TMI Blog2018 (11) TMI 205X X X X Extracts X X X X X X X X Extracts X X X X ..... t to appropriate the ‘efficiency gain’ amount and such amount is at the disposal of the DERC though not physically but in respect of utilization thereof. We, therefore, are convinced that the ratio of Puna Electricity Supply Co. Ltd (supra) is squarely applicable to the case of the assessee before us and on that score, we allow the contention of the assessee that they have rightly reduced the efficiency gain amount in their profit and loss account. Addition u/s 14A r.w.r. 8D - Held that:- AO recorded reasons for not accepting the statement of the assessee that no expenditure was incurred to earn the exempt income. AO also examined the cash flow statement furnished by the assessee. The reasons recorded by the assessing officer are in sufficient compliance with the requirement of 14A (2) of the act. Coming to the argument that Rule 8D is only prospective in its operation and has no application to the assessment year 2006-07, the Hon’ble Apex Court in CIT vs. Essar Teleholdings Ltd (2018 (2) TMI 115 - SUPREME COURT OF INDIA) held that Rule 8D is prospective and applies only from the assessment year 2008-09. Inasmuch as Rule 8D has no application to the assessment year 2006-07, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e three appeals by way of this common order. 3. North Delhi Power Ltd. (assessee) was set up in terms of the Policy Directions issued by the Government of National Capital Territory of Delhi (GNCTD) under the provisions of the Delhi Electricity Reforms Act, 2000. The assessee is engaged in the business of distribution and supply of electricity in the north and north-west area of NCT Delhi and w.e.f. 1.7.2002 undertook the business of distribution of electricity from the erstwhile Delhi Vidyut Board (DVB) for the distribution and supply of electricity in north Delhi and northwest Delhi. As per the Policy Directions in Notification dated 22.11.2001 and also the Notification of May 2002 issued by the Government of Delhi, the business of the DVB was transferred. The Delhi Electricity Regulatory Commission (DERC) constituted under the Delhi Reforms Act, 2000 determines the Retail Supply Tariff (RST) chargeable by the company to the consumers and bulk supply tariff (BST) payable by the company to Delhi Transco Ltd. for power purchase. As per the terms of the said notification, the tariffs are statutorily required to be fixed in a manner that the assessee recovers its prudently incurre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eciation on UPS Rs.11,73,797/- to the income returned under the normal provisions of the Act and a sum of ₹ 29.17 lacs to the book profits. 7. Simultaneously, learned AO initiated proceedings u/s 271(1)(c) of the Act and concluded levying penalty of ₹ 18,93,03,840/- by order dated 30.3.2012. 8. When the assessee challenged the additions under the three heads in the quantum income and addition u/s 14A in the book profits before the learned CIT(A), the assessee also advanced an alternate plea that as a matter of fact they have disclosed a sum of ₹ 52.11 crore in the earlier year as additional amount receivable and paid tax on it. So also it was the plea of the assessee that in the Asstt. Year 2006-07, they have disclosed a sum of ₹ 34.89 crores as additional receivables to be adjusted in the subsequent years. Assessee, therefore, prayed that without prejudice their claim that ₹ 91.13 crores shall not be considered as income for the Asstt. Year 2006-07, if for any reason the first appellate authority reaches a conclusion that the sum of ₹ 91.13 crores is treated as income for that year, then the income declared ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided as a liability net of assets brought forward in the balance sheet as on 31/03/2006, being the amount payable to consumers by way of utilization of this amount for tariff determination in future years. The assessee, therefore, claims to have reduced this amount from the sales amount in the profit and loss account. 13. When confronted, assessee submitted that the assessee company was of the view that as per the revenue model determined by the DERC, 50% of the excess receipts (for and above determined profits) was not to be retained by the assessee company and on that score it is not their income. Ld. Assessing Officer, however, did not agree with the contention of the assessee and held that the tariff determination is a separate exercise from the tax liability, and the provisions of the Income Tax Act shall override the norms laid down by the tariff determination by DERC. Holding that the moneys received by the assessee not only accrued to it but also received by it in actual terms as such the subsequent application thereof will not affect the taxability of such amounts. On this premise Ld. assessing officer brought the sum of ₹ 91.13 crores to tax. 14. Learned Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the assessee received the amount on sale of energy and subsequent spending of any portion of such amount for future determination of the tariff is only an application of the income of the assessee and, therefore, cannot de-recognize for tax purposes. She further argued that as rightly observed by the authorities below when the assessee seeks to de-recognize revenue to the extent of ₹ 91.1 crores on the ground of the revenue model determined by the DERC, it cannot do so without taking all the corresponding cost which may normally be attributed on a pro rata basis on earning of revenue to the extent of ₹ 172 crores, being the excess of targeted revenue. Learned DR also assailed the finding of the learned CIT(A) as to giving relief to the assessee in respect of ₹ 34.89 crores. Learned DR submitted that the assessee voluntarily offered such an amount and cannot be deleted without proper verification simply believing the words of the assessee. She also submitted that this aspect was not raised by the learned AO and learned CIT(A) did not verify the truth or otherwise of this averment. She, therefore, prayed to dismiss the appeal of the assessee and also to restore t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overnment considered the necessity of effective re-organization of the DVB and the sale of 51% equity shares in the distribution companies. The assessee is one of the entities, who participated in the bid, became successful for the lowest annual target loss was awarded 51% of equity. Vide para 12, this Notification prescribes that in the years between 2002-03 and 2006-07 in the event of actual AT C loss of a distribution licensee for any particular year is better i.e. lower than the level proposed in the bid, the distribution licensee shall be allowed to retain 50% of the additional revenue resulting from