M/S. MADHYA GUJARAT VIJ COMPANY LTD.,BARODA vs. THE ACIT, CIRCLE-2(1)(2),, BARODA

PER NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER:

The cross appeals filed by the Assessee and the Revenue for the Assessment Year (A.Y.) 2017-18 are against the order of National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘CIT(A)’] dated 25.03.2022; whereas the appeal filed by the Assessee for A.Y. 2016-17 is against the order of National Faceless Appeal Centre (NFAC), Delhi dated 22.05.2025. As some of the issues involved in these appeals were common and interconnected, all the matters were heard together and are being disposed of vide this common order for the sake of convenience.

ITA Nos. 190/Ahd/2022 (A)

ITA No. 190/AHD/2022 & ITA No. 204/Ahd/2022, A.Y. 2017-18 & ITA No. 1467/Ahd/2025, A.Y. 2016-17 M/s. Madhya Gujarat Vij Company Ltd. Vs. DCIT 3

Grants/subsidies/consumer contribution received during the year as against 5. 28% offered by the appellant. The learned Commissioner (Appeals) erred in law and on facts in not considering that the facts of the year under consideration were totally different from that of all the earlier years where similar additions were made. 2. The learned Commissioner of Income Tax (Appeals) has erred in law and on facts in confirming the additions of ₹6,14,06,000/- out of the interest expenditure treating the same as attributable to the Capital Work in Progress over and above the interest already capitalized by the appellant. 3. The learned Commissioner of Income Tax (Appeals) erred in law and on facts has confirmed the additions of the income shown under the head income from other sources in the Profit & loss Account viz., Sale of Scrap and Miscellaneous Receipts amounting to 6,15,000/- and ₹17,41,91.000/- respectively without considering the nature of each item included under this head. 4. The learned Commissioner of Income Tax (Appeals) has erred in law and on facts in confirming the additions of ₹41,57,90,000/- being the Government Subsidy received in advance during the year and shown under the head Current Liabilities in the Balance Sheet without appreciating the fact that the same is a Capital Receipt. 5. The learned Commissioner of Income Tax (Appeals) erred in law and on facts has dismissed the ground relating to the initiation of penalty proceedings under section 271(1)(c) of the IT Act 6. The learned Commissioner of Income Tax (Appeals) has erred in law and on facts in confirming the charging of interest under section 2348, 234C and 234D of the Income Tax Act, 1961. 7. The appellant craves leave to add to, alter, delete or modify any of the grounds of appeal either before or at the time of hearing of this appeal. 4. The assessee has raised the following additional grounds of appeal in the course of hearing:

ITA No. 190/AHD/2022 & ITA No. 204/Ahd/2022, A.Y. 2017-18 & ITA No. 1467/Ahd/2025, A.Y. 2016-17 M/s. Madhya Gujarat Vij Company Ltd. Vs. DCIT 4 Ground No. 1: Addition at the rate of 15% of capital grants and subsidies as against 5.28% offered by the assessee.

ITA No. 190/AHD/2022 & ITA No. 204/Ahd/2022, A.Y. 2017-18 & ITA No. 1467/Ahd/2025, A.Y. 2016-17 M/s. Madhya Gujarat Vij Company Ltd. Vs. DCIT 5

depreciation on all the assets to which capital grant pertained was allowable at the rate of 15% only, whereas different rate of depreciation is provided for different assets, in the Rules. The Co-ordinate bench of Tribunal had, therefore, set aside the matter to the file of the AO with a direction to re-compute the disallowable amount on the basis of actual rate of depreciation as admissible for the different assets to which the capital grant amount was apportioned. In this regard, it will be relevant to reproduce the findings of the Tribunal on this issue in ITA No. 372 to 374/Ahd/2022 dated 29.01.2024, as under:

