BSES RAJDHANI POWER LTD.,NEW DELHI vs. ACIT, NEW DELHI

per provisions of sec. 37 of the Act. The assessee submitted that the said

expenses were incurred in the regular course of its business to deal with

cases arising on account of its enforcement initiatives, to defend legal cases,

settlement in arbitration matters and other refunds made to customers. The

Assessing Officer did not agree with and made an ad hoc disallowance at

25% of the total legal expenditure amounting to Rs.44,71,064 with this

finding that the said expenditure is penal in nature hence is not allowable

under the provisions of the Act.

42.2 Before the Learned CIT(Appeals), the assessee mainly contended that

the Assessing Officer has not been able to point out any specific expense

incurred by the assessee to be penal in nature but has summarily made an ad

hoc disallowance @ 25% without any cogent reason. The Learned

CIT(Appeals) has deleted the disallowance.

reliance on the assessment order and has reiterated that the claimed

expenditure was penal in nature, hence, it was not allowable under the

provisions of the Income-tax Act, 1961.

Order on the issue and submitted that the assessee-company, in the course of

its business, incurred routine expenditure for settlement of legal claims

amounting to Rs.1.78 crores.

44.1 The aforesaid payments, it was submitted, were made by the assessee

in pursuance of settlement of certain claims made by consumers, in the

regular course of business and did not involve any penal element.

44.2 In this regard, the Learned AR submitted, that the payments made

were not on account of infraction or violation of law, but merely in the

nature of settlement of disputes arising in the regular course of business and could at best be treated as a trading liability.

44.3 Further, even the assessing officer has failed to pin-point any specific expenditure which is penal in nature and has merely made an ad-hoc disallowance @ 25% of such expenditure, merely on the basis of assumption.

44.4 Even otherwise, payments made to customers and others in lieu of civil claims/ suits, arbitration, etc., are merely in the nature of compensation paid in the regular course of business, which was purely compensatory in nature and cannot, be disallowed under section 37 of the Act.

Reliance in this regard has been placed by the Learned AR on the following decisions: − Prakash Cotton Mills vs. CIT: 201 ITR 684 (SC) − CIT vs. Indian Copper Corporation Ltd.: 161 ITR 327 (Pat) − CIT vs. Grand Cashew Corporation: 182 ITR 216 (Ker) − Jama Auto Industries vs. CIT: 299 ITR 92 (P&H) − CIT vs. Hindustan Copper Ltd.: 55 Taxman 392 (Cal) − CIT vs. Todi Tea Col. Ltd: 239 ITR 28 (Cal.) − G.L. Rexroth Industries Ltd. vs. DCIT: 59 TTJ 757 (Ahd.) − CIT vs. Deversons Industries Ltd.: 104 ITD 171 (Ahd.)

of the above submissions and the decisions cited, we find that the Learned

CIT(Appeals) has deleted the addition made on account of disallowance of

legal claim on the basis that the Assessing Officer has not highlighted a

single instance that the charges were of penal nature. We find that the

Assessing Officer has made the disallowance on estimate basis at 25% of the

expenditure claimed. No basis has been assigned for making such ad hoc

disallowance. Noting these material aspects, we are of the view that the

Learned CIT(Appeals) has rightly deleted the disallowance in absence of

any instance that there was any penalty which would fall under the

Explanation to Sec. 37 of the Income-tax Act, 1961. The First Appellate

Order in this regard is thus upheld. Ground No.3 is accordingly rejected.

made by the Assessing Officer on account of disallowance of extra

depreciation on computer peripheral. During the year, the assessee has

purchased certain computers accessories and peripheral in the nature of

scanner, printer, input and output processing units, etc. aggregating to

Rs.28,32,502, which were capitalized under the head “computer” and

depreciation thereon was claimed at the prescribed rate of 60%. The

Assessing Officer held that computer accessories and peripheral could not be

classified under the head “computer” and therefore, disallowed depreciation

claimed @ 60% and restricted the same @ 15%, disallowing the claim of

depreciation to the tune of Rs.12,11,462. The Learned CIT(Appeals) has,

however, deleted the disallowance relying upon the decision of Hon’ble

jurisdictional High Court of Delhi in the case of BSES Rajdhani Powers

Ltd., ITA No. 1266 of 2010 – judgment dated 31.8.2010. Against this action

of the Learned CIT(Appeals), the Revenue is in appeal.

reliance on the assessment order.

Order. He submitted that the claimed deprecation @ 60% on computer

accessories and peripheral is as per the law. He drew our attention in this

regard to the study material for PEE II information technology paper VI

issued by the ICAI which states as under: “The term "Computer" can logically be applied to any calculating machine. However, in common usage, the definition of a computer has become more limited in a contemporary usage. We now define a computer as an electronic data processing device capable of receiving

input, storing sets of instructions for solving problems and generating output with high speed and accuracy. Computers are composed of switches, wires, motors, transistors and integrated circuits assembled on frames. The frames form components such as keyboards, printers, visual display units, disk drives, magnetic tape drives and central processing units. These components are wired together into a network called a computing system often called a computer.”

48.1 The Learned AR also placed reliance on the decision of Hon'ble Delhi

High Court in the case of assessee itself in ITA No. 1266 of 2010- judgment

dated 31.8.2010 (supra). He also placed reliance on the decision of Hon'ble

Supreme Court in the case of CIT vs. Birla Soft Ltd., SLP No. (s)

20645/2014.

covered by the above cited decision of Hon'ble Delhi High Court in the case

of assessee itself in ITA No.1266 of 2010 (supra) holding that printers,

scanners and server etc. form integral part of the computer system and,

therefore, entitled to depreciation @ 60%. Respectfully following the same,

we are of the view that the Learned CIT(Appeals) has rightly deleted the

disallowance. The same is upheld. Ground No. 4 is accordingly rejected.

ITA No. 1437/Del/2011: (A.Y. 2007-08):

grounds: “1. Service Line deposits from the consumers wrongly upheld as taxable over a period of 3 Years.

The learned CIT(A)-VI has upheld that the service line deposits are capital in nature but in this regard she has wrongly upheld that the same are taxable over a period of 3 years. In fact the same deserves to be reduced from the cost of plant and machinery in accordance with the provisions of Section 43(1) of the Income Tax Act, 1961.

The Ld.CIT(A)- VI has wrongly upheld that the “ Energy Meters ” are eligible for depreciation @ 15 % as against the claims @ 80 % . In this regard she has ignored the facts that these meters are for measuring electric energy which has been specifically mentioned as eligible for 80% depreciation in the depreciation schedule of the Income Tax Rules 1961. Further these meters also has the characteristics of energy saving device which is subject to depreciation @ 80%.

