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2016 (9) TMI 1554 - HC - Income TaxMAT Applicability u/s 115JB - HELD THAT - Admit following question of law arises for consideration - Did the Tribunal fall into error in holding that the provision of Section 115 JB of the Income Tax Act did not apply to the assessee in this case? Appropriate rate of depreciation of electronic/energy meters - HELD THAT - We notice that the ITAT went by a plain reading of the rule of concerned provision i.e. Part A, under Appendix 1, Clause III (8) (ix) (B) (e) of the Income-tax Rules, 1962. The revenue had urged that the appropriate rate of depreciation would be 25% as against which the assessee had claimed 80% depreciation in view of the rule. Having regard to the fact that ITAT went by the text of the rule itself, in the absence of any other indication within the statute with respect to its inapplicability, the impugned ruling cannot be faulted. No question of law arises on this aspect. Treatment of the service line deposit over the years being capital or revenue - AO refused to recognise the amounts as capital receipts - HELD THAT - Assessee offered 1/3rd of the amount to the profit and loss account and later explained that these were capital receipts and are not revenue in nature. This volte face of the assessee seems to have triggered the AO s decision that the receipts were not capital but revenue and therefore entirely liable to be taxed. The issue is covered against the revenue in Hoshiarpur Electric Supply Co. vs. CIT 1960 (12) TMI 6 - SUPREME COURT Method of valuation - ITAT permitted the assessee to adopt the moving average methodology - ITAT noted that the previous method adopted by the assessee was First In First Out (FIFO) in terms of AS2. However, they changed that method from 2005-2006 onwards - HELD THAT - ITAT concurred with the CIT (A) s decision that the assessee had the autonomy to decide appropriate method as along as the authority did not find anything fundamentally wrong in it. In our opinion no question of law arises on this score as well. Treatment as deemed dividend - assessee was not a shareholder in Rajdhani Power Limited the provisions of Section 2 (22) (e) was not attracted - finding is affirmed by the ITAT - HELD THAT - The court is of the opinion that there is no infirmity with the finding as one of the essential pre-requisite for application of Section 2 (22) is that the assessee should be related to the other concern which advances the money or from which amount flows back to it as a shareholder. This position has now been affirmed by this court in CIT vs. Ankitech (P) Ltd. 2011 (5) TMI 325 - DELHI HIGH COURT .
Issues:
1. Applicability of Section 115 JB of the Income Tax Act 2. Rate of depreciation of electronic/energy meters 3. Nature of service line security deposits 4. Valuation of closing stock 5. Application of Section 2 (22) - deemed dividend Analysis: 1. The main issue in this case was whether Section 115 JB of the Income Tax Act applied to the assessee. The Tribunal held that it did not apply. The High Court found that the Tribunal's decision was based on a plain reading of the rule and no other indication within the statute suggested its inapplicability. Therefore, the High Court upheld the Tribunal's ruling, stating that no question of law arose on this aspect. 2. Regarding the rate of depreciation of electronic/energy meters, the revenue argued for a 25% depreciation rate, while the assessee claimed 80% based on a specific rule. The High Court observed that the ITAT decision was based on the rule itself, and since there was no indication of inapplicability, the ruling was upheld. 3. The treatment of service line security deposits as capital or revenue was another issue. The AO initially considered these amounts as revenue, but the assessee later argued they were capital receipts. The High Court referred to a precedent where a similar issue was decided in favor of the assessee, concluding that the issue was covered against the revenue. 4. The ITAT allowed the assessee to change the method of valuation to moving average from FIFO. The High Court agreed with this decision, stating that as long as the authority did not find any fundamental issues with the method, there was no question of law arising. 5. In the additional question related to the application of Section 2 (22) on deemed dividend, the CIT (A) and ITAT found that the provision did not apply since the assessee was not a shareholder in the relevant company. The High Court upheld this decision, citing a previous ruling to support the finding. Consequently, the appeals related to this issue were dismissed. In conclusion, the High Court dismissed the appeals related to various issues raised by the parties and listed pending appeals for further hearing on a specific date to address the questions of law framed.
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