ASSISTANT COMMISSIONER OF INCOME TAX, Ajmer V. M/S. AJMER VIDHYUT VITRAN NIGAM LTD., Ajmer

ITA 937/JPR/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2120 (ITAT-JAIPUR)
• Duration Of Justice: 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 04-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VARINDER MEHTA
• Assessee Lawyers: SUBHASH PORWAL
• Keywords: Capital asset; Business income; Depreciation; Deemed to accrue or arise in india; Cost of acquisition; Tax effect; Capital receipt; Reason to believe
• Section: 115JB; 32

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH HKKXPAN] YS[KK L NL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, A M VK;DJ VIHY LA- @ ITA NO. 933 TO 935, 937 & 890/JP/2017 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2004-05, 2005-06,2009-10, 2011-12 & 2007-08 THE ACIT, CIRCLE-2, AJMER. CUKE VS. M/S AJMER VIDYUT VITARAN NIGAM LTD., VIDYUT BHAWAN, PANCHSHEEL NAGAR, AJMER. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AACCA8562E VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI SUBHASH PORWAL (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI VARINDER MEHTA (CIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 05/02/2018 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 07/02/2018 VKNS'K@ ORDER PER BENCH: THESE FIVE APPEALS BY THE REVENUE ARE DIRECTED AGAI NST SEPARATE ORDERS OF LD. CIT (A), AJMER ALL DATED 21.09.2017 ARISING FROM THE PENALTY ORDER PASSED U/S 271(1)(C) OF THE I.T. ACT FOR THE ASSESSMENT YEARS 2004-05 TO 2007-08, 2009-10 & 2011-12 RESPECT IVELY. FOR THE ASSESSMENT YEAR 2004-05 THE REVENUE HAS RAI SED THE FOLLOWING GROUNDS:- ITA NO. 933 TO 935,937 &890/JP/2017 ACIT V M/S AJMER VIDYUT VITARAN NIGAM LTD., AJMER 2 IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A), AJMER HAS ERRED IN:- 1. CANCELLING THE PENALTY LEVIED FOR DISALLOWANCE O F DEPRECIATION ON NON-EXISTING ASSETS OF RS. 12,15,25,004/- WITHOU T APPRECIATING THE FACT THAT THE QUANTUM ADDITION MADE BY THE AO W AS CONFIRMED BY THE LD. CIT(A) AS THE ASSETS WERE NOT PHYSICALLY ALLOWABLE WITH THE ASSESSEE; 2. CANCELLING THE PENALTY LEVIED FOR DISALLOWANCE O F EXCESS DEPRECIATION OF RS. 22,05,23,697/- WITHOUT APPRECIA TING THE FACT THAT THE QUANTUM ADDITION MADE BY THE AO WAS CONFIR MED BY THE LD. CIT(A) AS WELL AS ITAT CONFIRMING THE FACT THAT THE SUBSIDY OR GRANT OR REIMBURSEMENT SHALL NOT BE INCLUDED IN THE ACTUAL COST OF THE ASSET; 3. CANCELLING THE PENALTY LEVIED FOR DISALLOWANCE O F PRIOR PERIOD EXPENSES OF RS. 4,64,27,170/- WITHOUT APPRECIATING THE FACT THAT THE QUANTUM ADDITION MADE BY THE AO WAS CONFIRMED B Y THE LD. CIT(A) AS THE ASSESSEE HAS FAILED TO PROVE THAT PRI OR PERIOD EXPENSES WERE ACTUALLY PAID IN THE RELEVANT FINANCI AL YEAR; 4. THE APPELLANT CRAVES TO ADD, AMEND, ALTER, DELET E OR MODIFY THE ABOVE GROUND OF APPEAL BEFORE OR AT THE TIME HEARIN G. 2. GROUND NO. 1 IS REGARDING CANCELLATION OF THE PE NALTY IN RESPECT OF THE DISALLOWANCE OF DEPRECIATION OF NON-EXISTING AS SETS. 3. WE HAVE HEARD LD. DR AS WELL AS AR AND CONSIDERE D THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET WE NOTE THAT THE DISALLOWANCE MADE BY THE AO HAS BEEN DELETED BY THIS TRIBUNAL IN QUAN TUM APPEAL IN ITA NO. 362/JP/2016 VIDE ORDER DATED 28.08.2017 AS HELD IN PARA 12 TO 16 AS UNDER:- ITA NO. 933 TO 935,937 &890/JP/2017 ACIT V M/S AJMER VIDYUT VITARAN NIGAM LTD., AJMER 3 12. IN RESPECT OF GROUND NO. 2, BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER DURING THE COURSE OF ASS ESSMENT PROCEEDINGS NOTICED THAT THE ASSETS WORTH RS. 115.2 1 CRORES COULD NOT BE PHYSICALLY VERIFIED AND FOLLOWING THE EARLIER YEARS, HE DISALLOWED DEPRECIATION 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 DISALL OWANCE. THE DECISION OF TRIBUNAL FOR A.Y. 2003-04 IN ITA NO. 86 7/JP/2007 DATED 20.06.2008 WAS BROUGHT TO THE NOTICE OF LD. C IT(A). THE LD. CIT(A) STATED THAT THE ORDER OF THE TRIBUNAL FOR A. Y. 2003-04 CANNOT BE INTERPRETED TO CONCLUDE THAT DEPRECIATI ON, ON THE FIXED ASSETS WORTH RS. 115.21 CRORE WHICH ARE NOT PHYSICA LLY AVAILABLE, IS ALLOWED INDEFINITELY, EVEN IF THE ASSESSEE DOES NOT PREPARE THE LIST OF FIXED ASSETS AFTER PHYSICAL VERIFICATION. T HE ASSESSEE SHOULD HAVE COMPLETED THE EXERCISE OF PHYSICAL VERIFICATIO N WITHIN REASONABLE TIME WHICH HAS NOT BEEN DONE. IF THE AS SESSEE CANNOT FIND WHERE THE ASSETS OF RS 115.21 CRORE ARE LOCATED, THEN THE QUESTION OF PUTTING THEM TO USE FOR BUSINESS PU RPOSES DOESNT ARISE. NO DEPRECIATION U/S 32 CAN BE ALLOWED ON NO N-EXISTING ASSETS AND ACCORDINGLY HE CONFIRMED THE DISALLOWANC E OF DEPRECIATION 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 INFACT BEEN SET ASIDE BY THE TRIBUNAL TO THE ASSESSING OFF ICER IN THE FIRST ROUND AND IT HAS AGAIN REACHED THE TRIBUNAL IN THE SECOND ROUND WHICH HAS SINCE BEEN DECIDED BY THE TRIBUNAL VIDE I TS CONSOLIDATED ORDER DATED 14.07.2016 IN ITA NO. 284/ JP/2009 AND ITS OTHERS. IT WAS FURTHER SUBMITTED THAT THE MATTE R IN THE SECOND ROUND OF APPELLANT PROCEEDINGS HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL AND THE SAME MAY BE FOLLOW ED IN THE INSTANT YEAR. ITA NO. 933 TO 935,937 &890/JP/2017 ACIT V M/S AJMER VIDYUT VITARAN NIGAM LTD., AJMER 4 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 RE PRODUCED AS UNDER:- 9. