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2016 (9) TMI 399 - AT - Income TaxEntitlement depreciation on the written down value of the assets to Rajasthan State Electricity Board - Held that - As per the balance sheet of the Rajasthan State Electricity Board, the allowable depreciation up to 19/7/2000 was mentioned as ₹ 1,04,82,30,121/-. Since block of assets were transferred to the assessee, therefore, the insistence of the ld Assessing Officer for physical verification of the assets for the purposes of depreciation, in our view, was not warranted. In our view, once the assets are forming part and parcel of the block of assets, which were transferred to the assessee from Rajasthan State Electricity Board, the physical verification for the purposes of depreciation may not be required and therefore, the assessee is entitled to depreciation on the written down value of the assets a per Income Tax Act 1961, subsequent to the transfer from the assets from Rajasthan State Electricity Board. - Decided in favour of assessee Disallowance of depreciation U/s 43(1) - Held that - A bare reading of the Explanation 10 of Section 43 of the Act, which clearly provides that where a portion of the cost of an asset acquired by the assessee has been met directly or indirectly by the Central Government or a State Government in the form of a subsidy or grant or reimbursement, then, so much of the subsidy or grant or reimbursement shall not be included in the actual cost of the asset to the assessee. Admittedly, the amount has been received by the assessee in the form of grant/reimbursement/subsidy from the state Government therefore, in our view, the order passed by the ld CIT(A) is required to be upheld and the value of the assets shall be taken by the ld Assessing Officer after adjusting the subsidy/grant/reimbursement from the State Govt. or the other government departments. Accordingly, this issue is decided against the assessee and in favour of the revenue. MAT U/s 115JB applacability - Held that - As gone through the contention raised by the assessee as well as the order passed by the Advance Rulings in the matter of Jodhpur Vidyut Vitran Nigam 2009 (11) TMI 20 - AUTHORITY FOR ADVANCE RULINGS which is situated on the same pedestal as that of the assessee, have been accepted by the revenue and the revenue has not insisted for application of provisions of MAT U/s 115JB of the Act. Therefore respectfully following the order passed by the Advance Rulings (Income Tax), New Delhi and applying the same to the present facts and circumstance of the case, we decide the issues in favour of the assessee. We also held that the benefit as has been given to Jodhpur Vidyut Vitran Nigam Limited under the provisions of the Electricity Act and the Companies Act be also extend it to the assessee without insisting for the application of Section 115JB of the Act In the light of the above, the issue is decided in favour of the assessee and against the revenue
Issues Involved:
1. Validity of notice U/s 147/148. 2. Disallowance of depreciation on non-existing assets. 3. Disallowance of depreciation U/s 43(1) explanation 10 of the Income Tax Act. 4. Applicability of MAT (sec. 115JB of Income Tax Act, 1961). 5. Charging of interest U/s 234B on MAT tax. 6. Deleting the disallowance of prior period expenses. Detailed Analysis: 1. Validity of Notice U/s 147/148: Ground No. 1 of the assessee's appeals for the A.Y. 2002-03 and 2003-04 was not pressed, and therefore, it was dismissed. 2. Disallowance of Depreciation on Non-Existing Assets: The Tribunal initially remanded the matter back to the Assessing Officer (A.O.) with directions to verify the physical existence of assets and allow depreciation accordingly. The A.O. disallowed depreciation due to the assessee's failure to submit the list of physically verified assets. The CIT(A) confirmed this disallowance, doubting the basis of the certificate issued by the Chief Accounts Officer. However, the Tribunal found that the insistence on physical verification was unwarranted since the assets were part of the block of assets transferred from the Rajasthan State Electricity Board (RSEB). The Tribunal allowed the depreciation on the written down value of the transferred assets but emphasized the need for the assessee to maintain a fixed assets register. 3. Disallowance of Depreciation U/s 43(1) Explanation 10: The A.O. disallowed depreciation on assets acquired through subsidies, grants, and consumer contributions, arguing that these should not be included in the actual cost of the assets. The CIT(A) confirmed this disallowance. The Tribunal upheld the CIT(A)'s decision, stating that the actual cost of the asset should exclude the portion met by subsidies or grants. 4. Applicability of MAT (sec. 115JB of Income Tax Act, 1961): The A.O. applied the provisions of MAT, adjusting the book profit by disallowing excessive depreciation. The CIT(A) partly allowed the appeal, directing the A.O. to take the correct figure for calculation of book profits. The Tribunal, following the order of the Advance Rulings (Income Tax) in a similar case, decided that the provisions of MAT U/s 115JB should not be applied to the assessee. 5. Charging of Interest U/s 234B on MAT Tax: This issue was linked to the applicability of MAT. Since the Tribunal decided against the applicability of MAT, the charging of interest U/s 234B on MAT tax was also not applicable. 6. Deleting the Disallowance of Prior Period Expenses: The CIT(A) allowed the appeal of the assessee, directing the A.O. to delete the addition of prior period expenses, relying on the Tribunal's decision for earlier assessment years. The Tribunal upheld the CIT(A)'s decision, dismissing the revenue's appeal on this ground. Conclusion: - The appeals of the assessee for all assessment years were partly allowed. - The appeals of the revenue for all assessment years were dismissed.
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