Case Law Details

Case Name : D C I T- 14(3)(1) Vs. M/s Reliance Infrastructure Ltd. (ITAT Mumbai)
Appeal Number : ITA No. 4345/Mum/2015
Date of Judgement/Order : 20/12/2017
Related Assessment Year : 2011- 12
Courts : All ITAT (4858) ITAT Mumbai (1572)

DCIT Vs. M/s Reliance Infrastructure Ltd. (ITAT Mumbai)

Where something is not possible then the assessee cannot be forced to do so under specific provisions of law. Those previsions of law cannot be followed because it is impossible to do so. The doctrine of impossibility is squarely applicable on the facts of the present case because it is not possible to prepare the accounts under the Companies Act because the assessee is preparing the accounts as per the policies of Electricity Supply Act.

The Honorable Supreme Court in the case of Kwality Biscuits Ltd in 284 ITR 434 has held that provisions of sec. 234B & 234C are not applicable in respect to computation of deduction u/s 115J because the computation of profit under the provisions of sec. 115J has to be made on the basis of book profit and since the entire exercise of computing the income under section 115J can only be done at the end of the financial year, and the provisions of sec. 207, 208, 209 & 210 cannot be made applicable ‘until and unless the accounts are audited and the balance sheet prepared. The ratio of this decision helps the case of the assessee because it is not possible to prepare the accounts in accordance with part II &III of Schedule VI of the Companies Act for the purpose of provisions of sec. 115JB. Therefore, in view of the ratio of this decision, in our considered view, the provisions of sec. 115JB cannot be attracted of the present case.

As discussed above when it is not possible to prepare the accounts under the Companies Act for the purpose of computation u/s 115JB, therefore, assessee cannot he forced to prepare the accounts when it is not possible. Therefore, we are in agreement with the contentions of in as much as the accounting policies followed in the accounts if followed for the preparation of Companies Act. 1 not disclose true and fair view and will not be in accordance work part II and III of Schedule VI of the Companies Act. The ratio of the decisions of the Hon7ble Supreme Court and the ratio of the decision of the Tribunal discussed above are in support of the contentions of the assessee. We further found that the issue of applicability of sec. 115J came before the Tribunal for AY 88-89. Taking into consideration the preparation of accounts under the Electricity Act and other contentions the assessee including the decisions of the Supreme Court in the case of B.C.Srinivasa Setty (supra), the Tribunal has held that. the provisions of Sec. 115J are not attracted on the facts of the present case.

As discussed above, the assessee is following the accounting policies under the Electricity Supply act and prepared its accounts in view of those very policies. Following those very policies, the accounts in accordance with part II & III of Schedule VI of the Companies Act are not applicable at all. Once there is no possibility for preparing the accounts in accordance with the part II & 11 of Schedule VI of Companies Act then the provisions of sec. 115JB cannot be forced. Therefore, in view of the above facts and circumstances and respectfully following the above decisions of the Honorable Supreme Court and the decision of the Tribunal for AY 88-89, we hold that provisions of sec. 115JB are not applicable on the facts of the present case.

FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-

These cross appeals have been filed against the order of the CIT(A) dated 28.04.2015.

2. In assessee’s appeal the assessee has not pressed ground No. 1. Therefore the only ground remain for our disposal reads as under: –

“2. The learned CIT(A) erred din considering all investments (excluding investment in subsidiaries) capable of earning tax free income whether they have yielded tax free income or not for computation of dis allowance u/s 14A read with Rule 8D. Your appellant submits that only those investments (excluding investment in subsidiaries) which had actually yielded tax free income during the year ought to have been considered while working out dis allowance u/s. 14A r.w. Rule 9D.”

3. We heard the rival submissions and carefully considered the same along with the orders of the Tax Authorities below. We noted that similar issue relating to the deletion of dis allowance made under Section 14A r.w. Rule 8D has also been taken by the Revenue by way of ground Nos. 3 & 3.1 in their appeal, which read as under:

“3. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in directing the AO not to consider the interest expenses for working out the dis allowance u/s 14A r.w. Rule 8D.

3.1 On the facts and in the circumstances of the case, the Ld. CIT(A) erred in directing the AO to exclude the investments made in subsidiary companies by the assessee while working out the average investment @ 0.5% as mandated by the Rule 8D of the Income Tax Rules without appreciating the fact that the assessee has earned exempt income from the investment in subsidiary companies.”

4. Since this issue involved in both the appeals relate to the dis allowance made under Section 14A, we therefore decided to dispose off this issue first instead of deciding the other ground taken by the Revenue in its appeal. The facts relating to the dis allowance made under Section 14A r.w. Rule 8D are that the assessee has computed the dis allowance under Section 14A at Rs. 39,12,99,320/- in the original return of income considering all the investments capable of earning tax free income which are exempt under Section 14A. Subsequently, during the course assessment proceedings the assessee submitted revised computation of dis allowance under Section 14A at Rs. 86,27,620/-. Further, by way of another submission he reduced the dis allowance under Section 14A to Rs. 50,20,000/- relying on the decision of in the case of it vs. Reliance Utilities and Power Ltd. (313 ITR 340) but the AO disallowed the sum of Rs. 39,12,93,402/- on the basis of the return filed by the assessee. The assessee went in appeal before the CIT(A). Before the CIT(A) assessee submitted that during the year the assessee received following exempt income:-

Sr. No. Particulars Amount (`) Exempt u/s.
1 Interest on 6.85% iifcl tax free bonds 6,85,00,000 10
2 Dividend on shares 39,60,000 10(34)
3 Dividend on Mutual Fund units 105,45,85,293 10(35)
Total 112,70,45,293

5. The assessee has worked out the dis allowance at Rs. 39,12,93,402/- taking into account all the investments whether they yielded tax free income or not. It was subsequently revised by the assessee to Rs. 86,27,620/- and ultimately Rs. 40,20,000/-. It was pointed out that the CIT(A) in A.Y. 2010-11 vide his order dated 04.12.2019 partially decided the issue in favor of the assessee by directing the AO that interest expenses need not be considered for dis allowance under Rule 8D(2)(ii) since assessee’s own funds are more than the investment. The CIT(A) also held in that year that for the purpose of computation of dis allowance under Rule 8D(2)(iii) being 0.5% of the average value of investment, the investment in the subsides need not be considered but did not accept assessee’s contention that only those investments on which tax free income has been received during the year for the purpose of the dis allowance. It was also noted by the CIT(A) that during A.Y. 2010-11 the assessee has raised additional ground that the dis allowance of interest expenses under Rule 8D(2)(ii) and 8D(2)(iii) should not be waived with respect to the investment which are made in subsidiary companies of the assessee. The CIT(A) during A.Y. 2010-11 following the decision of Garware Wall Ropes Ltd. vs. Addl. CIT 46 Taxmann.com 18 and J.M. Financial Ltd. vs. Addl. CIT in ITA No. 4521/Mum/2012 dated 26.03.2014 directed not to disallow under Rule 8D(2)(ii) and 8D(2)(iii) in respect of investment in subsidiary companies as they were made for controlling stock. It was also directed by the CIT(A) in A.Y. 2010-11 that no interest dis allowance is to be made in this regard as the assessee’s Reserves and Surplus are more than assessee’s total investment but it was held that however, the dis allowance of 0.5% of the average investment can be made for administrative expenses. The CIT(A)after considering the submissions of the assessee and following the decision in A.Y. 2010-11 held as under: –