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH TH E 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 ERSTWH ILE RAJASTHAN STATE ELECTRICITY BOARD WAS NOT ASSESSABLE TO INCOM E TAX AND THEREFORE, IT WAS NOT FILING THE INCOME TAX RETURN. HOWEVER, THEREAFTER ON GOING THROUGH THE RECORD AND THE JUDG MENT PASSED BY THE HON'BLE HIGH COURT AND HON'BLE SUPREME COURT , IT TRANSPIRES THAT THE RAJASTHAN STATE ELECTRICITY BOA RD IS AN TAXABLE ENTITY AND THEREFORE THE MATTER WAS FIXED FOR HEARI NG ON 29/6/2016 FOR THE PURPOSES OF CLARIFICATION. ON 29/ 6/2016, THE LD AR ALONGWITH REPRESENTATIVES OF THE ASSESSEE WERE P RESENT IN THE COURT. LD AR SUBMITTED THAT THE BOARD HAVE FILED TH E RETURN OF INCOME FOR THE ASSESSMENT YEAR 2001-02 AND HAVE ALS O PROVIDED THE CHART FOR DEPRECIATION IN RESPECT OF FIXED ASSE TS OF THE ASSESSEE. 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 TAX AND SUPER TAX ACCORDINGLY ON ITS INCOME, PROFIT S 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 TH E BOARD IS LIABLE TO PAY TAX UNDER THE PROVISIONS OF INCOME TA X ACT, 1961 AND THEREFORE, THE BOARD WAS REQUIRED TO FILE INCOM E TAX RETURN ITA NO. 933 TO 935,937 &890/JP/2017 ACIT V M/S AJMER VIDYUT VITARAN NIGAM LTD., AJMER 5 AND THE JUDGMENT PASSED BY THE HONBLE RAJASTHAN HI GH COURT IN THE CASE OF RAJASTHAN STATE ELECTRICITY BOARD VS. D CIT (1993) 200 ITR 434 CLEARLY DEALS THAT THE RAJASTHAN STATE ELEC TRICITY BOARD IS A GOVERNMENT COMPANY ASSESSABLE UNDER THE I.T. ACT. FURTHER IN THE MATTER OF CIT VS. RAJASTHAN STATE ELECTRICITY B OARD (2007) 160 TAXMAN 19, THE HONBLE JURISDICTIONAL HIGH COUR T HAS DEALT RAJASTHAN STATE ELECTRICITY BOARD AS A GOVERNMENT C OMPANY AND IS ALSO SUBJECT TO THE RIGOROUS OF THE INCOME TAX A CT. THEREFORE, WE ARE OF THE VIEW THAT THE RAJASTHAN STATE ELECTRI CITY 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. ADM ITTEDLY BY THE GAZETTE NOTIFICATION DATED 18/1/2002, THE RAJASTHAN STATE ELECTRICITY BOARD WAS DIVIDED INTO FIVE UNDERTAKING S AND THE TOTAL ASSETS OF THE RAJASTHAN STATE ELECTRICITY BOARD WER E DIVIDED IN VARIOUS COMPANIES AND THE GROSS FIXED ASSETS OF RS. 1029 CRORES CAME TO THE SHARE OF THE ASSESSEE. IT IS THE CONTEN TION OF THE LD AR THAT IT IS NOT POSSIBLE FOR THE ASSESSEE TO PHYS ICALLY VERIFY THE INDIVIDUAL ASSETS AS SOUGHT BY THE LD ASSESSING OFF ICER 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 P ER THE BALANCE SHEET OF THE RAJASTHAN STATE ELECTRICITY BOARD, THE ALLOWABLE DEPRECIATION UP TO 19/7/2000 WAS MENTIONED AS RS.1,04,82,30,121/-.SINCE BLOCK OF ASSETS WERE TRAN SFERRED TO THE ASSESSEE, THEREFORE, THE INSISTENCE OF THE LD ASSES SING OFFICER FOR PHYSICAL VERIFICATION OF THE ASSETS FOR THE PURPOSE S OF DEPRECIATION, IN OUR VIEW, WAS NOT WARRANTED. IN OU R VIEW, ONCE THE ASSETS ARE FORMING PART AND PARCEL OF THE BLOCK OF ASSETS, WHICH WERE TRANSFERRED TO THE ASSESSEE FROM RAJASTH AN STATE ELECTRICITY BOARD, THE PHYSICAL VERIFICATION FOR TH E PURPOSES OF DEPRECIATION MAY NOT BE REQUIRED AND THEREFORE, THE ASSESSEE IS ENTITLED TO DEPRECIATION ON THE WRITTEN DOWN VALUE OF THE ASSETS A ITA NO. 933 TO 935,937 &890/JP/2017 ACIT V M/S AJMER VIDYUT VITARAN NIGAM LTD., AJMER 6 PER INCOME TAX ACT 1961, SUBSEQUENT TO THE TRANSFER FROM THE ASSETS FROM RAJASTHAN STATE ELECTRICITY BOARD. 9.3 IT IS AN ADMITTED CASE THAT THE ASSESSEE COMPAN Y WAS CONSTITUTED UNDER THE ACT OF RAJASTHAN AND UNDER TH E STATUTORY TRANSFER SCHEME, THEREFORE, IN VIEW OF SECTION 43 O F THE ACT, TRANSFER OF ASSETS HAD BEEN FALL WITHIN THE REALM O F TRANSFER AS ENVISAGED UNDER THE ACT. AS PER EXPLANATION-6 OF SE CTION 43(1), THE ACTUAL BASIS OF TRANSFEREE COMPANY WOULD HAVE T O BE WRITTEN DOWN VALUE OF THE TRANSFEROR COMPANY MEANING THEREB Y THE BLOCK OF ASSETS, WHICH WAS TRANSFERRED BY THE RAJASTHAN E LECTRICITY BOARD WITH THE ORIGINAL COST OF ACQUISITION, SHALL BE DETERMINED THE WRITTEN DOWN VALUE FOR THE ASSESSEE COMPANY. TH E HONBLE DELHI HIGH COURT IN THE CASE OF DALMIA CERAMIC INDU STRIES LTD. VS. CIT (2005) 277 ITR 219 HAS HELD THAT WHAT WOULD 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 TH E HOLDING COMPANY. 9.4 SINCE THE ORIGINAL COST OF ACQUISITION OF THE T RANSFEROR COMPANY, IS DETERMINED, SIMILARLY, THE WRITTEN DOWN VALUE OF THE TRANSFEROR COMPANY IS ALSO AVAILABLE WITH THE ASSES SING OFFICER, THEREFORE, THE LD ASSESSING OFFICER WAS ONLY REQUIR ED TO ALLOW THE APPLICATION DEPRECIATION ON THE WRITTEN DOWN VALUE OF THE ASSETS ACQUIRED BY THE ASSESSEE FROM THE TRANSFEROR COMPAN Y (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 ACTU AL COST OF THE ASSESSEE OR THE AMOUNT PAID BY THE ASSESSEE TO THE HOLDING COMPANY? CHAPTER IV OF THE ACT REFERS TO COMPUTATION OF BUSINESS INCOME AND SECTION 43 IS RE QUIRED TO BE EXAMINED FOR THE PURPOSE OF DECIDING THIS MATTER . SECTION 43(1) OF THE ACT WHICH DEFINES ACTUAL COST READS AS UNDER: ITA NO. 933 TO 935,937 &890/JP/2017 ACIT V M/S AJMER VIDYUT VITARAN NIGAM LTD., AJMER 7 ' (1) ' ACTUAL COST' MEANS THE ACTUAL COST OF THE A SSETS TO THE ASSESSEE, REDUCED BY THAT PORTION OF THE COST THERE OF, IF ANY, AS HAS BEEN MET DIRECTLY OR INDIRECTLY BY ANY OTHER PERSON OR AUTHORITY : PROVIDED THAT WHERE THE ACTUAL COST OF AN ASSET, B EING A MOTOR-CAR WHICH IS ACQUIRED BY THE ASSESSEE AFTER T HE 31ST DAY 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 TOURISTS, EXCEEDS TWENTY-FIVE THOU SAND RUPEES, THE EXCESS OF THE ACTUAL COST OVER SUCH AMOUNT SHALL BE IGNORED, AND THE ACTUAL COST THEREOF SHALL BE TAKEN TO BE TW ENTY-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 DEPRECIATI ON ACTUALLY 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 ORDERS ISSUED WHEN THE INDIA N 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 T HE ASSESSMENT YEAR 1975-76. SUB- CLAUSE (B) CLEARLY IN DICATES THAT THE WRITTEN DOWN VALUE MEANS THE ACTUAL COST T O THE ASSESSEE LESS ALL DEPRECIATION ACTUALLY ALLOWED TO HIM UNDER THE ACT. IN THE INSTANT CASE EXPLANATION 2 