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TMI Blog2025 (5) TMI 747X X X X Extracts X X X X X X X X Extracts X X X X ..... enging the derecognition of income pertaining to consumer's portion of over achievement of minimum target or efficiency gain in the sum of Rs 59,18,86,000/-. 2.1. We have heard the rival submissions and perused the materials available on record. Both the parties before us mutually agreed that the issue in dispute is covered in favour of the assessee by the Co-ordinate Bench decision of this Tribunal in assessee's own case for Assessment Years 2011-12 & 2012-13 in ITA Nos. 4453 & 4454/Del/2017 dated 5-10- 2023 wherein it was observed as under:- "10. The original ground No. 2 raised by the assessee is challenging the confirmation of addition of Rs. 33,94,62,000/- as income of the assessee company towards de-recognition of income pertaining to consumer's portion over achievement of minimum target or efficiency gain. 11. We have heard the rival submissions and perused the materials available on record. The assessee is in business of electricity which was transferred to the company in terms of agreement dated 31.05.2002 as per the policy direction issued by GNCTD (Govt. of National Capital Territory) governing the transfer of business of erstwhile Delhi Vidyut Board (DVB) to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the efficiency gain amount and that such amount is at the disposal of DERC, the amount has to be reduced from the profits and loss account. The observations of the Tribunal on this aspect are as under "15. We find that similar facts were considered by the coordinate bench in assessment year 2006-07 in ITA No. 4848/DEL/2010 and 5026/DEL/2010. The relevant findings of the co-ordinate bench read as under: "17. It is, therefore, clear from the arguments advanced before us that the question involved in this matter is whether the disputed Rs. 91.13 crores could be brought to tax by treating it as the application of the income after its accrual. This aspect requires a reading of the provisions of the Delhi Electricity Reforms Act, 2000 with the notifications 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 matt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 and free reserves have been invested into fixed or any other assets etc. 19. Para 16 of this Notification sums up the mandate in this Notification in the following terms: (a) The AT&C loss programme is to be as per the bid submitted by the purchaser (selected bidder) as per para 11 above. (b) Distribution licensees shall be entitled to retain 50% of the additional revenues from any AT&C loss reduction over and above then level proposed 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 l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bligation 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 profits in such cases ie. Commercial profits and clear profits governed by two different enactments. Commercial profits are arrived at on commercial principle whereas the other is regulated by the statute. The clear profits could be determined only after excluding the amount statutorily transferred to represent the rebate to the customers of the excess amount collected from them. Finally the Hon'ble Apex Court held that the amount. transferrable for the benefit of the consumers 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial precedent, the Ground No. 2 raised by the revenue is dismissed. 3. The Ground No. 3 raised by the revenue is challenging the deletion of addition under section 43B of the Act on account of unpayable portion of Energy Tax. 3.1. We have heard the rival submissions and perused the materials available on record. In the tax audit report, the tax auditor had mentioned in the particulars of sums referred to section 43B of the Act that the figure reflected thereon does not include energy tax of Rs 13,45,26,097/- which was outstanding at the year end. The energy tax assessed is payable to MCD as and when the amount is collected from the customers. The learned AO asked the assessee to explain why the sum of Rs 13,45,26,097/- should not be added back in view of provisions of section 43B of the Act. The assessee submitted that this sum of Rs 13,45,26,097/- is the closing balance in the balance sheet during the year under consideration and that the increase in the energy tax during the year is only Rs 0.40 crores (Rs 13.45 crores minus Rs 13.05 crores). The assessee collected Rs 10,94,93,917/- as energy tax and the same was duly deposited before the due date for filing the income tax retu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the sum payable by way of tax etc. can be disallowed u/s 43B. Since the balance of Rs. 13.45 Crore is not payable as on 31.03.2010 therefore same cannot be added by way of disallowance u/s 43B. On the similar issue CIT(A) has allowed the relief to the appellant in AY 2007-08, 2008- 09 & 2009-10 and no disallowance was made by the AO in other assessment years. Considering the above facts, addition made by the AO at Rs. 13,45,26,097/- is not) sustainable and it is hereby deleted." 