In view of the above, depreciation allowed @ 15 % as against the 80% claim on energy meters resulting in a disallowance of Rs. 32,54,73,974 is wrong, against the facts of the case and unsustainable in the eyes of law”.

taken on identical issues in the above appeals for the assessment years 2005-

06 and 2006-07.

51.1 In ground No.1, the issue raised is regarding validity of the First

Appellate Order upholding service line deposits from the consumers as

taxable over a period of three years. We have dealt with this issue in the

appeals for the assessment years 2005-06 and 2006-07 hereinabove and held

that the Learned CIT(Appeals) was not justified in not directing the

Assessing Officer to reduce the amount of service line deposits credited to

the profit and loss account during the year as per the assessee’s policy of

offering the service line deposits for Revenue over a period of three years,

while computing the total income after holding that entire receipts by way of

service line deposits is capital in nature. Following the same, we decide the

issue raised in ground No.1 in favour of the assessee with the same finding

and with direction to the Assessing Officer to reduce the amount of service

line deposits credited to the profit and loss account during the year

accordingly while computing the total income treating the entire receipts by

way of service line deposits as capital in nature. The ground No.1 is

accordingly allowed.

allowance of depreciation at the rate of 15% as against 80% on energy

meters, resulting in disallowance of Rs.32,54,73,974. An identical issue has

been decided in the appeals for the assessment years 2005-06 and 2006-07

hereinabove with this finding that the assessee is entitled for claiming

depreciation @ 80% on the energy meters and has been set aside the matter

to the file of the Assessing Officer to allow the same on the

energy/electronic meters expenditure on which has been reflected in the

audit report made available at page No. 75 of the supplementary paper book

filed by the assessee. Following the same, we decide the matter accordingly

with the similar direction to the Assessing Officer. The ground No.2 is thus

allowed for statistical purposes.

ITA No. 1539/Del/20111: (A.Y. 2007-08):

grounds:

receipt was submitted which reveals that apart from service line charges, the co. is levying development charges from the customers for a new connection. Thus the co. is already collecting funds for incurring capital expenditure. j) The service line receipts simply cannot be treated as capital receipts because their nature would not depend upon how the assessee co. is utilizing them but in what capacity they have been received by the company. And the fact is that they have been received by the company. And the fact is that they have been received by the co. in the course of running its regular business operations. k) The assessee company also not provided the information in the tabular form inspite of specifically asked for by the AO during the Assessment proceedings. 2. The Ld. CIT(A) has erred on facts and in law in deleting addition of Rs.32,59,746/- made on account of disallowance of legal claims ignoring that payments made by the assessee are penal in nature and hence not allowable. 3. The Ld.CIT(A) has erred on facts and in law in deleting addition of Rs. 4,33,41,629/- made on account of disallowance of extra depreciation on computer peripherals/accessories ignoring that as per the IT Rules 60% depreciation is allowable only on computer and computer software and not on computer peripherals and accessories.”

CIT(Appeals) has erred in deleting the addition of Rs.51,22,43,735 made on

account of ‘service line deposits’ and on account of “consumers’

contribution” for capital works. This ground is connected with ground No.1

of the appeal preferred by the assessee for the assessment year under

consideration and both have been decided hereinabove on identical issues

raised in the appeals for the assessment years 2005-06 and 2006-07 with this

finding the Learned CIT(Appeals) was justified in treating the ‘service line

deposits’ received by the assessee from the consumers as capital in nature

and the Assessing Officer has been directed to reduce the amount of service

deposits credited to the profit and loss account during the year as per the

assessee’s policies of offering the service line deposits for revenue over a

period of three years, while computing the total income after holding that

entire receipts by way of service line deposits is capital in nature. The action

of the Learned CIT(Appeals) in treating “consumers’ contribution” for

capital work as capital in nature has also been justified and upheld. The

ground No.1 is decided accordingly. The same is thus rejected.

CIT(Appeals) has erred in deleting the addition of Rs.32,59,746 made on

account of disallowance of legal claims ignoring that payments made by the

assessee are penal in nature and hence not allowable. An identical issue has

been decided hereinabove in the appeal preferred by the Revenue for the

assessment year 2006-07. Following the same, we uphold the finding of the

Learned CIT(Appeals) as justified. The ground No.2 is accordingly rejected.

CIT(Appeals) was justified in deleting the addition of Rs.4,32,41,629 on

account of disallowance of extra depreciation on computer peripheral. An

identical issue has been decided hereinabove in the appeal preferred by the

Revenue for the assessment year 2006-07. Following the same, the issue is

decided in favour of the assessee while upholding the action of the Learned

CIT(Appeals) in this regard. The ground No.3 is accordingly rejected.

ITA No. 4780/Del/2013- Assessee’s appeal- (A.Y. 2008-09):

grounds:

“1. Depreciation on energy meters at 15% as against its eligibility of 80%.

The Ld. CIT (A)- V has dismissed this ground mentioning that since appellant has claimed 15% depreciation on Energy Meters in the revised return which has been allowed by the A.O. no cause of grievance arises. In this regard, it has been duly clarified that the appellant has claimed depreciation @ 15% against the eligibility of 80%. The higher depreciation may be allowed in case the appellant authorities allow the claim of 80% in earlier years. Accordingly, the issue of higher depreciation @ 80% on energy meters still stands.

Without prejudice to the ground that service line deposits and consumer contribution for capital works are capital receipts, in case authorities decide these issue otherwise, the additional depreciation on assets created out of service line deposits and consumer contribution should be allowed.”

eligibility of claiming of depreciation @ 80% on energy meters has been

decided hereinabove in the appeals preferred by the assessee for the

assessment years 2005-06, 2006-07 and 2007-08. Following the same, the

issue is decided in favour of the assessee with this finding that the assessee

is entitled for claiming depreciation @ 80% on the energy meters. We thus

set aside the matter to the file of the Assessing Officer to allow the claimed

depreciation on the expenditure incurred on enerty/electronic meters as per

audit report made available after affording opportunity of being heard to the

assessee. The ground No.1 is accordingly allowed for statistical purposes.

preferred by the Revenue questioning the action of the Learned

CIT(Appeals) in deleting the addition made on account of service line

deposits treating the same as capital in nature. We will thus deal with the

issue raised in ground No.2 of the appeal along with issue No.1 of the appeal

preferred by the Revenue in the succeeding paragraph.