TO CLAUS E (6) OF SECTION 43 IS RELEVANT AND IS REPRODUCED HEREUNDER : ITA NO. 933 TO 935,937 &890/JP/2017 ACIT V M/S AJMER VIDYUT VITARAN NIGAM LTD., AJMER 8 ' EXPLANATION 2.WHEN ANY CAPITAL ASSET IS TRANSFE RRED BY A HOLD ING COMPANY TO ITS SUBSIDIARY COMPANY OR BY A SUBSIDIARY 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 SATISFIED, 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 T RANSFEROR- COM PANY HAD CONTINUED TO HOLD THE CAPITAL ASSET FO R 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 WOULD BE THE WRITTEN DOWN VALUE OF THE TRANSFEROR-COMPANY . THIS ASPECT IS REQUIRED TO BE BORNE IN MIND WHILE CONSID ERING THE QUESTION. WE WILL NOW HAVE TO TURN TO EXPLANATION 6 TO SECTION 43(1) WHICH READS AS UNDER : ' EXPLANATION 6.WHEN ANY CAPITAL ASSET IS TRANSFE RRED BY A HOLD ING COMPANY TO ITS SUBSIDIARY COMPANY, OR BY A SUBSIDIARY COMPANY TO ITS HOLDING COMPANY, THEN, IF THE CONDITIONS OF CLAUSE (IV) OR, AS THE CASE MAY BE, O F CLAUSE (V) OF SECTION 47 ARE SATISFIED, THE ACTUAL COST OF THE TRANSFERRED CAPITAL ASSET TO THE TRANSFEREE-COMPANY SHALL BE TA KEN TO BE THE SAME AS IT WOULD HAVE BEEN IF THE TRANSFEROR-CO MPANY HAD CONTINUED TO HOLD THE CAPITAL ASSET FOR THE PUR POSES OF ITS BUSINESS.' 12. IT IS CLEAR THAT WHAT WOULD BE THE ACTUAL COST TO THE TRANSFEREE COMPANY ON THE DATE OF TRANSFER IS INDIC ATED IN SECTION 43(1), EXPLANATION 6. THUS, THE ACTUAL COST TO THE TRANSFEREE-COMPANY WILL BE THE WDV OF THE HOLDING C OMPANY (TRANSFEROR-COMPANY). 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 ITA NO. 933 TO 935,937 &890/JP/2017 ACIT V M/S AJMER VIDYUT VITARAN NIGAM LTD., AJMER 9 ASSESSEE HAS ALSO RELIED ON CIBA OF INDIA LTD. V. C IT [1993] 202 ITR 1 (BOM) AS ALSO ON CIT V. HIDES AND LEATHER PRODUCTS P. LTD. [1975] 101 ITR 61 (GUJ). IT IS REQUIRED TO BE NOTED THAT THE REVENUE AS WELL AS THE ASSESSEE PLAC ED RELIANCE ON THE DECISION OF THE APEX COURT IN THE C ASE 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 UND ER : ' EXPLANATION 6 OFFERS NO DIFFICULTY AS THE RELATI ONSHIP OF ' PARENT' AND ' SUBSIDIARY' BETWEEN THE COMPANIES INV OLVED IN THE TRANSFER, FOR THE PURPOSES OF THIS CLAUSE, HAS TO BE DETERMINED AS AT THE TIME OF THE TRANSFER OF THE AS SET AND WILL NOT BE A WOBBLING OR FLUCTUATING ONE AS SUGGES TED BY COUNSEL FOR THE ASSESSEE. . .' 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 F OR THE PROPERTY HAS BEEN TAXED IN THE HANDS OF THE HOLDING COMPANY IN THE RELEVANT ASSESSMENT YEARS AND THERE IS NO DISPUTE ON THIS ISSUE. IN VIEW OF THIS, IT WAS SUBM ITTED THAT THE REVENUE CANNOT HAVE TAX BENEFIT AT BOTH THE PLA CES, NAMELY, IN THE HANDS OF THE PARENT COMPANY AND AT T HE HANDS OF THE ASSESSEE. IT WAS THUS SUBMITTED THAT T HERE 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 Y EAR TO YEAR. NO DOUBT THERE MAY BE A SITUATION WHICH MAY REQUIRE THE ASSESSING OFFICER TO EXAMINE THE CASE AND RE-DETERM INE THE ITA NO. 933 TO 935,937 &890/JP/2017 ACIT V M/S AJMER VIDYUT VITARAN NIGAM LTD., AJMER 10 ACTUAL COST. IN FACT THE APEX COURT HAS CONSIDERED THIS ASPECT AT PAGE 306 AND POINTED OUT INSTANCES. THE APEX COU RT AT PAGE 309 (SEE [1992] 194 ITR) AS UNDER: 'IN PRINCIPLE, THEREFORE, WE ARE UNABLE TO ACCEPT THE CONTENTION THAT THE ACTUAL COST CANNOT BE DETERMINE D YEAR AFTER YEAR ON THE FACTUAL OR LEGAL POSITION APPLICA BLE FOR THE RELEVANT PREVIOUS YEAR AND THAT THE ACTUAL COST ONC E DETERMINED CANNOT BE ALTERED EXCEPT IN THE THREE SI TUATIONS OUTLINED BY COUNSEL WHERE THE ORIGINAL FIGURE ITSEL F REQUIRES A MODIFICATION.' 9.5 IN VIEW THEREOF, THIS GROUND OF THE ASSESSEES APPEAL IS ALLOWED. 16. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. UNDISPUTEDLY, THERE I S NO CHANGE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. NO CONTRA RY AUTHORITY HAS BEEN BROUGHT TO OUR NOTICE SUBSEQUENT TO THE AB OVE 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. THUS, WHEN THE DISALLOWANCE MADE BY THE AO HAS BEEN DELETED BY THIS TRIBUNAL THEN, THE PENALTY LEVIED AGAINST SUCH DISA LLOWANCE IS NOT SUSTAINABLE. ACCORDINGLY, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE LD. CIT(A) IN DELETING THE PENALTY LEV IED U/S 271(1)(C) OF THE ACT AGAINST ON THIS ACCOUNT. 4. GROUND NO. 2 IS REGARDING DELETION OF THE PENALT Y LEVIED ON ACCOUNT OF DISALLOWANCE OF EXCESS DEPRECIATION CLAI MED WITHOUT REDUCING THE AMOUNT OF SUBSIDY/GRANT/REIMBURSEMENT FROM THE COST OF THE ASSET. ITA NO. 933 TO 935,937 &890/JP/2017 ACIT V M/S AJMER VIDYUT VITARAN NIGAM LTD., AJMER 11 5. WE HAVE HEARD LD. DR AS WELL AS AR AND CONSIDERE D THE RELEVANT MATERIAL ON RECORD. THOUGH THE ISSUE IN QUANTUM APP EAL HAS BEEN DECIDED AGAINST THE ASSESSEE BY THIS TRIBUNAL HOWEV ER, THE TRIBUNAL HAS DELETED THE PENALTY LEVIED ON ACCOUNT OF DISALLOWAN CE OF EXCESS DEPRECIATION FOR THE ASSESSMENT YEARS 2002-03, 2003 -04, 2006-07 VIDE ORDER DATED 09.08.2017 IN ITA NO. 306 TO 308/JP/201 7 AS HELD IN PARAS 11 TO 21 AS UNDER:- 11. AS WE HAVE STATED ABOVE, IN THE INSTANT CAS E, THE FACTS OF THE CASE AFTER TAKING INTO CONSIDERATION THE FINDIN GS OF THE COORDINATE BENCH IN THE QUANTUM PROCEEDINGS ARE THA T THERE IS DISALLOWANCE OF DEPRECIATION UNDER THE NORMAL PROVI SIONS OF THE ACT AND AS A RESULT, LOSS DECLARED IN THE RETURN OF INCOME UNDER NORMAL PROVISIONS OF THE ACT HAS GOT REDUCED. FURT HER, THE PROVISIONS OF MAT ARE HELD NOT APPLICABLE IN THE IN STANT CASE. THE FACTS OF NALWA SONS ARE THEREFORE TOTALLY DISTINGUI SHABLE AND DONT SUPPORT THE CASE OF THE ASSESSEE. IN THAT CASE, TH OUGH THERE WERE ADDITIONS MADE UNDER THE NORMAL PROVISIONS OF THE ACT, INCOME OF THE ASSESSEE WAS ASSESSED AND BROUGHT TO TAX UNDER THE PROVISIONS OF MAT AND BASIS THAT, THE HONBLE D ELHI HIGH COURT HAS DECIDED THE MATTER. THE RELEVANT FINDING S OF THE HONBLE DELHI HIGH COURT ARE AS FOLLOWS: 24. THE INCOME OF THE ASSESSEE WAS THUS ASSESSED U NDER SECTION 115JB AND NOT UNDER THE NORMAL PROVISIONS. IT IS IN THIS CONTEXT THAT WE HAVE TO SEE AND EXAMINE THE APPLICATION OF EXPLANATION 4. 