DCIT Vs KEC International Ltd. (ITAT Mumbai)
The Mumbai Bench of the Income Tax Appellate Tribunal dealt with the Revenue’s appeal for Assessment Year 2011-12 arising from an assessment completed under Section 143(3) read with Section 144C(3) of the Income-tax Act, 1961. KEC International Ltd., engaged in transmission lines, telecom towers, railway electrification and infrastructure activities, had originally returned income of Rs.139.34 crore after set-off of brought-forward losses and book profit of Rs.230.87 crore under Section 115JB. It subsequently filed a revised return declaring income of Rs.113 crore under the normal provisions while retaining the same book profit. The Revenue’s appeal covered depreciation on revalued assets, mark-to-market foreign-exchange losses and several transfer-pricing adjustments relating to performance, bank and corporate guarantees.
On depreciation, the Assessing Officer had disallowed Rs.18,12,94,916 claimed on assets of the transmission business. Under a composite scheme sanctioned by the Bombay High Court, the movable and immovable assets and liabilities of the power transmission business of KEC Infrastructure had been acquired by the assessee and revalued. The Assessing Officer regarded the transaction as a demerger under Section 2(19AA) and held that depreciation could be claimed only on the written-down value rather than on the enhanced revalued amount. The CIT(A), however, followed the Bombay High Court’s decision in the assessee’s own case for AY 2006-07 and Tribunal orders for earlier years. The ITAT similarly followed its order for AY 2010-11 and dismissed the Revenue’s first three grounds.
