SR. MANAGER(FIN)--TAX, NHPC LTD.,,FARIDABAD vs. ACIT, FARIDABAD

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘E’, NEW DELHI BEFORE SH. ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SH. SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER (THROUGH VIDEO CONFERENCING) ITA No. 5211/Del/2016 Assessment Year: 2013-14 Dy. CIT, Vs. M/s. NHPC Ltd., Circle-II, Faridabad. NHPC Comples, Sector-33, Faridabad. PAN No. AAACN 0149 C (APPELLANT) (RESPONDENT) ITA No. 5106/Del/2016 Assessment Year: 2013-14 Sr. Manager(Fin)- Tax, Vs. ACIT NHPC Ltd., Circle – II, NHPC Office Comples, Faridabad 4th Floor, Finance Division Sector – 33, Faridabad-121003 (APPELLANT) (RESPONDENT) Appellant by Shri Pramita M. Biswas, CIT-DR Respondent by Shri Ved Jain, Adv. Shri Ashish Goel, C.A. Date of hearing: 08/02/2021 Date of Pronouncement: 17/02/2021 ORDER PER ANIL CHATURVEDI, AM: These cross appeals filed by the Revenue and assessee are directed against the order of the Commissioner of Income Tax (A)-

ITA Nos.5211 & 5106/Del/2016 M/s. NHPC Ltd.(cross appeals) A.Y. 2013-14 2 Faridabad dated 02.08.2016 relating to Assessment Year 2013- 14.

“1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) [CIT(A)] is bad both in the eyes of law and on facts.

ITA Nos.5211 & 5106/Del/2016 M/s. NHPC Ltd.(cross appeals) A.Y. 2013-14 3 2. (i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the action of the AO in not allowing deduction amounting to Rs.6,45,37,576/- claimed by the assessee under Section 80-IA of the Act. (ii) That the above said disallowance of deduction has been confirmed despite the fact that the said income is directly relatable to the business of the assessee. (iii) Without prejudice to the above and in the alternative, the learned CIT(A) has erred both on facts and in law in ignoring settled position of law that in case said income is held not to be eligible for deduction under Section 80-IA, corresponding relief on account of expenses related to said incomes may also be given. 3. (i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the addition of Rs.14,34,00,000/- on account of provision of interest to beneficiaries states due to reduction in Tariff as a result of CERC order while computing regular income of the assessee. (ii) That the said addition has been confirmed rejecting the contention of the assessee that the said liability is an ascertained liability and not a contingent liability and hence an allowable expenditure. 4. Addition u/s 115JB: (i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the addition of Rs.14,34,00,000/- on account of provision of interest to beneficiaries states due to reduction in Tariff as a result of CERC order while computing income u/s 115JB of the Act. (ii) That the said addition has been confirmed rejected the contention of the assessee that the said liability is an ascertained liability and not a contingent liability and hence an allowable expenditure.

ITA Nos.5211 & 5106/Del/2016 M/s. NHPC Ltd.(cross appeals) A.Y. 2013-14 4 5. That the appellant craves leave or add, amend or alter any of the grounds of appeal.” 5. On the other hand, Revenue has raised the following grounds of appeal in ITA No.5211/Del/2016 for A.Y. 2013-14 which reads as under:

“1. Whether, on the facts and in circumstances of the case and in law, the Ld. CIT(A) was right in law in deleting addition of Rs.32,92,00,000/- made under normal provision as well as on book profit by the Assessing Officer under section 14A of the Act by applying Rule 8D? 2. Whether, on the facts and in circumstances of the case and in law, the Ld CIT(A) was right in law in deleting disallowance of Rs.4,07,79,845/- made by the Assessing Officer in computing the book profit u/s 115JB in respect of depreciation claimed on amortization of land Unclassified by the assessee even though there is no depreciation allowable on land under Companies Act and no rate of depreciation is provided in schedule XIV of Companies Act?”

ITA Nos.5211 & 5106/Del/2016 M/s. NHPC Ltd.(cross appeals) A.Y. 2013-14 5 Rangit Power Station, Dhauliganga Power Station, Dulhasti Power Station and Teesta-V Power Station. AO also noticed that in the Profit and Loss account of the respective units, the assessee had earned income from other sources which was shown under the head “Other Income”. The AO was of the view that assessee being in the business of generation and distribution of power, it shall be eligible for deduction only from profits earned from that business and not from “other income”. The assessee was accordingly show- caused to explain as to how the income earned under the head “Other Income” was eligible for deduction u/s 80-IA of the Act. The assessee made the submissions which are noted by the AO in the assessment order but he was not satisfied with the explanations. AO noted that the income shown under the head “Others” aggregating to Rs.6,45,37,576/- [comprising of Rs.96,40,329/- from Chamera-II, 96,71,102/- from Dhauliganga, Rs.33,00,795/- from Rangit and Rs.4,19,25,350/- from Dulhasti]. He therefore, held that the aforesaid aggregate amount of Rs.6,45,37,576/- to be not eligible for deduction u/s 80-IA and accordingly denied the claim of deduction.