25. JUDGMENT IN THE CASE OF GOLD COIN HEALTH FOOD ( P.) LTD. (SUPRA), OBVIOUSLY, DOES NOT DEAL WITH SUCH A SITUA TION. WHAT IS HELD BY THE SUPREME COURT IN THAT CASE IS THAT EVEN IF IN THE ITA NO. 933 TO 935,937 &890/JP/2017 ACIT V M/S AJMER VIDYUT VITARAN NIGAM LTD., AJMER 12 INCOME-TAX RETURN FILED BY THE ASSESSEE LOSSES ARE SHOWN, PENALTY CAN STILL BE IMPOSED IN A CASE WHERE ON SETTING OFF THE CONCEALED INCOME AGAINST ANY LOSS INCURRED BY THE ASSESSEE UN DER OTHER HEAD OF INCOME OR BROUGHT FORWARD FROM EARLIER YEAR S, THE TOTAL INCOME IS REDUCED TO A FIGURE LOWER THAN THE CONCEA LED INCOME OR EVEN A MINUS FIGURE. THE COURT WAS OF THE OPINION T HAT 'THE TAX SOUGHT TO BE EVADED' WILL MEAN THE TAX CHARGEABLE N OT AS IF IT WERE THE TOTAL INCOME. ONCE, WE APPLY THIS RATIONAL E TO EXPLANATION 4 GIVEN BY THE SUPREME COURT, IN THE PR ESENT CASE, IT WILL BE DIFFICULT TO SUSTAIN THE PENALTY PROCEEDING S. REASON IS SIMPLE. NO DOUBT, THERE WAS CONCEALMENT BUT THAT HA D ITS REPERCUSSIONS ONLY WHEN THE ASSESSMENT WAS DONE UND ER THE NORMAL PROCEDURE. THE ASSESSMENT AS PER THE NORMAL PROCEDURE WAS, HOWEVER, NOT ACTED UPON. ON THE CONTRARY, IT I S THE DEEMED INCOME ASSESSED UNDER SECTION 115JB OF THE ACT WHIC H HAS BECOME THE BASIS OF ASSESSMENT AS IT WAS HIGHER OF THE TWO. TAX IS THUS, PAID ON THE INCOME ASSESSED UNDER SECTION 115JB OF THE ACT. HENCE, WHEN THE COMPUTATION WAS MADE UNDER SEC TION 115JB OF THE ACT, THE AFORESAID CONCEALMENT HAD NO ROLE TO PLAY AND WAS TOTALLY IRRELEVANT. THEREFORE, THE CONCEALM ENT DID NOT LEAD TO TAX EVASION AT ALL. SIMILARLY, CIRCULAR NO. 25/2015 DATED 31.12.2015 DO ESNT COME TO SUPPORT THE POSITION OF THE ASSESSEE. 12. NOW COMING TO OTHER CONTENTIONS OF THE LD AR. O N MERITS, THE CONTENTION OF THE LD AR IS THAT THE ASSESSEE UN DER GOOD FAITH AND AS PER ELECTRICITY (SUPPLY) ANNUAL ACCOUNT RULE , 1985 AND ACCOUNTING INSTRUCTIONS, PREPARED ITS ACCOUNTS AND THERE WAS NO HIDING OR CONCEALMENT OF FACTS. IT IS MERELY AN OPI NION ON THE SUBJECT FOR SAKE OF ADDITION BY THE AO AND THE SAME CANNOT BE TERMED AS FURNISHING OF INACCURATE PARTICULARS OF I NCOME OR CONCEALMENT OF FACTS. ITA NO. 933 TO 935,937 &890/JP/2017 ACIT V M/S AJMER VIDYUT VITARAN NIGAM LTD., AJMER 13 13. IN THIS REGARD, THE QUESTION THAT ARISES IS THA T WHETHER THERE ARE TWO OPINIONS ABOUT THE APPLICABILITY OF P ROVISIONS OF SECTION 43(1) READ WITH EXPLANATION 10 IN THE INSTA NT CASE OR NOT. IN THE QUANTUM PROCEEDINGS, WHEN THE MATTER REACHED BEFORE THE CO-ORDINATE BENCH, THE CO-ORDINATE BENCH IN ITS ORD ER NOTED THAT DURING THE COURSE OF ARGUMENT, A POINTED QUERY WAS ASKED FROM THE LD AR, TO WHICH IT WAS FAIRLY STATED THAT THE C ONTRIBUTION / GRANT IN THE FORM OF SUBSIDY WERE RECEIVED FROM THE STATE GOVT./OTHER DEPARTMENT TOWARDS THE COST OF CAPITAL ASSET AND FOR REPLACEMENT OF THE ASSETS. THEREAFTER, THE COORDIN ATE BENCH HELD THAT A BARE READING OF THE EXPLANATION 10 OF SECTION 43 OF THE ACT, WHICH CLEARLY PROVIDES THAT WHERE A PORTIO N OF THE COST OF AN ASSET ACQUIRED BY THE ASSESSEE HAS BEEN MET DIRE CTLY OR INDIRECTLY BY THE CENTRAL GOVERNMENT OR A STATE GOV ERNMENT IN THE FORM OF A SUBSIDY OR GRANT OR REIMBURSEMENT, TH EN, SO MUCH OF THE SUBSIDY OR GRANT OR REIMBURSEMENT SHALL NOT BE INCLUDED IN THE ACTUAL COST OF THE ASSET TO THE ASSESSEE. ADMIT TEDLY, THE AMOUNT HAS BEEN RECEIVED BY THE ASSESSEE IN THE FOR M OF GRANT/REIMBURSEMENT/SUBSIDY FROM THE STATE GOVERNME NT THEREFORE, IN OUR VIEW, THE ORDER PASSED BY THE LD CIT(A) IS REQUIRED TO BE UPHELD AND THE VALUE OF THE ASSETS S HALL 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. IN LIGHT OF ABOVE, IN THE FACTS OF THE PRESENT CASE AND IN LIGH T OF CLEAR ADMISSION BY THE LD AR THAT THE CONTRIBUTION / GRAN T IN THE FORM OF SUBSIDY WERE RECEIVED FROM THE STATE GOVT./OTHER DE PARTMENT TOWARDS THE COST OF CAPITAL ASSET AND FOR REPLACEME NT OF THE ASSETS, THERE DOESNT APPEAR TO BE TWO OPINIONS THA T EMERGES REGARDING APPLICABILITY OF SECTION 43(1) READ WITH EXPLANATION 10 IN THE INSTANT CASE. THE ASSESSEE HAS SIMPLY FOLLO WED THE ELECTRICITY (SUPPLY) ANNUAL ACCOUNT RULE, 1985 AND ACCOUNTING INSTRUCTIONS. THESE ACCOUNTING RULES AND INSTRUCTI ONS ARE NOT DOUBT BINDING ON THE ASSESSEE AS FAR AS PREPARING I TS FINANCIAL ITA NO. 933 TO 935,937 &890/JP/2017 ACIT V M/S AJMER VIDYUT VITARAN NIGAM LTD., AJMER 14 STATEMENTS IS CONCERNED AND INFACT, THE COORDINATE BENCH IN THE QUANTUM PROCEEDINGS HAS AGREED TO THIS CONTENTION W HILE UPHOLDING NON-APPLICABILITY OF MAT PROVISIONS. HOW EVER, BEING A TAXABLE ENTITY, THE ASSESSEE IS EQUALLY GOVERNED BY THE REGULAR PROVISIONS OF INCOME TAX ACT AND HAS TO COMPUTE ITS INCOME AND OFFER THE SAME TO TAX TAKING INTO CONSIDERATION THE RELEVANT PROVISIONS OF THE ACT. IT CANNOT THEREFORE BE SAID THAT THE ASSESSEE BEING GOVERNED BY THE ELECTRICITY RULES AN D REGULATIONS WILL NOT FOLLOW THE INCOME TAX ACT OR THE ELECTRICI TY RULES AND REGULATIONS OVERRIDE THE INCOME TAX ACT. IN OUR VI EW, IN THE INSTANT CASE, THE ASSESSEE COMPANY HAS SIMPLY FAILE D TO APPLY THE PROVISIONS OF THE ACT WHILE DETERMINING THE ACTUAL COST OF THE ASSETS AND COMPUTING THE DEPRECIATION ALLOWANCE THE REON. 14. THE NEXT QUESTION THAT ARISES IS WHERE THE ASSESS EE COMPANY HAS FAILED TO GIVE EFFECT TO AND TAKE INTO CONSIDERATION THE PROVISIONS OF SECTION 43(1) READ WITH EXPLANATI ON 10, WHILE DETERMINING THE ACTUAL COST AND CLAIMED EXCESS DEPR ECIATION THEREON, CAN IT BE SAID THAT THE ASSESSEE COMPANY H AS FURNISHED INACCURATE PARTICULARS OF INCOME UNDER SECTION 271( 1)(C) WHICH READS AS UNDER: '271.