“4.1. Ld. Counsel for the assessee submitted that this issue was considered by the Co-ordinate Bench of this Tribunal in assessee’s own case in ITA Nos.2080/Ahd/2012 and Ors. dated 18.08.2023 which has followed earlier years order in ITA No.2583/Ahd/ 2010 dated 09.11.2016 relating to the Assessment Year 2006-07 wherein this issue was set aside to the Ld. A.O. as follows: “…7. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, we note that the issue in the dispute regarding the recognition of income on account of government grants and customer contribution in the case of present assessee was also there in the AY 2006-07 which has been adjudicated by the ITAT in ITA No. 2583/Ahd/2010 vide order dated 09.11.2016 wherein it was held that receipt of grants was in connection with capital assets. Therefore, the same is required to be reduced from the cost of the capital as prescribed under section 43(1) read with explanation 10 to section 43(1) of the Act. However, the issue has been restored back to the A.O. to adjudicate afresh after verifying the amount of grants to be apportioned relating to different assets and calculate the amount of depreciation allowance accordingly. The relevant finding of the coordinate bench reads as under: 17. We have heard the rival contentions and perused the material on record. Through this ground assessee has challenged the order of ld. CIT(A) sustaining the disallowance of depreciation at Rs.10,84,81,976/- by observing that capital subsidy and grant received are to be reduced from fixed asset and depreciation to be allowed on the remaining balance. We observe that the Government gives grant/subsidy to the holding company and then it is allocated to the assessee which is one of the subsidiary company and further such subsidy are not granted to actually to meet the cost but are granted as an inclusive of rural economically backward unviable areas.

ITA No. 190/AHD/2022 & ITA No. 204/Ahd/2022, A.Y. 2017-18 & ITA No. 1467/Ahd/2025, A.Y. 2016-17 M/s. Madhya Gujarat Vij Company Ltd. Vs. DCIT 6

Assessee received subsidies on different schemes viz. Rural Electrification and Tribal area Electrification and the assets cannot be bifurcated into Rural/Tribal area etc. 17.1 There is no dispute to the fact that the grants received from the Government are capital in nature but they have not been given specifically for acquiring a particular asset. In such situation provision of section 43(1) Explanation 10 of the Act squarely applies for the treatment of such capital grant. Relevant provisions of section 43(1) of the Act read as under :- In sections 28 to 41 and in this section, unless the context otherwise 43. requires (1) "actual cost" means the actual cost of the assets to the assessee, reduced by that portion of the cost thereof, if any, as has been met96 directly or indirectly by any other person or authority: [Provided that where the actual cost of an asset, being a motor car which is acquired by the assessee after the 31st day of March, 1967, [but before the 1st day of March, 1975,] and is used otherwise than in a business of running it on hire for tourists, exceeds twenty- five thousand rupees, the excess of the actual cost over such amount shall be ignored, and the actual cost thereof shall be taken to be twenty-five thousand rupees.] [Explanation 10.--Where a portion of the cost of an asset acquired by the assessee has been met directly or indirectly by the Central Government or a State Government or any authority established under any law or by any other person, in the form of a subsidy or grant or reimbursement (by whatever name called), then, so much of the cost as is relatable to such subsidy or grant or reimbursement shall not be included in the actual cost of the asset to the assessee : Provided that where such subsidy or grant or reimbursement is of such nature that it cannot be directly relatable to the asset 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. 17.2. Proviso to Explanation -10 to section 43(1) contemplates that subsidy or grant or reimbursement which cannot be relatable to the assets acquired then grant amount to be apportioned in the assets at the same proportion as such assets bears all the assets. We further observe that ld. Assessing Officer has given following finding for application of explanation -10 to section 43(1) by observing as follows:-

ITA No. 190/AHD/2022 & ITA No. 204/Ahd/2022, A.Y. 2017-18 & ITA No. 1467/Ahd/2025, A.Y. 2016-17 M/s. Madhya Gujarat Vij Company Ltd. Vs. DCIT 7