such better performance and the balance 50% of additional revenue from such better performance shall be counted for the purpose of tariff fixation. Para 13 of such Notification provides that all expenses that shall be permitted by the Commission, tariffs shall be determined in such a way that the distribution licensees earn, at least, 16% return on the issued and paid up capital and free reserves (excluding consumer contribution and revaluation reserves but including share premium and retained profits outstanding at the end of any particular year) provided that such share capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s income is concerned, for this Asstt. Year 2006-07 also, there is no dispute. The balance 50% of this additional revenue, which is mandatory to be counted for the purpose of tariff fixation, which is called as the efficiency gain will be taken into consideration by the DERC while permitting the tariff of the future years to be determined so as to see that the assessee would earn at least 16% return on the issued and paid up capital and free reserves. The Notification issued in November 2001, referred to above, is clear in its mandate that this 50% efficiency gain shall be reckoned as revenue for the purpose of tariff fixation and the assessee is under obligation to follow the mechanism of fixation of tariff by the DERC. 22. In Puna Electricity Supply Co. Ltd. Vs CIT (1965) 56 ITR 521 (SC), the Hon ble Apex Court considered a similar situation where the licensee like the assessee was under the obligation to set apart some amount and transfer it to the consumer benefit reserve account which represents a rebate to the customers of the excess amount collected from them. Hon ble Apex Court held that there are two types of profits in such cases i.e. Commercial profits and clear pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is at the disposal of the DERC though not physically but in respect of utilization thereof. We, therefore, are convinced that the ratio of Puna Electricity Supply Co. Ltd (supra) is squarely applicable to the case of the assessee before us and on that score, we allow the contention of the assessee that they have rightly reduced the efficiency gain amount in their profit and loss account. 25. Ground No. 3 relates to disallowance of ₹ 29,17,000/-under section 14A by applying the Rule 8D of the Income Tax Rules, 1962 ( the Rules ) in respect of the dividend income of ₹ 21,01,025/- on investments. Assessee pleaded that no expenditure is incurred to earn this exempt income. Ld. assessing officer observed that the cash flow statement of the assessee company indicated out-flow on account of interest paid but the income earned from the investment as dividend is claimed as exempt. By holding that Rule 8D of the Rules is procedural in nature and have retrospective effect, Ld. assessing officer made the addition. 26. Ld. CIT(A) held that it is difficult to accept that without incurring any expense the assessee could have had the exempt income and on that premise and placin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A No. 65 66 of 2011) and Commissioner of Income Tax vs. BSES Yamuna Powers Ltd. (in ITA No. 1267 decided on 31.08.2010), a coordinate Bench of this Tribunal in Bayer Bioscience P. Ltd., Vs. DCIT ITA No. 2685 and 5388/Del./2009) observed that,- 10. Coming to the last issue involved in Revenue's appeal, the brief facts are that the assessee claimed depreciation on UPS at the rate of 60% considering the same as computer peripherals. The AO observed that the UPS is not integral to computers and is capable of being used independently, cannot be allowed to fetch depreciation as computer peripherals and therefore, applying the depreciation @ 25% as applicable to plant and machinery, the total claim of depreciation of ₹ 3,39,701/- on UPS was reduced by ₹ 1,41,542/-. As such, total depreciation was allowed at ₹ 2,97,13,838/- as against ₹ 2,99,11,997/- claimed by assessee. The ld. CIT(A) deleted the addition. 11. Having considered the submissions of both the parties, we find that in view of several judicial pronouncements relied upon by the assessee, the ld. CIT(A) has rightly allowed the claim of the assessee in this regard. Hon'ble Delhi High Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough under the normal rules of interpretation of statutes the omission of a clause which existed in the statute at some point of time by a subsequent amendment would indicate that the legislature intended not to give the benefit of such clause any more to those who were getting the benefit of such exclusion clause, in our opinion, it is not an absolute rule. The other attendant remedied by the amendment are all required to be examined before reaching at definite conclusion. 19. The Circular No. 762 not only is binding on the respondents, but also explains the purpose in introducing s. 115JA. The relevant portion reads as follows : 46.1 In recent times, the number of zero-tax companies and companies paying marginal tax has grown. Studies have shown that in spite of the fact that companies have earned substantial book profits and have paid handsome dividends, no tax has been paid by them to the exchequer. 46.2 The Finance Act has inserted a new s. 115JA of the IT Act, so as to levy a minimum tax on companies who are having book profits and paying dividends but are not paying any taxes. The scheme envisages the payment of a minimum tax by deeming 30 per cent of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eveloping, maintaining and operating infrastructure facilities, as a matter of policy, are not brought within the purview of the amendment (s. 115JA) for the reason that such a policy would promote the infrastructural development of the country. Such an understanding of the CBDT is binding on the Department. 20. If that is the background in which s. 115JA is introduced into the IT Act, s. 115JB, which is substantially similar to s. 115JA, in our opinion, cannot have a different purpose and need not be interpreted in a manner different from the understanding of the CBDT of s. 115JA. 35. Above decision is applicable to the facts of the case in hand on all fours. No circumstances are brought to our notice not to follow the ratio laid down in the above decision. We, therefore, while respectfully following the same hold that section 115 JB has no application to the facts of the case in hand and accordingly the additions made to enhance the book profits under section 115 JB are directed to be deleted. 36. Ground No. 8 is in respect of interest chargeable under section 234 B/D of the Act and as rightly observed by the Ld. CIT(A) interest is statutory and consequential in nat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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