“6.4 I have considered appellant’s submissions. In this  case appellant had suo motto originally disallowed Rs. 39,12,93,402/- u/s.14A and later submitted submissions during the assessment proceedings reducing the dis allowance U/S. 14A Rs. 86,27,6207- and further another submissions was submitted that dis allowance should be Rs. 50,20,000/- relying on the decision of CIT vs. Reliance Utilities and Power Ltd. 313 ITR 340.

6.4(i) Now the issue has to be considered here is where appellant himself suo motto had disallowed but ”later based on the decision of the jurisdictional High Court i.e. CIT vs. Reliance Utilities and Power Ltd. 313 ITR 340 the appellant had modified the dis allowance whether this is to be considered. This issue had come into consideration of Bombay High Court in the case of CIT vs. Pruthvi Brokers and Shareholders 349 ITR 336 wherein it is held that “if the claim of the appellant during appellate proceeding is legal in nature then this claim has to be considered if no verification is required on these facts.” In this case no further verification is required in the facts of the case, hence, this claim of the appellant is considered.

6.4(ii) Regarding dis allowance u.s.14A, this issue had come into consideration of CIT(A) 2010-11 wherein in para 10.3 it is held as under:

“10.3 I have considered the facts and circumstances of the case. The A.O. had disallowed Rs. 37,34,41,170/- U/S.14A. This dis allowance is for the expenditure related to interest and administrative expenditure. However, when we examine appellant’s own funds, the appellant is having share capital of Rs. 244.92 crores and reserves of Rs. 14366.19 crores. The share capital and reserves, in the appellant’s balance sheet is together i.e. totaling to Rs. 14611 crores The total investment for earning exempt income is Rs. 10119.57 crores. Here appellant’s own funds is more than the investments, hence, no dis allowance is required for interest u/s.14A r.w. Rule 8D(2)(i) in view of Bombay High Court decisions in the cases of Reliance Utilities and Power Ltd,. 178 Taxman 135, CIT vs. HDFC Bank Ltd. ITA No. 330 of 2012 and Winsome Textile Industries Ltd. 319 ITR 204 (P&H). However the A.O. is directed to disallow 0.5% of the average investment for administrative-expense.

During appellate proceedings the appellant had filed additional ground stating that dis allowance u/s.14A as per Rule 8D should be made considering only those investment on which is tax free income is received during the year. On this issue appellant had relied on the decision of Cheminvest Ltd. Special Bench. On considering the above decision, ITAT held that “if there is no exempt income earned, then no dis allowance is required u/s.14A”, however, in our case, there are two incomes where appellant had earned exempt income and another investment appellant had not earned any exempt income. When we examine the case of Cheminvest Ltd., in this case there is only one investment in which no income is earned, but in our case in some investment there is exempt income earned in some investment no exempt income is earned. Hence, facts are distinguishable in this case, therefore, appellant’s claim is dismissed on this issue. The appellant had raised additional ground that dis allowance of interest and expenses under Rule (3D(2)(ii) and-8D(2)(iii) should not be made with respect to investment which are made in the subsidiary company of the appellant. The appellant had relied on the decision of Garware Wall Ropes Ltd. vs. Addl. CIT ITA No. 4521/MUM/2012 dated 26.03.2014. On examination of the above cases, the ITAT held that investments in subsidiary companies were investments were made for controlling stake, no dis allowance can be made u/s.14A r.w. Rule 8D(2)(ii) and 8D(2)(iii). Hence, following the above decisions, the A.O. is directed not to disallow under Rule 8D(2)(ii) and 8D(2)(iii).

In conclusion the A.O. is directed that no interest dis allowance is to be made in this case as appellant’s reserves and surplus are more than appellant’s total investment. However, dis allowance of 0.5% of average investment can be made for administrative expenses. In this dis allowance also no dis allowance can be made on the investments for the subsidiary companies. Hence, this ground of appeal is party allowed.”

Following the above decision of CIT(A) in earlier year, in this case share capital of the appellant is Rs. 267.47 crores, reserves & surplus is Rs. 17,400 crores. Here the investment of Rs. 12,584 crores is less than the capital and the reserves, then no interest can be disallowed in view of Bombay High Court decisions in the case of CIT vs. Reliance Utilities and Power Ltd. 313 ITR 340 and CIT vs. HDFC Ltd. 330 ITR 212. However, the A.O. is directed to compute 0.5% of average investment but while computing 0.5% of average investment the investment in subsidiary company is to be excluded.

6.4(iii) Further appellant had filed additional ground in which appellant contention is that even investment on which there is no tax free income is earned, this is to be excluded from calculating 0.5% of average investments. This issue had come into consideration of CIT(A) in A.Y. 2010-11 in para 10.3 reproduced above i.e. para 6.4(ii). Following the order, ground of appeal is dismissed.

6.4(iv) Regarding second additional ground for reducing the investment in subsidiary company from computing 0.5% of average investment. This issue had come into consideration of CIT(A) in A.Y. 2010-11 in para 10.3 reproduced above i.e. para 6.4(ii) wherein it is held that this has to be excluded while computing 0.5% of average investment for expenditure involved in administrative expenses. This ground of appeal is partly allowed.

To sum up, these grounds of appeal are partly allowed.

