THE ACIT, CIRCLE-1(1)(1), VADODARA V. GUJARAT ENERGY TRANSMISSION CORPN. LTD., VADODARA

MA 19/AHD/2023

AI Insights

The case involves the Assistant Commissioner of Income Tax, Vadodara (Appellant) against M/s. Gujarat Energy Transmission Corporation Ltd. (Respondent) concerning the treatment of certain income and grants in the assessment years 2013-14 and 2014-15. The Revenue filed Miscellaneous Applications against the Tribunal's earlier order, seeking re-examination of the classification of miscellaneous receipts and the treatment of capital grants in the computation of book profits under section 115JB of the Income Tax Act. The Tribunal's decision addressed these issues, referencing previous cases and accounting standards, ultimately setting aside one issue for re-evaluation and dismissing the other.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 42034 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 18 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 24-10-2024
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 26-07-2024
• Assessment Year: 2014-2015
• Appeal Filed On: 06-02-2023
• Other Referred Cases: ACIT Vs. Gujarat State Energy Generation Ltd., Gujarat State Electricity Corporation Ltd. in ITA No. 950/Ahd/2015
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Set aside; Business income; Capital asset; Depreciation; Capital expenditure
• Section: 250; 28; 115JB

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “C” BENCH Before: Smt. Annapurna Gupta, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member Asst. Commissioner Of Income Tax Circle-1(1)(1), Vadodara (Appellant) Vs M/s. Gujarat Energy Transmission Corporation Ltd. Sardar Patel Vidyut Bhavan, Race Course Circle, Baroda-390007 PAN No. AABCG4029R (Respondent) Revenue Represented: Shri V.K. Mangla, Sr. D.R. Assessee Represented: Shri Manish J. Shah, A.R. & Shri Rushin Patel, A.R. Date of hearing : 26-07-2024 Date of pronouncement : 24-10-2024 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- These Miscellaneous Applications are filed by the Revenue as against the common order dated 24-08-2022 passed by this Tribunal in the Revenue appeals in ITA Nos. 852 & 853/Ahd/2018 for the Asst. Years 2013-14 and 2014-15. M.A. Nos: 18 & 19/Ahd/2023 (in ITA Nos: 852 & 853/Ahd/2018) Asst. Years: 2013-14 & 2014-15) M.A. Nos. 18 & 19/Ahd/2023 A.Ys. 2013-14 & 14-15 ACIT Vs. M/s. Gujarat Energy Transmission Corporation Ltd. 2 2. The Grounds of Appeal in M.A. No. 18/Ahd/2023 for Asst. Year 2013-14 reads as under: “[1] On the facts and in the circumstances of the case and in law, the Hon'ble ITAT has erred in not adjudicating the ground No. 3 \"On the facts and in the circumstances of the case and in law, the ld.CIT(A) erred in directing the Assessing Officer to treat the miscellaneous receipts as business income instead of income from other sources without appreciating the fact that the receipt is not covered in clauses (1) to (vii) of sec. 28 of the Income Tax Act under which such income is charged.\" filed by the Revenue in ITA No. 852/Ahd/2018 for A.Y. 2013-14. [2] On the facts and in the circumstances of the case and in law, the Hon'ble ITAT has erred in rendering decision on some other issue which was not contested by the Revenue instead of adjudicating the ground No. 4b \"On the facts and in the circumstances of the case and in law, the ld.CIT(A) erred in deleting Capital Grants amounting to Rs.2969.475 lacs without appreciating the fact that the assessee neither credited this grant to the profit and Loss account directly nor debited the capital assets from the capital grant nor it defer the amount of grant for certain period as provided.\" | filed by the Revenue in ITA No. 852/Ahd/2018 for A.Y. 2013-14.” 