ITA Nos.5211 & 5106/Del/2016 M/s. NHPC Ltd.(cross appeals) A.Y. 2013-14 6 11. Before us, Learned AR pointed to the project-wise recovery of expenses & other income earned by the assessee and the details which are also listed at Page 430 of the Paper Book which are as under:

Details of other income under the head other income of the Balance Sheet for the F.Y. 2012-13 (AY 2013-14) GI Code Particulars Dulhasti Chamea-II Dhauliganga Rangit Total 840701 RENT/Hire Charges 15,952 310,712 - 52,400 379,064 From Contractors 840708 Rent/hire charges- - 236,317 - 128,515 364,832 others 841001 Other income 38,923,077 6,463,144 6,815,731 717,782 52,919,734 841201 Township recoveries 667,156 892,418 907,938 723,938 3,191,450 841702 Lease recovery 303,290 309,091 441,752 171,263 1,225,396 841703 Electricity recovery 1,925,123 1,007,434 1,102,983 1,075,141 5,110,681 841704 Telephone recovery - 26,286 8,305 6,687 41,278 841706 Cable charges 120 265,518 110,821 106,010 482,469 841709 Misc. Charges - - - 199,328 199,328 841710 Guest house recovery 90,632 129,409 283,572 119,731 623,344 total 41,925,350 9,640,329 9,671,102 3,300,795 64,537,576

ITA Nos.5211 & 5106/Del/2016 M/s. NHPC Ltd.(cross appeals) A.Y. 2013-14 7 14. We have heard the rival submissions and perused the materials on record. The issue in the present ground is with respect to denial of claim of deduction u/s 80-IA of the Act. The claim of deduction was disallowed by the AO as he was of the view that the other income shown by the assessee was not eligible for deduction u/s 80IA. We find that identical issue arose in A.Y. 2011-12 before the Co-ordinate Bench of Tribunal. The Co- ordinate Bench of Tribunal by following the order in assessee’s own case for A.Y. 2010-11 decided the issue in favour of the assessee by observing as under:

“15. Coordinate Bench of the Tribunal in assessee's own case for AY 2010-11 (supra) decided the identical issue in favour of the assessee by returning following findings :- "47. We find that the AAR in the case of National Fertilizers Limited 193 CTR 498(AAR) held that the expenses incurred to earn these other incomes should be excluded from the debit side of the profit and loss account for computing the deduction u/s 80-I of the Act. The relevant extract of the judgment is as below: "(2)question No. 2 in AAR/532/2001 that the expenses of Rs.2,76,03,364 and Rs.12,12,74,426 (it is stated that the correct figure is Rs.11,02,56,561) allocated by marketing office and corporate office and interest expenditure of Rs.71,65,99,045 allocated by the corporate office and on question No. 2 in AAR/533/2001 that expenses of Rs.2,56,44,186 and of Rs.12,94,59,292 allocated by corporate office and marketing office and interest expenditure of Rs.8,49,30,952 allocated by corporate office should be excluded from the debit side of the profit and loss account of the industrial undertaking for the purpose of deduction under section 80-I of the Income-tax Act, 1961; the fact that the allocated interest income from corporate office Rs.5,22,94,939 and Rs.3,97,44,811 credited to profit and loss account of Vijaipur unit in the assessment years

ITA Nos.5211 & 5106/Del/2016 M/s. NHPC Ltd.(cross appeals) A.Y. 2013-14 8 1995-96 and 1996-97 is of no consequence as both interest income and interest expenditure are liable to be excluded for the purpose of deduction under section 80-I of the Act." 48. Further, the Hon'ble Delhi High Court in the case of Pr. CIT vs. Bharat Sanchar Nigam Limited reported in 388 ITR 371 explaining the meaning derived from while computing the deduction u/s 80-IA of the Act, has held as under: "8. The question arose in the context of the Assessee being asked to explain why certain specific items categorized as 'other income' and 'extraordinary item' in the Profit and Loss Account in assessment year 2004-05 should not be excluded from the profit and gains of the Assessee. According to the Revenue, these items could not be considered as profits and gains 'derived from' the eligible business for the purpose of deduction under Section 80 IA. The said six items were: (i) Extra Ordinary Items (ii) Refund from Universal Service Fund (iii) Interest from others (iv) Liquidated Damages (v) Excess provision written back (vi) Others including sale of directories, publications, form, waster paper, etc. 9. The AO held that the six items of income could not be said to be derived from the business of the Assessee and added the income therefrom to the returned income of the Assessee. In the appeal by the Assessee, the Commissioner of Income Tax (Appeals) ["CIT (A)"] agreed with the AO that three of the above items, viz. Extraordinary Items, Refund from Universal Service Fund and Interest from Others, did not form part of the profit derived from eligible business. However, the Assessee's plea regarding the other three items as being derived from the business was accepted by the CIT (A). 10. The Assessee filed appeals and the Revenue filed cross- appeals before the ITAT. The ITAT in the impugned orders concluded that with sub-section (2A) beginning with a non- obstante clause, the legislative intention of making available to an undertaking, providing telecommunication services, the benefit of deduction of 100% of the profits and

