9911796707
TMI Blog2018 (9) TMI 790X X X X Extracts X X X X X X X X Extracts X X X X ..... otal income under the normal provisions, is not correct. - decided against revenue X X X X Extracts X X X X X X X X Extracts X X X X ..... accounting entries passed by it, the appellant has stated that, "it can be observed that the capital contributions which has part funded the fixed assets of the company, are adjusted to the cost of fixed assets and also the depreciation originally charged on the fixed assets are reversed, thereby the assets are shown at net values in the books of account and there is no impact on the P&L account, as the capital contributions are not on the revenue account and the depreciation originally charged attributable to the cost of assets partly funded by the capital contributions are reversed". The appellant has submitted that during the asst.year 2009-10, the company has received consumer contributions including subsidies and grants towards cost of capital assets amounting to ₹ 147.77 cr. and an amount of ₹ 58.53 cr. has been reduced from the capital contributions and transferred to P&L account which is equal to the amount of depreciation charged on the assets purchased out of capital contributions. The appellant has also submitted that it has followed Accounting Standard-12 regarding treatment of consumer contributions. Accounting Standard-12 is as under: Accounting Stan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t acquired, so much of the amount which bears to the total subsidy or reimbursement or grant the same proportion as such asset bears to all the assets in respect of or with reference to which the subsidy or grant or reimbursement is so received, shall not be included in the actual cost of the asset to the assessee. The appellant has gone on to state that the Assessing Officer has misunderstood the accounting policy and accounting entries passed in the books and erroneously treated the capital contributions received from consumers as income. Therefore, the amount of ₹ 58,53,98,095/- added to the total income under the normal provisions, is not correct. The appellant has 'placed reliance on the decision in the case of Jodhpur Vidyut Vitran Nigam Vs CIT 321 ITR 18(2010). 2. Ground No.2 is regarding the treatment of subsidy received under Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) credited to P&L Account amounting to ₹ 2,36,64,224/-. This subsidy has been received from the Government towards construction/purchase of fixed assets. The appellant has stated that on receipt of subsidy from Government, the amount is spent for procurement· of capital stock/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and reducing the depreciation attributable to consumers contribution/subsidy. The appellant has then claimed depreciation allowable under the Income tax Act on the net value of assets. The net value of assets is the gross value as reduced by consumers contributions/subsidy as is required under. explanation-l0 to sec.43(1). It is logical that adjustments are made to net profit for entries in the P&L account towards depreciation, before allowing deductions towards depreciation as per the I.T.Act. In the normal course such adjustment is required only for the depreciation debited to the P&L account. In the assessee's case· there is also a credit of such amount in accordance with ESAAR (Electricity Supply Annual Account Rules) even though it is not in the nature of income. It logically follows that this amount is to be reduced from net profit for the purpose of computation of total income. To sum up the amount of ₹ 58,53,98,095/- and ₹ 2,36,64,224/- were the amounts of depreciation claimed on assets generated out of the capital contributions/subsidy and had been credited to the P&L account since the P&L account had been debited by gross depreciation and not depre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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