4.2. The contention of the assessee that Consumer's Contribution and Capital Grant are capital in nature is found tenable, but its treatment, of 10% thereof transferred to P & L account every year is not in accordance with the provisions of the Act. As envisaged in explanation 10 to section 43(1), where a portion of the cost an asset acquired by the assessee has been met directly or indirectly by the Central Government or State Govt. or any Authority established under any law, or by any other person, in the form of subsidy or grant or reimbursement then in a case where the subsidy is directly relatable to the asset, such subsidy shall not be included in the actual cost of the assets. In a case, where such subsidy or Grant or reimbursement, is of such nature that, it cannot be directly relatable to any particular assets, 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 which or with reference to which such grant or subsidy or reimbursement is received shall no be included in the actual cost of that assets to the assessee. 4.3 In view of the clear provisions of the Act as stated supra and the assessee himself have admitted that the subsidy and grant received are towards Capital assets, the assessee should have reduced the same from the Capital asset to arrive at the actual cost. However the assessee has failed to do so and also not furnished the details of fixed assets in respect of which the subsidy and grants have been received. Hence and inference is drawn that the Govt. grants/subsidy and consumers' contribution are relatable to fixed assets of plant & machinery. The assessee has claimed depreciation on Plant & Machinery as under: 17.3 We further observe that similar type of issue came up before the Tribunal in the case of GETCL(supra) which was adjudicated by the Coordinate Bench by observing as follows :- 20. We find that in the instant case, the CIT{A) held that excess depreciation claimed on account of capital grant comes to Rs.18.93 crores being 15% of Rs.176,62,04,718/-, i.e. Rs.26,49,30,708/- minus Rs.17,20,37,655/-, which amounts to Rs.9,28,93,053/-, and 15% of Rs.6427.94 lakhs amounting to Rs.964.191 lakh. The submissions of the assessee before us is that the uniform rate of 15% adopted by the CIT(A) is not justified. As per provisions of section 43(1} of the Act, the capital grant should be reduced from the cost/WDV of the relevant asset, and thereafter the depreciation is to be calculated. Thus, the capital grant receipt in respect of asset, on which depreciation is allowable at the rate different from 15% should be worked out as per

ITA No. 190/AHD/2022 & ITA No. 204/Ahd/2022, A.Y. 2017-18 & ITA No. 1467/Ahd/2025, A.Y. 2016-17 M/s. Madhya Gujarat Vij Company Ltd. Vs. DCIT 8

the applicable rate. The DR could not point out any mistake in the above submission of the assessee. which we find is in accordance with law. We, therefore, set aside the orders of the lower authorities on this issue, and restore the matter back to the file of the AO for adjudication afresh after verifying the proportionate amount of grant relating to different asset, and applying the actual rate of depreciation which relate to these assets.Thus, this ground of appeal of the assessee is allowed for statistical purpose. 17.4. In the light of the decision of the Co-ordinate Bench discussed above and in the light of proviso to Explanation -10 to section 43(1) of the Act we find it justified to restore the issue back to the file of Assessing Officer to adjudicate afresh after verifying the apportioned amount of grant relating to different assets and calculate the depreciation at the rates applicable to such assets. Needless to mention that all necessary details will be provided by the assessee to the Assessing Officer in order to calculate the correct amount of depreciation, Ld. Assessing Officer to provide proper opportunity of being heard should be given to the assessee. Accordingly, this ground of assessee is allowed for statistical purposes. 7.1. The above finding of the of the coordinate bench has been followed in the subsequent year i.e. A.Y. 2008-09 in ITA No. 1709/Ahd/2018 vide order dated 28-2-2022. Therefore, following the concurrent view taken by the ITAT, we hereby restore the issue to file of the AO for fresh adjudication in accordance with the direction of the ITAT in assessment year 2006-07 and as per the provision of law. Hence the ground of the assessee is hereby allowed for statistical purposes.” 8. Respectfully following the decision taken by the Co-ordinate bench of this Tribunal on this issue, we deem it proper to remand this issue to the file of the AO with a direction to re-adjudicate the same after verifying the proportionate amount of grant relating to different assets and thereafter pass the order accordingly. The ground taken by the assessee is allowed for statistical purpose.

Ground No. 2 : Capitalisation of interest to Capital Work In Progress

ITA No. 190/AHD/2022 & ITA No. 204/Ahd/2022, A.Y. 2017-18 & ITA No. 1467/Ahd/2025, A.Y. 2016-17 M/s. Madhya Gujarat Vij Company Ltd. Vs. DCIT 9 of 15% of capital work in progress (CWIP), whereas till the preceding year the rate of such capitalisation was 25%. According to the AO, the interest expense to be capitalised on CWIP of Rs. 5231.47 lakhs at the rate 25% was Rs. 1307.86 lakhs. As the assessee had capitalised an amount of Rs.693.80 lakhs only, the balance amount of Rs.614.06 lakhs was added to the income of the assessee, which was upheld by the Ld. CIT(A). The Ld. AR of the assessee submitted that the entire basis of the addition made by the AO was factually incorrect as the assessee had neither capitalised interest at the rate of 25% in the earlier years nor at the rate of 10% in the current year. He explained that the interest is capitalised project wise on actual basis. He has drawn out attention to audited accounts and explained that the actual interest capitalised was Rs. 142.02 lakhs only [693.80-551.78]. He further submitted that the interest capitalised by the assessee was never disputed by the Department either in the earlier or in the subsequent years and the addition made by the AO was due to incorrect appreciation of facts of the case.