ITA Nos.5211 & 5106/Del/2016 M/s. NHPC Ltd.(cross appeals) A.Y. 2013-14 9 gains "of the eligible business" was explicit. Indeed, the legislature appears to have made a conscious departure in adopting for sub-section (2A) a wording different from that appearing in sub section (1). Under Section 801A (1), what is available for deduction are profits and gains "derived by an undertaking or an enterprise from any business referred to in sub-section (4)" whereas in Section 80-IA (2A) what is available for deduction is "hundred percent of the profits and gains of the eligible business". The following conclusion reached by the ITAT in para 13.11 of the impugned order correctly encapsulates the legal position as far as the interpretation of Section 801A (2A) is concerned. "13.11 Thus, we find that the legislature being alive to providing tax deductions to business enterprises and undertakings, it wanted to curtail the time line during which deduction can be claimed and also addressing the extent upto which it can be claimed has consciously carved out an exception to specified undertakings/enterprises whose needs and priorities differ has taken care to expand the time line for claiming deductions. It has consciously enabled those undertakings/enterprise 'who fall under subsection (2A) to claim 100% deduction of profits and gains of eligible business for the first five years and upto 30% for the remaining five years in the ten consecutive assessment years out of the fifteen years starting from the time the enterprise started its operation. The legislature having ousted applicability of sub-section (1) and (2) in the opening sentence brought in for the purposes of time line sub-section (2) into play but made no efforts whatsoever to put the assessee under sub-section (2A) to meet the stringent requirements that the profits so contemplated were to be "derived from". The requirements of the first degree nexus of the profits from the eligible business has not been brought into play." 11. As a result, the orders of both the AO and the CIT (A) to the extent they deny the Assessee, which in this case is in the business of providing telecommunication services, deduction in respect of the above items in terms of Section 80IA(2A) are unsustainable in law and have rightly been reversed by the IT AT."

ITA Nos.5211 & 5106/Del/2016 M/s. NHPC Ltd.(cross appeals) A.Y. 2013-14 10 49. Further, the Hon'ble Gujarat High Court in the case of Nirma Industries Ltd. Vs DCIT (2006) 283 ITR 402 has held as under: "27. Insofar as question No. 2 is concerned, according to the Tribunal s. 80-I of the Act uses the phrase 'derived from' and hence the interest received by the assessee from its trade debtors cannot be taken into consideration for the purpose of computing profits derived from an industrial undertaking. The Tribunal has failed to appreciate that it is not the case of the AO that the interest income is not assessable under the head 'Profits and gains of business'. It is only while computing relief under s. 80-I of the Act that the Revenue changes its stand. When one reads the opening portion of s. 80-I of the Act it is clear that words used are: "gross total income of an assessee includes any profits and gains derived from an industrial undertaking". Once this is the position then, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to the prescribed percentage is to be allowed. That, in fact, the gross total income of the assessee included profits and gains from such business, and this is apparent on a plain glance at the computation in the assessment order. Both in relation to Vatva Unit and Mandali Unit the computation commences by taking profit as per statement of income filed along with return of income. Therefore, the same item of receipt cannot be treated differently: once while computing the gross total income, and secondly at the time of computing deduction under s. 80-I of the Act. Therefore, on this limited count alone, the order of the Tribunal suffers from a basic fallacy resulting in an error in law and on facts. The Tribunal instead of recording findings on facts proceeded to discuss law. This litigation could have been avoided if the parties had invited attention to basic facts. 28. Neither the approach nor the reasons advanced by the Tribunal deserve acceptance. It is an incorrect proposition to state that interest paid by the debtors for late payment of the sale proceeds would not form part of the eligible income for the purpose of computing relief under s. 80-I of the Act. The reliance on the general meaning of the term interest as well as drawing distinction between the source of sale proceeds and the source of interest is erroneous in law in the case