3.3. We find that this issue was subject matter of adjudication by the Hon'ble Punjab & Haryana High Court in the case of Pr. CIT vs Dakshin Haryana Bijli Vitran Nigam Ltd reported in 449 ITR 605 (P&H) wherein it was held as under:- "14. The argument raised by counsel for the appellant(s) that Section 43B will be attracted merely for the reason that the appellant(s) is following mercantile system of accounting deserves to be rejected. The revenue is required to show that the duty, tax, cess or fee (in the present case electricity duty) is payable by the assessee. The reliance placed on judgment passed by Gujarat High Court in Ahmedabad Electricity Co. Ltd.'s case (supra) is misplaced. In the said c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.1. We have heard the rival submissions and perused the materials available on record. Both the parties mutually agreed that this issue is covered in favour of the assessee by the Co-ordinate Bench decision of this Tribunal in assessee's own case for Assessment Years 2011-12 & 2012-13 in ITA Nos. 4097 & 4098/Del/2017 ; ITA Nos. 4453 & 4454/Del/2017 dated 5-10-2023 wherein it was observed as under:- "14. Ground No. 3 is challenging the confirmation of addition of Rs. 1,92,07,000/- being interest liability on additional consumer security deposits under the normal provisions of the Act as well as in the computation of book profit u/s 115JB of the Act. 15. We have heard the rival submissions and perused the materials available on record. This ground relates to the addition made by the AO by disallowing appellant's claim of interest amounting to Rs. 1,92,07,000/- in respect of additional consumer security deposits brought on record by the assessee as a result of validation exercise carried out through an independent agency as per which consumer security deposits to the tune of Rs. 6244 lakhs were brought on record as against security deposits of Rs. 1000 lakhs transferred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t bound by it. Consequently, the assessee company has preferred a writ petition before the Hon'ble Delhi High Court. Pursuant to above, the assessee company has provided for an interest expense aggregating to Rs. 1640.99 lakhs for the previous year ending on 31.3.2011 on the opening balance of security deposit, security deposit received by TPDDL (formerly NDPL) itself on or after 1.7.2002 and on the such excess 'consumer security deposit' for which a writ-petition has been preferred by the assessee company before the Hon'ble Delhi High Court. In case, the assessee company's contention is upheld by the Hon'ble Delhi High Court, an amount of Rs. 192.07 lakhs would stand recoverable from DPCL towards the interest cost of such excess amount of 'consumer security deposit'. Moreover, if the assessee company's contention is upheld by the Hon'ble Delhi High Court, then whole of the interest recoverable from DPCL would be offered for tax as income in that year itself. 16. Further, it was submitted that the assessee company was bound to pay and has actually paid such interest (as per the DERC regulations) to the consumers by way of giving its credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upply through a prepayment meter." (emphasis supplied by us) 18. From the above, it could be seen that the interest is payable by the assessee as a discharge of its statutory obligation. Further, the Hon'ble Delhi High Court pursuant to the Writ had passed an interim order in WP(C) NO. 2395/2008 dated 26.03.2008 by directing the petitioner (i.e. assessee) to continue to refund the security deposit and pay interest to consumer in accordance with law. The assessee herein had merely discharge its statutory obligation in consonance with the provisions of section 47 of the Electricity Act, 2003 and in consonance with the directions of the Hon'ble Delhi High Court. This certainly would become an expenditure incurred wholly and exclusively for the purpose of business of the assessee and hence, allowabie as deduction. Accordingly, ground Nos. 3(1) and 3(2) raised by the assessee are allowed." 6.2. Respectfully following the same, the Ground No. 1 raised by the assessee is allowed. 7. The Ground Nos. 2 &3 raised by the assessee is with regard to dispute in the rate of depreciation claimed on UPS at a higher rate as against 15% granted by the learned AO. 7.1. We have heard the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the eligible unit and hence consequentially would be eligible for deduction u/s 80IA of the Act. Respectfully following the aforesaid CBDT Circular and the decision of the Hon'ble Delhi High Court referred (supra), we direct the Id AO to grant enhanced deduction u/s 80IA of the Act for the additions made in the sum of Rs. 2499.84 lakhs. Accordingly, original ground no. 5 raised by assessee is allowed. 29. The only ground raised by the revenue for AY 2011-12 in ITA No. 4453/Del/2017 is challenging the grant of deduction u/s 80IA of the Act on account of late payment of surcharge collected in the sum of Rs. 17,43,87,000/-. 30. We have heard the rival submissions and perused the materials available on record. We find that that the said late payment of surcharge collected by the assessee pertains to the eligible unit of the assessee. We have already narrated the purpose behind the collection of late payment of surcharge by the assessee. The only purpose of making this recovery is to ensure collection of electricity dues in time and hence this receipt is also having possible nexus with the profit derived by the eligible unit and consequentially eligible for deduction u/s 80I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view was taken by the courts in the following cases: * Income-tax Officer - Ward 5(1) vs. Keval Construction, Tax Appeal No. 443 of 2012, December 10, 2012, Gujarat High Court. * Commissioner of Income-tax-IV, Nagpur vs; Sunil Vishwambharnath Tiwari, IT Appeal No. 2 of 2011, September 11, 2015, Bombay High Court. (ii) deduction under section 40A(3) of the Act. is not allowed, the same would be added to the profits of the undertaking on which the assessee would d o for deduction under section 80- IB of the Act. This view was taken by the. court in the following cases: "Principal CIT. Kanpur vs. Sonya Merchants Ltd.. I.T. Appeal No. 248 of 2015, May 03, 2016 Allahabad High Court The above views have attained finality as these judgments of the High Courts of Bombay, Gujarat and Allahabad have been accepted by the Department. 3. In view of the above, the Board has accepted the settled position that the disallowance made under sections 32, 40 (a) (ia), 40A (3), 43B, etc of the Act and other specific disallowance, relted 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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