 29.2. The Ld. D.R. could not controvert to the above submissions of the assessee. Therefore the additions made by the Ld. CIT(A) does not require any interference, hence this Ground is dismissed. I.T.A Nos. 553 to 555/Ahd/2020 and Ors. A.Ya. 2013-14 to 2015-16 Page No Dakshin Gujarat Vij. Co. Ltd. vs. DCIT 21 30. Ground No. 3 to 5: Deleting adjustment to book profit u/s. 115JB of Rs. 98,05,000/- as prior period expenses and addition of Capital Grants of Rs. 59,16,52,00/-. 30.1. The Assessing Officer has included prior period expenses, prior period income and addition on account of capital grants while calculating book profit u/s. 115JB of the Act. The Ld. D.R. submitted thus this ground was set aside by the Co-ordinate Bench in assessee’s own case in ITA No. 618/Ahd/2018 for the Assessment Year 2011-12 vide common order dated 22.07.2022 as follows: “..... 57. Having heard to the facts and circumstances of the case we find it fit and proper to remit the issue to the file of the Ld. AO to adjudicating the issue taking into consideration the Capital Grant and subsidies and consumers contribution made by the assessee and pass orders in accordance with law upon granting a reasonable opportunity of being heard to the assessee. This ground of appeal preferred by the Revenue is allowed for statistical purposes.” 30.2. The Ld. A.R. appearing for the assessee has no objection in setting aside the matter back to the file of the Assessing Officer for fresh adjudication. Thus we set aside this issue to the file of the Ld. Assessing Officer and pass orders in accordance with law by giving proper opportunity to the assessee. 30.3. Thus this grounds of appeal raised by the Revenue are allowed for statistical purposes. 31. In the result, the appeal filed by the Revenue is partly allowed. I.T.A Nos. 553 to 555/Ahd/2020 and Ors. A.Ya. 2013-14 to 2015-16 Page No Dakshin Gujarat Vij. Co. Ltd. vs. DCIT 22 ITA No. 569 & 570/Ahd/2020 (Revenue’s appeal for A.Ys. 2014-15 & 2015-16) 32. Ground no. 1 is identical ground has also been decided by us in ITA No. 568/Ahd/2020 for the Assessment Year 2013-14 in Para No. 26 & 27 of this order. In the absence of any changed circumstances, the same ratio shall apply mutatis mutandis on this ground. 33. Ground no. 2 to 4 are identical ground have also been decided by us in ITA No. 568/Ahd/2020 for the Assessment Year 2013-14 in Para No. 29 of this order. In the absence of any changed circumstances, the same ratio shall apply mutatis mutandis on this ground. 34. In the combined result, the appeals filed by the Assessee in ITA Nos. 553 to 555/Ahd/2020 are partly allowed for statistical purpose and the appeals filed by the Revenue in ITA Nos. 568 to 570/Ahd/2020 are also partly allowed. Order pronounced in the open court on 17-02-2023 Sd/- Sd/- (WASEEM AHMED) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad : Dated 17/02/2023 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT I.T.A Nos. 553 to 555/Ahd/2020 and Ors. A.Ya. 2013-14 to 2015-16 Page No Dakshin Gujarat Vij. Co. Ltd. vs. DCIT 23 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलȣय अͬधकरण, अहमदाबाद