6. We heard the rival submissions and perused the orders of the Tax Authorities below. We noted that the CIT(A) has given a clear cut finding of fact that investment of the assessee, which is amounting to Rs. 585 crores, is less than the assessee’s capital reserve and accordingly following the decision in the case of CIT vs. Reliance Utilities and Power Ltd. (313 ITR 340) and CIT vs. HDFC Bank Ltd. 366 Tribunal 505 deleted the dis allowance in respect of interest but directed the AO to compute 0.5% of the average investments and while computing the 0.5% of the average investments in the subsidiary company directed to exclude and dismissed the additional ground taken by the assessee for excluding from calculation of 0.5% of the average investment on which there is no tax free income is earned following the order of the CIT(A) for A.Y. 2010-11. The CIT(A) also following the order for A.Y. 2010-11 directed the AO to exclude while computing 0.5% of the average investment expenditure involved in administrate expenses.

7. We noted that against the deletion of dis allowance made under Section 14A the Revenue went in appeal before the Tribunal by taking the following grounds of appeal in A.Y. 2010-11:-

“6. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the AO not to consider the interest expenses for working out the dis allowance u/s. 14A r.w. Rule 8D.”

6.1 On the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in directing the AO to exclude the investments made in subsidiary companies by the assessee while working out average investment @50% as mandated by the Rule 8D of the IT Rules without appreciating the fact that the assessee has earned exempt income from the investment in subsidiary companies.”

8. The assessee has also came in appeal before the Tribunal by taking the following ground of appeal: –

“2. The learned CIT(A) erred in considering all investments (excluding investment in subsidiaries) capable of earning tax free income whether they have yielded tax free income or not for computation of dis allowance u/s. 14A r.w. R.8D.

Your appellant submits that only those investments (excluding investment in subsidiaries) which had actually yielded tax free income during the year ought to have been considered while working out dis allowance u/s 14A r.w. R. 8D.”

9. The Tribunal disposed off the grounds of appeal taken by the Revenue by observing in ITA No. 1422/Mum/2014 vide order dated 02.06.2017 as under: –

“2.1 We have heard the rival contentions and gone through the facts and circumstances of the case. We find that the assessee had worked out the dis allowance u/s 14A of the Act at Rs. 37,34,41,170/- in its revised return of income. The dis allowance u/s14A was reduced to Rs. 37,34,41,170/- in the revised return of income on account of change in assets, investments and interest expense on withdrawal of the demerger scheme. The above dis allowance was worked out taking all investments whether they have yielded any income during the year or not and also considering interest expense. During the course of assessment proceedings, the assessee was asked to furnish details as per the provisions of section 14A of the Act r.w.r. 8D of the rules in response to which the assessee had filed a revised computation of free income was earned/received during the year. The assessee has showed the investments on which exempt income is received and those investments on which no income is received. The assessee submitted that dis allowance of interest under Rule 8D(2)(ii) is not warranted in the facts of the assessee’s case as the assessee had sufficient amount of interest free funds available with them in form of share capital and reserves. The interest free funds available are as under: –

Opening Closing
Share capital 226.07 244.92
Reserves 10,897.88 14,366.19
Total 11,123.95 14,611.11

As against the above, the total investments as appearing in the balance sheet are as under: –

In crores
Opening Closing
Total investments yielding table income –(A) 8,487.02 6,263.63
All tax free investments That can yield tax free income (B) 3,660.08 3,755.94
Investments which has given tax free income during the year (included in (B) above) 1,104.61 1,104.61
Total (A)+(B) 12,147.10 10,019.57

The appellant relies upon the following decisions of the High Courts in support of their contention that if the capital and reserve is much more than the investment it is presumed that the investment has been made out of own funds and therefore dis allowance of interest under section 14A of the Act cannot be made. We find force in the argument of Ld Counsel and in the given facts of the case we are of the view that the CIT(A) has rightly deleted the addition and we confirm the order of CIT(A) . This issue of revenue’s appeal is dismissed.”

10. During the impugned assessment year, we noted, the Revenue has come in appeal before us taking similar grounds being ground Nos. 3 & 3.1 as has been taken against the order of the CIT(A) during A.Y. 2010-11. During the assessment year the Tribunal has given a finding that the assessee has much more interest free funds as compared to the investment made by the assessee. For the impugned assessment year the CIT(A) has given a clear finding that the share capital and reserve & surplus of the assessee are much more than the investment made by the assessee and the CIT(A) has deleted the dis allowance following the decisions of the Honorable Bombay High Court in the case of CIT vs. Reliance Utilities and Power Ltd. 313 ITR 340 and CIT vs. HDFC Ltd. 330 ITR 212. We, therefore, respectfully following the decision of this Tribunal in assessee’s own case in ITA Nos. 1422 & 1480/Mum/2015 for A.Y. 2010-11 dismiss the ground Nos. 3 and 3.1 taken by Revenue.

11. Now coming to the ground of the assessee in its appeal, we noted that the ground of appeal taken by the assessee is similar to the ground of appeal taken by the assessee in A.Y. 2010-11 in ITA No. 1480/Mum/2015 and we noted that this Tribunal under para 28 of the order dated 02.06.2017 held as under while disposing of this ground: –

“28. At the outset, the learned Counsel for the assessee stated that this issue is settled by following Tribunal’s judgement in the cases of CIT vs. M/s Delite Enterprises (I.T.A No. 110 of 2009) (Bom), ACB India Ltd. vs. ACIT (2015) 62 taxmann.com 71 (Delhi) & CIT vs. Shivam Motors (P) Ltd. (2015) 55 taxmann.com 262 (Allahabad). In view of the above the learned counsel for the assessee requested the Bench to set aside this issue back to the file of the AO to ascertain the investment giving rise to taxable income and non-taxable income and accordingly, taxable investments can be excluded while making dis allowance. We are in agreement with the argument of the assessee and accordingly, we remand this issue back to the file of the AO. This issue of assessee’s appeal is allowed for statistical purposes.”

Respectfully following the decision of this Tribunal in assessee’s own case in A.Y. 2010-11 in ITA No. 1480/Mum/2015 we set aside the order of the CIT(A) on this issue and restore this issue back to the file of the AO to ascertain the investments giving rise to taxable income and non taxable income and accordingly the taxable investment can be excluded while taking the dis allowance. We also noted that similar issue has been decided in favor of the assessee by the decision of the Special Bench in ITA No. 502/Del/2012 dated 16.06.2017 in which the Special Bench has taken similar view. Thus, the ground taken by the assessee is allowed for statistical purposes.

12. Ground No. 1 in Revenue’s appeal reads as under: –

“1. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in allowing the claim of Rs. 17,79,20,026/- on account of replacement of electricity meters, even though the impugned expenditure is inherently capital in character as installation and replacement of electricity meters given to the end customers is capital expenditure and the meter deposits received against the same is shown as capital advance by the assessee.”