(1) IF THE ASSESSING OFFICER OR THE COMMISSION ER (APPEALS) OR THE PRINCIPAL COMMISSIONER OR COMMISSIONER IN TH E COURSE OF ANY PROCEEDINGS UNDER THIS ACT, IS SATISFIED THAT A NY PERSON- (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. 15. IT IS WELL ESTABLISHED THAT THE PROVISIONS O F SECTION 271(1)(C) BEING IN THE NATURE OF PENAL PROVISIONS REQUIRE A S TRICT INTERPRETATION AND IT MUST BE SHOWN THAT THE INSTAN T CASE FALLS WITHIN FOUR CORNERS OF THE SAID PROVISIONS AND COND ITIONS LAID THEREIN ARE SPECIFICALLY FULFILLED. THE CASE OF TH E REVENUE IS THAT THE PRESENT CASE IS ABOUT FURNISHING INACCURATE PAR TICULARS OF INCOME. THEREFORE, IT HAS TO BE EXAMINED WHETHER T HERE IS ITA NO. 933 TO 935,937 &890/JP/2017 ACIT V M/S AJMER VIDYUT VITARAN NIGAM LTD., AJMER 15 FURNISHING OF INACCURATE PARTICULARS OF INCOME BY T HE ASSESSEE COMPANY IN THE INSTANT CASE. 16. IN THIS REGARD, THE LD AR HAS DRAWN OUR REF ERENCE TO THE DECISION OF THE HONBLE SUPREME COURT IN CASE OF RELIANCE PETROPRODUCTS (322 ITR 158). IN THAT CASE, THE FACTS OF THE CASE WERE THAT THE ASSESSEE COMPANY FILED ITS RETUR N OF INCOME CLAIMING INTEREST EXPENDITURE IN RESPECT OF LOAN AM OUNT FOR PURCHASING SHARES BY WAY OF ITS BUSINESS POLICIES. THE ASSESSING OFFICER DISALLOWED SAID EXPENDITURE AND SIMULTANEOU SLY LEVIED PENALTY UNDER SECTION 271(1)(C) ON ACCOUNT OF CONCE ALMENT OF INCOME/FURNISHING OF INACCURATE PARTICULARS OF INCO ME. THE REVENUE CONTENDED BEFORE THE HONBLE SUPREME COURT THAT THE CLAIM OF THE EXPENDITURE WAS TOTALLY WITHOUT ANY LE GAL BASIS AND WAS MADE WITH MALAFIDE INTENTIONS AND IT WAS A CLEA R CASE OF FURNISHING INACCURATE PARTICULARS OF INCOME. IT WA S FURTHER CONTENDED BY THE REVENUE THAT SINCE THE ASSESSEE HA D CLAIMED EXCESSIVE DEDUCTIONS KNOWING THAT THEY ARE INCORREC T; IT AMOUNTED TO CONCEALMENT OF INCOME. IT WAS CONTENDED BY THE REVENUE IN THAT CASE THAT THE FALSEHOOD IN ACCOUNTS CAN TAKE EITHER OF THE TWO FORMS; (I) AN ITEM OF RECEIPT MAY BE SUPPRESSED FRAUDULENTLY; (II) AN ITEM OF EXPENDITURE MAY BE FA LSELY (OR IN AN EXAGGERATED AMOUNT) CLAIMED, AND BOTH TYPES ATTEMPT TO REDUCE THE TAXABLE INCOME AND, THEREFORE, BOTH TYPES AMOUN T TO CONCEALMENT OF PARTICULARS OF ONE'S INCOME AS WELL AS FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE HONBLE SU PREME COURT HOWEVER NEGATED THE CONTENTIONS OF THE REVENUE AND HELD AS UNDER: SINCE THE ASSESSEE HAD FURNISHED ALL THE DETAILS O F ITS EXPENDITURE AS WELL AS INCOME IN ITS RETURN, WHICH DETAILS, IN THEMSELVES, WERE NOT FOUND TO BE INACCURATE NOR COULD BE VIEWED AS T HE CONCEALMENT OF INCOME ON ITS PART. IT WAS UP TO THE AUTHORITIES TO ACCEPT ITS CLAIM IN THE RETURN OR NOT. MERELY BECAU SE THE ASSESSEE HAD CLAIMED THE EXPENDITURE, WHICH CLAIM WAS NOT AC CEPTED OR ITA NO. 933 TO 935,937 &890/JP/2017 ACIT V M/S AJMER VIDYUT VITARAN NIGAM LTD., AJMER 16 WAS NOT ACCEPTABLE TO THE REVENUE, THAT BY ITSELF W OULD NOT, IN OUR OPINION, ATTRACT THE PENALTY UNDER SECTION 271( 1)(C). THE LEARNED COUNSEL ARGUED THAT 'SUBMITTING AN INC ORRECT CLAIM IN LAW FOR THE EXPENDITURE ON INTEREST WOULD AMOUNT TO GIVING INACCURATE PARTICULARS OF SUCH INCOME'. WE DO NOT T HINK THAT SUCH CAN BE THE INTERPRETATION OF THE CONCERNED WORDS. T HE WORDS ARE PLAIN AND SIMPLE. IN ORDER TO EXPOSE THE ASSESSEE T O THE PENALTY UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISIO N, THE PENALTY PROVISION CANNOT BE INVOKED. BY ANY STRETCH OF IMAG INATION, MAKING AN INCORRECT CLAIM IN LAW CANNOT TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. 17. IN THE INSTANT CASE, THE ASSESSEE COMPANY H AS DULY FILED ITS RETURN OF INCOME ALONG WITH AUDITED BALANCE SHEET A ND PROFIT/LOSS ACCOUNT. IN SCHEDULE 2 RESERVE AND SURPLUSES OF ITS BALANCE SHEET, THE ASSESSEE COMPANY HAS DISCLOSED CONTRIBUT ION, GRANTS, SUBSIDIES TOWARDS COST OF CAPITAL ASSETS. THE ASSE SSING OFFICER DRAWING REFERENCE TO SCHEDULE 2 OF THE BALANCE SHEE T AS FURNISHED, ASKED THE ASSESSEE COMPANY TO SUBMIT ITS EXPLANATION AS TO WHY INCREASE IN RESERVE AND SURPLUS AS PER TH E BALANCE SHEET SHOULD NOT BE REDUCED FROM COST OF THE ASSETS FOR PURPOSES OF CALCULATION OF DEPRECIATION IN VIEW OF SECTION 3 2(1)(III) READ WITH SECTION 43(1) AND EXPLANATION 10 THERETO. THE REAFTER, AFTER TAKING INTO CONSIDERATION THE SUBMISSION AND EXPLAN ATION OF THE ASSESSEE, THOUGH NOT AGREEING WITH IT, THE AO WANT AHEAD AND RECALCULATED THE DEPRECIATION CLAIM AS MADE BY THE ASSESSEE IN ITS RETURN OF INCOME. IT IS THUS SEEN THAT ALL MATERIA L FACTS AND FIGURES ARE DULY DISCLOSED IN THE RETURN OF INCOME AND THE FINANCIAL STATEMENTS, AND THE ASSESSING OFFICER, ON PERUSAL OF THE SAME, CAME TO A CONCLUSION THAT CONTRIBUTION, GRANT S, SUBSIDIES TOWARDS COST OF CAPITAL ASSETS RECEIVED BY THE ASSE SSEE COMPANY DURING THE YEAR UNDER CONSIDERATION SHOULD BE REDUC ED FROM THE TOTAL VALUE OF THE ASSETS FOR THE PURPOSES OF DETER MINING THE ITA NO. 933 TO 935,937 &890/JP/2017 ACIT V M/S AJMER VIDYUT VITARAN NIGAM LTD., AJMER 17 DEPRECIATION ALLOWANCE. ALL THE FACTS RELATING TO CLAIM OF DEPRECIATION ARE THUS ON RECORD. THERE IS NO FALSI TY THAT HAS BEEN FOUND IN THE FINANCIAL STATEMENTS OR IN THE RETURN OF INCOME. AT THE SAME TIME, IT IS EQUALLY RELEVANT TO REFER TO T HE OBSERVATIONS OF THE AUDITOR WHICH HAS ATTRACTED THE ATTENTION OF THE AO. 18. THE AUDITORS