ITA Nos.5211 & 5106/Del/2016 M/s. NHPC Ltd.(cross appeals) A.Y. 2013-14 11 of CIT vs. Govinda Choudhury & Sons (supra) the apex Court was called upon to decide as to the nature of interest received by the assessee therein. In the case before the apex Court the assessee who was executing Government contracts found itself involved in disputes with the State Government with regard to the payments due under the contracts and upon reference to arbitrators, the award included the principal sum as well as the interest for delay in payment of the principal sum. The assessee claimed that the interest was of the same nature as other trading receipts, but it was held by the Tribunal that the same was 'Income from other sources'. The apex Court laid down: "The assessee is a contractor. His business is to enter into contracts. In the course of the execution of these contracts, he has also to face disputes with the State Government and he has also to reckon with delays in payment of amounts that are due to him. If the amounts are not paid at the proper time and interest is awarded or paid for such delay, such interest is only an accretion to the assessee's receipts from the contracts. It is obviously attributable and incidental to the business carried on by him. It would not be correct, as the Tribunal has held, to say that this interest is totally de hors the contract business carried on by the assessee. It is well settled that interest can be assessed under the head 'Income from other sources' only if it cannot be brought within one or the other of the specific heads of charge. We find it difficult to comprehend how the interest receipts by the assessee can be treated as receipts which flow to him de hors the business which is carried on by him. In our view, the interest payable to him certainly partakes of the same character as the receipts for the payment of which he was otherwise entitled under the contract and which payment has been delayed as a result of certain disputes between the parties. It cannot be separated from the other amounts granted to the assessee under the awards and treated as 'Income from other sources'". 50. In view of the above quoted decisions, we are of the considered view that the disallowance made of Rs.4,46,54,883/- while computing the deduction allowable u/s 80-IA of the Act is not justified. Hence, we set aside the orders of the lower authorities and direct the Assessing

ITA Nos.5211 & 5106/Del/2016 M/s. NHPC Ltd.(cross appeals) A.Y. 2013-14 12 Officer to recompute the deduction allowable to the assessee u/s 80-IA of the Act without excluding Rs.4,46,54,883/-. Thus, this ground of appeal of the assessee is allowed." 16. Following the decision rendered by the coordinate Bench of the Tribunal on the issue in controversy discussed above, the arguments addressed by the ld. DR and the case laws relied upon are not applicable to the facts and circumstances of the case, thus we are of the considered view that making disallowance by the AO and confirmed by the ld. CIT (A) to the tune of Rs.2,99,54,875/- while computing the deduction allowable u/s 80IA is not sustainable and all the items of income qua which deduction has been sought by the assessee u/s 80IA are allowable deduction and order passed by the AO and ld. CIT (A) is not sustainable. So, the order passed by the lower authorities is set side directing the AO to recompute the deduction allowable to the assessee u/s 80IA without excluding amount of Rs.2,99,54,875/- disallowed by the AO. Consequently, ground no.2 is determined in favour of the assessee.” 15. Before us, Revenue has not pointed to any contrary binding decision in its support nor has placed any material on record to demonstrate that the aforesaid decision of Delhi Tribunal for A.Y. 2010-11 & 2011-12 in assessee’s own case has been set aside, stayed or overruled by higher judicial forum. In view of these facts and following the order of the Co-ordinate Bench of Tribunal and for similar reasons, we allow the ground of appeal of the assessee.

ITA Nos.5211 & 5106/Del/2016 M/s. NHPC Ltd.(cross appeals) A.Y. 2013-14 13 which may have to be paid in case of reduction in tariff as a result of revision order. AO was of the view that it being an unascertained liability, it was not allowable deduction while computing taxable income as well as computing profit under MAT. The assessee was asked to justify the claim of expenditure. The submissions made by assessee were not found acceptable to AO. AO was of the view that the amount was merely a provision and not an ascertained liability. He accordingly added the same while computing the taxable income under the normal provisions as well as for computing the book profits u/s 115JB of the Act. Aggrieved by the order of AO, assessee carried the matter before the CIT(A) who upheld the order of AO. Aggrieved by the order of CIT(A), assessee is now before us.

ITA Nos.5211 & 5106/Del/2016 M/s. NHPC Ltd.(cross appeals) A.Y. 2013-14 14 holding that provision towards electricity tariff adjustment made as per the CERC Regulations is an ascertained liability and could not be added to book profit under section 115JB of the Act. He pointed to the relevant findings of the Hon’ble High Court order placed in paper book. He further submitted that while deciding the issue, the Hon’ble Punjab and Haryana High Court has also considered the decision rendered by Hon’ble Delhi High Court in the case of NTPC Ltd. vs. CIT (2014) 45 Taxmann.com 527. He therefore, submitted that following the decision of Punjab & Haryana High Court (supra), the issue be decided in assessee’s favour.