13. The brief facts of this ground are that the AO disallowed expenditure amounting to Rs. 17,79,20,026/- incurred by the assessee on replacement of electricity meters not debited in its Profit & Loss Account. By holding that the same to be capital expenditure and AO allowed depreciation to the assessee amounting to Rs. 2,00,16,003/-. The CIT(A) relying on the order of the ITAT for assessment years 2008-09 and 2010-11 deleted the dis allowance. After hearing the rival submissions we noted that this Tribunal in the case of the assessee for A.Y. 2010-11 confirmed the order of the CIT(A) deleting the said dis allowance as the said issue has been decided in favor of the assessee by the decision of the Honorable High Court in assessment years 2001-02, 2002-03, 2003-04, 2006-07, 2007-08 and 2008-09 by holding as under: –

“4. At the outset, the learned Counsel for the assessee stated that this issue is covered by High Court judgement in assessee’s own case for AYs 2001-02, 2002-03, 2003-04, 2006-07, 2007-08 and 2008-09. He particularly referred to Bombay High Court order in Income Tax Appeal No. 277 of 2009 dated 01-07-2013 wherein Honorable High Court held as under: –

“(ii) In any view of the matter, the expenditure incurred on the replacement of the electricity meters was held to be capital expenditure by the Assessing Officer. This was on the ground that this electricity meters were installed at the premises of the customers after taking deposit from the consumers and it led to an enduring benefit to it. In appeal, the CITA(A) has allowed the appeal of the respondent- assessee holding that expenses incurred on replacement of electricity meters is of revenue nature while following the orders of his predecessors for the earlier Assessment Year. On further appeal by the revenue, the Tribunal held that these electricity meters have to be replaced periodically on account of obsolescence, meters burning out or becoming faulty etc. and these expenses are necessarily required to be incurred for the purposes of carrying out business operations. The expenditure is incurred for the purposes of enabling the Respondent- Assessee to carry out its business more efficiently and more profitably. The replacement of meters does not increase the generation and/or distribution capacity of electricity. Moreover, as held by the Supreme Court in the matter of Empire Jute Co. Ltd. v/s. CIT (124 ITR 1), the test of enduring benefit is not a conclusive test to be applied mechanically without considering the facts of a given case. In the above facts, the expenses on replacement of electricity meters would be on revenue and not on capital account.

(iii) The Counsel for the Respondent has not been able to point out that how the conclusion of the Tribunal in the earlier years will not be applicable to the present Assessment Year. The Counsel for the revenue has also not been able to show that the finding of fact arrived at by the Tribunal is perverse and/or erroneous. In the above view, we see no reason to entertain Question (a).

4. So far as Questions (b) to (e) are concerned, Counsel for the parties are agreed that all the aforesaid questions are covered in favour of the respondent- assessee and against the revenue by the decision of this Court rendered on 26 June 2013 in respect of the same respondent- assessee in Income Tax Appeal No.1688 of 2009. In the above view of the matter and for the reasons mentioned in our order dated 26 June 2013 the Income Tax Appeal No.1688 of 2009, we see no reasons to entertain Questions (b) to (e) as proposed by the revenue.

5. We find that consistently this issue has been held in favor of assessee and hence respectfully following the Honorable High Court, we confirm the order of CIT(A) and this issue of Revenue’s appeal is dismissed.”

Respectfully following the order of this Tribunal in assessee’s own case for A.Y. 2010-11 we affirm the order of the CIT(A) and dismiss ground No. 1 taken by the Revenue.

14. Ground No. 2 taken by the Revenue reads as under: –

“2. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in deleting the proportionate apportionment of Head Office Expenses and allocation of Rs. 8,60,62,142/- to Goa Unit, Rs. 11,08,59,778/- to Samalkot Unit and Rs. 28,01,080/- to Windmill Unit Respectively of the assessee company, while computing the profits of eligible business for deduction u/s 80IA,by the AO.”

15. The brief facts of this ground are that the AO apportioned head office expenses for Goa Unit Rs. 8,60,62,142/-, Samalkot Unit Rs. 11,08,59,778/- and to Windmill Unit Rs. 28,01,080/- and reduced the amount of eligible profit for allowing deduction to the assessee under Section 80IA. The CIT(A) allowed the claim of the assessee by following the order of the Tribunal in assessee’s own case for A.Y. 2008-09 and A.Y. 2009-10 by observing in para 4.3 as under: –

“4.3 I have considered appellants submissions. This issue had come into consideration of the CIT(A) in A.Y. 2010-11 wherein in para 5.2 it is held as under: –

“5.2 I have considered the facts and circumstances of the case. This issue had come into consideration of Honorable ITAT in A.Y. 2008-09 and CIT(A) in A.Y. 2009-10 held as under:

“11. This issue has been discussed by the Tribunal in its order cited supra from paras 14 to 18, wherein the Tribunal has decided the issue in favor of’ the assessee for the reasons stated therein. Since the issue before us is identical to the issue decided by the Tribunal in assessee’s own case cited supra, consequently, the ground raised by the revenue is treated as dismissed.”

CIT(A)’s order in A.Y. 2009-10

“4.1. I have carefully considered the facts of the case. This issue was also there in appellant’s own case in the earlier assessment years. In A.Y. 2007-08, my predecessor CIT(A)-1 Mumbai vide order dated 27-01-2010, by following the CIT(A) appeal order of A.Y. 2006-07, directed the AO, not to allocate the head office expenses against the Goa unit, Samalkot unit and Windmill unit and grant deduction u/s 80 IA for those units on the profits without allocating the head office expenses. In A.Y. 2007-08, the ITAT, Mumbai, following the ITAT decisions in A.Y. 2002-03 to 2006-07, dismissed the department’s ground of appeal and directed to the AO to accept the allocation of head office expenses as done by the appellant. There are some decisions of Court/Tribunal holding that head office expenses are required to be allocated to 80-IA units. However, in appellant’s own case, the ITAT has decided the issue in appellant’s favor. The decision of ITAT in appellant’s own case is binding on lower judicial authority i.e. CIT(A). Therefore, since the issue under consideration is covered in favor of appellant by the ITAT orders, the allocation made by AO in the year under consideration is deleted. This ground of appeal is, therefore, allowed.”

Following the above decisions of above orders the A.O. is directed to allow allocation made by the appellant for the head office expenses. The amount disallowed for allocation of head office expenses is deleted. This ground of appeal is allowed.”

Following the above decision of CIT(A), the allocation of head office expenses by A.O. is disallowed. This ground of appeal is allowed.

