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2018 (2) TMI 1351 - HC - Income TaxAdditions for Advance against depreciation (AAD) - MAT - Book profit u/s 115JB - whether is 'income received in advance', thus making the said income subject to 'Charge' under Chapter-II, as business income under Chapter-IV-D read with sub clause (i) of sub-Section 24 of Section 2 of the Income Tax Act? - Held that:- In our view, the matter is covered in favour of the respondent assessee by the judgment in the assessee's case National Hydroelectric Power Corp. Ltd. v. Commissioner Of Income-Tax (2010 (1) TMI 281 - SUPREME COURT) as held advance against depreciation (AAD) was not a reserve nor was an appropriation of profit. The assessee could not use AAD for any purpose (which was possible in the case of a reserve) except to adjust it against future depreciation so as to reduce the tariff in the future years. The AAD was an income received in advance. It was a timing difference. Although the Supreme Court had in that case considered the effect of Explanation-I to Section 115 JB, the observations apply equally to the question before us, namely, whether AAD constitutes income. Although in the context of Explanation-I to Section 115JB, the Supreme Court categorically held that AAD “did not enter the stream of income for the purposes of determination of net profit at all”. It is clear, therefore, that AAD was held not to constitutes income of the year in question. Further the Supreme Court also held that AAD is income received in advance. In other words, it is not income received for the relevant accounting year. It is in that context that the Supreme Court observed that there is a timing difference and that it represents the adjustment in future and that it is therefore not even carried through the profit and loss account. - Decided in favour of assessee.
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