ITA Nos.5211 & 5106/Del/2016 M/s. NHPC Ltd.(cross appeals) A.Y. 2013-14 15 4. Whether, on the facts and in circumstances of the case and in law, the Hon’ble ITAT was right in law in holding that ‘the contention of the AO that this liability has not crystallized is also not correct and the AO has not appreciated the facts in the right perspective’ disregarding the fact that later on, the CERC actually approved the tariff rates which were different from the rates proposed by the assessee and quantification of adjustment of tariff was evidently not an ascertained liability during the year under consideration. *** Re: Question Nos. 3 and 4: 5. The respondent-assessee sells electricity to the State Electricity Boards (DISCOMs). The tariff is determined and identified by the Central Electricity Regulatory Commission (CERC). The assessee filed its return declaring a loss of about Rs.225.31 crores. The case was selected for scrutiny and the proceedings pursuant thereto ensued. The assessee computed book profit under section 115JB at about Rs.58 crores in the original return. The Assessing Officer, upon examining the computation of book profit, noticed that the provision for tariff adjustment of about Rs.51.80 crores was not considered for addition while computing the book profit under section 115JB. The assessee answered the notice issued by the Assessing Officer under section 143(2).

ITA Nos.5211 & 5106/Del/2016 M/s. NHPC Ltd.(cross appeals) A.Y. 2013-14 16 the CERC approved the tariff rates by orders dated 29-05-2006 and 31-05-2006 for its two projects Chamera and Rangit for the period 01-04-2005 onwards i.e. relevant to the current Assessment Year i.e. 2006-07 onwards, the CERC fixed the tariff at rates lower than what was demanded by the respondent. In other words, whereas, the assessee claimed a tariff at a particular rate, the CERC approved the tariff at a different rate.

In view thereof, the Assessing Officer held that the liability is not ascertained and is contingent upon the order of the CERC. The Assessing Officer held:— "The CERC may have kept the tariff at the same level or have reduced by a factor which is not certain on the date of provisioning and therefore, the liability cannot be ascertained.” Accordingly, the Assessing Officer added back Rs.51.80 crores to the book profit for the purpose of computing the minimum alternate tax under section 115JB. ………….. 8. The question of law that arises is whether the tariff charged by the assessee from 01-04-2005 and till the final order of the CERC is contingent and cannot be said to have crystallized or attained certainty and is, therefore, liable to be added back to the assessee s income.

ITA Nos.5211 & 5106/Del/2016 M/s. NHPC Ltd.(cross appeals) A.Y. 2013-14 17 The assessee has been following this accounting practice consistently in accordance with the principle of conservatism as laid down in Accounting Standard-1 as per which all known ascertained liabilities have to be accounted for. The assessee is following the mercantile system of accounting. 10. The reliance placed by Mr. Ved Jain, the learned counsel appearing on behalf of the respondent/assessee upon the judgment of the Supreme Court in Bharat Earth Movers v. CIT [2000] 245 ITR 428/112 Taxman 61 is well- founded. In that case the assessee had created a fund by making a provision for meeting its liability arising on account of accumulated earned/vacation leave that the employees were entitled to for the relevant assessment year. An amount of about Rs.62 lakhs was set apart in a separate account as provision for encashment of accrued leave which was claimed as a deduction. The Tribunal held that the assessee was entitled to do so whereas the High Court held that the provision for accrued leave salary was a contingent liability and, therefore, was not a permissible deduction. The High Court based its judgment on the ground that the liability will arise only if an employee does not go on leave and applies for encashment. The Supreme Court held:— "4. The law is settled: if a business liability has definitely arisen in the accounting year, the deduction should be allowed although the liability may have to be quantified and discharged at a future date. What should be certain is the incurring of the liability. It should also be capable of being estimated with reasonable certainty though the actual quantification may not be possible. If these requirements are satisfied the liability is not a contingent one. The liability is in present though it will be discharged at a future date. It does not make any difference if the future date on which the liability shall have to be discharged is not certain. 5. In Metal Box Co. of India Ltd. v. Their Workmen [1969] 73 ITR 53 (SC) the appellant Company estimated its liability under two gratuity schemes framed by the Company and the amount of liability was deducted from the gross receipts in the P&L account. The Company had worked out on an actuarial valuation its estimated liability and made provision for such liability not all at once but spread over a number of years. The practice followed by the Company was that every year the Company worked out the additional liability incurred by it on the employees putting in every additional year of service. The gratuity was payable on the

ITA Nos.5211 & 5106/Del/2016 M/s. NHPC Ltd.(cross appeals) A.Y. 2013-14 18 termination of an employee's service either due to retirement, death or termination of service - the exact time of occurrence of the latter two events being not determinable with exactitude beforehand. A few principles were laid down by this Court, the relevant of which for our purpose are extracted and reproduced as under: (i) for an assessee maintaining his accounts on mercantile system, a liability already accrued, though to be discharged at a future date, would be a proper deduction while working out the profits and gains of his business, regard being had to the accepted principles of commercial practice and accountancy. It is not as if such deduction is permissible only in case of amounts actually expended or paid; (ii) just as receipts, though not actual receipts but accrued due are brought in for income tax assessment, so also liabilities accrued due would be taken into account while working out the profits and gains of the business; (iii) a condition subsequent, the fulfilment of which may result in the reduction or even extinction of the liability, would not have the effect of converting that liability into a contingent liability; and (iv) a trader computing his taxable profits for a particular year may properly deduct not only the payments actually made to his employees but also the present value of any payments in respect of their services in that year to be made in a subsequent year if it can be satisfactorily estimated. 6. So is the view taken in Calcutta Co. Ltd. v. CIT [1959) 37 ITR 1 : AIR 1959 SC 1165] wherein this Court has held that the liability on the assessee having been imported, the liability would be an accrued liability and would not convert into a conditional one merely because the liability was to be discharged at a future date. There may be some difficulty in the estimation thereof but that would not convert the accrued liability into a conditional one; it was always open to the tax authorities concerned to arrive at a proper estimate of the liability having regard to all the circumstances of the case."