16. We noted that similar issue has arisen in A.Y. 2010-11 in ITA No. 1422/Mum/2015 in which the Tribunal confirmed the order of the CIT(A) by observing as under: –

“8. Now before us, the learned Counsel for the assessee stated that this issue is covered in favor of assessee by assessee’s own case of Hon’ble High Court decision for AYs 2006-07 and 2007-08 and he particularly referred to Income Tax Appeal No. 2180 of 2011 order dated 17-04-2014, wherein, this issue is dealt with at Para 5 which reads as under: –

“5. Insofar as the question (c) in relation to Head Office Expenses is concerned, the findings of fact by the ITAT for the prior Assessment Years have been referred to and if at all any reference is needed, paragraphs 17 and 18 of the ITAT’s order are complete answers. Therefore, the factual findings do not raise any substantial question of law in relation to this claim as well. .”

9. Respectfully, following the Honorable High Court, we confirm the order of CIT(A), hence, this issue of Revenue’s appeal is dismissed.”

Respectfully following the decision of this Tribunal in assessee’s own case for A.Y. 2010-11 we affirm the order of the CIT(A) and dismiss ground No. 2 taken by Revenue.

17. Ground No. 4 taken by the Revenue reads as under: –

“4. On the facts and in the circumstances of the case and in law, whether the Ld. CIT(A) is justified in holding that provisions of Section 115JB are not applicable to the assessee company as the Accounts of the assessee are prepared according to provisions of Electricity Supply Act?”

18. Brief facts relating to this ground are that the AO computed the book profit under Section 115JB and thereby computed the minimum alternate tax. The assessee submitted that the provisions of Section 115JB are not applicable in the case of the assessee. The CIT(A) agreed with the assessee by holding that the assessee is preparing its account under the Regulatory Act instead of Companies Act and there is no requirement for computation of minimum alternate tax under Section 115JB and ultimately in para 7.3 held as under:-

“7.3 I have considered appellant’s submissions. This issue had come into consideration of CIT(A) in A.Y. 2010-11 wherein in para 11.2 it is held as under:

11.2 I have considered the facts and circumstances of the case. This issue had come into consideration of Honorable ITAT in A.Y.2008-09 and CIT(A) in A.Y. 2009-10 held as under:

Honorable ITAT in A. Y. 2008-09

“11. We find that the Tribunal, in its order cited supra, in assessee’s own, vide paras 37 to 40, has decided the issue in favor of the assessee. Since the issue before us is identical to the issue decided by the Tribunal in assessee’s own case cited supra, consequently, the ground raised by the revenue is treated as dismissed.”

CIT(A)’s order in A.Y. 2009-10:

“8.1. I have considered the facts of the case. The ITAT in appellants own case in earlier years i.e. from A.Y. 2001-02 to 2007-08 has held that the provisions of section 115JB were not applicable in appellant’s case. The’ ITAT held that the appellant was following the accounting policies under the electricity Supply Act and prepared its accounts in view of those very policies. Following those very policies, the accounts in accordance with part II and part III, Schedule VI of the Companies Act were not applicable at all. There was no possibility for preparing the accounts in accordance with the part II and part II of schedule-of the Companies Act as the provisions of section 115JB could not be forced. The ITAT in appellants own case in earlier years held that the provisions of section 115 JB were not applicable, in appellant’s case. Following the orders of ITAT in appellants own case in the earlier years, it is held that the provisions of section 115 JB were not applicable in the case of the appellant. This ground of .appeal is therefore allowed.”

Following the above order appellant’s compiling accounts under Regulatory Act instead of Companies Act as required for the computation u/s 115JB. Following the above order Sec. 115JB is not applicable in the appellant’s case. The computation of book profit of appellant is deleted. This ground of appeal is allowed.”

As appellant is not following Companies. Act for office accounting purpose, it is following Electricity Supply Act, hence boom profit u/s. 115JB is not applicable. This ground of appeal is allotted.”

19. As agreed by both the parties, similar issue has arisen during A.Y. 2010-11 in ITA No. 1480/Mum/2015 in which this Tribunal dismissed the ground taken by the Revenue by observing as under: –

“17. At the outset, the learned Counsel for the assessee stated that the Tribunal consistently from AY 2001-02 to 2009-10 holding the issue in assessee’s favor by following the Tribunal detailed order in ITA No. 218/Mum/2005 for AY 2001-02, wherein Tribunal has held as under: –

“23 We have heard rival submissions and considered them carefully. The contentions raised by the id counsel of the assessee through written note/ submissions are as under:

“Coming to the first issue of levy of tax u/s. 1 15JB, the assessee company submits that section 11 5JB requires every company to prepare its Profit and Loss Account in accordance With the provisions of Parts 11 and HI of Schedule Vito the Companies Act, 2956. The assessee company is an Electricity Company to which the provisions of Electricity Supply Act applies. The said Electricity Supply Act requires the assessee company to follow various accounting policies while preparing the accounts. The accounts are therefore required to be prepared in accordance with the said provisions of Electricity Supply Act. It is submitted that section 211(1) of the Companies Act, 1956 requires every company to prepare the Balance Sheet to give trite and fair view of the state of affairs in the form set out in Part I of Schedule VI of the Companies Act. Prothso to section 211(1) however states that this provision will not apply to a company engaged in the generation or supply of electricity for which a form of Balance Sheet has been specified in or under the Act governing such class of company. Similar section 211(2) of the Companies Act requires every company to prepare a Profit and Loss Account to give a true and fair view of the profit or loss of the company and further requires the company to comply with the requirements of ‘ Part H of Schedule VI of the Companies Act. Proviso to section 211(2) further exempts the company engaged in the business of generation or supply of electricity where a form of Profit and Loss Account has been specified in or under the Act governing such class of company. Section 616 of the Companies Act further provides that the provisions of the Companies Act shall apply to companies engaged generation in supply of electricity, except insofar as the said provisions are inconsistent with the provisions of Electricity Supply Act, 1948. Thus the provisions ‘of Electricity Supply Act which are different from the provisions of the Companies Act prevail.”

As submitted that section 115 JB introduced with effect from 1.4.2001 i.e. AY 2001-02 has incorporated provisions relating to compensation of “book profit” which are different from the provisions relating to the same in section 115J or 115JA.

Section 115J requires every company to prepare its Profit and Loss Account in accordance with the provisions of Part II and III of Schedule VI of the Companies Act, 1956. “Book profit” is, defined to mean the net profit as shown in the Profit and Loss Account prepared in accordance with the provisions of Part II and III of Schedule VI of the Companies Act, 1956. Section 115JA also requires every company to prepare its Profit and Loss Account in accordance with the provisions of Part II and III of Schedule VI of the Companies Act, 1956. However a proviso is added to specify that while preparing the Profit and Loss Account the depreciation should be calculated on the same method and rates which have been adopted for calculating the depreciation for the purpose of preparing the Profit and Loss Account laid before the company at its Annual General Meeting.

