TMI Blog2017 (9) TMI 649X X X X Extracts X X X X X X X X Extracts X X X X ..... located, then the question of putting them to use for business purposes doesn’t arise. - But as per the submissions of Ld. AR for earlier AY 2003-04, the same case with same facts was decided by Tribunal in favor of assessee, therefore following the decision of the Co-ordinate Bench [2016 (9) TMI 399 - ITAT JAIPUR] there is no change in the facts and circumstances in the present case same is allowed in favor of assessee. Disallowance of depreciation u/s 32 r/w sec 43(1) - Contribution, grants and subsidies towards cost of capital assets - AO has disallowed the amount of ₹ 22,05,23,697/- as excess depreciation claimed by assessee on the grounds that as per section 32(1)(iii) read with section 43(1) and Explanation 10 contribution, grants and subsidies received for Capital Assets are to be reduced from the cost of capital assets and therefore AO recalculated the depreciation allowable to the assessee. - Held that:- the same issue has been decided against the assessee by Co-ordinate Bench [supra] therefore, following the decision of the Coordinate Bench referred supra,there is no change in the facts and circumstances of the case - Decided against assessee. Applicability o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s erred in confirming the:- ( 1) Addition of ₹ 4,64,27,170 show under the prior period expenses claimed. ( 2) Addition for disallowance of depreciation of ₹ 12,15,15,004 on non- existing assets. ( 3) Addition for disallowance of depreciation of ₹ 22,05,23,697 u/s 43(1) (Wrongly figure taken by Ld CIT(A) at ₹ 12,61,87,639). Assessee s grounds of appeal (ITA No. 361/JP/16) Under the facts circumstances of the case, the Ld. CIT(A) has erred in confirming the :- ( 1) Addition of ₹ 4,64,27,170 shown under the prior period expenditure. ( 2) Disallowance of depreciation of ₹ 23,04,20,000 (Now rectified to ₹ 12,15,15,004 in the assessment order dated 30.12.2009 passed u/sec. 143(3)/148 for assessment year 2004-05) Revenue s grounds of appeal (ITA No. 357/JP/16) In view of the facts and circumstances of the case the Ld. CIT(A), Ajmer has erred in deleting the disallowances of ₹ 22,05,23,697/- made by the AO on account of excess depreciation claimed and added to the MAT income without appreciating the facts that as per provision of section 115JB(2) of the I.T. Act the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 35D of the Act. Regarding assessee company s contention that the issue has been decided in its favour by the ld. CIT(A) for A.Y. 2002-03, the Assessing Officer stated that since the Revenue is an appeal before the Tribunal against the said order, he is not in a position to follow the order of the ld. CIT(A). Finally, the Assessing Officer, following the past history of the assessee, disallowed the prior period expenditure amounting to ₹ 4,64,27,170/-. 5. Being aggrieved, the assessee carried the matter in appeal before the ld. CIT(A) and reiterated its submission made before the Assessing Officer. It was further submitted that the issue has since been decided by the Tribunal in assessee s own case in its favour for A.Y. 2002-03 and A.Y. 2003-04. The ld. CIT(A) didn t consider the decision of the Tribunal for the earlier years. Further, the ld. CIT(A) referred to his predecessor order for AY 2002-03 and 2003-04 and stated that in those years, a finding has been given that the liability in respect of these expenses were crystallized in the year in which these expenses have been claimed as deduction. The ld. CIT(A) further held that in the year under consideration, either du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng mercantile system of accounting. The relevant findings of the Hon ble High Court are contained in para 6 and 7 of its judgement which are reproduced as under:- 6. Counsel for the respondent contended that the issue is covered by the decision of Delhi High Court in case of SMCC Construction India Ltd. vs. Assistant Commissioner of Income Tax reported in [2013] 38 taxmann.com 146 (Delhi) wherein in para 13 14 it has been held as under:- 13. The prior period expenses are eligible for deduction during the current year provided the liability was determined and crystallized during the relevant year. 14.The reason to believe recorded by the Assessing Officer that the assessee has debited a sum of ₹ 1,20,765 in the P L account on account of prior period expenses after netting income of ₹ 30,34,463/- and expenditure of ₹ 31,55,228/- has not been crystallized during the year 2001-02 relevant to the assessment year 2002-03 such prior period expenses should have been disallowed is not based on any material that had come to the knowledge of the Assessing Officer. The Assessing Officer has placed reliance on the notes to the accounts that were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that the settled position should not be disturbed unless there are glaring changes in the facts and circumstances of the case or there are change in law which call for a fresh examination. Further, the Courts have held that where the rate of tax remained the same in the present assessment year as well as in the subsequent assessment year, the dispute raised by the Revenue is entirely academic or at best may have a minor tax effect. In the instant case, we have been informed that the assessee is subject to corporate tax rate of 35% and there is no change in the said tax rate in the subsequent assessment year. 11. In the entirety of facts and circumstances of the case and respectfully following the decision of the Hon ble Rajasthan High Court in assessee s own case, the AO is directed to allow the claim of deduction of the prior period expenses amounting to ₹ 4,64,27,170/-. In the result, the ground of appeal taken by the assessee is allowed. Disallowance of depreciation on non-existing assets 12. In respect of ground no. 2, briefly the facts of the case are that the Assessing Officer during the course of assessment proceedings noticed that the assets worth & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dgment passed by the Hon'ble High Court and Hon'ble Supreme Court, it transpires that the Rajasthan State Electricity Board is an taxable entity and therefore the matter was fixed for hearing on 29/6/2016 for the purposes of clarification. On 29/6/2016, the ld AR alongwith representatives of the assessee were present in the court. Ld AR submitted that the Board have filed the return of income for the assessment year 2001-02 and have also provided the chart for depreciation in respect of fixed assets of the assessee. 