ITA No. 5075/Del/2013 – Revenue (A.Y. 2008-09):

issues:

CIT(Appeals) has erred in deleting the addition (of Rs.1,21,47,44,450) made

on account of service line deposits received from the customers, has been

decided in favour of the assessee and upholding the finding of the Learned

CIT(Appeals) in this regard that the deposits are capital in nature, in the

appeals preferred by the Revenue for the assessment years 2005-06 and

2006-07. Following the same, the First Appellate Order on the issue is

upheld with this finding that the deposits are capital in nature. The issue

No.1 is thus decided against the Revenue and is accordingly rejected. The

issue raised in ground No.2 of the appeal preferred by the assessee does not

stand.

CIT(Appeals) has erred in deleting the addition ( of Rs.1,26,99,307 ) made

on account of disallowance of legal claims has been decided in favour of the

assessee by upholding the First Appellate Order in this regard in the appeal

for the assessment year 2006-07 preferred by the Revenue. Following the

same, the issue No.2 is decided against the Revenue with this finding that

the legal claims being not penal in nature are allowable. The same is thus

rejected.

finding given therein against the issue No.1, the issue No.3 is decided

against the Revenue. It is accordingly rejected.

and that preferred by the revenue is dismissed.

ITA No. 3689/Del/2011 (Assessee) (A.Y. 2005-06):

grounds:

The Ld. CIT(A)- V has wrongly upheld that the “ Energy Meters ” are eligible for depreciation @ 25 % as against the claims @ 80 %. In this regard she has ignored the facts that these meters are for measuring electric energy which has been specifically mentioned as eligible for 80% depreciation in the depreciation schedule of the Income Tax Rules 1962. Further these meters also have the characteristics of energy saving device which is subject to depreciation @ 80%.

In view of the above, depreciation allowed @ 25% as against the 80% claim on energy meters resulting in a disallowance of Rs. 20,36,82,454, is wrong, against the facts of the case and unsustainable in the eyes of law.

of the following two additional grounds:

hereinabove in the appeal for the assessment year 2005-06 in the case of

BSES Rajdhani Power Ltd. Following the view taken therein, the present

application raised for the admission of the above stated additional grounds is

allowed.

depreciation @ 80% on energy meters against 25% allowed by the

authorities below under the similar facts has been decided in favour of the

assessee in the appeal for the assessment year 2005-06 preferred by the

BSES Rajdhani Power Ltd. hereinabove. Following the same, ground No.1

is decided in favour of the assessee with this finding that the assessee is

entitled to claim depreciation @ 80% on the energy meters and we direct the

Assessing Officer to allow the same after verifying the expenditure incurred

on electronic meters/energy meters made available in the audit report, after

affording opportunity of being heard to the assessee. The ground No.1 is

accordingly allowed for statistical purposes.

the corresponding additional grounds hereinabove in the appeal for the

assessment year 2005-06 preferred by the BSES Rajdhani Power Ltd. have

been decided in favour of the assessee with this finding that the Learned

CIT(Appeals) while treating the service line deposits received from the

consumers are of capital nature, should have directed the Assessing Officer

to reduce the amount of service line deposits credited to the profit and loss

account during the year as per the assessee’s policy of offering the service

line deposits for Revenue over a period of three yearts while computing the

total income after holding that the entire receipt by way of service line

deposit is capital in nature (Additional ground No.1) and it has been held

that the Assessing Officer was not justified in assessing the income of the

assessee under sec. 115JB and not under the normal provisions of the

Income-tax Act, 1961 ( additional ground No.2 ). Following these decisions

therein on identical issues, the issues raised in additional grounds in the

present appeal are decided in favour of the assessee. The additional grounds

are accordingly allowed.

The appeal is partly allowed.

has questioned First Appellate Order on the following grounds:

“ 1. The Ld. CIT(A) has erred on facts and in law in deleting addition of Rs. 10,94,42,155/- subsequently reduced to Rs. 13033059/- made on account of security line deposits form customers ignoring that: a) The whole of these service line receipts are in fact not a liability of the company but are revenue receipts accrued/received during the year on running of business operations of the assessee company and hence are taxable in its hands.

b) Further the assessee co is engaged in selling electricity to the consumers from whom it charges fees in the name of energy charges. These energy charges are undisputedly in the nature of revenue receipts.

c) Since the assessee co is engaged in selling the energy, therefore for this purpose it has to provide service line connections to all consumers for which it charges service line deposits. Hence it can be seen that these service line receipts are received by the co. during the course of its regular business/commercial operations. Hence, they are in the nature of revenue receipts.

d) The service line receipts simply cannot be treated as capital receipts because their nature would bot depend upon low the assessee co. is utilizing them but in what capacity they have been received by the company. And the fact is that they have been received by the co. in the course of running its regular business operations.

a) In this particular case the assessee was earlier following First In First Out (FIFO) method for valuation of stores/spares. Under any circumstances FIFO method is more correct & hence more appropriate for the valuation of stores/spares as closing stock as compared to “Moving Average” method.

b) No sound reasoning/acceptable logic is given by the assessee company for change in the cost method from FIFP to Moving Average.

c) The order of CIT(A) is not acceptable because the change in the method of valuation is neither bonafide nor regulatory followed by the assessee as required for the change in the method of valuation.

d) Further, on perusal of Accounting Standard-2, provisions of the IT Act, case laws & relevant excerpts from 3CD report which clearly states that due to change of valuation of inventories, profit of the company is lower by Rs. 5.02 crores, it can be soundly included that AO is correct while making the addition on account of valuation of closing stock.

e) The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal.”

whereby the Learned CIT(Appeals) has deleted the addition of Rs.

10,94,42,155 (subsequently reduced to Rs.1,30,33, 059) made on account of

service line deposits from customers has been questioned. Under similar set

of facts, an identical issue has been decided against the Revenue

hereinabove in the appeal preferred by the Revenue in this case of BSES

Rajdhani Power Ltd. for the assessment year 2005-06. Following the same,

we decide the issue raised in this ground No.1 in favour of the assessee

while upholding the First Appellate Order in this regard. It is also made clear

that as per the decision taken in the additional ground No.1 hereinabove, the

Assessing Officer is directed to reduce the amount of service line deposits

credited to the profit and loss account during the year as per the assessee’s

policy of offering the service line deposits for Revenue over a period of

three years, while computing the total income after holding that entire

receipt by way of service line deposit is capital in nature. The ground No.1 is

accordingly rejected.

in deleting the addition of Rs.2,62,00,000 made on account of valuation of

closing stock has been questioned by the Revenue. Under the similar set of

facts, an identical issue has been decided in favour of the assessee by

upholding the First Appellate Order in this regard hereinabove in the appeal

preferred by the Revenue in the case of BSES Rajdhani Power Ltd. for the

assessment year 2005-06. Following the same, the issue raised in ground

No.2 of the present appeal is decided against the Revenue by upholding the

action of the Learned CIT(Appeals) giving the above relief. The ground

No.2 is accordingly rejected.