Thus under section 115J the Profit and Loss Account prepared for the purpose of 11,53 can have different method and rate of depreciation then used while preparing the Profit and Loss Account which has been laid before shareholders in the Annual General Meeting. Section 11 .5JA has brought about the above change in order to plug the device of having different depreciation amounts between the accounts presented before the shareholders and the accounts prepared for the purpose of computation of book profit”.

Section 115JB also requires every company to prepare its Profit and Loss Account in accordance with the provisions of Part II and Hi of Schedule VI of the Companies Act, 1956. However while preparing the accounts including Profit and Loss Account the company has to follow same method and rates of calculating depreciation as has been adopted for the purpose of preparing Profit and Loss Account as laid before the shareholders in the Annual General Meeting. Section 115JB further requires every company to follow the same Accounting Policies and Accounting Standards which have been followed while preparing the accounts which are laid before the shareholders in the Annual General Meeting. Thus under section 115JB, the Profit and Loss Account which is required to he prepared by every company has to adopt the following: The Profit and Loss Account ‘should he in accordance with the provisions of Part II and III of Schedule VI of the Companies Act.

The accounts and the Profit and Loss Account so prepared in acceptance with Part 11 and 1ff of Schedule VI of the Companies Act: should again follow the same (a) the Accounting Policies) (b) the Accounting Standards and (c) the rates of depreciation, as have been adopted for the purpose of preparing such accounts including Profit and Loss Account laid before shareholders in the Annual General Meeting.

The thrust of the above provisions is that the Profit and Loss Account for the purpose of section 1 15JB must be in accordance with the provisions of the Companies Act. Further the Accounting Policies, Accounting Standards and Method and Rates of Depreciation adopted in Profit and Loss Account for the purpose of section 115JB should be same as adopted in the Profit and Loss Account laid before the shareholders in the Annual General Meeting.

As stated earlier, Electricity company is exempted by the Companies Act to follow the provisions of the Companies Act as regards matters which are inconsistent with the provisions of the Electricity Supply Act. Electricity Supply Act has the following provisions, which are different from the Companies Act.

Under the Electricity Supply Act, depreciation on addition to fixed assets can be provided only from the subsequent year of addition and not in the year of addition whereas under the Companies Act, the depreciation is to be provided in the year of addition and even in the part of the year.

Rate of depreciation, under Electricity Supply Act is lower than the rate of depreciation under the Companies Act.

Electricity Supply Act permits only straight line method of depreciation whereas Companies Act permits both Straight Line Method and Written Down Value Method.

Under the Electricity Supply Act, depreciation is restricted to 90% of the cost of the assets whereas under the Companies Act entire asset value is allowed to be written off.

When an electricity Company has incurred losses and unable to bear the burden of depreciation, an amount equal to the unabsorbed depreciation has to be transferred to the depreciation reserve which will be charged td profit and loss account of the year in which the profits are made and will, become the additional depreciation charge of that year.

Under the Electricity Supply Act, the company has to capitalize certain replacement expenses like meters and the depreciation in the books whereas under the companies Act, the said replacement expenses have to be write off as revenue expenditure.

Under the Electricity Supply Act, if the profit of the company in a year is in excess of the amount of Reasonable Return as computed under the Electricity Act, 1/3rd of such excess at exceeding 5% of the amount of Reasonable Return only is at the disposal of the company. Out of the balance excess, 50% is to be apportioned to Tariff and Dividend Control Reserve and balance 50% is to be distributed in form of proportional rebate on the amounts collected from the sale of electricity and meter rentals and to he carried forward in the account of company for the distribution to the consumers. Tariff and Dividend Control Reserve is available to the company when the clear profits as computed under the Electricity Supply Act is less than the Reasonable Return in any subsequent year. There is no similar provision in the Companies Act. Under the Electricity Supply Act, the company has to create various reserves out of the retained earning i.e. contingency reserves, which can be utilized or the happening of certain events, and the company has to invest the said reserves in Trust securities. There is no similar provision in the Companies Act.

In the accounts) which are presented before the shareholders in the Annual General Meeting the assessee, company has followed the above accounting policies as per the requirement of Electricity Supply Act. The above accounting policies are not in accordance with the provisions of the Companies Act. Since the Profit and Loss Account to be prepared for the purpose of section 115J)3 has to follow the same accounting policies as are followed in the accounts presented before the shareholders, the Profit and Loss Account to be prepared under the Companies Act will not be in accordance with the provisions of Schedule VI of the Companies Act. Thus if the Profit and Loss Account is prepared in accordance with the provisions of Schedule Vi of the Companies Act) the accounting policies to be followed in preparation of such Profit and Loss Account will not be same as followed in the Profit and Loss Account presented before the shareholders in the Annual General Meeting. Thus there is a breakdown of the provisions of section 1 15J.B in as much as the Profit and Loss Account cannot be prepared in accordance with the provisions of the Companies Act following the same accounting policies as followed in the Electricity Accounts presented before the shareholders.”

Further, reliance was placed on the decision of the Supreme Court in the case Liquidator, Palai Central Bank ltd. in 150 ITR 539. It was further submitted in their own case for AY 198889, the Tribunal has held that the provisions of sec. 115J are not applicable.

24. After taking into consideration the order of the Assessing Officer, ld CIT(A) and the submissions of the id DR and the Id counsel of the assessee, we find that the assessee deserves to succeed on this issue.

24.1 We noted that the assessee’s main contention is that the company has prepared its account in accordance with the provisions of the Electricity Supply Act and not in accordance with the provisions of Part II and Part III of Schedule VI of the Companies Ad. The assessee therefore submits that there cannot be computation of “book profit” as required by Explanation to Section 1 153B. The assessee has submitted that under the Companies Act, the Electricity Companies are allowed to prepare the profit and loss account and the balance sheet in accordance with the statute under which they are operating to the extent the provisions of said statute are not in accordance with or are different from Companies Act. The assessee had submitted that there are major differences in the provisions between the Companies Act and Electricity Supply Act in preparation of accounts. As the per Electricity Supply Act, the following are the major differences: –

i) Under the Electricity Supply Act, depreciation on addition to fixed assets can be provided only from the subsequent year of addition and not in the year of addition whereas under the Companies Act, the depreciation is to be provided in the year of addition and even in the part of the year.

ii) Rate of depreciation, under Electricity Supply Act is lower than the rate of depreciation under the Companies Act.