ITA No. 190/AHD/2022 & ITA No. 204/Ahd/2022, A.Y. 2017-18 & ITA No. 1467/Ahd/2025, A.Y. 2016-17 M/s. Madhya Gujarat Vij Company Ltd. Vs. DCIT 10

From the figure of interest capitalised in the earlier years as appearing in this table, it is evident that the interest was not capitalised at the rate of 25%. Thus, the finding given by the AO that the interest was capitalised by the assessee at the rate of 25% in the earlier years is not found correct. Rather in reply dated 21.12.2018 filed before the AO, the assessee had submitted that “Borrowing Cost specifically identified and directly attributable to the acquisition or construction of qualifying assets is capitalised as part of such assets”. The finding given by the AO that there was a change in the method of accounting during the year is also not found correct. From Form No. 3CA brought on record by the assessee, it is found that the Auditor did not report any change in the method of accounting employed during the year vis-à-vis the method employed in the immediately preceding year. Further the interest capitalised by the assessee to CWIP was not disputed by the assessee in the preceding as well as in the subsequent years. The addition made by the AO is thus found to be based on incorrect facts. Therefore, the addition of Rs. 614.06 lakhs made by the AO on account of capitalisation of interest to CWIP is deleted. The ground taken by the assessee is allowed.

ITA No. 190/AHD/2022 & ITA No. 204/Ahd/2022, A.Y. 2017-18 & ITA No. 1467/Ahd/2025, A.Y. 2016-17 M/s. Madhya Gujarat Vij Company Ltd. Vs. DCIT 11 12. Ground No. – 3 – This ground pertained to treating the income from sale of scrap and misc. receipts as income from other sources instead of business income. This ground was not pressed by the Ld. AR in the course of hearing, as the relief on this issue was allowed by the Ld. CIT(A) and the ground was wrongly raised. Hence, the ground is dismissed.

Ground No. – 4 : Government Subsidy Advance

ITA No. 190/AHD/2022 & ITA No. 204/Ahd/2022, A.Y. 2017-18 & ITA No. 1467/Ahd/2025, A.Y. 2016-17 M/s. Madhya Gujarat Vij Company Ltd. Vs. DCIT 12 Government in advance was in the nature of revenue receipt as the assessee was only an implementing agency to execute solar capacity unit for eligible people residing in inaccessible areas. He, therefore, strongly supported the order of the Ld. CIT(A).

The scheme was to be implemented by four Electricity State Distribution Ccompanies and the target for each distribution company was to be fixed

ITA No. 190/AHD/2022 & ITA No. 204/Ahd/2022, A.Y. 2017-18 & ITA No. 1467/Ahd/2025, A.Y. 2016-17 M/s. Madhya Gujarat Vij Company Ltd. Vs. DCIT 13 by Gujarat Urja Vikas Nigam Limited. The solar home light system was to be owned by the beneficiary who had to pay only 10% of the estimated cost.

From a perusal of the above Government Resolution, it is evident that the above amount is like a contractual/revenue receipt from the Gujarat Government to execute solar electricity units for eligible people residing in inaccessible areas. Therefore, it is clear that the impugned receipts are revenue in nature. However, the expenses claimed by the appellant related to this receipt, has to be allowed as expenditure by the AO. Moreover, the appellant has not substantiated why these receipts have been treated as advances by the appellant, raising the concern that the appellant might claim double benefit by showing this as capital receipt and not offering to tax, and at the same claiming the expenditure incurred on this account as allowable expenditure. Therefore, in view of the above, the addition made by the AO in total income of the appellant is hereby confirmed. However, the AO is wrong in adding this amount to the book profit in his computation u/s. 115JB for the same reasons as discussed above in ground No. 2. Therefore, this ground is partly allowed.

As per the scheme of the Government of Gujarat, the assessee company was only an implementing agency for setting up solar home light system in remote areas. The amount received by the assessee was in the nature of trading receipt as it was eligible to claim the deduction for cost of solar power home light system installed by it. By no stretch of imagination this receipt can be categorised as the capital receipt of the assessee. The amount was never meant to be utilised by the assessee for its own activities. Therefore, the Ld. CIT(A) had rightly held the subsidy/grant of Rs. 4157.90 lakhs received by the assessee as revenue receipt. We do not find any reason to differ with the findings of the Ld. CIT(A) on this

ITA No. 190/AHD/2022 & ITA No. 204/Ahd/2022, A.Y. 2017-18 & ITA No. 1467/Ahd/2025, A.Y. 2016-17 M/s. Madhya Gujarat Vij Company Ltd. Vs. DCIT 14 issue. Accordingly, the order of the Ld. CIT(A) is upheld and the ground taken by the assessee is dismissed.