9.1 Even otherwise Section 80 of the Electricity Supply Act, 1948 provides as under:- 80. Provision relating to Income Tax and Super Tax.- ( 1) For the purposes of the Indian Income-tax Act, 1922 (XI of 1922), 4 the Board shall be deemed to be a company within the meaning of that Act and shall be liable to income tax and super tax accordingly on its income, profits and gains. ( 2) The State Government shall not be entitled to any refund of any such taxes paid by the Board. In view of the specific provisions under the Electricity Supply Act, 1948, a Board constituted under the said Act and the Board is liable to pay tax under the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rajasthan and under the statutory transfer scheme, therefore, in view of Section 43 of the Act, transfer of assets had been fall within the realm of transfer as envisaged under the Act. As per explanation-6 of Section 43(1), the actual basis of transferee company would have to be written down value of the transferor company meaning thereby the block of assets, which was transferred by the Rajasthan Electricity Board with the original cost of acquisition, shall be determined the written down value for the assessee company. The Hon ble Delhi High Court in the case of Dalmia Ceramic Industries Ltd. Vs. CIT (2005) 277 ITR 219 has held that what would be the actual cost of the transferee company on the date of transfer is indicated in Section 43(1), explanation-6, thus the actual cost of transferee company will be written down value of the holding company. 9.4 Since the original cost of acquisition of the transferor company, is determined, similarly, the written down value of the transferor company is also available with the Assessing Officer, therefore, the ld Assessing Officer was only required to allow the application depreciation on the written down value of the assets ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iv), or, as the case may be, of clause (v) of section 47, are satisfied, the written down value of the transferred capital asset to the transferee-company shall be taken to be the same as it would have been if the transferor-com pany had continued to hold the capital asset for the purpose of its business. 11. There is no dispute that the case falls under clause (iv) of section 47. Therefore, it is clear that the actual cost would be the written down value of the transferor-company. This aspect is required to be borne in mind while considering the question. We will now have to turn to Explanation 6 to section 43(1) which reads as under : Explanation 6. -When any capital asset is transferred by a hold ing company to its subsidiary company, or by a subsidiary company to its holding company, then, if the conditions of clause (iv) or, as the case may be, of clause (v) of section 47 are satisfied, the actual cost of the transferred capital asset to the transfereecompany shall be taken to be the same as it would have been if the transferor-company had continued to hold the capital asset for the purposes of its business. 12. It is clear that what would be the actu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In principle, therefore, we are unable to accept the contention that the actual cost cannot be determined year after year on the factual or legal position applicable for the relevant previous year and that the actual cost once determined cannot be altered except in the three situations outlined by counsel where the original figure itself requires a modification. 9.5 In view thereof, this ground of the assessee s appeal is allowed. 16. We have heard the rival submissions and perused the material available on record. Undisputedly, there is no change in the facts and circumstances of the case. No contrary authority has been brought to our notice subsequent to the above referred decision of the Coordinate Bench. In light of the same, following the decision of the Coordinate Bench, the ground is allowed in favour of the assessee company. Disallowance of depreciation u/s 32 r/w sec 43(1), Explanation 10 17. In respect of ground no. 3, briefly the facts of the case are that the Assessing officer after going through the schedule-2 of the balance sheet of the assessee company noticed that there is an increase in contribution, grants and subsidies towards cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cost of an asset acquired by the assessee has been met directly or indirectly by the Central Government or a State Government in the form of a subsidy or grant or reimbursement, then, so much of the subsidy or grant or reimbursement shall not be included in the actual cost of the asset to the assessee. Admittedly, the amount has been received by the assessee in the form of grant/reimbursement/subsidy from the state Government therefore, in our view, the order passed by the ld CIT(A) is required to be upheld and the value of the assets shall be taken by the ld Assessing Officer after adjusting the subsidy/grant/reimbursement from the State Govt. or the other government departments. Accordingly, this issue is decided against the assessee and in favour of the revenue. 