(iii) Electricity Supply Act permits only straight-line method of depreciation whereas Companies Act permits both Straight line method and Written Down Method.

iv) Under the Electricity Supply Act, depreciation is restricted to 90% of the cost of the assets whereas under the Companies Act entire asset value is allowed to be written off.

v) When an Electricity Company has incurred losses and unable to bear the burden of depreciation, an amount equal to the unabsorbed depreciation has to be transferred to the depreciation reserve which will be charged to profit and loss account of the year in which the profits are made and will become the additional depreciation charge of that year.

vi) Under the Electricity Supply Act, the company has to capitalize certain replacement expenses like meters and provide the depreciation in the books whereas under the Companies Act, the said replacement expenses have to be written off as revenue expenditure.

vii) Under the Electricity Supply Act, if the profit of the company in any year is in excess of the amount of Reasonable Return as computed under the Electricity Act, 1/3rd of such excess not exceeding 5% of the amount of Reasonable Return only is at the disposal of the company. Out of the balance excess, 50% is to be apportioned to Tariff and Dividend Control Reserve and balance 50% is to be distributed in form of proportional rebate on the amounts collected from the sale of electricity and meter rentals and to be carried forward in the account of company for the distribution to the consumers. Tariff and Dividend Control Reserve ‘is available to the company when the clear ‘profits as computed under the Electricity Supply Act is less than the Reasonable Return in any subsequent year. There is no similar provision in the Companies Act.

viii) Under the Electricity Supply Act, the company has to create various reserves out of the retained earning contingency reserves which can be utilized on the happening of certain events and the company has to vest the said reserves in Trust securities. There is similar provision in the Companies Act.

Section 115JB requires every assessee being a company to prepare its profit and loss account in accordance with the provisions of Parts II & III of Schedule VI to the Companies Act. While preparing annual accounts including profit and loss account, the company has to follow the same i.e. accounting policies; accounting standard adopted for preparing such accounts including profit and loss account; the method and rates, adopted for calculating the depreciation, which have been adopted for preparing such accounts including profit and loss account arid laid before the company at its Annual General Meeting in accordance with the provisions of Section 210 of the Companies Act, 1956.

24.2 From the above requirement of the Proviso to section 11 53B(2), it is clear that the Electricity company has to comply with the provisions of Parts II & III of Schedule VI and the same time follow the same accounting policies, accounting standard and method and rate of depreciation as followed in the accounts which arc presented in the Annual General Meeting.

24.3 The assessee has claimed that the accounts laid before the Annual General Meeting have followed the accounting policies which are required to be followed under the Electricity Supply Act and which are not in accordance with the Companies Act. The assessee has drawn attention to the requirement of the Electricity Supply Act which provides for the accounting policy in respect of expenses on replacement of meters to be capitalized whereas the same is not in accordance with the Companies Act at the same is required to be written off. Proviso to section 115JB require the Electricity company to follow the same accounting policy while preparing the accounts in accordance with Parts 11 & III of Schedule VI and if the said policy of capitalizing the replacement of meters is followed in preparing the accounts under Companies Act, the accounts will not be in accordance with Parts II & Ill of Schedule VI of the Companies Act. The Electricity company therefore cannot and will not be able to prepare the accounts under the Companies Act following the same accounting policy which is mandated by the proviso to section 115JB(2) to be followed.

24.4 The assessee further brought to our notice the case of depreciation. Rate of depreciation under the Electricity Supply Act is lower than the rates provided under the Companies Act and if the rates as provided in the accounts presented before the Annual General Meeting i.e. Electricity Act Accounts, the depreciation at the same rates in the accounts for the Companies Act will be below what is required under the Companies Act and therefore the accounts so prepared under the Companies Act will not be in accordance with Parts II & III of Schedule VI.

24.5 The assessee also referred to the requirement of Electricity Supply Act as regards the real profits and Reasonable Return, in the accounts under the Electricity Supply Act, the excess of profits is required to be transferred to Tariff and Dividend Control Reserve and also to be distributed to the consumers. This treatment is not in consonance with the accounting policy which is permitted under the Companies Act as the company is required to disclose the entire profit earned irrespective of the, same being more or less than Reasonable Return, Part IT of Schedule VI requires the profit and loss account shall be so made out as clearly to accounting policy of transferring the excess profits to be under the Electricity Supply Act cannot be followed under the Companies Act and if followed the accounts will not be in accordance Parts II & III of Schedule VI.

24.6 It was, therefore, submitted that an electricity company can not prepare the accounts under Part II & III of Schedule VI of the Companies Act following the same accounting policies as followed in the accounts under the Electricity Supply Act which are presented before the company in Annual General Meeting. The assessee therefore submitted that the provisions of section 115JB(2) as mandated by the first proviso cannot be complied with.

24.7 Attention of the Bench was also drawn to the provisions of section, 115JA. Proviso to section 115JA(2) has provided that while preparing profit and loss account under Parts II & III of Schedule VI the same methods and rates which are adopted for calculation of depreciation in the accounts presented before the company in Annual General Meeting should be followed. There was no provision for following the same accounting policies and same accounting standards in both the accounts as prepared under the Electricity Supply Act and under the Companies Act. This material departure in section 115JB from the provisions in section 115JA has resulted in the accounts to be prepared under the Companies Act following the same accounting policies and same accounting standards unworkable and any such attempt to make the accounts will be not in accordance with the provisions of the Companies Act.

25 As per the contentions of the Id counsel of the assessee, there will be a big anomaly in preparing the accounts as per Electricity Supply Act and as per Companies Act. The Honorable Supreme Court in the case of CIT vs. Official Liquidator, Palai Central Bank Ltd., in 150 ITR 539, on which reliance was placed by the id counsel of the assessee supports the case by the assessee. This case was under Super Profits Tax Act. In this case e was a banking company, which went into liquidation. For ….  the Assessing Officer was of the opinion that their taxable e would attract liable to Super Profits Tax Act Under the Act the Super Profit Tax is leviable in respect of chargeable profits, which are in excess of standard deduction as specified in Third Schedule in the said Act. Standard Deduction was defined to mean an amount equal to six percent of the capital of the company or Rs.50,000 whichever is higher. The issue arose as to whether a company in liquidation can be said to have a paid-up capital and reserves. The Supreme Court came to conclusion that after liquidation of company there can not be any share capital. Supreme Court further held that once the provisions contained in the Act for computing the capital of the company and its reserves cannot have any application, the “standard deduction is incapable of ascertainment, and the charge of Super Profits Tax under section 4 of the Act is not attracted. In this case the definition of “Standard Deduction” was to mean six percent of the capital or Rs.50,000 whichever is higher Out of two limbs of the calculation, one limb being capital was not capable of ascertainment. Supreme Court held that when one limb is not capable of ascertainment the whole provision fails, in other words there is “breakdown” of the whole provision and the provision cannot he applied.