Additional Ground – Interest income on staff loan and advance

ITA No. 190/AHD/2022 & ITA No. 204/Ahd/2022, A.Y. 2017-18 & ITA No. 1467/Ahd/2025, A.Y. 2016-17 M/s. Madhya Gujarat Vij Company Ltd. Vs. DCIT 15

income received from staff loans and advances was directly related to the business of the assessee. The relevant portion of the judgment is reproduced below:

“12. Heard learned advocates for both the sides. In case of Gujarat Urja Vikas Nigam Ltd. (supra), this Court has held as under: "13. With regard to question No.2[d], the Assessing Officer noticed that as per Schedule 14, the assessee has shown other income consisting of interest on loan and advances, incentives from CPSU, etc. The Assessing Officer was of the view that this income was to be assessed as income from other sources instead of business income shown by the assessee. 14. On appeal, the CIT(A) as well as the Tribunal held that the interest income is required to be treated as business income instead of income from other sources. The Tribunal in its order observed as under: "10 We have heard the rival contentions and perused the material on record on this issue. The assessing Officer has treated the aforesaid income under the head income from other sources without controverting the submission of the assessee on the basis of which it was claimed that these income were of the nature of business income as elaborated in para seven of this order. The Id. CIT(A) has decided the issue in favour of the assessees taking that this issue was decided in favour of the assessee for assessment year 2009-10. During the course of appellate proceedings, the Revenue has failed to controvert the aforesaid contention and the findings of the Id. CIT (A), therefore after considering the material fact that interest earned on loan and advances from deposit placed with Mega Power Project toward sits sharing of power and interest of UL pool account received from M/s.Power Grid Corporation India Ltd were directly related to the business of the assessee, therefore, this ground of appeal of the Revenue stands dismissed." 15. In view of above findings of acts arrived at by the Tribunal that interest earned by the assessee was directly related to the business of the assessee, no question of law much less substantial question of law arises. Therefore, appeal stands dismissed qua question No.2[d]."

ITA No. 190/AHD/2022 & ITA No. 204/Ahd/2022, A.Y. 2017-18 & ITA No. 1467/Ahd/2025, A.Y. 2016-17 M/s. Madhya Gujarat Vij Company Ltd. Vs. DCIT 16

"8. Having heard learned advocates for the parties it appears that it is not in dispute that the petitioner has relied upon the decision of this court in case of Gutarat Urja Vikas Nigam Itd v. DCIT in Tax Appeal No. 63/2020 wherein, the Tax Appeal was preferred by the Revenue on the aspect as to whether interest received on staff loan is business income or not for the purpose of consideration of disallowance under section 14A of the Act. The facts of the case of Gujarat Urja Vikas Nigam Ltd v. DCIT and the facts of the case of the petitioner are identical and not different and as such, the Tribunal could not have relied upon the decision of Orissa High Court while distinguishing the facts of the case of the petitioner by ignoring the decision of the Jurisdictional High Court. More particularly, when the CIT and the Tribunal in case of the Guiarat Urja Vikas Nigam Ltd v. DCIT have held that interest income on staff loans is required to be treated as 'business income' instead of 'income from other sources' which is confirmed by this court in the aforesaid Tax Appeal. 9. In case of Gujarat Energy Transmission Corporation Ltd supra) in ITA No. 633/2013, the Coordinate Bench of the Tribunal, after considering the decision of this Court, has held that the interest on staff loans and advances are part of the 'business income' only. In such circumstances, the decision of the co-ordinate Bench of the Tribunal as well as this court were binding upon the Tribunal resulting into the mistake apparent on record." 14. In view of the above view taken by this Court, we do not find any merit in this Appeal as no question of law much less any substantial question of law can be said to have arisen in the impugned order passed by the Tribunal so far as the proposed questions of law are concerned. The Appeal therefore, being devoid of any merit is accordingly dismissed.

