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TMI Blog2018 (6) TMI 1857X X X X Extracts X X X X X X X X Extracts X X X X ..... finding that contribution to PF and ESI has been paid before the due date of filing of return of income under section 139(1) of the Act. The said findings remain uncontroverted before us. Following the decisions of Jaipur Vidyut Vitran Nigam ltd [ 2014 (1) TMI 1085 - RAJASTHAN HIGH COURT] and Udaipur Dugdh Utpadak Sahakari Sangh Ltd [ 2014 (8) TMI 677 - RAJASTHAN HIGH COURT] he has allowed the claim of the assessee. No infirmity in the order of the ld. CIT (A) has directed the deletion of disallowance so made by the AO. Decided against revenue. - Shri Vijay Pal Rao, JM And Shri Vikram Singh Yadav, AM For the Revenue : Shri P.C. Parwal (CA). For the Assessee : Vimlendu Verma (CIT). ORDER PER BENCH: These are two appeals filed by the Revenue against the order of ld. CIT(A)-2, Jaipur dated 25.01.2018 for A.Y. 2007-08 2009-10 respectively. 2. Firstly, a common ground has been taken by the Revenue in both the appeals challenging the action of the ld CIT (A) in deleting the disallowance on account of advance received against depreciation deferred. 3. At the outset, the ld. AR submitted that the matter is squarely covered by the recent decision of this Bench in assessee s own case in IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s required to be carried through the profit and loss account. At this stage, it may be stated that there are broadly two types of reserves, viz., those that are routed through the profit and loss account and those which are not carried via the profit and loss account, for example, a capital reserve such as share premium account. AAD is not a reserve. It is not an appropriation of profits. AAD is not meant for an uncertain purpose. AAD is an amount that is under obligation, right from the inception, to get adjusted in the future, hence, cannot be designated as a reserve. AAD is nothing but an adjustment by reducing the normal depreciation includible in the future years in such a manner that at the end of the useful life of the plant (which is normally 30 years) the same would be reduced to nil. Therefore, the assessee cannot use the AAD for any other purpose (which is possible in the case of a reserve) except to adjust the same against future depreciation so as to reduce the tariff in the future years. As stated above, at the end of the life of the plant AAD will be reduced to nil. In fact, schedule XII-A to the balance-sheet for the financial years 2004-05 onwards indicates recoupi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and those which are not carried via profit and loss account, for example, a Capital Reserve such as Share reserve. It is not appropriation of profits. AAD is not meant for an uncertain purpose. AAD is an amount that is under obligation, right from the inception, to get adjusted in the future, hence, cannot be designated as a reserve. AAD is nothing but an adjustment by reducing the normal depreciation includible in the future years in such a manner that at the end of useful life of the Plant (which is normally 30 years) the same would be reduced to nil. Therefore, the assessee cannot use the AAD for any other purpose (which is possible in the case of a reserve) except to adjust the same against future depreciation so as to reduce the tariff in the future years. As stated above, at the end of the life of the Plant, AAD will be reduced to nil. In fact, Schedule XII-A to the balance sheet for the years 2004-05 onwards indicates recouping. In our view, AAD is income received in advance . It is a timing difference. It represents adjustment in future which is in-built in the mechanism notified on 26.5.1997. This adjustment may take place over a long period of time. Hence, we are of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e contention of the Revenue as is being argued is taken to the logical conclusion, then AAD will be income and hence part of Profit and Loss Account. The liability created will be a reserve by debit to the profit and loss account. The Supreme Court has categorically held that AAD is not a reserve . Once AAD is considered as income as is being alleged by Revenue the obvious implication will be that such income in the Balance Sheet is a reserve. It can't be that AAD is an income and then it vanishes. Income has to be carried to the Balance Sheet and such income carried to Balance Sheet will form part of the 'Reserve'. Since 'AAD' has been held by Supreme Court is not a reserve, this contention of the Revenue can't be accepted. It is to be further noted that Supreme Court has not stopped by just saying that AAD is not a reserve. It has gone further to define the nature of AAD and held that it is a liability and is to be discharged in future as can be seen from the following observations: AAD is not meant for an uncertain purpose. AAD is an amount that is under obligation, right from the inception, to get adjusted in the future, hence, cannot be designated as a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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