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2018 (11) TMI 205 - AT - Income TaxAccrual of income - Reduction of efficiency gain amount in their profit and loss account - revenue model determined by the DERC - excess receipt to be accounted for while determining the tariff for the next year and not available to the assessee to spend in the way they desire - Held that:- The assessee is under a statutory obligation to set apart 50% of the excess amount generated due to the overreaching of the targets, for the purpose of the consideration of the DERC to fix the future tariffs either to give relief to the consumers or otherwise. A reading of the statute, notification and the orders of the DERC clearly indicates that the assessee is not free to use this efficiency gain amount the way it likes. Whether or not a separate account is opened, when this amount is separately shown under this head in the books, it makes little difference in so far as the application of the ratio of Puna Electricity Supply Co. Ltd. (1965 (4) TMI 20 - SUPREME COURT) is concerned. Crux of the matter is that the assessee in both the cases has no right to appropriate the ‘efficiency gain’ amount and such amount is at the disposal of the DERC though not physically but in respect of utilization thereof. We, therefore, are convinced that the ratio of Puna Electricity Supply Co. Ltd (supra) is squarely applicable to the case of the assessee before us and on that score, we allow the contention of the assessee that they have rightly reduced the efficiency gain amount in their profit and loss account. Addition u/s 14A r.w.r. 8D - Held that:- AO recorded reasons for not accepting the statement of the assessee that no expenditure was incurred to earn the exempt income. AO also examined the cash flow statement furnished by the assessee. The reasons recorded by the assessing officer are in sufficient compliance with the requirement of 14A (2) of the act. Coming to the argument that Rule 8D is only prospective in its operation and has no application to the assessment year 2006-07, the Hon’ble Apex Court in CIT vs. Essar Teleholdings Ltd (2018 (2) TMI 115 - SUPREME COURT OF INDIA) held that Rule 8D is prospective and applies only from the assessment year 2008-09. Inasmuch as Rule 8D has no application to the assessment year 2006-07, the disallowance under section 14A has to be computed on some reasonable basis as has been held in several decisions of the jurisdictional High Court including the one in Maxopp Investments Ltd vs. CIT [2011 (11) TMI 267 - DELHI HIGH COURT]. We, therefore, set aside the impugned order and restore the matter to the file of the learned assessing officer for computing the fresh amount of disallowance under section 14A on a reasonable basis, after affording a reasonable opportunity of being heard to the assessee. Disallowance of depreciation on UPS - @60% OR 15% - Held that:- As relying on ORIENT CERAMICS & INDUSTRIES LTD. [2011 (1) TMI 908 - DELHI HIGH COURT] and BSES YAMUNA POWERS LLD. / BSES RAJDHANI POWERS LTD. [2010 (8) TMI 58 - DELHI HIGH COURT] UPS is also an integral part of computer periphery system on which depreciation at 60% is allowable. We accordingly allow this ground. MAT - enhancement of profit under section 115 JB - Held that:- As assessee is a company engaged in the business of distribution of electricity and in view of the decision reported in Kerala State Electricity Board vs. DCIT [2010 (11) TMI 127 - KERALA HIGH COURT], the provisions under section 115 JB have no application to the assessee. There is no dispute as to the nature of business conducted by the assessee
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