ITA No. 190/AHD/2022 & ITA No. 204/Ahd/2022, A.Y. 2017-18 & ITA No. 1467/Ahd/2025, A.Y. 2016-17 M/s. Madhya Gujarat Vij Company Ltd. Vs. DCIT 17

204/Ahd/2022 (R) : A.Y. 2017-18

1.1. That on the facts and circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition of Rs 113,17,93,000/- to book profits u/s. 115JB of the IT. Act towards govt grants, subsidies and consumers contribution towards capital assets. 1.2. That on the facts and circumstances of the case and in law, the Ld CIT(A) erred in deleting the addition to book profits u/s 115JB of the IT Act without appreciating that the assesee had not prepared its statement of profit and loss in accordance with section 115JB of the IT. Act, and had failed to comply with the provisions of the Companies Act and Accounting Standards. The Ld CIT(A) failed to consider that the assessee has claimed depreciation on related assets @15%, but the corresponding deferred income credited to the P&L account is not computed on the same basis, but at lower rate, and this mismatch and inconsistency in accounting treatment was not in accordance with the requirements of section 115JB(2) of the IT Act and accounting principles 1.3. That on the facts and circumstances of the case and in law, the Id CIT(A) erred in deleting the addition to book profits u/s 115JB of the IT Act towards grants, subsidies and consumers contribution, without appreciating that the assessee had not prepared its statement of profit and loss in accordance with section 115JB(2), and failed to comply with the provisions of the Companies Act and Accounting Standards, and failed to furnish complete information regarding the assets relating to grants, subsidies and consumers' contribution and the AO was therefore, justified in computing the book profits in accordance with section 115JB(2) of the IT Act and making the addition to deferred income credited to the P& L account, on the same basis as followed by the assessee in debiting depreciation on related assets to its P& L account 1.4. That on the facts and circumstances of the case and in law, the Id.CIT(A) erred in deleting the addition of Rs 41,57,90,000/- to book profits u/s 115JB of the 1.T. Act towards subsidy/grants received in advance, without appreciating that the assessee had not prepared its statement of profit and loss in accordance with section 115)B(2), and failed to comply with the provisions of the Companies Act and Accounting Standards, and failed to furnish information and necessary supporting evidences and also did not furnish any justification and the AO was therefore, justified in computing the book profits in accordance with section 115)B(2) of the Act and making the addition.

ITA No. 190/AHD/2022 & ITA No. 204/Ahd/2022, A.Y. 2017-18 & ITA No. 1467/Ahd/2025, A.Y. 2016-17 M/s. Madhya Gujarat Vij Company Ltd. Vs. DCIT 18

1.5. That on the facts and circumstances of the case and in law, the Ld CIT(A) erred in deleting the additions to book profit u/s 115JB of the IT. Act by merely relying on the decision of CIT(A) in another sister concern and without examining the facts of the case, and without considering the facts that the assessee had not prepared its statement of profit and loss in accordance with section 115JB(2) of the Act, and the additions were justified when the book profits was computed by the AO in accordance with provisions of section 115JB(2) of the 1.T.Act 1.6. That on the facts and circumstances of the case and in law, the Id.CIT(A) erred in deleting the additions to book profits u/s 115JB of the I.T.Act without appreciating that the assessee had not prepared its statement of profit and loss account in accordance with provisions of section 115JB(2) of the Act, and the AO was justified in making the additions after computing, book profits in accordance with section 115JB(2) of the Act. 1.7. That on the facts and circumstances of the case and in law the Ld CIT(A), erred in treating the miscellaneous receipts of Rs 17,41,91,000/- as business income instead of income from other sources without appreciating that these miscellaneous receipts were not generated from day to day business activity, and the assessee had failed to controvert the findings of the AO and failed to substantiate its claim with necessary documentary evidence. 1.8. That on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in treating miscellaneous receipts of Rs 17,41,91,000/- as business income following the order of CIT(A) for earlier year of sister concern of the assessee without examining the facts this year, and without considering that the department had filed appeal in the Hon'ble ITAT against the decisions of the Ld. CIT(A) on this issue, in earlier years 1.9. The appellant craves leaves to add, modify, amend or alter any grounds of appeal at the time of, or before, the hearing of appeal. It is prayed that the order of the CIT(A) on the above issues be set side and that of the Assessing Officer be restored.