ITA No. 404/Del/2012 –(Assessee) - (A.Y. 2006-07):

grounds:

“1. Service Line deposits from the consumers wrongly upheld as taxable over a period of 3 Years.

The learned CIT (A)-VII has upheld that the service line deposits are capital in nature but in this regard he has wrongly upheld that the same are taxable over a period of 3 years. In fact the same deserves to be reduced from the cost of plant and machinery in accordance with the provisions of Section 43(1) of the Income Tax Act, 1961.

The Ld. CIT (A) - VII has wrongly upheld that the “Energy Meters” are eligible for depreciation @ 15 % as against the claims @ 80 %. In this regard he has ignored the facts that these meters are for measuring electric energy which has been specifically mentioned as eligible for 80% depreciation in the depreciation schedule of the Income Tax Rules, 1962. Further these meters also have the characteristics of energy saving devices which are subject to depreciation @ 80%.

In view of the above, depreciation allowed @ 15% as against the 80% claim on energy meters resulting in a disallowance of Rs. 48,13,62,420, is wrong, against the facts of the case and unsustainable in the eyes of law.

The Ld. CIT (A) - VII had wrongly upheld that adjustment of grants in aid for fixed assets is to be made in the ratio of addition to plant and machinery which is (subject to depreciation @ 15%) and addition to energy meters which is (subject to depreciation @ 80%) resulting in disallowance of depreciation to the tune of Rs. 3,03,32,909.

of the following additional ground:

“That on the facts and circumstances of the case and in law, the Assessing Officer erred in assessing the income of the appellant under sec. 115JB and not under the normal provisions of the Income-tax Act, 1961 (The Act), without appreciating that the deeming provisions of sec. 115JB of the Act were not applicable during relevant assessment year.

78.1. Similar arguments have been advanced by the parties on the

allowability of the present application for admission of the above additional

ground as advanced by them on a similar application in the appeal of the

assessee hereinabove for the assessment year 2005-06. Following the same,

the present application is allowed.

78.2 The parties have also adopted similar arguments as advanced by them

on the issue raised in this additional ground as advanced by them

hereinabove in the appeal of the assessee for the assessment year 2005-06.

Following the same, we hold that the Assessing Officer was not justified in

assessing the income of the assessee under sec. 115JB of the Act and not

under the normal provisions of the Act during the year. The additional

ground is accordingly allowed.

service line deposit from the consumers as taxable over a period of three

years has been questioned. During the year, the assessee had received a sum

of Rs.10.44 crores (as per rectification order dated 31.1.2011) as non-

refundable service line deposits from customers as per the provisions of

DERC and the expenses for providing new connections to customers. The

Learned CIT(Appeals) while treating the service line deposit as capital in

nature did not direct the Assessing Officer to reduce the amount of service

line deposit credited to the profit and loss account during the year as per the

company’s policy of offering the service line deposit for Revenue over a

period of three years, while computing the total income after holding that

entire receipt by way of service line deposit is capital in nature. Being

aggrieved, the assessee has raised this ground. The issue raised in this

ground under the similar set of facts has been decided hereinabove in the

case of assessee itself in the appeal preferred by it for the assessment year

2005-06 hereinabove. Following the same, we direct the Assessing Officer

to reduce the amount of service line deposit credited to the profit and loss

account during the year as per the company’s policy of offering the service

line deposit for Revenue over a period of three years, while computing the

total income after holding that entire receipt by way of service line deposit is

capital in nature. The ground No.1 is accordingly allowed.

80 Ground NO.2: It is in relation to the depreciation on energy meters

allowed at 15% as against 18% resulting in a disallowance of

Rs.48,13,62,420. An identical issue under the similar set of facts has been

decided hereinabove in ground No.1 of the appeal for the assessment year

2005-06 preferred by the assessee. Following the same, it is held that the

assessee is eligible to claim depreciation on energy meters @ 80% and

accordingly direct the Assessing Officer to allow the same on the basis of

the expenditure incurred on electronic meters/energy meters reflected in the

audit report. The ground No.2 is accordingly allowed for statistical purposes.

of Rs.3,03,32,909. The facts in brief are that during the year, the assessee

had received grant in aid of Rs.18.63 crores from the Ministry of Power

under the Accelerated Power Development Reforms Program (APRBRP) for

the purpose of up-gradation of sub-transmission and distribution in Densely

Electrified Zone in the urban and industrial area and improvement in the

commercial viability of the SEVS/DISCOM. The expenditure incurred on

up-gradation of the system was duly capitalized by the assessee under the

head “plant and machinery” and the grant/aid received under the said

scheme was reduced from the block of such asset(s). The Assessing Officer

held that since the grant in aid received by the assessee could not be directly

attributed to the specific assets acquired during the assessment year under

consideration, the same was required to be reduced from both “plant and

machinery” as well as “energy meters”, particularly when accelerated

depreciation @ 80% is allowed on such energy meters.

81.1. The Learned CIT(Appeals) held that since the assessee was not

eligible for claiming accelerated depreciation @ 80% on the energy meters,

no interference was required with the findings of the Assessing Officer.

81.2 Under similar set of facts and identical issue has been decided in

favour of the assessee in the case of BSES Rajdhani Power Ltd. in the appeal

preferred by the assessee for the assessment year 2006-07 hereinabove.

Following the same, we while setting aside orders of the authorities below in

this regard direct the Assessing Officer to reduce grant in aid received by the

assessee from the respective “cost of assets(s)” as reflected in the tax audit

report of the assessee for the years as it has been rightly adjusted by the

assessee and not against the meters and allow the claimed relief after

affording opportunity of being heard. The ground No.3 is accordingly

allowed for statistical purposes.

ITA No.1438/Del/2011 -Assessee- (A.Y. 2007-08):

grounds:

The learned CIT(A)-VI has upheld that the service line deposits are capital in nature but in this regard she has wrongly upheld that the same are taxable over a period of 3 years. In fact the same deserves to be reduced from the cost of plant and machinery in accordance with the provisions of Section 43(1) of the Income Tax Act, 1961.