HAVE STATED IN THEIR AUDIT REPO RT THAT: (1) CONTRIBUTIONS. GRANTS & SUBSIDIES TOWARDS COST OF CAPITAL ASSETS THE GRANTS/ CONTRIBUTION RECEIVED FROM STATE GOVT. / OTHER GOVT. DEPARTMENTS TOWARDS THE COST OF FIXES ASSETS IS SHO WN SEPARATELY UNDER THE HEADS CONTRIBUTIONS, GRANTS, SUBSIDIES TO WARDS COST OF CAPITAL ASSETS AND IS NEITHER DEDUCTED FROM THE GRO SS VALUE OF THE ASSETS NOR IT IS TREATED AS A DEFERRED INCOME ON TH E SYSTEMATIC AND RATIONAL BASIS OVER THE USEFUL LIFE OF THE ASSE T. THUS BOTH THE FIXED ASSETS AND GRANTS ARE OVERSTATED BY THE AMOUN T OF GRANTS; THIS SHOULD HAVE BEEN TAKEN AS PER THE PROVISIONS O F AS-12. (2) IN CASE REPLACEMENT OF ASSETS. WDV OF THE ASSET DISCARDED SHOULD BE REDUCED FROM THE TOTAL FIXED ASSETS AND L OSSES ARISING FROM THE RETIREMENT OR GAINS OR LOSSES ARISING FROM DISPOSAL OF THE FIXED ASSETS, WHICH IS CARRIED AT COST SHOULD BE RE COGNIZED IN THE PROFIT & LOSS ACCOUNT. HOWEVER THIS IS NOT BEING DO NE. ALSO SCRAP IS ACCOUNTED FOR AT NIL VALUE AND NET REALIZABLE VA LUE WHILE AS PER THE PROVISIONS OF AS-10 CLAUSE-24 MATERIAL ITEMS FR OM ACTIVE USE AND HELD FOR DISPOSAL SHOULD BE STATED AT THE LOWER OF THEIR NET BOOKS VALUE AND NET BOOK VALUE AND SHOWN SEPARATELY IN THE FINANCIAL STATEMENTS. THE SAME HAS NOT BEEN DONE TH US LEADING TO THE VIOLATION OF AS-10. (3) IN THE ABSENCE OF CONTRIBUTION, GRANTS, SUBSID IES TOWARDS THE COST OF CAPITAL ASSETS BEING DEDUCTED FROM THE GROSS VALUE OF ASSET AS ALSO IN CASE OF REPLACEMENT OF ASSET, WDV OF THE ASSET, WDV OF THE ASSET DISCARDED IS NOT REDUCED FROM THE GROSS VALUE OF THE ASSET, DEPRECIATION IS CHARGED ON THE FULL G ROSS VALUE OF THE ITA NO. 933 TO 935,937 &890/JP/2017 ACIT V M/S AJMER VIDYUT VITARAN NIGAM LTD., AJMER 18 ASSET. THIS IS AGAINST THE PROVISIONS OF AS-6. THUS , DEPRECIATION IS OVERSTATED AND NET LOSS, WHICH IS SHOWN AS SUBSIDY RECEIVABLE FROM GOVT. IS OVERSTATED BY THE AMOUNT THE QUANTIFI CATION OF WHICH IS NOT POSSIBLE IN THE ABSENCE OF FULL DETAIL S OF DISCARDED ASSETS AND THE ALLOCATION OF CONTRIBUTION & TOWARDS THE RESPECTIVE ASSET. 19. IN RESPONSE TO THE ABOVE OBSERVATIONS OF THE AUDITOR, THE ASSESSEE COMPANY HAS SUBMITTED THAT: A. THAT THE COMPANY IS A 100% OWNED UNDERTAKING OF RAJASTHAN GOVERNMENT AND IS GOVERNED BY THE INSTRUC TIONS APPROVED BY GOVERNMENT FOR RAJASTHAN STATE ELECTRIC ITY BOARD'S THE ELECTRICITY (SUPPLY) ANNUAL ACCOUNTS RULES, 199 5 AND ACCOUNTING INSTRUCTIONS. ACCORDING TO RULES PAGE NO . 252 & 253 THE TREATMENT OF CONTRIBUTION, GRANTS AND SUBSIDIES TOWARDS COST OF CAPITAL ASSETS SHALL BE CREDITED IN ACCORDANCE W ITH THE POLICIES LAID DOWN IN THE FOLLOWING PARAGRAPHS. 2.34 AMOUNT RECEIVABLE AS CONSUMER'S CONTRIBUTION, SUBSIDY ARE GRANT TOWARDS CAPITAL ASSETS SHALL BE CREDITED TO A PPROPRIATE ACCOUNT SET OUT IN CHART OF ACCOUNTS ONLY IF THE FO LLOWING CONDITIONS ARE SATISFIED : (I) THE AMOUNT IS NOT SUBJECT TO ANY CONDITIONS TO BE FULFILLED BY THE BOARD. OR THE CONDITIONS ATTACHED TO THE AMOUNT HAVE BEEN FUL FILLED BY THE BOARD. (II) NO PART OF THE AMOUNT IS REFUNDABLE NOR IS LIK ELY TO BECOME REFUNDABLE BY THE BOARD. 2.35 CONSUMER'S CONTRIBUTION, SUBSIDIES AND GRANTS TOWARDS COST OF CAPITAL ASSETS SHALL NOT BE TREATED AS A RE DUCTION IN THE 'COST' BUT AS A CAPITAL RECEIPT TO BE CREDITED TO C APITAL RESERVE ACCOUNT. ITA NO. 933 TO 935,937 &890/JP/2017 ACIT V M/S AJMER VIDYUT VITARAN NIGAM LTD., AJMER 19 2.36 ACCOUNTING FOR COST OF A CAPITAL ASSET SHALL B E DONE IN THE NORMAL COURSE WITHOUT CONSIDERING ANY CONTRIBUTION, SUBSIDY ARE GRANTS TOWARDS THE COST OF THE ASSET, DEPRECIATION SHALL BE CHARGED IN THE NORMAL COURSE ON THE 'FULL COST' OF THE ASSET. B. THAT THE RESERVES & SURPLUSES IN WHICH THESE GRA NTS, SUBSIDIES, CONTRIBUTION ARE CREDITED ARE IN FORM OF DEPOSITS FROM CUSTOMERS ARE IN ACTUAL THE LIABILITIES AND COULD N OT BE REDUCED FROM THE COST OF ASSETS FOR THE PURPOSE OF CALCULAT ION OF DEPRECIATION SINCE THEY ARE IN THE NATURE OF 'CAPITAL RECEIPT'. C. FURTHER THESE CAPITAL RECEIPTS ARE NOT DIRECTLY REL ATABLE TO THE ASSETS ACQUIRED OUT OF WHICH THE SAME DEDUCTED TO REDUCE THE BLOCK. FURTHER ALREADY ADHOC DISALLOWANCE OF FI XED ASSETS OUT OF FRP TRANSFERS ALREADY MADE OF 20% OF ASSETS WITH OUT ANY BREAKUP AS ABOVE AND FURTHER DISALLOWANCE OF DEPREC IATION ON THE SAME BLOCK OF ASSETS IS A 'DOUBLE DISALLOWANCE / DO UBLE ADDITION'. D. THAT THE COMPANY HAS TO FOLLOW THE INSTRUCTION O F ACCOUNTING AS APPROVED AND THE ACCOUNTS HAS BEEN PR EPARED ON THE BASIS AND AS PER THE BYE LAWS THE TREATMENT OF CONSUMERS CONTRIBUTION, SUBSIDIES AND GRANTS HAS BEEN MADE IN THE BOOKS ACCORDINGLY BY CREATING THE RESERVES AND THE A.O. H AS ERRED TO REDUCE THE SAME FROM THE COST AND DISALLOW PORTION DEPRECIATION. THE COMPANY CANNOT ACT BEYOND THE ACCOUNTING NORMS APPROVED FOR THEM AND IS ALSO GOVERNED BY ACCOUNTING FOR ELE CTRICITY COMPANIES AND ACCORDINGLY THE TREATMENT HAS BEEN MA DE IN BOOKS AND THE A.O. HAS MADE DISALLOWANCE WITHOUT CO NSIDERING THE ACCOUNTING APPLICABLE TO ELECTRICITY COMPANIES. E. ALTERNATIVELY THE A.O. WHILE MAKING THE DEDUCTIO N FROM FIXED ASSETS BLOCK FOR RESERVES & SURPLUS HAS NOT F OLLOWED CONSISTENT METHOD I.E. IN A.Y. 2001-02 AND 2002-03 HAS NOT DEDUCTED AMOUNTS FOR MATERIAL COST VARIANCE UNDER T HE HEAD ITA NO. 933 TO 935,937 &890/JP/2017 ACIT V M/S AJMER VIDYUT VITARAN NIGAM LTD., AJMER 20 RESERVES & SURPLUS BUT IN THE LATER YEARS FOR DEDUC TION OF RESERVES & SURPLUS FROM FIXED ASSETS THE AMOUNT OF MATERIAL COST VARIANCE HAS ALSO BEEN DEDUCTED WHICH IS NOT I N RELEVANCE WITH THE FIXED ASSETS COST AND IS RATHER RELATED TO MATERIAL COST AND THUS THE BLOCK OF