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TMI Blog2012 (8) TMI 190X X X X Extracts X X X X X X X X Extracts X X X X ..... al is that re-assessment was held to be invalid by the CIT(Appeals). 4. Short facts apropos are that assessee, a public sector undertaking, engaged in the business of generation of electricity and mining of lignite, had claimed deduction under Section 80-IA of the Act for 30% of the profits in respect of its units named Unit-V, Unit-VI of Thermal Power Station (TPS) Stage-II. Original assessment was completed under Section 143(3) of the Act on 29.3.2005. Thereafter, Assessing Officer issued a notice under Section 148 of the Act on 17.3.2009 and the reasons mentioned for the reopening was as under:- "Prior to 01.04.1994, the erstwhile section 80IA would apply only for an industrial undertaking, which began to manufacture articles or things. Generation of electricity would not amounts to manufacture or production of articles or things to qualify for the deduction. Further, the intention of the Legislature was to give benefit to the assessees involved in the generation of power only who had set up in any part of India for the generation and distribution of power at any time during the period beginning on the 01.04.1993 and ending on 31.03.2006. But the assessee's following units vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his questionnaire dated 14.11.2003, during the course of assessment proceedings, which was duly replied by the assessee. Ld. CIT(Appeals) also noted that similar question had also been asked in the preceding assessment year 2000-01 as well. According to him, the re-assessment proceedings were initiated simply based on change of opinion and relying on the decision of Hon'ble Apex Court in the case of CIT v. Kelvinator of India Ltd. (320 ITR 561) ruled that the reopening of assessment was not valid. He, thus quashed the reopening and pursuant re-assessment. 6. Now before us, learned D.R., strongly assailing the order of ld. CIT(Appeals), submitted that just because assessee submitted details, it could not be concluded that Assessing Officer had formed an opinion on every aspect of an issue. The question here was regarding eligibility of the assessee for claiming deduction under Section 80-IA of the Act and whether assessee could be considered an industrial undertaking eligible for claiming deduction under Section 80-IA of the Act. This aspect was never examined by the Assessing Officer during the course of original assessment proceedings. According to learned D.R., Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngaged in the manufacture of articles or things and generation of electricity would not amount to manufacture of articles or things. The question before us is whether Assessing Officer had considered the issue viz. generation of electricity whether eligible for deduction under Section 80-IA of the Act, during the course of original assessment proceedings. Assessing Officer in his letter dated 14.11.2003 issued to the assessee, during the course of assessment proceedings, which is placed at paper-book pages 34 to 38, had at para 24 required the assessee to produce its Profit & Loss account for the Units on which deduction under Section 80-IA was claimed. This included Units-V, VI & VII and Mines-II. At para 25, a specific question had been raised by the Assessing Officer, which is reproduced hereunder:- "25. Deduction u/s 80 IA has been claimed on the Profits derived from the mines. To be eligible for deduction u/s 80 IA, the undertaking should be engaged in the business of manufacturing or producing an article or thing. As per the decision of Rajasthan High Court in the case of CIT v. Lucky Mineral Pvt. Ltd. (226 ITR 245) mining is not either manufacturing or producing an article ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... smissed. 10. Now let us take Revenue's appeal for assessment year 2006- 07. Grievance is regarding disallowance under Section 14A of the Act which was deleted by the CIT(Appeals). 11. When the matter came up, learned D.R. submitted that ld. CIT(Appeals) had not considered the decision of Special Bench of this Tribunal in the case of ITO v. Daga Capital Management (P) Ltd. (117 ITD 169)which held that Rule 8D of Income-tax Rules, 1962, applied for years prior to assessment year 2008-09 also. 12. Learned A.R., on the other hand, submitted that exempt income earned was from tax free bonds issued by Electricity Boards and such bonds were issued pursuant to Government order. Interest was automatically credited to the bank account and there was no expenses for such income earned. According to learned A.R., ld. CIT(Appeals) had rightly followed the decision of Hon'ble Punjab & Haryana High Court in the case of CIT v. Hero Cycles Ltd. (325 ITR 518) and held in favour of the assessee. 13. We have perused the orders and heard the rival submissions. Insofar as ground of the Revenue that ld. CIT(Appeals) had not considered the decision of Special Bench of this Tribunal in the case of Daga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion (CERC). CERC had passed orders fixing such tariffs during the relevant previous year for earlier periods as well, and assessee was bound by such orders. Therefore, it had to make adjustments for differences arising out of such power tariff relating to earlier years. Such adjustment was carried out in the relevant previous year since the order from CERC was received only in the said previous year. Assessee also filed year-wise break-up of its claim. As per the assessee, in the earlier years, sales were booked based on tariffs as per power purchase agreement but, orders of CERC being binding on it, reversal made to sales account for giving effect to such orders could not be disallowed. However, the Assessing Officer did not accept this explanation. According to him, difference in tariff pertained to earlier years and not for the relevant previous year. Profits for the year under consideration could not be correctly determined if assessee was allowed to adjust difference arising in earlier year's profits, with the profit of the relevant previous year. He, therefore, rejected the claim and made an addition of Rs. 502,15,00,000/-. 18. In its appeal before ld. CIT(Appeals), argument ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rior items are covered by Accounting Standard 2 notified u/s 145(2) of the Act, which only covers errors and omissions and not cases of genuine redetermination of final price by a higher statutory authority. 8. The order of the ld. A.O. is therefore patently against the Accounting Standard 2 (AS 2) notified by the Board. 9. The Accounting Standard (AS) 5 (E 10) notified by the Central Government u/s 209 of the Companies Act 1956 also is to identical effect. There is no specific provision of law dealing with the situations like this in the computation scheme enacted for business income. Hence the normal method of accounting governing the issue will have to be applied for determination of taxable income. 10. The appellant accordingly submits that its case is explicitly covered by the Accounting Standard notified under the Incometax Act." 19. Therefore, as per the assessee, it had to be either allowed as bad debts since amounts were irrecoverable or as business loss. Ld. CIT(Appeals) was appreciative of these contentions. He held that assessee having already accounted and offered to tax the amounts as per the tariff in the power purchase agreement, it could claim as a bad debt the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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