TMI Blog2019 (6) TMI 1453X X X X Extracts X X X X X X X X Extracts X X X X ..... the CBDT of section 1153A . Where the computation provision could not be applied in a particular case, it is indicative of the fact that the charging section also would not apply. The Electricity Board or bodies similar to it, which are totally owned by the Government, either State or Central, have no shareholders. Profit, if at all, made would be for the benefit of entire body politic of the State. Therefore the enquiry as to the mischief sought to be remedied by the amendment becomes irrelevant. Therefore, the fiction fixed under section 1153B cannot be pressed into service against the Electricity ' Board while making the assessment of the tax payable under the Income-tax Act. Finding parity of facts with the facts of the judgment of KERALA STATE ELECTRICITY BOARD VERSUS DEPUTY COMMISSIONER OF INCOME-TAX [ 2010 (11) TMI 127 - KERALA HIGH COURT] we hold that the provisions of section 115JB of the Act are not applicable to the appellant company. The Assessing Officer is directed accordingly. The additional ground raised by the assessee is allowed. Addition on account of de-recognition of revenue on account of efficiency gain - HELD THAT:- Prescribed procedure bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Assessing Officer are related to the business activity against which deduction u/s 80IA of the Act has been claimed which resulted in enhancement of the profits of the eligible business and hence deduction under Chapter VIA is admissible on the profit so enhanced by the disallowances. In light of the above CBDT Circular, all the issues become academic in nature and therefore, need no separate adjudication, though it would be pertinent to mention here that all the disputed issues remain open for both the parties in case the deduction u/s 80IA is denied by the Hon'ble Superior Court. In the light of the above discussion and finding, all the appeals of the assessee are allowed whereas those of the revenue are dismissed. - ITA No. 2784/DEL/2013, ITA No. 2785/DEL/2013, ITA No. 5368/DEL/2013, ITA No. 4055/DEL/2013, ITA No. 4054/DEL/2013 And ITA No. 5676/DEL/2013 - - - Dated:- 14-6-2019 - Shri N.K. Billaiya, Accountant Member, And Ms. Suchitra Kamble, Judicial Member Assessee by: Shri S.D. Kapila, Adv Shri R.R. Maurya, Adv Shri Pravesh Sharma, Adv Revenue by: Ms.Pramita M. Biswas, CIT- DR ORDER PER BENCH:- The above captioned cross appeals by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section on 115JB of the Income-tax Act, 1961creates a legal fiction regarding the total income of assessees which are companies. The book profit of the company is deemed to be the total income of the assessee in the circumstances specified in the section. The expression book profit for the purpose of the section is explained to mean the net profit as increased or decreased by the various amounts shown in the various sub-clauses of the section. The net profit itself must be the net profit as shown in the profit and loss account of the company. Sub-section (2) mandates that the profit and loss account of the company is required to be prepared in the manner specified therein. Section 115JB stipulates that the accounting policies, accounting standards, etc. shall be uniform both for the purpose of Income-tax as well as for the information statutorily required to be placed before the annual general meeting conducted, in accordance with section 115JB of the Companies Act, 1956. Though the Kerala State Electricity Board, a statutory corporation constituted by virtue of section 5 of the Electricity (Supply) Act, 1948 answers the description of an Indian company and therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, if at all, made would be for the benefit of entire body politic of the State. Therefore the enquiry as to the mischief sought to be remedied by the amendment becomes irrelevant. Therefore, the fiction fixed under section 1153B cannot be pressed into service against the Electricity ' Board while making the assessment of the tax payable under the Income-tax Act. 8. Finding parity of facts with the facts of the judgment of the Hon'ble Kerala High Court [supra], respectfully following the finding of the Hon'ble High Court, we hold that the provisions of section 115JB of the Act are not applicable to the appellant company. The Assessing Officer is directed accordingly. The additional ground raised by the assessee is allowed. 9. First addition contested by the appellant company relates to the addition on account of de-recognition of revenue on account of efficiency gain. 10. At the very outset, the ld. counsel for the assessee stated that on identical set of facts, the issue has been considered by the co-ordinate bench in assessment year 2006-07 by the Tribunal in ITA No. 4848/DEL/2010 and 5026/DEL/2010. It is the say of the ld. counsel for the assessee that f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cations issued and the orders passed by the DERC. As could be seen from the Delhi Electricity Reforms Act, 2000, it received the assent of the President of India on 6.3.2001 and promulgated by way of Notification dated 8.3.2001. Section 2(c) of the Act defines the commission to mean the Delhi Electricity Regulatory Commission. The Act constitutes the Commission. It empowers the Government to issue directions to the Commission in the matters of policy involving public interest from time of time regulating the discharge of the commission functions. In turn, by virtue of Section 28 of the Act, the holder of the license (i.e. assessee) is under obligation to observe the methodologies and procedure specified by the Commission from time to time in calculating the expected revenue from charges which it is permitted to recover pursuant to the terms of its license and in designing tariffs to collect those revenues. The Commission is also empowered to prescribe the terms and conditions for determination of the licensee's revenues and tariffs by regulations duly published in the official Gazette and in such other manner as the Commission considers appropriate. In this respect, it is provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the bid by the Purchaser (selected bidder) and this shall not be counted as revenue for the purpose of tariff fixation for the succeeding years. The balance 50% of the excess efficiency gain shall be counted as revenue for the purpose of tariff fixation. (c) Distribution licensees earn, at least, 16% return on the issued and paid up capital and free reserves (d) The amount agreed to be made available by the Government to TRANSCO will be as a loan for the particular year. 20. In deference to this Notification, the DERC in its order passed in July 2005 at paragraph 4.2 observed that for the Asstt. Year 2004-05, the assessee had achieved AT C loss level lower than the minimum bid level specified by the GNCTD, accordingly the provisions of the policy directions and the GNCTD's clarification have been applied to determine the extent of additional revenue to be retained by the DISCOM and that it will be passed down to the consumers while determining the annual revenue requirement of the utilities. It is further observed that in case of the assessee as the over achievement in AT C loss reduction is more than the minimum level target the entire additional revenue as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umers do not form part of the assessee's real profit; and for the purpose of calculating the taxable income, such amount have to be deducted from its total income. 23. Record speaks that this decision was brought to the notice of the learned CIT(A) but he distinguished the same stating that in such case the assessee was crediting the excess amount in a separate account called Consumer Benefit Reserve Account and they were part of the excess amount paid to it and reserve to be returned to the consumers; whereas in the case of the assessee, the assessee is not required to return the excess amount to the consumers and on the contrary, the assessee is the beneficial owner of the amount which it could use the way it likes. On this premise, learned CIT(A) held that the decision in the case of Puna Electricity Supply Co. Ltd (supra) has no application to the facts of the present case. 24. On a careful consideration of the factual matrix involved in both the cases and the reasoning of the Hon'ble Apex Court in reaching the conclusion, we are of the considered opinion that the approach of the learned CIT(A) is incorrect. In the preceding paragraphs, we have noted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said provision provides that substantial renovation and modernisation means an increase in the plant and machinery in the net work by at least 50% of book value as on 01.04.2004. 20. A perusal of the record, read with the audit report and report in Form No. 10CCB, shows that plant and machinery in the network of transmission or distribution lines have increased by more than 50% of the book value of the plant and machinery as on 01.04.2004. On these undisputed facts, we find that the return of income was filed well within due date alongwith audit report including audit report in Form No. 10CCB and were available before the Assessing Officer during the assessment proceedings. 21. As mentioned elsewhere, the Assessing Officer has not disputed the claim of deduction u/s 80IA of the Act mentioned in the computation of income nor he has objected during the course of assessment proceedings. On these facts, the first appellate authority allowed the claim of deduction u/s 80IA of the Act irrespective of the fact that certain disallowances/additions were made by the Assessing Officer while completing the assessment order. 22. In our considered opinion, the issue is now well set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. In view of the above, the Board has accepted the settled position that the disallowances made under sections 32, 40(a)(ia), 40A(3), 43B, etc. of the Act and other specific disallowances, related to the business activity against which the Chapter VI-A deduction has been claimed, result in enhancement of the profits of the eligible business, and that deduction under Chapter VI-A is admissible on the profits so enhanced by the disallowance. 4 Accordingly, henceforth, appeals may not be filed on this ground by officers of the Department and appeals already filed in Courts/ Tribunals may be withdrawn/ not pressed upon. The above may be brought to the notice of all concerned. 23. In view of the above Circular, disallowances made by the Assessing Officer are related to the business activity against which deduction u/s 80IA of the Act has been claimed which resulted in enhancement of the profits of the eligible business and hence deduction under Chapter VIA is admissible on the profit so enhanced by the disallowances. 24. In light of the above CBDT Circular, all the issues become academic in nature and therefore, need no separate adjudication, though it would be pertinent ..... X X X X Extracts X X X X X X X X Extracts X X X X
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