25.1. While deciding so, the Honorable Supreme Court has taken into consideration its own decision in the case of CIT vs B C Srinivasa Setty in 128 JTR 294 wherein Supreme Court had pointed out that under the scheme of the Income Tax Act charge of tax will not get attracted unless the case or transaction falls under the governance of the relevant computation provisions. The Supreme Court in B.C. Srinivasa Setty’s case as observed as under:-

“The character of the computation provisions in each case bears a relationship to the nature of the charge. Thus, the charging section and the computation provisions together constitute an integrated code. When there is a. case to which the computation provisions cannot apply at all, it is evident that such a case was not intended to fall within the charging section. Otherwise, one would be driven to conclude that while a certain income seems to fall within, the charging section, there is no scheme of computation for quantifying it. The legislative pattern discernible in the Act is against such a conclusion”.

26. After going through the ratio of the decisions of the Hon’ble Supreme Court, it is clearly seen that where something is not possible then the assessee cannot be forced to do so under specific provisions of law. Those previsions of law cannot be followed because it is impossible to do so. The doctrine of impossibility is squarely applicable on the facts of the present case because it is not possible to prepare the accounts under the Companies Act because the assessee is preparing the accounts as per the policies of Electricity Supply Act.

26.1 The Honorable Supreme Court in the case of Kwality Biscuits Ltd in 284 ITR 434 has held that provisions of sec. 234B & 234C are not applicable in respect to computation of deduction u/s 115J because the computation of profit under the provisions of sec. 115J has to be made on the basis of book profit and since the entire exercise of computing the income under section 115J can only be done at the end of the financial year, and the provisions of sec. 207, 208, 209 & 210 cannot be made applicable ‘until and unless the accounts are audited and the balance sheet prepared. The ratio of this decision helps the case of the assessee because it is not possible to prepare the accounts in accordance with part II &III of Schedule VI of the Companies Act for the purpose of provisions of sec. 115JB. Therefore, in view of the ratio of this decision, in our considered view, the provisions of sec. 115JB cannot be attracted of the present case.

27. The issue in regard to doctrine of impossibility has been discussed of the Tribunal in the case of M/s Divine Holdings Pvt. Ltd 180/Mum/2000 vide order dated 26.6.2001. The Tribunal in para 8 has observed that the assessee did whatever was possible on its part. It is well-known principles “law canonized in the dictum “lex non cogit ad impossibilia”. Law cannot compel you to do the impossible.” Again this ratio has been considered in the case of Shri Hitewsh S Mehtam in ITA No. 2469/Mum/2002 vide order dated 7.5.2004. In the case of Growmore Leasing Investments Ltd, the Tribunal has again taken into consideration the ratio of the decision of the Tribunal in case of Divine Holdings Pvt ltd (supra) and has held that the assessee cannot force to do something, which is not possible for it. In view of the’ above facts and circumstances, it can be easily held that a person cannot be forced to do something impossible. The law does not compel a man to do that which he cannot possible perform. The law creates a duty or charge, and the party is disable to perform it, without any default in him, and has no remedy over, there the law will in general excuse him arid though impossibility of performance is in general no excuse for not performing an obligation which a party has expressly undertaken by contract yet when the obligations one implied by law, impossibility of performance is a good excuse. Thus in a case in which consignees of a cargo were prevented from unloading a ship promptly by reason of a dock strike, the Court, after holding that in the absence of an express agreement to unload in a specified time there was implied obligation to unload within a reasonable time, held that the maxim lex non cogit ad impossibilia applied.

28 As discussed above when it is not possible to prepare the accounts under the Companies Act for the purpose of computation u/s 115JB, therefore, assessee cannot he forced to prepare the accounts when it is not possible. Therefore, we are in agreement with the contentions of in as much as the accounting policies followed in the accounts if followed for the preparation of Companies Act. 1 not disclose true and fair view and will not be in accordance work part II and III of Schedule VI of the Companies Act. The ratio of the decisions of the Hon7ble Supreme Court and the ratio of the decision of the Tribunal discussed above are in support of the contentions of the assessee. We further found that the issue of applicability of sec. 115J came before the Tribunal for AY 88-89. Taking into consideration the preparation of accounts under the Electricity Act and other contentions the assessee including the decisions of the Supreme Court in the case of B.C.Srinivasa Setty (supra), the Tribunal has held that. the provisions of Sec. 115J are not attracted on the facts of the present case.

29 As discussed above, the assessee is following the accounting policies under the Electricity Supply act and prepared its accounts in view of those very policies. Following those very policies, the accounts in accordance with part II & III of Schedule VI of the Companies Act are not applicable at all. Once there is no possibility for preparing the accounts in accordance with the part II & 11 of Schedule VI of Companies Act then the provisions of sec. 115JB cannot be forced. Therefore, in view of the above facts and circumstances and respectfully following the above decisions of the Honorable Supreme Court and the decision of the Tribunal for AY 88-89, we hold that provisions of sec. 115JB are not applicable on the facts of the present case.”

Taking consistent view, we confirm the order of CIT(A) and hence, appeal of Revenue on this issue is dismissed.”

Respectfully following the decision of this Tribunal in assessee’s own case in ITA No. 1480/Mum/2015 we affirm the order of the CIT(A). Thus, ground No. 4 taken by the Revenue stands dismissed.

20. Ground No. 5 relates to exclusion of dis allowance of Rs. 39,12,93,402/-under Section 14A r.w. Rule 8D from the book profit of the assessee. While disposing ground No. 4 respectfully following the decision of this Tribunal in assessee’s own case for A.Y. 2010-11 we confirmed the order of the CIT(A) that provisions of Section 115JB are not applicable to assessee company, therefore, ground No. 5 taken by Revenue become infructuous. Therefore the same stands dismissed as such as agreed by both the parties.

21. In the result, the appeal filed by the Revenue stands dismissed while the appeal filed by the assessee is allowed for statistical purposes.

Order pronounced in the open court on 20th December, 2017.

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Tags : ITAT Judgments (5040) mat (125) section 115JB (98)

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