3. Regarding Ground No. 1 of this M.A.: On perusal of the common order, it is found that Ground No. 3 was not adjudicated namely to treat the miscellaneous receipts as “business income” instead of “income from other sources”. However vide Para No. 8 to 9.1 of the common order in assessee’s appeal in ITA No. 753/Ahd/2018 this very issue was set aside to the file of Assessing Officer to examine the issue afresh. Following the same, this Ground No. 3 filed by the Revenue is set aside to the file of Ld. A.O. to consider the issue afresh. Thus the ground raised by the Revenue is partly allowed for statistical purpose. 4. Regarding the Ground No. 2 of this M.A.: In Para No. 17 of this common order, there is a typo error of mentioning “Ground No. 3(b)” instead correct “Ground No. 4(b)”. This issue relates to M.A. Nos. 18 & 19/Ahd/2023 A.Ys. 2013-14 & 14-15 ACIT Vs. M/s. Gujarat Energy Transmission Corporation Ltd. 3 treatment of Government Grant of Rs.2696.475 lakhs which was deleted by Ld. CIT(A). The Ld. CIT(A) followed his predecessor order passed for the Asst. Year 2012-13, following the decision of the ITAT in the case of ACIT Vs. Gujarat State Energy Generation Ltd. in ITA No. 1777/Ahd/2009 vide order dated 15-04-2011 thereby held that the capital grant and subsidies made under normal provisions, cannot be made to the book profit u/s. 115JB because it is not covered by any of the items specifically mentioned in Explanation-1 to Section 115JB(2) of the Act. Accordingly, Ld. CIT(A) deleted the addition made to the book profit on this account. 5. Ld. CIT-DR could not place any contra decisions in support of the grounds raised by the Revenue. The Co-ordinate Bench of this Tribunal in the case of Gujarat State Electricity Corporation Ltd. in ITA No. 950/Ahd/2015 dated 13.12.2016 held as follows: “12. The third issue relates to the treatment of Government Grant of Rs. 250 crores u/s. 115JB of the Act. 13. The assessee company has received capital grant of Rs. 250 crores which was transferred to the Reserve & Surplus account. The Id. Principal CIT was of the view that the same should have been reduced from the cost of assets and since the same has not been done, the company has claimed excess depreciation thereby offering lesser Book Profits. 14. We find that the ld. Principal CIT has ignored the fact that the grant in question was received in terms of the Financial Restructuring Plan from the Government and the company has accounted Government Grants in terms of the mandatory Accounting Standard (AS)-12 on \"Accounting for Government Grants\" prescribed by the ICAI. The relevant part of AS-12 reads as under:- M.A. Nos. 18 & 19/Ahd/2023 A.Ys. 2013-14 & 14-15 ACIT Vs. M/s. Gujarat Energy Transmission Corporation Ltd. 4 10. Presentation of Grants of the nature of Promoters, contribution. 10.1 Where the government grants are of the nature of promoters contribution, Le, they are given with reference to the total investment in an undertaking or by way of contribution towards its total capital outlay (for example, central investment subsidy scheme) and no repayment is ordinarily expected in respect thereof, the grants are treated as capital reserve which can be neither distributed as dividend nor considered as deferred income. 15. The relevant Office Note needs special mention here:- Sub: Allocation of FRP Grant as Share Capital contribution to subsidiaries. At the Board Meeting held on 29.06.2009, Board approved to allocate the FRP grant of Rs.250 crores being given by Govt. of Gujarat to GUVNL for system strengthening as Share Capital contribution from GUVNL to subsidiaries. Board further authorized MD, GUVNL to decide the quantum of such equity contribution to each of the subsidiaries. As far as DISCOMs are concerned, their equity requirement is being met through consumers' contribution and as such there is hardly any equity requirement which is required to be contributed by GUVNL Moreover, the capita! grant being released by GoG to GUVNL for various DISCOM related projects, the Board at the meeting held on 04.01.2010 has approved to allocate the same to DISCOMs in the form of Share Capital from GUVNL Since the DISCOM related grants alongwith consumers' contribution meet with the equity requirement of DISCOMs it is