ITA Nos.5211 & 5106/Del/2016 M/s. NHPC Ltd.(cross appeals) A.Y. 2013-14 19 11. Although the judgment was not under section 115JB, the ratio applies equally to the case before us as the question is the same. The liability in the present case also has definitely arisen, although it would have to be quantified and discharged to adjust it at a future date, i.e., the date on which the CERC determined the tariff. It is not even suggested by the revenue that the liability was not likely to be incurred. Considering the nature of the assessee's enterprise and the mode of fixation of tariff, it is reasonably certain that the liability would arise. Nor is it suggested that the liability was not capable of being estimated with reasonable certainty. The assessee estimated the liability after taking all the relevant factors into consideration. Indeed, the liability was enhanced on account of the CERC fixing the tariff at a rate lower than that sought by the assessee. The difficulty in estimating does not convert the accrued liability into a conditional one as held by the Supreme Court. Further, as held by the Supreme Court, it is upon the tax authorities to arrive at a proper estimate of the liability having regard to all the circumstances of the case. However, it is not suggested that the liability was not properly estimated. 12. The Delhi High Court dealt with a similar question in NTPC Ltd. v. CIT, [2014] 45 taxmann.com 527/224 Taxman 234 (Mag,) Delhi High Court. We were informed that the nature of the NTPC activities in business and the manner in which it fixes the tariff are the same. The Division Bench of the Delhi High Court held:— "21. There is authority, in the form of Supreme Court judgments in Shree Sajjan Mills Ltd. v. CIT [1985] 156 ITR 585, Bharat Earth Movers Ltd. v. CIT [2000] 245 ITR 428 and Metal Box Company of India Ltd. v. Their Workmen, (1969) 73 ITR 53, that a provision made on a reasonable basis, it would be in the nature of an ascertained liability and that in a mercantile system of accounting, provision for liability ascertained during the course of the relevant accounting period, which is payable at a future is permissible." We are in respectful agreement with this conclusion based on the judgments cited therein.”

ITA Nos.5211 & 5106/Del/2016 M/s. NHPC Ltd.(cross appeals) A.Y. 2013-14 20 21. Before us, no contrary binding decision in its support has been pointed out by Revenue nor has it placed any material on record to demonstrate the aforesaid decision of Hon’ble Punjab & Haryana High Court has been set aside, stayed or overruled by higher judicial forum. In view of these fact and respectfully following the decision of the Hon’ble Punjab & Haryana High Court, we hold that the AO was not justified and in not allowing the claim of Rs.14.34 crores as unascertained liability. We therefore, direct the AO to treat the amount of Rs.14.34 crores as ascertained liability for the purpose of computing income under normal tax provisions and also for the purpose of computing book profits u/s 115JB. Thus the grounds of the assessee are allowed.

ITA Nos.5211 & 5106/Del/2016 M/s. NHPC Ltd.(cross appeals) A.Y. 2013-14 21 bonds and had earned interest and dividend income and the same was claimed as exempt while computing the taxable income. AO also noticed that while computing the income, no disallowance u/s 14A has been made by the assessee. The assessee was therefore, asked to explain as to why the expenses claimed for earning exempt income should not be disallowed while computing the income under the normal provision of the Act as well as book profit under section 115JB of the Act. To the aforesaid query of AO, assessee made the submissions but the same were not found acceptable to the AO. The AO thereafter, by following the methodology prescribed under Rule 8D worked out the disallowance u/s 14A r.w.r 8D at Rs.32.92 crores and made its addition.