The Ld.CIT(A)- VI has wrongly upheld that the “ Energy Meters ” are eligible for depreciation @ 15 % as against the claims @ 80

% . In this regard she has ignored the facts that these meters are for measuring electric energy which has been specifically mentioned as eligible for 80% depreciation in the depreciation schedule of the Income Tax Rules 1961. Further these meters also has the characteristics of energy saving device which is subject to depreciation @ 80%. In view of the above, depreciation allowed @ 15 % as against the 80% claim on energy meters resulting in a disallowance of Rs. 33,28,96,938 is wrong, against the facts of the case and unsustainable in the eyes of law.

the provisions of Section 2(18) of the Income Tax Act, 1961, provisions of Section 2(22)(e) are not attracted on the amount of the loan / advance provided by BRPL to the appellant. 4. The appellant craves to leave, add, alter, modify, rectify, and amend all or any of the grounds before or at the time of hearing.

83.1. Besides above, the assessee has also moved an application for

admission of the following additional ground:

“1. That on the facts and circumstances of the case and in law, the Assessing Officer erred in assessing the income of the appellant under sec. 115JB and not under the normal provisions of the Income-tax Act, 1961 (“the Act”), without appreciating that the deeming provisions of section 115JB of the Act were not applicable during the relevant assessment year.”

83.2 An identical issue after admitting the above additional ground has

been decided in favour of the assessee hereinabove in the appeal for the

assessment year 2005-06 with this finding that the Assessing Officer has

erred in assessing the income of the assessee under sec. 115JB of the Act

and not under the normal provisions of the Act. Following the same, the

additional ground is decided in favour of the assessee.

wrongly upheld as taxable over a period of three years. Under the similar set

of facts in case of the assessee itself in the appeal preferred by it for the

assessment year 2005-06 has been decided in favour of the assessee

hereinabove. Following the same, we while setting aside orders of the

authorities below in this regard direct the Assessing Officer to reduce the

amount of service line deposit credited to the profit and loss account during

the year (as per the assessee’s policy of offering the service line deposits for

Revenue over a period of three years) while computing the total income after

holding that the entire receipts by way of service line deposits is capital in

nature (as decided by the Learned CIT(Appeals) ). The ground No.1 is

accordingly allowed.

the rate of 80% on energy meters and allowing depreciation @ 15% thereon

by the authorities below resulting in disallowance of Rs.33,28,96,938. An

identical issue under the similar set of facts has been decided hereinabove in

the case of the assessee in its appeal for the assessment year 2005-06 in

favour of the assessee. Following the same, we hold that the assessee is

eligible for claiming depreciation @ 80% on energy meters and direct the

Assessing Officer to allow depreciation accordingly on the expenditure

incurred on electronic/energy meters reflected in audit report of the assessee.

The ground No.2 is accordingly allowed for statistical purposes.

Officer made an addition of Rs.59,27,00,000 on account of deemed dividend

under sec. 2(22)(e) relating to loans advanced to the company by BSES

Rajdhani Power Ltd. Before the Learned CIT(Appeals), the assessee

contended that since it was a company in which public was substantially

interested by virtue of sec. 2(18)(b) (B) and therefore, the provisions of sec.

2(22)(e) of the Act were not applicable to it. The Learned CIT(Appeals)

while deleting the addition made by the Assessing Officer however, held

that since the assessee is not a shareholder in BRPL(BSES Rajdhani Power

Ltd.), the provisions of sec. 2(22)(e) will not be applicable by virtue of the

decision of Special Bench of the ITAT in the case of ACIT vs. Bhaumik

Colours (P) Ltd. – 118 ITD 1 (Mumbai) (SB). The parties are accordingly in

appeal. The grievance of the assessee against the First Appellate Order is

that based upon the provisions of sec. 2(18) of the Income-tax Act, 1961,

applicability of the provisions of sec. 2(22)(e) of the Act (pertaining to the

taxability of deemed divided of Rs.59,27,00,000 ) has not been decided in

the hands of the assessee. The grievance of the Revenue on the other hand is

that the Learned CIT(Appeals) has erred in deleting the addition of

Rs.59,27,00,000 made on account of disallowance of deemed dividend under

sec. 2(22)(e) of the Act ignoring that the Reliance Energy Ltd., Reliance

Global Pvt. Ltd. are common shareholder in the assessee company as well as

BSES Rajdhani Pvt. Ltd. from whom the assessee company has received

loan and advances. The shareholding of Reliance Energy Ltd. and Reliance

Global Pvt. Ltd. is also not less than 10%. We thus decided to deal with

ground No.3 of the appeal of the assessee and ground No.4 of the appeal of

the Revenue simultaneously.

86.1 Brief facts on the issue, case of the Assessing Officer, findings of the

Learned CIT(Appeals) and contention of the assessee are as under:

86.2 In the assessment year under consideration the assessee-company received loan amounting to Rs.59,27,00,000 from M/s BSES Rajdhani Power Ltd.(‘BRPL’) The shareholding of the assessee-company as on 31.03.2007 was as under: Percentage of Name of Share Holder No. of shares Total Reliance Energy Ltd. 30,60,000 Reliance Energy Mgt. Service Pvt. Ltd 96,00,000 51% Reliance Energy Global Pvt. Ltd. 96,00,000 Powersurfer Interactive (I) Pvt. Ltd. 97,00,000 Delhi Power Co. Ltd. 5,68,39,997 Chief Secretary 1 49% Principal Secretary (Finance) 1 Principal Secretary (Power) 1 Total 11,60,00,000 100%

Further, the shareholding of BRPL as on 31.03.2007 is tabulated as under: Percentage of Name of Share Holder No. of shares Total Reliance Energy Ltd. 11,97,00,000 Reliance Energy Mgt. Service Pvt. Ltd 3,83,00,000 51% Reliance Energy Global Pvt. Ltd. 3,83,00,000 Powersurfer Interactive (I) Pvt. Ltd. 3,83,00,000 Delhi Power Co. Ltd. 22,53,99,997 Chief Secretary 1 49% Principal Secretary (Finance) 1 Principal Secretary (Power) 1 Total 46,00,00,000 100%

86.3 On perusal of the aforesaid table, it may be noted that Reliance Energy Ltd. (REL) is one of the common-shareholder in the assessee as well as BRPL and held more than 26% shares in each of the companies in the assessment year under consideration. It may, however, be pertinent to note that the assessee did not have any direct shareholding in BRPL.

