TMI Blog2018 (2) TMI 1351X X X X Extracts X X X X X X X X Extracts X X X X ..... ofit. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tation of the normal income', whereas the Hon'ble Supreme Court in its decision dated 05.01.2010 has held that the 'advance against depreciation' 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? 2. Whether, on the facts and in circumstances of the case and in law, the Hon'ble ITAT was right in law in deleting the addition of ₹ 133,81,00,000/- made by the Assessing Officer under Section 143 (3) (and not under Section 115JB) on account of Advance Against Depreciation ignoring the provisions of Section 2(24) read with Section 28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lanation-I to Section 115JB of the 1961 Act is required to be carried through the profit and loss account. At this stage it may be stated that there are broadly two types of reserves, viz, those that are routed through profit and loss account and those which are not carried via profit and loss account, for example, a capital reserve such as share premium account. AAD is not a reserve. It is not appropriation of profits. AAD is not meant for an uncertain purpose. AAD is an amount that is under obligation, right from the inception, to get adjusted in the future, hence, cannot be designated as a reserve. AAD is nothing but an adjustment by reducing the normal depreciation includible in the future years in such a manner that at the end of usefu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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