ITA Nos.5211 & 5106/Del/2016 M/s. NHPC Ltd.(cross appeals) A.Y. 2013-14 22 28. Learned AR on the other hand reiterated the submissions made before the AO and CIT(A) and further submitted that AO had merely made the impugned addition by stating that the provisions of section 14A are automatic and there is always a portion of interest expenditure which is attributable to earning exempt income. He further submitted that AO had not recorded any satisfaction to disbelief the submission of assessee that no expenditure has been incurred by assessee to earn the exempt income. He submitted that it is a settled law that the AO has to first examine the records of the assessee, and only after arriving at the dissatisfaction as to the correctness of the claim of assessee in respect of expenditure incurred in relation to exempt income, can resort to the provisions of section 14A read with Rule 8D. He further submitted that the investments made by the assessee have been either out of its own funds or out of the interest free funds provided by the Government. He submitted that it is a settled law that when the own funds available with the assessee are more than the investments, it cannot be presumed that the investments have been made through borrowed funds. He further pointed that there is no increase / fresh purchase in the investments which yielded exempt income. As far as the addition u/s 14A while computing book profits under section 115JB of the Act is concerned, he placed reliance on the judgement of Special Bench of ITAT Delhi in the case of ACIT vs. Vireet Investments Pvt. Ltd. - 2017 (6) TMI 1124 - ITAT DELHI wherein it has been held that the computation under clause (f) of

ITA Nos.5211 & 5106/Del/2016 M/s. NHPC Ltd.(cross appeals) A.Y. 2013-14 23 Explanation 1 to section 115JB(2) is to be made without resorting to the computation as contemplated u/s 14A read with Rule 8D of the Income-tax Rules. He further submitted that identical issue arose in assessee’s own case for A.Y. 2012-13 wherein the addition was deleted by CIT(A) and the Revenue had preferred the appeal before the Tribunal. The Tribunal vide order in ITA No. 2786 & 3121 /Del/2016 order dated 20.03.2020 has upheld the order of CIT(A). He further submitted that identical issue also arose in assessee’s own case in A.Y. 2008-09, 2009-10, 2010-11, 2011-12 & 2012-13 wherein the issue has been decided in assessee’s favour. He therefore, submitted that in view of these facts, no interference to the order of CIT(A) is called for.

“8. Though the Ld. DR placed reliance on the assessment order there is no denial of the fact that the assessee submitted before the assessing officer that the investments were made even out of assessee's own funds or out of interest free funds provided by the government and no part of the borrowed funds were utilised for investment. Further it could be seen from the assessment order, on a perusal of the computation of income, learned Assessing Officer noticed that no disallowance was made by the assessee under the provisions of section 14A of the Act read with Rule 8D of the

ITA Nos.5211 & 5106/Del/2016 M/s. NHPC Ltd.(cross appeals) A.Y. 2013-14 24 Rules and without having regard to the accounts of the assessee, learned Assessing Officer straightaway proceeded under section 14A of the Act read with Rule 8D of the Rules, without recording any reason for not agreeing with the assessee not making any disallowance in this regard. 9. When the assessee received tax-free investment income on bonds/LTA which was in lieu of long overdue is receivable on account of sales made to the parties and pursuant to the drive-by trade agreement between the assessee, state electricity boards and reserve bank of India the assessee acquired the bonds to ensure timely payment of the warrant use and the investment in NHDC a subsidiary of the assessee, for out of the equity capital and internal accruals/equity/reserves the investment was made, it was necessary for the learned Assessing Officer to record as to why he reached a conclusion that the assessee must have incurred some expenditure that too having regard to the accounts of the assessee. Law laid down by the Hon'ble Delhi High Court on this aspect in the decisions relied upon by the assessee is clear that is only after arriving at the dissatisfaction as to the correctness of the claim of the assessee in respect of expenditure incurred in relation to exempt income, learned Assessing Officer can resort to the provisions of section 14A of the Act read with Rule 8D of the Rules and any contravention in this regard would enure to the benefit of the assessee. 10. Furthermore, there is no denial of the fact that the investments made by the assessee were even out of its own funds or out of the interest free funds provided by the government and in view of the decisions of the Hon'ble Punjab and Haryana High Court in the case of CIT vs. Max India Ltd in ITA No. 186 of 2013 by order dated 6/9/2016 and CIT vs. winsome textile industries Ltd 319 ITR 204 and Bombay High Court in the case of CIT vs. HDFC bank Ltd in ITA No. 330 of 2012 by order dated 23/7/2014, no addition could be made by invoking Rule8D (2) (ii) of the Rules. 11. It is an admitted fact that a similar question in had arisen and was decided in favour of the assessee in assessee's own case for the assessment year 89, 2010-11 and 2011-12 in assessee's own case, as was noticed by the Ld. CIT(A) in the impugned order. Further the facts of this issue are covered by the decision of the

ITA Nos.5211 & 5106/Del/2016 M/s. NHPC Ltd.(cross appeals) A.Y. 2013-14 25 Hon'ble Punjab and Haryana High Court in assessee's own case for the assessment year 2006-07 also. 12. In the circumstances we are of the considered opinion that the addition made by the assessing officer by invoking section 14A of the Act read with Rule 8D of the Rules cannot be sustained and the Ld. CIT(A) rightly deleted the same. No reasons to interfere with the reasoning given and conclusions reached by the Ld. CIT(A) on this aspect and therefore, the same is appended. Ground No. 1 of Revenue's appeal is, accordingly, dismissed. 30. Before us, no distinguishing feature in the facts of the present case as compared to assessee’s own case for earlier years has been pointed out by the Revenue. Further it has also not brought on record any material to show that the decision of the Co-ordinate bench of the Tribunal in assessee’s own case in earlier years has been set aside/ stayed or over ruled by the higher judicial forum. Considering the totality of the aforesaid facts and following the order of the Co-ordinate bench in the assessee’s own case and for similar reasons we find no reason to interfere with the order of CIT(A). Thus the ground of the Revenue is dismissed.