proposed not to allocate the FRP grant to DISCOMs for the FY 2009-10. As regards to GETCO, they have incurred capital expenditure of Rs.650 crores upto January 10. Against the said capital expenditure, they have received consumers' contribution to the tune of Rs.87 crores. Further, the Govt. grant towards creation of transmission lines and sub-stations of Rs. 151 crore (RE) is specifically meant for GETCO. In addition for creation of new Sub-Stations in coastal areas under Sagarkhedu Yojana, Govt. of Gujarat has given Share Capital Contribution of Rs.37.20 crores to GUVNL. The said grant and share capital contribution will be given to GETCO as share capital contribution from GUVNL. In addition, in the revised estimate, Govt, has made a provision of Rs.50 crores as Equity Share Capital contribution to GETCO directly (without routing through GUVNL). Thus, GETCO is already having Equity Share Capital contribution to the tune of Rs. 238.20 crores in addition to consumer's contribution of Rs. 87 crores whereas in case of GSECL whose equity M.A. Nos. 18 & 19/Ahd/2023 A.Ys. 2013-14 & 14-15 ACIT Vs. M/s. Gujarat Energy Transmission Corporation Ltd. 5 requirement is substantially higher than that of GETCO, they have been given only Rs. 60.77 crores as Equity Share Capital contribution from GUVNL Considering the above position, it is proposed to allocate entire FRP grant of Rs.250 crores to GSECL as Equity Share Capital contribution from GUVNL for their projects. 16. Considering the accounting treatment in the light of the Accounting Standard-12, we do not find any error on facts or in law. Therefore, to this extent the findings of the ld. Principal CIT are reversed.” 6. Having regard to the facts and circumstances of the case and the decisions passed by the Co-ordinate Bench of this Tribunal, we do not find any reason to interfere with the order passed by the Ld. CIT(A) in deleting the above addition. Thus the Grounds of Appeal raised by the Revenue is devoid of merit and hence dismissed. 7. The Grounds of Appeal in M.A. No. 19/Ahd/2023 for Asst. Year 2014-15 reads as under: “[1] On the facts and in the circumstances of the case and in law, the Hon'ble ITAT has erred in not adjudicating [Ground \"On the facts and in the circumstances of the case and in law, the ld.CIT(A) erred in directing the Assessing Officer to treat the miscellaneous receipts as business income instead of income from other sources without appreciating the fact that the receipt is not covered in clauses (i) to (vii) of sec. 28 of the Income Tax Act under which such income is charged of the Revenue in ITA No. 853/Ahd/2018 for A.Y. 2014-15 following the decision rendered in A.Y. 2013-14 wherein the Hon'ble ITAT has not adjudicated identical issue filed by the Revenue in ITA No. 852/Ahd/2018 for A.Y. 2013-14. [2] On the facts and in the circumstances of the case and in law, the Hon'ble ITAT has erred in not adjudicating [Ground \"On the facts and in the circumstances of the case and in law, the ld.CIT(A) erred in deleting the addition being made in book profit-Capital Grants amounting to Rs. 3345.25 lacs) of the Revenue in ITA No. 853/Ahd/2018 for A.Y. 2014-15 following the decision rendered in A.Y. 2013-14, wherein the Hon'ble M.A. Nos. 18 & 19/Ahd/2023 A.Ys. 2013-14 & 14-15 ACIT Vs. M/s. Gujarat Energy Transmission Corporation Ltd. 6 ITAT has not adjudicated the identical issue filed by the Revenue in ITA No. 852/Ahd/2018 for A.Y. 2013-14.” 8. The facts and circumstances of the above M.A. is similar to the previous Asst. Year 2013-14 in M.A. No. 18/AHD/2023 except change in figures, the decision rendered in the above order is applicable in the present M.A. filed by the Revenue mutatis mutandis. 9. In the result, the Miscellaneous Applications filed by the Revenue are hereby allowed. Order pronounced in the open court on 24-10-2024 Sd/- Sd/- (ANNAPURNA GUPTA) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 24/10/2024 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलȣय अͬधकरण, अहमदाबाद "