19. We have heard the rival submissions and perused the material available on record. Undisputedly, there is no change in the facts and circumstances of the case. Following the decision of the Coordinate Bench referred supra, the ground taken by the assessee company is dismissed. Applicability of MAT provisions u/s 115JB of the Act 20. At the outset, the ld. AR submitted that the Coordinate Bench in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... towards prior period expenditure and disallowance of depreciation of ₹ 23,04,20,000 since rectified to ₹ 12,15,15,004. In ITA No. 362/JP/16 for AY 2004-05 arising out of the order passed by the ld CIT(A) pursuant to reassessment under section 147 read with section 143(3) of the Act, we have already examined both these issues in detail. Our findings and directions contained in ITA No. 362/JP/2016 shall apply mutatis mutandis to this appeal as well. In the result, both the grounds taken by the assessee are allowed. ITA. No. 357/JP/16 24. In this appeal for AY 2004-05, the Revenue has challenged the action of ld CIT(A) in deleting the disallowance of excess depreciation claimed by the assessee company amounting to ₹ 22,05,23,697/- while working out the book profits as per provisions of section 115JB of the Act. 25. In ITA No. 362/JP/16 (supra), we have already taken a view that the provisions of section 115JB are not applicable to the assessee company. In view of the same, the subject ground of appeal relating to excess depreciation relating to computation of book profits becomes academic and we donot think it is necessary to examine the same in detail. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 115JB of the Act, as we have held above that the provisions of section 115JB are not applicable, the subject ground of appeal becomes academic and is dismissed being infructious. 30. With the above directions, the grounds of appeal for AY 2005-06 are disposed off. Assessment Year 2007-08 (ITA No. 366/367/JP/16 ITA No. 359/JP/16) 31. For AY 2007-08, there are two appeals filed by the assessee. In ITA No. 366/JP/2016, the assessee has challenged the order of ld CIT(A) dated 22.01.2016 passed pursuant to the assessment order u/s 143(3) of the Act and has taken grounds of appeal relating to disallowance of prior period expenses, disallowance of depreciation on non-existing assets, disallowance of depreciation under section 32 r/w section 43(1) of the Act and applicability of MAT provisions under section 115JB of the Act. In ITA No. 367/JP/2016, the assessee has challenged the order of ld CIT(A) dated 22.01.2016 passed pursuant to the reassessment order u/s 147 r/w section 143(3) of the Act, the assessee has taken grounds of appeal challenging issue of notice u/s 148 of the Act, applicability of MAT provisions under section 115JB of the Act and disallowance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicability of MAT provisions under section 115JB of the Act, disallowance of depreciation on stolen fixed assets worth ₹ 1.49 Crores, on non-existence assets, on assets lying idle and excess depreciation under section 32 r/w section 43(1) of the Act. In ITA No. 360/JP/16, the Revenue has challenged the action of ld CIT(A) in deleting the disallowance of excess depreciation claimed by the assessee company amounting to ₹ 12,61,87,639/- while working out the book profits as per provisions of section 115JB of the Act. 37. We have examined the subject issues in detail in ITA No. 362/JP/16 for AY 2004-05 relating to disallowance of depreciation on non-existing assets, disallowance of excess depreciation under section 32 r/w section 43(1) of the Act and applicability of MAT provisions under section 115JB of the Act. Undisputedly, both the parties agreed that the facts and circumstances of the case are identical. Our findings and directions contained in ITA No. 362/JP2016 shall apply mutatis mutandis to this appeal as well. 38. In ITA No. 368/JP/2016, the assessee has challenged the action of the AO where he has carried out various adjustments relating to depreciation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 30,63,23,038. The AO stated that any provision for uncertain liability is to be added back to the book profits. He accordingly added back the subject provision while computing the total income as per normal provisions of the Act and also for the purposes of computing the book profits under section 115JB of the Act. 46. Being aggrieved, the assessee carried the matter in appeal before the ld CIT(A) who has confirmed the said disallowance. The relevant findings of ld CIT(A) are contained at para 6.3 of his order which is reproduced as under:- 6.3 I have gone through the assessment order, statement of facts, grounds of appeal and written submission carefully. The provision for doubtful debt is not a deduction admissible in view of the specific provision of clause (vii) of sub-section 1 of section 36. Under no other provisions of the Act, unascertained liability can be allowed as deduction for the purpose of computing business income. Here it would be pertinent to mention that in the A.Y. 2011-12, the assessee itself has treated the provision for doubtful debt as inadmissible deduction and added back to the profit as per P L accounts for purpose of computing income under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entries are posted in the bad debut reserve account, it would be sufficient compliance with the provisions of the statutory requirement for writing off as irrecoverable the concerned debut in the books of the assessee- CIT V. GIC of India (No.2)(2002) 254 ITR 204 (Bom/(2001)114 Taxman 13 (Bom.) The Ld. CIT(A) while rejecting assessee s claim has stated the provision for doubtful debut is not a deduction admissible in view of the specific provision of clause (vii) of sub-section 1 of section 36. Under no other provisions of the act, unascertained liability can be allowed as deduction for the purpose of computing business income. Whereas it is not terminology but the intention act of assessee is important to justify the act of write off . 48. We have heard the rival submissions and purused the material available on record. The assessee company has contended that it is not a provision but an actual write off. It was submitted that as per accounting procedure/guidelines prescribed for the electricity companies, it is not directly debited to the customer account for the purposes of determining the amount to be recovered in future. It was further submitted that as and when the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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