ASSETS HAS REDUCED FOR DEPREC IATION BY THIS AMOUNT AND THE ELIGIBLE DEPRECIATION HAS ALSO REDUC ED. FURTHER THE ADDITION TO FIXED ASSETS AS PER BOOKS HAS BEEN TAKEN BY A.O. AT OTHER ARBITRARY FIGURES WHICH HAVE ALSO BEEN COR RECTED IN CHART. THUS AS PER THE CHART ON THE THEORY OF A.O. THE DEP RECIATION DISALLOWABLE COME TO RS. 11,63,37,224.00 FOR THE YE AR AGAINST TAKEN BY A.O. AT RS. 18,99,41,047/-. F. FURTHER ANY LOSS/ SHORT FALL IN REVENUE IS SUBJE CT TO SUB- VENTION CHARGES AS RECEIVABLE FROM STATE GOVERNMENT SUBJECT TO VERIFICATION; HOWEVER TO CLOSE THE ACCOU NTS, THE CORPORATION TAKES 'DIFFERENCE IS REVENUE' AS 'SUBVE NTION'& NULLIFIED THE LOSS. THUS IF THIS DEPRECIATION IS DI SALLOWED; SUBVENTION CHARGES SHALL ALSO GOT REDUCED & ULTIMAT ELY THE INCOME/ LOSS WOULD BE NIL & THUS IN OTHER TERMS SUB VENTION BEING A 'PROVISIONAL INCOME' ALREADY TAKES CARE FOR SUCH VARIATION IF ANY. 20. IN OUR VIEW, THE OBSERVATIONS OF THE AUDITOR ARE IN RELATION TO NON-COMPLIANCE WITH THE VARIOUS ACCOUNTING STANDARD S AS PRESCRIBED BY THE ICAI WHICH HAVE TO BE FOLLOWED WH ILE PREPARING THE FINANCIAL STATEMENTS. AT THE SAME TIME, THE AS SESSEES EXPLANATION IS THAT BEING A 100% OWNED UNDERTAKING OF RAJASTHAN GOVERNMENT, IT IS GOVERNED BY THE INSTRUC TIONS APPROVED BY GOVERNMENT FOR RAJASTHAN STATE ELECTRIC ITY BOARD'S, THE ELECTRICITY (SUPPLY) ANNUAL ACCOUNTS RULES, 199 5 AND ACCOUNTING INSTRUCTIONS WHICH CANNOT BE LOST SIGHT OFF. IN OUR VIEW, THESE ARE PLAUSIBLE EXPLANATION RELATING TO V ARIATION IN THE ACCOUNTING POLICIES FOLLOWED BY THE ASSESSEE COMPAN Y GIVEN THE NATURE OF BUSINESS THE ASSESSEE COMPANY IS ENGAGED IN AND RELATED ELECTRICITY REGULATIONS WHICH IT MUST COMPL Y WITH. THESE ITA NO. 933 TO 935,937 &890/JP/2017 ACIT V M/S AJMER VIDYUT VITARAN NIGAM LTD., AJMER 21 ARE STATUTORY REQUIREMENTS WHICH THE ASSESSEE COMPA NY IS REQUIRED TO FOLLOW WHILE PREPARING ITS FINANCIAL ST ATEMENTS. HOWEVER, THE FACT REMAINS THAT THERE IS COMPLETE DI SCLOSURE OF ALL MATERIAL FACTS IN THE FINANCIAL STATEMENTS SO FAR A S ISSUE RELATING TO DETERMINATION OF ACTUAL COST OF THE ASSETS ARE C ONCERNED. THE MATERIAL FACTS SO DISCLOSED IN THE FINANCIAL STATEM ENTS HAVE INFACT BEEN CONSIDERED BY THE AO WHILE RECALCULATING THE D EPRECIATION CLAIM OF THE ASSESSEE COMPANY. 21. IN THE ENTIRETY OF FACTS AND CIRCUMSTANCES OF THE CASE AND RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN CASE OF RELIANCE PETROPRODUCTS (SUPRA), WE HEREB Y DELETE THE LEVY OF PENALTY UNDER SECTION 271(1)(C) IN RESPECT OF DISALLOWANCE OF DEPRECIATION UNDER SECTION 32(1)(III) READ WITH SECTION 43(1) AND EXPLANATION 10 THERETO IN RESPECT OF ALL THREE YEARS UNDER CONSIDERATION. THUS, THE ISSUE BEING COMMON AND IDENTICAL, THEREFO RE, FOLLOWING THE EARLIER DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 2002-03, 2003-04 & 2006-07 WE DO N OT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE LD. CIT(A) IN DE LETING THE PENALTY LEVIED AGAINST THE DISALLOWANCE OF DEPRECIATION DUE TO NON REDUCTION OF SUBSIDY/GRANT/REIMBURSEMENT FROM THE COST OF ASSET. 6. GROUND NO. 3 IS REGARDING DELETION OF THE PENALT Y LEVIED IN RESPECT OF THE DISALLOWANCE OF PRIOR PERIOD EXPENSES. 7. WE HAVE HEARD LD. DR AS WELL AS AR AND CONSIDERE D THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE NOT THAT IN T HE QUANTUM APPEAL ITA NO. 933 TO 935,937 &890/JP/2017 ACIT V M/S AJMER VIDYUT VITARAN NIGAM LTD., AJMER 22 THE TRIBUNAL VIDE ORDER DATED 28.08.2018 IN ITA NO. 362/JP/2016 HAS DELETED THE DISALLOWANCE MADE BY THE AO IN PARAS 6 TO 11 AS UNDER:- 6. DURING THE COURSE OF HEARING, THE LD. AR SUBMI TTED THAT HONBLE RAJASTHAN HIGH COURT HAS RECENTLY DECIDED T HIS PARTICULAR MATTER RELATING TO PRIOR PERIOD EXPENDITURE IN ASSE SSEES OWN CASE FOR A.Y. 2003-04 IN ITS FAVOUR BY ITS JUDGEMENT DAT ED 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 17.10.2008 FOR AY 2003-04 WHEREIN THE COORDINATE BE NCH 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 TH E CASE OF DCIT V/S CHAMBAL FERTILIZERS AND CHEMICALS LTD, 34 TW 59 (JPR.) HOLDING THAT THE DEDUCTION OF AN EXPENDITURE WILL B E ADMISSIBLE ONLY IN THE YEAR IN WHICH IT CRYSTALLIZED AND ACCOU NTED FOR ON THE BASIS OF SYSTEM OF ACCOUNTING REGULARLY FOLLOWED BY THE ASSESSEE. AN IDENTICAL ISSUE IN THE CASE OF ASSESSEE FOR THE A.Y. 2002-03 HAS ALSO BEEN DECIDED BY JAIPUR BENCH OF THE TRIBUN AL IN FAVOUR OF THE ASSESSEE VIDE ITS ORDER DATED 31.10.2007 IN ITA NO. 272/JP/2006. UNDER THESE CIRCUMSTANCES, WE ARE OF T HE 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 ACCOUNTI NG WHERE PRIOR PERIOD INCOME AND EXPENDITURE ARE CLAIMED ONLY WHE N THE SAME GETS CRYSTALLIZED. THE COMPANY HAS FOLLOWED THE SYS TEM UNDER THE PECULIAR CIRCUMSTANCES OF THE CASE WHEN THE COMPANY CAME INTO EXISTENCE AFTER RESTRUCTURING OF THE PARENT COMPANY I.E. RSEB. THE FIRST APPELLATE ORDER BEING REASONED ONE IS THU S UPHELD. 