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2014 (9) TMI 1196 - AT - Income TaxTaxability of advance against depreciation (AAD) - Addition on account of advance against depreciation while computing regular income of the assessee - HELD THAT:- As decided in own case [2014 (11) TMI 92 - ITAT DELHI] AAD is not meant for an uncertain purpose. AAD is an amount that is under obligation, right from the inception, to get adjusted in the future, hence, cannot be designated as a reserve. AAD is nothing but an adjustment by reducing the normal depreciation includible in the future years in such a manner that at the end of useful life of the Plant (which is normally 30 years) the same would be reduced to nil. Therefore, the assessee cannot use the AAD for any other purpose (which is possible in the case of a reserve) except to adjust the same against future depreciation so as to reduce the tariff in the future years. In view of the categorical finding of the Supreme Court NATIONAL HYDROELECTRIC POWER CORPORATION LTD. VERSUS COMMISSIONER OF INCOME-TAX [2010 (1) TMI 281 - SUPREME COURT] we hold that the CIT(A) was correct in holding that advance against depreciation cannot be added under the computation of the normal income. The order of CIT(A) is upheld and the appeals of the Revenue are dismissed. Addition in the book profit while computing Minimum Alternate Tax liability under section 115JB on account of the tariff adjustments - ascertained liability - AO made this addition to the book profit as well as normal income - CIT- deleted the addition - HELD THAT:- AO has added this amount considering the same as unascertained liability. In our considered view, this contention of the AO is not correct. In fact it is not a liability at all. It is a reduction in the sale consequent to the rate being determined by the CERC which by the calculation done by the appellant company itself was required to be done. This view of ours gets further strengthened from the fact that the CERC approved tariff rates vide order dated 29th May, 2006 and 31st May, 2006 which resulted into further reduction by ₹ 18.74 Crores. Thus it cannot be said that the adjustment made by the appellant company was not correct or not bonafide. It is not the case of the AO that the rate proposed by the appellant company was different as compared to the rate which it has applied for the tariff adjustment. The contention of the AO that this liability has not crystallized is also not correct. The AO has not appreciated the facts in the right perspective while the CIT(A) has rightly appreciated the facts of this issue, therefore, we sustain the order of CIT (A). Addition to book profit on account of provision made for gratuity, leave encashment and post retirement benefits - HELD THAT:- As in assessee’s own case in assessment year 2002-03 [2010 (10) TMI 1022 - ITAT DELHI] once the assessee is maintaining his accounts on mercantile system, a liability accrued though to be discharged at a future date would be a proper deduction while working out the profits and gains of business, regard being had to be accepted principles of commercial practice and accountancy. If the facts of the case are viewed in the light of the decisions referred to above, we find that the provision made by the assessee in respect of gratuity, leave encashment and post retirement medical benefit on actuarial basis cannot be said provisions for unascertained liability so as to fall in clause (c) of the Explanation to section 115-JB (2) of the Act. Accordingly the CIT (Appeals) and the assessing officer erred in holding the provisions made by the assessee were on account of unascertained liability to be added back under clause (c) of the Explanation to section 115-JB (2) of the Act. Accordingly, we set aside the order of the authorities below and direct the assessing officer to allow the claim of the assessee. Addition on account of provision for doubtful debts - HELD THAT:- AR was fair enough to concede that this issue is covered against the assessee in view of the retrospective amendment made by the Finance (No.2) Act, 2009. Accordingly this ground of the department is allowed. Addition on account of amortization of land by addition to the book profit - MAT computation - HELD THAT:- As decided in own case it is not the case of the Revenue here that the adjustment made by the AO is under Explanation to section 115J. The contention of the Revenue here is that land is not a depreciable asset and depreciation charged in the profit and loss account which is not in accordance with the provisions of the Companies Act read with Accounting Standard 6. As stated hereinabove, the contention of the Revenue that the land in question of the assessee company is not a depreciable asset is factually incorrect and further as held by the Supreme Court no adjustment can be made to net profit as certified by the statutory auditors. Applicability of provisions of section 234B(2)(ii) read with section 140A - as contended by the Ld. DR that the CIT(A) was not justified in allowing the adjustment of the self assessment tax before deducting the same in respect of the interest liability arising under section 234B - HELD THAT:- As decided in PATSON TRANSFORMERS LTD. VERSUS DEPUTY COMMISSIONER OF INCOME-TAX, SPECIAL RANGE-VIII [2005 (11) TMI 388 - ITAT AHMEDABAD] we are of the considered view that adjustment towards interest payable under section 234B is to be considered only at the time of filing return of income i.e., when payment of self-assessment under section 140A is required to be made. Before that interest under section 234B is independently required to be calculated only in accordance with the provisions provided in section 234B(i). If at the time of filing return it is found short payment after adjustment of interest out of tax paid under section 140A, further interest is required to calculate in accordance with section 234B(2)(ii), on balance amount which is assessed tax minus advance tax and ad hoc payment. Thus, we find that approach of revenue for calculation of interest under section 234B is not correct, therefore, the orders of lower authorities are set-aside and the claim of the assessee is allowed. The Assessing Officer is directed to calculate interest under section 234B as per above discussion
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