86.4 It may also be observed that 49% of the shares of BRPL are held by Delhi Power Co. Ltd., which is a Corporation set up under the Delhi Electricity Reform Act, 2000 (Delhi Act No2 of 2001), i.e. a State Act.

86.5 The assessing officer, in the impugned assessment order, held that the transaction of loan advanced by BRPL to the assessee was in the nature of ‘deemed dividend’ as defined under section 2(22)(e) of the Act.

86.6 In the impugned assessment order the assessing officer, despite admitting the fact that 49% of the shares of BRPL was held by Delhi Power Co. Ltd., which is a corporation set up under a State Act, proceeded to treat the amount of loan advanced as ‘deemed dividend’ by merely holding that there was no evidence to prove that the shares held by Delhi Power Co. Ltd. were allotted or acquired ‘unconditionally’.

86.7 On appeal against the aforesaid order of the assessing officer, the CIT(A) deleted the addition made by the assessing officer by holding that since the assessee-company did not have any direct share-holding in BRPL, the provisions of section 2(22)(e) of the Act were not applicable. The CIT(A), however, did not examine the fundamental question that the provisions of section 2(22)(e) of the Act were, per se, not applicable in the case of the assessee.

“(e) any payment by a company, not being a company in which the public are substantially interested, of any sum (whether as representing a part of the assets of the company or otherwise) [ made after the 31st day of May, 1987 , by way of advance or loan to a shareholder, being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten per cent of the voting power, or to any concern, in which such shareholder is a member or a partner and in which he has a substantial interest (hereafter in this clause referred to as the said concern)] or any payment by any such company on behalf, or for- the individual benefit, of any such shareholder, to the extent to which the company in either case possesses accumulated profits; but" dividend" does not include— ……………….” (emphasis supplied) 87.1 On perusal of the aforesaid, it may be noted that the provisions of this clause are attracted to any payment made by a Company, not being a ‘company in which the public is substantially interested’ (as defined under section 2(18) of the Act, discussed infra) and the payments being in the nature of (1) advance; or (2) loan; or (3) any payment on behalf of any shareholder; or (4) any payment for the individual benefit of any shareholder. 87.2. In the present case, it is submitted that the provisions of section 2(22)(e) of the Act were not applicable in the case of the assessee at the very threshold as BRPL is a ‘company in which public is substantially interested’ as elaborated hereunder: 87.3 A Company in which public is substantially interested is defined under section 2(18) of the Act, which reads as under: (18) "company in which the public are substantially interested" -- a company is said to be a company in which the public are substantially interested-- (a) if it is a company owned by the Government or the Reserve Bank of India or in which not less than forty per cent of the shares are held (whether singly or taken together) by the Government or the Reserve Bank of India or a corporation owned by that bank; or ………………….. (b) if it is a company which is not a private company as defined in the Companies Act, 19569 (1 of 1956 ), and the conditions specified either in item (A) or in item (B) are fulfilled, namely:- (A) shares in the company (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) were, as on the last day of the relevant previous year, listed in a recognised stock exchange in India in accordance with the Securities Contracts (Regulation) Act, 1956 1 (42 of 1956 ), and any rules made thereunder; (B) shares in the company (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) carrying not less

than fifty per cent of the voting power have been allotted unconditionally to, or acquired unconditionally by, and were throughout the relevant previous year beneficially held by- (a) the Government, or

(b) a corporation established by a Central, State or Provincial Act, or (c) any company to which this clause applies or any subsidiary company of such company if the whole of the share capital of such subsidiary company has been held by the parent company or by its nominees throughout the previous year. Explanation.- In its application to an Indian company whose business consists mainly in the construction of ships or in the manufacture or processing of goods or in mining or in the generation or distribution of electricity or any other form of power, item (B) shall have effect as if for the words" not less than fifty per cent", the words" not less than forty per cent" had been substituted;” (emphasis supplied) 87.4 On perusal of the aforesaid section, it may be noted that if fifty percent of shares a Company, not being a Private Company is held by: (1) the Government; or (2) Corporation established by a Central, State or Provincial Act; or (3) any company to which this clause applies; then such Company is considered to be a “company in which the public are substantially interested”, for the purposes of the Act. 87.5 Further, Explanation to the aforesaid section provides that in the case of an Indian company whose business consists mainly of distribution of electricity, then the words ‘not less than 50%’ shall be substituted with ‘not less than 40%’. 87.6 The Learned AR submitted that BRPL is a “company in which the public are substantially interested” as defined under section 2(18) of the Act, as elaborated hereunder: BRPL, was incorporated as a public company incorporated on 04.07.2001 and 49% of the shares of the said Company are held by Delhi Power Co. Ltd., a Corporation set up under the State Act of Delhi Electricity Reform Act, 2000 (Delhi Act No.2 of 2001). Further, it may also be noted that Delhi Power Co. Ltd., is a Company which is wholly held by the Government and hence a company in which public is substantially interested. 87.7 Thus, in view of the aforesaid facts, it is respectfully submitted that BRPL satisfies the conditions stipulated in both sub-clause (b) and (c) of section 2(18)(b)(B) of the Act as:

(i) more than 40% of its shares are held by Corporation set up under a State Act and;

(ii) more than 40% of its share is held by a Company which is held directly by the Government, 87.8 Accordingly provisions of section 2(22)(e) of the Act are not attracted at the threshold. 87.9 The assessing officer has, in the impugned assessment order, nowhere disputed the fact that 49% shares of BRPL are held by Delhi Power Co. Ltd., which is a Corporation set under a State Act, but has merely made a bald allegation that there was no evidence to prove that 49% shares of BRPL held by Delhi Power Co. Ltd. were allotted or acquired ‘unconditionally’ 87.10 In making the aforesaid observation, the assessing officer has not brought anything on record to establish that the aforesaid shares were not allotted or acquired ‘unconditionally’. 87.11 Without prejudice to the aforesaid, it is of utmost importance to note that section 2(22)(e) of the Act only deals with a payment to the shareholder directly and the payment by a Company not to a shareholder but to a third party on behalf of or for the individual benefit of the shareholder. 87.12 Thus, on the date of advancement of loan/advance, the recipient should be a shareholder and if it is not so established, the provisions of section 2(22)(e) of the Act are not applicable. Reliance in this regard is placed on the following decisions: − CIT vs. Ankitech (P.) Ltd.: 318 ITR 376 (Del) − CIT v. Universal Medicare (P.) Ltd. : 324 ITR 263 (Bom) − CIT vs. Suram Holdings (P.) Ltd.: 220 Taxman 327 (Raj.) − ACIT vs. Bhaumik Colour (P) Ltd.: 118 ITD 1 (MUM.) (SB) 87.13 In the instant case, the assessee did not have any ‘direct shareholding’ in BRPL in the assessment year under consideration and was therefore not a ‘shareholder’ in BRPL. 87.14. In view of the above, it is respectfully submitted, that the addition of Rs.59,27,00,000/- made by the assessing officer under section 2(22)(e) of the Act calls for being deleted.

assessment order.

incorporated as public company on 04.07.2001 and 49% of the shares of the

said company are held by the Delhi Power Co. Ltd., a corporation set up

under the State Act of Delhi Electricity Reforms Act, 2000 (Delhi Act No.2

of 2001). It has also been pointed out that Delhi Power Co. Ltd. is a

company which is wholly held by the government and hence a company in

which public is substantially interested. In view of the submissions, the

contention of the Learned AR remained that BRPL satisfies the conditions

stipulated in both sub-clause (b) and (c) of section 2(18)(b)(B) of the Act as:

i) More than 40% of its shares are held by Corporation set up under the State Act;

ii) More than 40% its share is held by a company which is held directly by the government.

89.1 Accordingly provisions of sec. 2(22)(e) of the Act are not attracted at

the threshold. The Assessing Officer nowhere disputed the fact that 49%

shares of BRPL are held by Delhi Power Co. Ltd., which is a corporation set

up under the State Act, but has held that there was no evidence to prove that

49% shares of BRPL held by Delhi Power Co. Ltd. were allotted or acquired

unconditionally.

89.2 Before the Learned CIT(Appeals), the assessee has raised two

contentions. Firstly, the BRPL who has provided loan/advance to the

assessee is a company in which public is substantially interested by virtue of provisions of sec. 2(18) (b)(B)(c) of the Act, hence the provisions of section

2(22)(e) of the Act are not attracted on the amount of loan/advance provided by BRPL to the assessee. BRPL is a company which is not a private company within the meanings of the Company’s Act, 1956 and, therefore,

qualifies as a company in which the public has substantial interest, since the below two conditions are also satisfied: (a) 40% of its shares are held by DPCL, a company to which section 2(18)(b)(B) applies, and

(b) The above mentioned shareholding of BRPL was unconditionally allotted to and acquired by DPCL and was beneficially held by it throughout the relevant year.

89.3 Without prejudice to the above, the second contention of the assessee remained that the assessee company is not a shareholder in BRPL and

accordingly cannot be taxed under sec. 2(22)(e) of the Act.

89.4 In support, reliance was placed on the decisions in the cases of ACIT

vs. Bhaumik Colour (P) Ltd. (2009) – 313 ITR (AT) 146 (S.B) and DCIT vs. National Travel Services – 31 SOT 76. In view of the above cited decisions

on the issue, the Learned CIT(Appeals) agreed with the alternative

submissions of the assessee and held that the provisions of sec. 2(22)(E) will

not be applicable in this case and directed the Assessing Officer to delete the

addition. The Special Bench in the above cited decisions in the case of ACIT

vs. Bhaumik Colour (P) Ltd. (supra) has held that deemed dividend can be

assessed only in the hands of a person who is shareholder of the lender

company and not in the hands of the person other than shareholder. Similar

view has been expressed in the other cited decisions. Since the decision

taken by the Learned CIT(Appeals) on the other alternative argument of the

assessee is fully covered in favour of the assessee by the above cited

decisions, we do not find reason to interfere with the First Appellate Order

in this regard. The same is upheld. The ground No.4 of the Revenue’s appeal

questioning the above finding is thus rejected.

89.5 The Learned CIT(Appeals) has, however, left open the above

discussed first contention of the assessee, treating the same as turned

academic in view of is above finding on the alternative contention of the

assessee. The assessee is aggrieved with this non-action of the Learned

CIT(Appeals).

By virtue of the provisions laid down under sec. 2(18)(b)(B)(c) of the Act, we principally agree with the contention of the assessee that provisions of sec. 2(22)(e) of the Act are not attracted, where the company, who provides loan/advance to the assessee, is a company in which public has substantial interest. In support, the assessee has also cited hereinabove the two conditions i.e. (a) (b) claimed to have been fulfilled in the present case, which our view need verification to decide the issue raised in ground NO.3 of the assessee. Since the Learned CIT(Appeals) has left the issue undecided, we in the interest of justice set aside the matter to the file of the Learned CIT(Appeals) to decide the issue after affording opportunity of being heard to the parties. The ground No.3 of the appeal preferred by the assessee is thus allowed for statistical purposes.

89.6 Thus, ground No.3 of the appeal of the assessee is allowed for

statistical purposes and ground No.4 of the appeal filed by the Revenue is

rejected.

ITA No. 1538/Del/2011 – Revenue – (A.Y.2007-08):

grounds:

m) Once these receipts have been accepted as non-refundable receipts they are no more a liability on the company. Hence the treatment given by the assessee co. to service line deposit by treating them as loan funds and accordingly as liabilities is all together incorrect. n) Further the assessee co. is engaged in selling electricity to the consumers from whom it charges fees in the name of energy charges. These energy charges are undisputedly in the nature of revenue receipts. o) The assessee co. is a service provider co. and is engaged in the business of distribution of electricity to different categories of customers as per their requirements. Hence it is in the nature of service provider. p) Since the assessee co. is engaged in selling the energy, therefore for this purpose it has to provide service line connections to the consumers for which it charges service line deposits. Hence it can be seen that these service line receipts are received by the co. during the course of its regular business/commercial operations. Hence, they are in the nature of revenue receipts. q) The reasoning given by the assessee co. that it incurs capital expenditure for extending service lines to the consumers and these receipts are utilized for this purpose does not explain that how these receipts are capital receipts in its hands. r) The fact that the assessee co itself treated 1/3rd of these receipts as revenue receipts impliedly, goes on to show that the co.believes that they are of revenue nature. s) Further the co. has not submitted any reasoning whatsoever as to why it has treated specifically 1/3rd of these receipts as revenue receipts and not ½ or 1/4th or some other proportion as revenue receipts. t) Lastly the assessee co. has not provided the details of these receipts including their reconciliation with its books even though specific query was raised in this regard vide not sheet entry dt. 21.11.2008. However a sample voucher of receipt was submitted which reveals that apart from service line charges, the co. is levying development charges from the customers for a new connection. Thus the co. is already collecting funds for incurring capital expenditure. u) The service line receipts simply cannot be treated as capital receipts because their nature would not depend upon how the assessee co. is utilizing them but in what capacity they have been received by the company. And the fact is that they have been received by the company. And the fact is that they have been received by the co. in the course of running its regular business operations. v) The assessee company also not provided the information in the tabular form inspite of specifically asked for by the AO during the Assessment proceedings.

additions made on account of service lines deposits and on account of

consumers contribution for capital work has been impugned by the Revenue.

