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2014 (4) TMI 683 - HC - Income TaxPower u/s 263 of the Act – Withdrawal of additional depreciation – Reference made for revision of sales - Whether the CIT fell into error in invoking his power u/s 263 of the Act modifying the assessment order by withdrawing the additional depreciation and further directing the AO to examine the allowance on account of revision of sales afresh – Held that:- NTPC could not be accused of withholding information or material information, or providing incomplete facts - there was some tentativeness in the CERC Regulations about the tariff rates and conditions that were to be applied for the period 01-04-2004 onwards - The previous Tariff Regulations – framed in 2001 – were to end on 31.03.2004; yet by the latter date, even though the conditions for tariff applicability had been more or less finalized, the final tariff order, notifying the rates and some final principles, had not been brought into force - the CERC directed that the existing conditions were to be applied till 30.9.2004. NTPC had no choice in the matter but to carry on billing in terms of the previous notification on a provisional basis up to 31.03.2005 or till the approval of tariffs; such billing figures were to be subject to adjustment after final tariff determination - inherently there was a degree of uncertainty and incompleteness in the process - This was reflected in the return when the adjustment of the billing became necessary on account of the application of the CERC notification. NTPC’s argument that the tariff for power plants from 2004-09 was lower than the tariff norms for 2000-04 has not been disputed by the Revenue - Even a bare look at the later Tariff Regulations shows that the rate of return was revised downwards - NTPC submits that it accounted sales for electricity for Rs.2212.8 crores based upon the previous experience in tariff fixation orders of CERC - This was even though the billed amount was Rs. 2306.6 crores - The estimate was bona fide and made on a realistic assessment of sales estimation that could be realized in terms of accepted tariff notifications - There was nothing erroneous or prejudicial to Revenue’s interest in such estimate. Power generation companies owned or controlled by the Central Government are a sub-species of business entities for which a separate provision has been enacted by the Act - the income of utilities, especially ones subject to stringent public control, are tightly regulated in terms of what are the accounting methods to be adopted, how depreciation is to be claimed, allowances rate of return on capital, etc. -All the aspects are subject to CERC Regulations - the transition between the old (2001) CERC Regulations, and the later ones (2004-2009), had not been fully worked out by the CERC as to what had to be recovered by NTPC and other entities – it is directed that the previous regime be followed - for a portion of previous accounting periods, provisional figures were being indicated as income estimates, and depending on how the final figures were worked out at times, higher figures would be offered as amounts received in excess of the sum estimated and reported during other periods - Relying upon Shree Sajjan Mills Ltd v. CIT [1985 (10) TMI 2 - SUPREME Court] - A provision made on a reasonable basis, it would be in the nature of an ascertained liability and that in a mercantile system of accounting, provision for liability ascertained during the course of the relevant accounting period, which is payable at a future is permissible. The court is satisfied that the AO’s order was made after appropriate inquiry; the absence of discussion regarding downward revision of sales figures in this case did not make it any less vulnerable to correction u/s 263 - The view taken by him is one which is endorsed by law, as the CERC Regulations left the NTPC with little choice to make such revision awaiting a final determination in regard to the whole period after the expiry of the assessment in that instance - The Commissioner acted erroneously in exercising revisional power u/s 263 – Decided in favour of Assessee.
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