ITA Nos.5211 & 5106/Del/2016 M/s. NHPC Ltd.(cross appeals) A.Y. 2013-14 26 unclassified and Leasehold land and of which assessee had debited of Rs.4,07,79,845/- to the Profit and Loss account and the balance amount of Rs.9,34,00,823/- was added to the cost of capital work in progress. He further noticed that assessee had added back the amount debited to the Profit and Loss account in the computation of normal income but the same was not added for treatment under MAT. The assessee was therefore asked to explain as to why the amount of Rs.4.07 crores debited to the Profit and Loss account not be added back to work out the book profit, to which assessee made the submission which was not found acceptable to AO. He accordingly proceeded to disallow Rs.4.07 crores debited to the Profit and Loss account and added back to the profit to work out the book profits.

ITA Nos.5211 & 5106/Del/2016 M/s. NHPC Ltd.(cross appeals) A.Y. 2013-14 27 department appeal and the aforesaid order for A.Y. 2004-05 has been followed by the Tribunal in assessee’s own case for A.Y. 2005-06, 2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011- 12 & 2012-13. He further submitted that the issue is also covered by the decision of Hon’ble Punjab and Haryana High Court in assessee’s own case for A.Y. 2006-07 in ITA No. 136 of 2015, dated 28.02.2018. He therefore, submitted that in view of these facts no interference to the order of CIT(A) is called for.

“16. Now coming to the last ground of Revenue's appeal, in respect of the disallowance of Rs.3,32,81,500/- made in computing book profits under section 115 JB of the Act on account of amortisation of leasehold land, learned Assessing Officer disallowed the same stating that no rate of depreciation was prescribed either in the companies act or in the Income Tax Act, 1961 (for short "the Act") in respect of land, and the claim of the assessee is not in accordance with law and therefore it is liable to be disallowed. Ld. CIT(A) deleted the same by relying upon his own orders for the Assessment Years: 2010-11 and 2011-12. 17. It is the submission of the Ld. AR before us that the amortisation of leasehold land was made as per their accounting

ITA Nos.5211 & 5106/Del/2016 M/s. NHPC Ltd.(cross appeals) A.Y. 2013-14 28 standard 10 of ICAI amortisation of leasehold land classified as per accounting standards 6 of ICAI and the same has been done to meet the requirement of Companies Act and as such amortisation is permissible under section 115 JB of the Act as the same is in accordance with the provisions of Companies Act. Further it is submitted that this issue has been covered by the addition of the Hon'ble Punjab and Haryana High Court in assessee's own case for the Assessment Year: 2006-07 and followed by the Tribunal in assessee's own case for the earlier and subsequent years. 18. We have gone through the record in the light of the submissions made on either side. The submissions made before us could not be contradicted by the Revenue and more particularly the fact that this issue has been covered by the addition of the Hon'ble Punjab and Haryana High Court in assessee's own case for the Assessment Year: 2006-07 in ITA No. 136/2015 by order dated 28/02/2018. Further it is also not in dispute that a view in consonance with the decision of the Hon'ble High Court has been taken by the Tribunal for the Assessment Years: 2004-05 to 2011- 12. In the circumstances since it is an issue covered by the decision of the Hon'ble High Court and also the Tribunal for earlier years, respectfully following the same we uphold the finding of the Ld. CIT(A) on this aspect and dismiss ground No. 3.” 37. Before us, no distinguishing feature in the facts of the present case as compared to assessee’s own case in earlier years has been pointed out by the Revenue. Further it has also not brought on record any material to show that the decision of the Co-ordinate bench of the Tribunal in assessee’s own case in earlier years has been set aside/ stayed or over ruled by the higher judicial forum. Considering the totality of the aforesaid facts and following the order of the Co-ordinate bench in the assessee’s own case for earlier years and for similar reasons, we find no reason to interfere with the order of CIT(A) on this aspect. Thus the ground of the Revenue is dismissed.

ITA Nos.5211 & 5106/Del/2016 M/s. NHPC Ltd.(cross appeals) A.Y. 2013-14 29 38. Thus the appeal of Revenue is dismissed.

Order pronounced in the open court on 17.02.2021

Sd/- Sd/-

(SUDHANSHU SRIVASTAVA) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER

Date:- 17.02.2021 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI