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ACIT, Cirlce, Shimla Versus SJVN Limited.

2015 (11) TMI 21 - ITAT CHANDIGARH

Advance Against Depreciation (AAD) added to Book Profit u/s 115 JB - MAT computation - Held that:- The issue is no longer res-integra as it is covered by the decision of Hon'ble Supreme Court in the case of NHPC Vs. CIT (2010 (1) TMI 281 - SUPREME COURT)in which it was held as AAD is a timing difference, it is not a reserve, it is not carried through profit and loss account and that it is "income received in advance" subject to adjustment in future and, therefore, clause(b) of Explanation-I to s .....

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is not enough to categorize it is capital in nature. This issue has been settled by the Supreme Court in Empire Jute Co. Ltd. Vs. CIT (1980 (5) TMI 1 - SUPREME Court) - Decided in favour of assessee. - ITA No. 1309/Chd/2012 - Dated:- 4-8-2015 - Bhavnesh Saini, JM And T R Sood, AM For the Appellant : Dr Amarveer Singh For the Respondent : Sh Rajiv Sood ORDER Per Bhavnesh Saini, JM This appeal filed by the Revenue is against the order of the Ld. CIT(A), Shimla dt. 26/09/2012, for Assessment year .....

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ed to added back to the book profit under clause(i) of Explanation (1) to section 115JB of the Income tax Act, 1961. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in holding that the catchment area expenses are revenue in nature being the expenditure not resulted into any enduring benefit to the assessee as against held by the AO that the benefit derived from such land improvement was long lasting and therefore, the said expenditure resulted in a benefit of enduring .....

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of ₹ 120,47,63,829/- under normal provisions and book profit for MAT was shown at ₹ 2139,97,27,180/-. Subsequently the return was revised on 17/06/2010 and ₹ 849.35 crores, pertaining to Advance Against Depreciation (AAD) was reduced from the book profit u/s 115JB. Assessment was framed u/s 143(3) vide order dt 29-12-2011,computing income under the normal provisions at ₹ 120.47 crores and the Book Profit as per 115JB at 2140,64,39,486/-. Addition of ₹ 849.35 crores .....

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was deleted by holding that the issue of allowability and nature of AAD had already been settled by the Hon'ble Supreme Court, in National Hydro Electric Power Corporation Ltd. vs CIT 320 ITR 374 (SC). The disallowance of CAT expenses by holding them to be capital in nature, was also deleted by the CITA(A) by holding that the same is a recurring expenditure which has to be incurred every year by the assessee to improve the quality of water by reducing its silt content. The CIT(A) held that .....

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e repayment of loan taken by power companies like SJVN Ltd. While the assessee excluded it from its income by treating it as income received in advance, The AO added back the same to the Book Profits by holding that : a- AAD is an accrued income and liable to be credited to P&L Account and exclusion of AAD, violated Part II & III of Schedule VI of Companies Act and contravention of these established norms of preparing & drawing book profit u/s 115JB empowered AO to add AAD to the aud .....

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h profit and loss account and that it is "income received in advance" subject to adjustment in future and, therefore, clause(b) of Explanation-I to section 115JB is not applicable. Accordingly, the impugned ruling is set aside and the civil appeal filed by the assessee stands allowed with no order as to costs." Accordingly this ground of appeal of the revenue is dismissed. 7. Ground No.3 relates to the issue of treatment of catchment area treatment expenses as revenue. The AO at p .....

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tion by any hydro-power generating company. Heavy siltation would lead to disruption in power generation, thereby resulting in lower income and profits and causing harm to the profit making apparatus. The expenditure therefore results in a benefit or enduring nature and is hence capital expenditure. The Accounting Policy of the assessee as stated in Schedule 20 to the accounts itself states at para 6.9 thereof that "expenditure on catchment area treatment plan during construction is capital .....

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it is a mandatory charge paid to the Department of Forest and Department of Fisheries. The catchment area of river Satluj is a vast area over which the appellant company has no ownership rights. It is required to incur CAT expenditure in order to improve the quality of water by reducing its silt content. However, there is nothing about this expenditure which results in any enduring benefit to the appellant in the form of the creation of any tangible or intangible asset. The catchment area of th .....

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d to be in order. Accordingly the appellant succeeds on this ground of appeal." 9. Before us the AR relied upon the order of the CIT(A). The DR on the other hand relied on the findings of the AO. 10. On consideration of the rival submissions, we find that CAT payments were made for maintaining the environment and afforestation of the catchment area of the project, which is an operational project, to minimize silt erosion. The expenditure is vital for the continued power-generation by any hy .....

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