The assessee on the other hand has raised a connected issue in ground No.1

of its appeal for the same assessment year questioning the First Appellate

Order upholding the service line deposit from consumers as taxable over a

period of three years. While deciding this issue hereinabove in the appeal of

the assessee for the assessment year 2006-07, we have already dealt with

both the connected grounds. Following the same, the finding of the Learned

CIT(Appeals) that service line deposits and consumers contribution for

capital works are capital in nature is upheld. The ground No.1 preferred by

the Revenue is thus rejected.

made on account of disallowance of legal claims. Under similar set of facts,

this issue has been decided in favour of the assessee in ground No.3 of the

appeal preferred by the Revenue for the assessment year 2006-07. Following

the same, we do not find reason to interfere with the action of the Learned

CIT(Appeals) in deleting the addition of Rs.22,74,094 with this finding that

payments made on account of legal claims by the assessee are not penal in

nature. The ground No.2 is accordingly rejected.

Rs.2,73,27,670 on account of disallowance of extra depreciation on

computer peripheral. Under the similar set of facts, an identical issue has

been decided in the appeal preferred by the Revenue for the assessment year

2006-07 vide ground No.4 therein. Following the same, we affirm the action

of the Learned CIT(Appeals) in deleting the addition in question with this

finding that the assessee was very much eligible for the claimed depreciation

on computer peripherals. The ground No.3 is accordingly rejected.

Rs.59,27,00,000 made on account of disallowance of deemed dividend under

sec. 2(22)(e) of the Act, which has been dealt with connected issue raised in

ground No. 3 of the appeal preferred by the assessee hereinabove. Following

the decision taken therein the action of the Learned CIT(Appeals) in deleting

the addition in question is upheld. Ground No. 4 is accordingly rejected.

ITA No. 3922/Del/2012 - Assessee – (A.Y. 2008-09):

grounds:

“1. Service line deposits from the customers wrongly upheld as taxable over a period of 3 years.

The Learned CIT(Appeals)-VIII has upheld that the service line deposits are capital in nature but in this regard he has wrongly upheld that the same are taxable over a period of 3 years. In fact the same are in the nature of capital receipts and at the most can be reduced from the cost of plant and machinery in accordance with the provisions of sec. 43(1) of the Income-tax Act, 1961.

energy meters @ 80% and in case the same is allowed, then the higher depreciation may be allowed. Accordingly the issue of higher deprecation @ 80% on energy meters still stands.

of the following additional ground:

“That on the facts and circumstances of the case and in law, the Assessing Officer erred in assessing the income of the appellant under sec. 115B and not under the normal provisions of the Income-tax Act, 1961 (“the Act”), without appreciating that the deeming provisions of section 115JB of the Act were not applicable during relevant assessment year.”

98.1 The parties have adopted similar arguments as advanced by them on

similar application in the appeal of the assessee hereinabove for the

assessment year 2007-08. Following the same, the application is allowed.

The parties have also advanced a similar arguments on the issue raised on

the additional ground as advanced by them in the assessment year 2007-08

in the appeal of the assessee. Following the same, we hold that the Assessing

Officer was not justified in assessing the income of the assessee under sec.

115JB of the Act and not under the normal provisions of the Act during the

year. The additional ground is accordingly allowed.

consumers taxable over a period of three years.

99.1 Under similar set of facts, we have decided the issue raised in this

ground in the appeal of the assessee for the assessment year 2005-06

hereinabove. Following the same and the decision taken in the connected

additional ground for the assessment year 2005-06 in the assessee’s appeal,

we hold that the Learned CIT(Appeals) while holding the service line

deposits from consumers as capital in nature should have directed the

Assessing Officer to reduce the amount of service line deposits credited to

the profit and loss account during the year (as per the company’s policy of

offering the service line deposits for Revenue over a period of three years)

by computing the total income after holding that entire receipts by way of

service line deposits is capital in nature. We direct to the Assessing Officer

accordingly. The ground No.1 is accordingly allowed.

meters @ 80% claimed by the assessee has been decided in the assessment

year 2005-06 in ground No.1 of the appeal preferred by the assessee.

Following the same, the issue is decided in favour of the assessee with this

finding that the assessee is very much eligible for the claimed depreciation

@ 80% on the energy meters with direction to the Assessing Officer to allow

the claimed depreciation @ 80% on the expenses incurred on

electronic/energy meters reflected in the audit report. The ground No. 2 is

accordingly allowed for statistical purposes.

created out of service line deposits and consumer contribution for capital

works from consumers. The assessee without prejudice to the ground that

service line deposits and consumers contribution for capital work are capital

receipts has pleaded that in case authorities decide this issue otherwise, the additional depreciation on assets created out of service line deposits and

consumers contribution should be allowed. We find that this ground is consequential to ground No.1 of the present appeal. Since ground No.1 has already been decided in favour of the assessee, the consequential ground

no.3 does not stand. This ground is accordingly rejected. 102. In result, the appeal is partly allowed. 103. In summary, appeals preferred by the assessee are partly allowed and those preferred by the Revenue are dismissed.

Order pronounced in the open court on 05 .10.2015 Sd/- Sd/- ( INTURI RAMA RAO ) ( I.C. SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated: 05 /10/2015 Mohan Lal Copy forwarded to: 1) Appellant 2) Respondent 3) CIT 4) CIT(Appeals) 5) DR:ITAT ASSISTANT REGISTRAR

Date Draft dictated on computer 21.9.2015 to 23.9.2015 & 01. 10.2015 Draft placed before author 01.10.2015 Draft proposed & placed before the second 01.10.2015 member Draft discussed/approved by Second Member. 05.10.2015 Approved Draft comes to the Sr.PS/PS 14.10.2015 Kept for pronouncement on 15.10.2015 File sent to the Bench Clerk 1510.2015 Date on which file goes to the AR Date on which file goes to the Head Clerk. Date of dispatch of Order.