ITA No. 190/AHD/2022 & ITA No. 204/Ahd/2022, A.Y. 2017-18 & ITA No. 1467/Ahd/2025, A.Y. 2016-17 M/s. Madhya Gujarat Vij Company Ltd. Vs. DCIT 19 Rs.113,17,93,000/- under the normal provisions had deleted the addition made while computing the book profit u/s 115JB of the Act.

ITA No. 190/AHD/2022 & ITA No. 204/Ahd/2022, A.Y. 2017-18 & ITA No. 1467/Ahd/2025, A.Y. 2016-17 M/s. Madhya Gujarat Vij Company Ltd. Vs. DCIT 20 Explanation-1 to section 115JB(2) of the Act, the present addition is covered. We, therefore, deem it proper to set aside the matter to the file of the AO, with a direction to categorically specify as to under which clause of the Explanation the proposed addition is required to be added. The decision in this regard may be taken in accordance with the provisions of law after allowing a proper opportunity of being heard to the assessee. The ground of the Revenue is treated as allowed for statistical purpose.

ITA No. 1467/Ahd/2025 : A.Y. 2016-17

ITA No. 190/AHD/2022 & ITA No. 204/Ahd/2022, A.Y. 2017-18 & ITA No. 1467/Ahd/2025, A.Y. 2016-17 M/s. Madhya Gujarat Vij Company Ltd. Vs. DCIT 21 1.1. The learned Commissioner of Income Tax (Appeals), NFAC erred in law and on facts has also confirmed the similar additions of ₹55.98.59.000/ as above made under section 115JB of the IT Act without appreciating the jurisdictional judgement of ITAT. Ahmedabad in case of ACIT vs Gujarat State Energy Generation Limited 2.0. The learned Commissioner of Income Tax (Appeals). NFAC erred in law and on facts has confirmed the additions of the interest income from staff loans and advances. amounting to ₹3,85,94,000/- treating the same as income from other sources. 3.0. The learned Commissioner of Income Tax (Appeals), NFAC has erred in law and on facts in confirming the action of the Assessing Officer in treating the balance miscellaneous receipts of ₹5,41,34,269/- (out of total miscellaneous receipts of ₹23,95.50,000/) a "Income from Other Sources instead of "Business Income", even though such receipt are intrinsically connected with the business operations of the appellant. 4.0. The appellant craves leave to add to, alter, delete or modify any of the above ground of appeal either before or at the time of hearing of this appeal. 31. Ground No. 1 pertains to addition of Rs. 29,12,72,722/- on account of capital grants of subsidies and is identical to Ground No. 1 as adjudicated in ITA No. 190/Ahd/2022 for A.Y. 2017-18. The decision taken on this issue in ITA No. 190/Ahd/2022 is applicable mutatis mutandis to this year as well. Accordingly, the ground of the assessee is treated as allowed for statistical purpose.

ITA No. 190/AHD/2022 & ITA No. 204/Ahd/2022, A.Y. 2017-18 & ITA No. 1467/Ahd/2025, A.Y. 2016-17 M/s. Madhya Gujarat Vij Company Ltd. Vs. DCIT 22 Following the decision taken on this issue in ITA No. 190/Ahd/2022, the ground of the assessee is allowed.

Order pronounced in the Court on 29/06/2026 at Ahmedabad.

Sd/- Sd/- (SUCHITRA KAMBLE) (NARENDRA PRASAD SINHA) Judicial Member Accountant Member Dated – 29th June, 2026 (True Copy)

ITA No. 190/AHD/2022 & ITA No. 204/Ahd/2022, A.Y. 2017-18 & ITA No. 1467/Ahd/2025, A.Y. 2016-17 M/s. Madhya Gujarat Vij Company Ltd. Vs. DCIT 23 Neelesh, Sr. PS आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order forwarded to : अ�ेिषत 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु�(अपील) / The CIT(A) 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण / DR, ITAT, 6. गाड� फाईल /Guard file. आदेशानुसार/BY ORDER, आदेशानुसार आदेशानुसार आदेशानुसार पंजीकार (Dy./Asstt.Registrar) उप उप/सहायक उप उप सहायक सहायक पंजीकार सहायक पंजीकार पंजीकार आयकर अपीलीय आयकर अपीलीय अिधकरण अिधकरण, अहमदाबाद अहमदाबाद / ITAT, Ahmedabad आयकर आयकर अपीलीय अपीलीय अिधकरण अिधकरण अहमदाबाद अहमदाबाद