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TMI Blog2020 (3) TMI 719X X X X Extracts X X X X X X X X Extracts X X X X ..... n applying the ratio of the decision of the Supreme Court in Poona Electric Supply Company Limited vs. CIT (supra) is wholly justified and does not call for any interference. Accordingly the ground of challenge urged by the revenue on this aspect is rejected. Disallowance deduction made u/s 80 IA - Tribunal has observed that the issue has become redundant and academic in nature - HELD THAT:- We do not find any perversity in the view taken by the Tribunal. The circular of CBDT has been issued in view of the decisions of various High Courts that find mention therein. The issue is no longer res integra. The Board has accepted the settled position that the disallowances made under Section 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 - ITA 186/2020 - - - Dated:- 11-3-2020 - MR. MANMOHAN AND MR. SANJEEV NARULA JJ. Appellant Through: Ms. Adeeba Mujahid, Advocate for Mr.Ajit Sharma, Senior Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ues that this incidental income arising out of the business of the respondent undertaking is not directly related to the business and is therefore not eligible for deduction under the aforenoted provision of the Act. She further argues that since the assessee has included income arising on account of commission on arrears, replacement of burnt metres, inspection fee, reconnection fee, miscellaneous recovery from suppliers etc, which are incidental incomes and therefore, cannot be claimed as income derived form eligible business so as to be entitled to deduction under Section 80 IA of the Act. She also submits that this Court in Principal of Commissioner of Income Tax vs. M/s Tata Power Delhi Distribution Ltd., ITA No. 687/2019 has issued notice on the appeal preferred by the appellant and prays that this appeal be also admitted. 4. We have given thoughtful consideration to the submissions advanced by the learned counsel for the Revenue. The questions of law that have been urged for our consideration as also the gounds of challenge made out in the memorandum of appeal are relating only to (i) additions made on account of de-recognised revenue and (ii) for deleting the disallowanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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 provided that the Commission shall be guided by the following parameters, namely:- the financial principles and their application provided in the Sixth Schedule to the Act, 1948 read with sections 57 and 57 A of the said Act; the factors which would encourage efficiency, economic use of the resources, good performance, optimum investments and other matters which the Commission considers appropriate keeping in view the salient objects and purposes of the provisions of this Act; and the interest of the consumers. 18. In exercise of the powers conferred by Section 12 and ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 05 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 directjgns 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 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 result of AT and C loss reduction up to minimum level with respect to bid level, and 50% of the additional revenue beyond minimum level has been considered as additional revenue for the purpose of ARR determination and balance 50% of the savings beyond minimum level has been approved to be retained by the assessee. 21. Basing on this, we are convinced that the assessee is under statutory obligation to meet the targets of reduction of A TC losses and when the AT C loss level reached by the assessee in that particular year is better i.e. lower than the level prescribe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss 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 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 assessee is under a statutory obligation to set apart 50% of the excess amount generated due to the overreaching of the targets, for the purpose of the consideration of the DERC to fix the future tariffs either to give relief to the consumers or otherwise. A reading of the statute, notification and the orde rs of the DERC clearly indicates that the assessee is not free to use this efficiency gain amount the way it likes. Whether or not a separate account is opened, when this amount is separately shown under this head in the books, it makes little difference in so far as the application of the ratio of Pun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been claimed, the deduction needs to be allowed on the enhanced profits. Some illustrative cases upholding this view are as follows: (i) if an expenditure incurred by assessee for the purpose of developing a housing project was not allowable on account of non-deduction of TDS under law, such disallowance would ultimately increase assessee s profits from business of developing housing project. The ultimate profits of assessee after adjusting disallowance under section 40(a)(ia) of the Act would qualify for deduction under section 80-IB of the Act. This 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 do for deduction under section 80IB of the Act. This view was taken by the. court in the following cases: Principal CIT. Kanpur vs. S on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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