8. FURTHER, OUR REFERENCE WAS DRAWN TO THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN DB APPEAL NO. 333/2009 DATE D ITA NO. 933 TO 935,937 &890/JP/2017 ACIT V M/S AJMER VIDYUT VITARAN NIGAM LTD., AJMER 23 19.05.2017 FOR AY 2003-04 WHEREIN THE FOLLOWING QUE STION OF LAW WAS RAISED FOR ITS CONSIDERATION:- 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE THE TRIBUNAL WAS JUSTIFIED IN CONFORMING THE DELETION O F PRIOR PERIOD EXPENSE OF RS. 1,55,40,777/- MADE BY THE ASSESSING OFFICER WHICH CANNOT ALLOWED WHILE FOLLOWING MERCANTILE SY STEM 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 I SSUE IS COVERED BY THE DECISION OF DELHI HIGH COURT IN CASE OF SMCC CONSTRUCTION INDIA LTD. VS. ASSISTANT COMMISSIONER OF INCOME TAX REPORTED IN [2013] 38 TAXMANN.COM 146 (DELHI) WHERE IN 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 DETERMINED AND CRYSTALLIZED DURING THE RELEVANT YEA R. 14.THE REASON TO BELIEVE RECORDED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS DEBITED A SUM OF RS. 1,20,76 5 IN THE P&L ACCOUNT ON ACCOUNT OF PRIOR PERIOD EXPENSES AFT ER NETTING INCOME OF RS. 30,34,463/- AND EXPENDITURE O F RS. 31,55,228/- HAS NOT BEEN CRYSTALLIZED DURING THE YE AR 2001- 02 RELEVANT TO THE ASSESSMENT YEAR 2002-03 SUCH PRI OR PERIOD EXPENSES SHOULD HAVE BEEN DISALLOWED IS NOT BASED ON ANY MATERIAL THAT HAD COME TO THE KNOWLEDGE OF T HE ASSESSING OFFICER. THE ASSESSING OFFICER HAS PLACED RELIANCE ON THE NOTES TO THE ACCOUNTS THAT WERE AVAILABLE AT THE TIME OF THE SCRUTINY ASSESSMENT. BUT THE NOTES ALSO STATES THAT THE PRIOR PERIOD EXPENSES HAD CRYSTALLIZED/SET TLED IN THE YEAR. THE REASONS TO BELIEVE RECORDED DO NOT SH OW AS TO ON WHAT BASIS THE ASSESSING OFFICER HAS FORMED A REASONABLE BELIEF THAT THE SAID EXPENDITURE HAD NOT ITA NO. 933 TO 935,937 &890/JP/2017 ACIT V M/S AJMER VIDYUT VITARAN NIGAM LTD., AJMER 24 CRYSTALLIZED DURING THE YEAR RELEVANT TO THE ASSESS MENT YEAR. IT IS APPARENT THE ASSESSING OFFICER SUSPECTS THAT THE INCOME HAS ESCAPED ASSESSMENT. BUT MERE SUSPICION I S NOT ENOUGH. THE REASONS TO BELIEVE MUST RECORD REASONS, THE READING OF WHICH SHOULD DEMONSTRATE, THAT SUCH A REASONABLE BELIEF COULD BE FORMED ON SOME BASIS/FOUNDATION AND WAS IN FACT FORMED BY THE ASSE SSING OFFICER THAT INCOME HAS ESCAPED 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 D ECISION OF THE HONBLE 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 EXPENSES AS WELL AS THE PRIOR PERIOD INCOME HAVE BE EN ACCOUNTED FOR IN ITS FINANCIAL 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 ASSESSIN G OFFICER HAS STATED THAT FOLLOWING THE PAST HISTORY OF THE ASSES SEE, THE ADDITION ON ACCOUNT OF PRIOR PERIOD EXPENDITURE HAS BEEN MAD E IN THE YEAR UNDER CONSIDERATION. THIS SHOWS THAT THE ASSESSEE H AS BEEN CONSISTENT IN ITS ACCOUNTING POLICY REGARDING PRIOR PERIOD EXPENDITURE AND THE REVENUE IS EQUALLY CONSISTENT I N DISALLOWING THE SAME. THE HONBLE RAJASTHAN HIGH COURT IN ABOV E REFERRED DECISION FOR AY 2003-04 HAS DECIDED THE ISSUE IN FA VOUR OF THE ASSESSEE COMPANY. FURTHER, THE COORDINATE BENCHES I N ASSESSEES OWN CASE FOR AY 2002-03, 2003-04 & 2006-07 HAS DECI DED THE ISSUE IN FAVOUR OF THE ASSESSEE. THOUGH THE PRINCI PLE OF RES JUDICATA DOESNT APPLY IN THE INCOME TAX PROCEEDING S BUT WHERE ITA NO. 933 TO 935,937 &890/JP/2017 ACIT V M/S AJMER VIDYUT VITARAN NIGAM LTD., AJMER 25 THE SAME 'FUNDAMENTAL ASPECT' PERMEATES IN DIFFEREN T ASSESSMENT YEARS AND THE ASSESSEE IS CONSISTENT IN ITS ACCOUNTING POLICY, AS IN THE INSTANT CASE, OF ACCOUNTING FOR T HE LIABILITIES IN THE YEAR IN WHICH IT IS CRYSTALLISED, THE COURTS HA VE HELD THAT THE SETTLED POSITION SHOULD NOT BE DISTURBED UNLESS THE RE ARE GLARING CHANGES IN THE FACTS 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 OF TAX REMAINE D THE SAME IN THE PRESENT ASSESSMENT YEAR AS WELL AS IN THE SUBSE QUENT ASSESSMENT YEAR, THE DISPUTE RAISED BY THE REVENUE IS ENTIRELY ACADEMIC OR AT BEST MAY HAVE A MINOR TAX EFFECT. IN THE INSTANT CASE, WE HAVE BEEN INFORMED THAT THE ASSESSEE IS SU BJECT TO CORPORATE TAX RATE OF 35% AND 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 HIGH COURT IN ASSESSEES OWN CASE, THE AO IS DIRECTED TO ALLOW THE CLAIM OF DEDUCTION OF THE PRIOR PERIOD EXPENSES AMO UNTING TO RS. 4,64,27,170/-. IN THE RESULT, THE GROUND OF APPEAL TAKEN BY THE ASSESSEE IS ALLOWED. SINCE, THE DISALLOWANCE HAS BEEN DELETED AND THE D EDUCTION WAS ALLOWED BY THE TRIBUNAL AS WELL AS BY THE HONBLE H IGH COURT IN THE EARLIER ASSESSMENT YEAR, THEREFORE, THE PENALTY LEV IED AGAINST SUCH DISALLOWANCE IS NOT SUSTAINABLE. ACCORDINGLY, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE LD. CIT(A) QUA THIS ISSUE. 8. FOR THE ASSESSMENT YEARS 2005-06, 2007-08, 2009- 10 & 2010-11 GROUND NO. 1 IS COMMON AS RAISED FOR THE ASSESSMENT YEAR 2004-05 ACCORDINGLY, IN VIEW OF OUR FINDING ON THIS ISSUE F OR THE ASSESSMENT YEAR ITA NO. 933 TO 935,937 &890/JP/2017 ACIT V M/S AJMER VIDYUT VITARAN NIGAM LTD., AJMER 26 2004-05 THIS GROUND OF REVENUES APPEAL STANDS DISP OSED OFF BEING DECIDED AGAINST THE REVENUE. 9. GROUND NO. 2 IS COMMON FOR THE ASSESSMENT YEAR 2 004-05, 2005- 06, 2007-08 & 2009-10. IN VIEW OF OUR FINDING ON TH IS ISSUE FOR THE ASSESSMENT YEAR 2004-05 THIS GROUND OF THE REVENUE S APPEAL FOR THE ASSESSMENT YEARS 2005-06, 2007-08 & 2009-10 STANDS DISPOSED OF BEING DISMISSED. 10. GROUND NO. 3 IS COMMON FOR ALL FIVE ASSESSMENT YEARS. WE HAVE DECIDED THIS ISSUE FOR THE ASSESSMENT YEAR 2004-05 BY CONSIDERING THE FACT THAT THE TRIBUNAL IN THE QUANTUM APPEAL DELETE D THE DISALLOWANCE OF CLAIM OF THE ASSESSEE FOR ALL THESE ASSESSMENT YEAR S. ACCORDINGLY, THIS GROUND OF THE REVENUES APPEAL FOR ALL THE ASSESSME NT YEARS BEFORE US IS DECIDED AGAINST THE REVENUE. IN THE RESULT, THE APPEALS FILED BY THE REVENUE AR E DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 07/02/2018 SD/- SD/- HKKXPAN FOT; IKY JKO (BHAGCHAND) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 07/02/2018. ITA NO. 933 TO 935,937 &890/JP/2017 ACIT V M/S AJMER VIDYUT VITARAN NIGAM LTD., AJMER 27 * SANTOSH. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- ACIT, CIRCLE-2, AJMER. 2. IZR;FKHZ@ THE RESPONDENT- M/S AJMER VIDYUT VITARAN NIGAM LTD. , AJMER. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 933 TO 935 ,937 & 890/JP/2017} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR