M/s Eastern Power Distribution Company of AP Ltd.,, Visakhapatnam v. The ACIT, Circle-3(1)., Visakhapatnam

ITA 315/VIZ/2007 | 2001-2002
Pronouncement Date: 14-03-2011 | Result: Partly Allowed

Appeal Details

RSA Number 31525314 RSA 2007
Assessee PAN AAACE9876B
Bench Visakhapatnam
Appeal Number ITA 315/VIZ/2007
Duration Of Justice 3 year(s) 8 month(s) 24 day(s)
Appellant M/s Eastern Power Distribution Company of AP Ltd.,, Visakhapatnam
Respondent The ACIT, Circle-3(1)., Visakhapatnam
Appeal Type Income Tax Appeal
Pronouncement Date 14-03-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 14-03-2011
Date Of Final Hearing 20-01-2011
Next Hearing Date 20-01-2011
Assessment Year 2001-2002
Appeal Filed On 20-06-2007
Judgment Text
ITA NO 315 OF 07 EASTERN POWER DISTRIBUTION COMPANY OF AP LIMITED VISAKHAPATNAM PAGE 1 OF 22 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI BR BASKARAN ACCOUNTANT MEMBER ITA NO.315/VIZAG/2007 ASSESSMENT YEAR:2001-02 EASTERN POWER DISTRIBUTION COMPANY OF AP LIMITED VISAKHAPATNAM ACIT CIRCLE-3(1) VISAKHAPATNAM (APPELLANT) PAN NO: AAACE 9876 B VS. (RESPONDENT) APPELLANT BY: SHRI G.V.N. HARI CA RESPONDENT BY: SHRI T.H. LUCAS PETER CIT (DR) ORDER PER SHRI B. R. BASKARAN ACCOUNTANT MEMBER: THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 23.04.2007 PASSED BY LEARNED CIT(A) VISAKHAPATNAM AND IT RELATES TO THE ASSESSMENT YEAR 2001-02. 2. THE LEARNED CIT(A) HAS CONFIRMED THE ADDITIONS MADE WHILE COMPUTING THE INCOME BOTH UNDER NORMAL PROVISIONS OF THE ACT AND UNDER SECTION 115JB OF THE ACT. HENCE THE ASSESSEE IS CONTESTING THE SAID ADDITIONS UNDER BOTH THE PROVISIONS. THE GROUNDS RELATING TO THE CO MPUTATION OF INCOME UNDER NORMAL PROVISIONS OF ACT GIVE RISE TO THE FOL LOWING ISSUES: A) WHETHER THE LEARNED CIT(A) IS JUSTIFIED IN HOLDI NG THAT THE AMOUNT OF RS.1 12 38 786/- IS THE INCOME OF THE ASSESSEE. B) WHETHER THE LEARNED CIT(A) IS JUSTIFIED IN CONFI RMING THE DISALLOWANCE OF RS.9 08 06 966/- RELATING TO THE PR OVISIONS MADE FOR TERMINAL BENEFITS OF EMPLOYEES. ITA NO 315 OF 07 EASTERN POWER DISTRIBUTION COMPANY OF AP LIMITED VISAKHAPATNAM PAGE 2 OF 22 IN THE GROUNDS RELATING TO THE DETERMINATION OF TAX UNDER SECTION 115JB FOLLOWING ISSUES ARE URGED. A) WHETHER THE LEARNED CIT(A) IS JUSTIFIED IN CONFIRMI NG THAT THE NET PROFIT AS PER PROFIT AND LOSS ACCOUNT IS RS.1 12 38 786/-. B) WHETHER THE LEARNED CIT(A) IS JUSTIFIED IN CONFIRMI NG THE ADDITION MADE TO BOOK PROFITS OF RS.9 08 06 966/- PERTAININ G TO THE PROVISION MADE FOR TERMINAL BENEFITS OF EMPLOYEES. 3. THE FACTS RELATING TO THE ISSUES ARE STATED IN BRIEF. THE ASSESSEE IS A STATE GOVERNMENT UNDERTAKING ENGAGED IN THE BUSINES S OF PROCUREMENT AND DISTRIBUTION OF ELECTRICITY. THE ASSESSEE COMPANY WAS INCORPORATED ON 30- 03-2000 AND IT COMMENCED ITS OPERATIONS FROM 01-4-2 000. HENCE THE YEAR UNDER CONSIDERATION IS THE FIRST YEAR OF OPERATION OF THE COMPANY. AFTER FILING THE ORIGINAL RETURN OF INCOME THE ASSESSEE ALSO FILED A REVISED RETURN ON 31.3.2003 DECLARING A LOSS OF RS.14 24 79 614/-. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT UNDER NORMAL PROVISIONS OF THE ACT BY REDUCING THE LOSS TO RS.4.05 CRORES BY MAKING FOLLOWING ADJU STMENTS. A) NET PRIOR YEAR CREDIT/CHARGES DISALLOWED - R S.1 12 38 786/- B) AMOUNT DEBITED AS PENSION AND GRATUITY PAYABLE AND TRANSFERRED TO RESERVE ACCOUNT DISALLOWED RS.9 08 06 966/- C) DEPRECIATION CLAIM ALLOWED FURTHER - RS.1 38 375/- 3.1 IN THE REVENUE ACCOUNT (PROFIT AND LOSS ACCOUN T) THE ASSESSEE FIRST DETERMINED THE PROFIT FOR THE YEAR AT RS.1 12 38 78 6/- AND THE SAME WAS REDUCED TO NIL BY BOOKING EXPENDITURE OF EQUAL AMOU NT UNDER THE HEAD NET PRIOR PERIOD CREDITS/CHARGES. THUS THE NET P ROFIT AFTER THE ABOVE SAID EXPENDITURE WAS DECLARED NIL. HENCE THE ASSESSEE COMPANY DID NOT COMPUTE INCOME CHARGEABLE UNDER SECTION 115JB OF TH E ACT. HOWEVER THE ASSESSING OFFICER WAS OF THE VIEW THAT THE PROFIT O F THE ASSESSEE SHOULD BE TAKEN AS RS.1 12 38 786/- FOR THE PURPOSES OF SEC. 115JB AS HE DID NOT ACCEPT THE CLAIM OF NET PRIOR PERIOD CREDITS/CHARG ES FOR THE FOLLOWING REASONS: ITA NO 315 OF 07 EASTERN POWER DISTRIBUTION COMPANY OF AP LIMITED VISAKHAPATNAM PAGE 3 OF 22 A) THE IMPUGNED AMOUNT CLAIMED UNDER THE HEAD NET PRIOR PERIOD CREDITS/DEBITS WAS TRANSFERRED TO ANOTHER COMPANY N AMED APTRANSCO IN VIEW OF THE AGREEMENT ENTERED AFTER FI NALIZATION OF ACCOUNTS I.E. ALMOST AFTER 2 YEARS. B) EVEN IF IT IS TAKEN AS A LIABILITY IT FALLS IN THE CATEGORY OF LIABILITY OTHER THAN AS ASCERTAINED LIABILITY AND HENCE THE SAME IS LIABLE TO BE DISALLOWED UNDER SECTION 115JB. ACCORDINGLY THE ASSESSING OFFICER COMPUTED INCOME U NDER SECTION 115JB OF THE ACT BY TAKING THE NET PROFIT AT RS.1 12 38 786/ -. TO THE SAID PROFIT THE ASSESSING OFFICER ADDED THE EXPENDITURE AMOUNT OF R S.9.08 CRORES BOOKED TO PROVIDE FOR THE TERMINAL BENEFITS SINCE THE ASS ESSEE HAD TRANSFERRED THE SAME TO A RESERVE FUND. THUS THE ASSESSING OFFIC ER DETERMINED THE INCOME UNDER SECTION 115JB OF THE ACT AT RS.10 20 4 5 752/- AND LEVIED TAX THEREON. 4. THE ASSESSEE CARRIED THE MATTER IN APPEAL BE FORE LEARNED CIT(A) AND ITS CONTENTIONS DID NOT FIND FAVOUR OF LEARNED CIT( A). HENCE THE FIRST APPELLATE AUTHORITY DISMISSED THE APPEAL OF THE ASS ESSEE. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS. FIRST W E SHALL TAKE UP THE ISSUES RELATING TO THE COMPUTATION OF INCOME UNDER NORMAL PROVISIONS OF THE ACT. THE FIRST ISSUE RELATES TO THE DISALLOWANCE OF CLAI M MADE UNDER THE HEAD NET PRIOR PERIOD CREDITS/CHARGES WHICH WAS EQUIV ALENT TO THE NET PROFIT AMOUNT OF RS.1 12 38 786/-. IT IS NOTICED THAT THE ASSESSEE IS GETTING POWER SUPPLY FROM APTRANSCO AND IN TURN DISTRIBUTES THE POWER TO VARIOUS TYPES OF CUSTOMERS. IT WAS STATED THAT THE ASSESSE E COMPANY DID NOT HAVE RETAIL SUPPLY LICENSE WHILE THE APTRANSCO WAS HAVI NG BOTH BULK SUPPLY AND RETAIL SUPPLY LICENSE. IN VIEW OF THE ABOVE IT WAS CONTENDED THAT THE ASSESSEE SHOULD BE CONSIDERED AS AN AGENT OF APTRAN SCO AND HENCE IT HAD TO REIMBURSE THE ENTIRE PROFIT EARNED BY IT TO APTR ANSCO. ACCORDINGLY IT WAS STATED THAT THE PROFIT OF RS.1 12 38 786/- WAS TRANSFERRED TO ITA NO 315 OF 07 EASTERN POWER DISTRIBUTION COMPANY OF AP LIMITED VISAKHAPATNAM PAGE 4 OF 22 APTRANSCO RESULTING IN NIL PROFIT FOR THE ASSESSEE COMPANY. IT WAS ALSO SUBMITTED THAT THE PROFIT AMOUNT REPRESENTS ADDITIO NAL PURCHASE COST OF POWER. THE SAID EXPLANATIONS DID NOT FIND FAVOUR W ITH THE TAX AUTHORITIES. THE LEARNED CIT(A) CONFIRMED THE SAID DISALLOWANCE WITH THE FOLLOWING OBSERVATIONS. 4.1 COMING TO THE MERITS OF THE CASE THE FIRST IS SUE THAT NEEDS EXAMINATION IS WHETHER THERE WAS A PROFIT OF RS.1 12 38 786/- IN THE PREVIOUS YEAR RELEVANT TO A SSESSMENT YEAR 2001-02. AS PER PAGES 28 AND 29 OF THE ANNUAL ACCOUNTS OF THE APPELLANT COMPANY THE FOLLOWING IS THE SUMMA RY OF THE REVENUE ACCOUNT: TOTAL INCOME RS. 1180 76 18 405/- TOTAL EXPENDITURE RS. 1179 63 79 619/- EXCESS OF INCOME OVER EXPENDITURE RS. 1 12 38 786/- NET PRIOR PERIOD CHARGES RS. 1 12 38 786/- SURPLUS/DEFICIT RS. N I L AS PER SCHEDULE 18 AT PAGE 47 OF THE ANNUAL ACCOUNT S THE NET PRIOR PERIOD CHARGES IS AS UNDER. INCOME RELATING TO PREVIOUS YEAR: RECEIPTS PRIOR PERIODS RS. 42 83 407 EXCESS PROVISION OF INTEREST AND FINANCE CHARGES RS. 1 15 636 OTHER INCOME PRIOR PERIODS (-) RS. 1 71 289 SUB TOTAL RS.42 27 754 PRIOR PERIOD EXPENSES SHORT PROVISION FOR POWER RS. 63 24 788 INTEREST AND OTHER FINANCE CHARGES RS. 22 19 297 OTHER CHARGES RS. 69 22 455 SUB TOTAL RS.1 54 66 540 NET PRIOR PERIOD CHARGES (RS.15466540 RS.4227754) RS.1 12 38 786 IN THIS CONTEXT THE APPELLANTS ARGUMENTS IS THAT AFTER ADJUSTING THE NET PRIOR PERIOD CHARGES THE PURCHAS E COST OF POWER IS RS.1002 45 95 693/- WHICH HAS BEEN TRANSFE RRED TO APTRANSCO AS POWER PURCHASE COST. IT WAS ARGUED THA T AFTER CONSIDERING THE COST OF PURCHASE OF POWER BY THE AP TRANSCO AT THE BALANCING AMOUNT OF RS.1002 45 95 693/- THE INCOME OF THE APPELLANT COMPANY HAS BEEN ADOPTED AT NIL. IT W AS FURTHER SUBMITTED THAT THE SAID AMOUNT OF NET PRIOR PERIOD CHARGES ITA NO 315 OF 07 EASTERN POWER DISTRIBUTION COMPANY OF AP LIMITED VISAKHAPATNAM PAGE 5 OF 22 RELATES TO THE PERIOD PRIOR TO INCORPORATION OF THE APPELLANT COMPANY. THESE ARGUMENTS OF THE APPELLANT COMPANY P RIMA- FACIE APPEAR TO BE MISCONCEIVED. PERUSAL OF THE PRO FIT & LOSS ACCOUNT OF THE APPELLANT COMPANY REVEAL THAT AFTER DEBITING THE PURCHASE COST OF POWER OF RS.1002 45 95 693/- THE E XCESS OF INCOME OVER EXPENDITURE IS RS.1 12 38 786/-. THIS C LEARLY REPRESENTS THE NET PROFIT OF THE APPELLANT COMPANY AS ON 31/03/2001. THEREFORE THE PURCHASE COST OF POWER IS CERTAINLY NOT THE BALANCING FIGURE SO AS TO MAKE TH E PROFIT NIL . FURTHER IT IS SEEN THAT THE APPELLANT COMPANY WA S INCORPORATED ON 30/03/2000 VIDE NO.01-34117 OF 1999 -2000 BY THE REGISTRAR OF COMPANIES ANDHRA PRADESH HYDE RABAD. A LIMITED COMPANY CAN COMMENCE ITS BUSINESS OPERATION S ONLY UPON BEING GRANTED A CERTIFICATE FOR COMMENCEMENT O F BUSINESS OPERATIONS. SUCH A CERTIFICATE HAS BEEN GR ANTED TO THE APPELLANT COMPANY BY THE DY. REGISTRAR OF COMPANIES ANDHRA PRADESH HYDERABAD. EVEN THOUGH THE COMPANY WAS INCORPORATED ON 30/03/2000 AND ALLOWED TO COMMENCE BUSINESS ON 31/03/2000 THERE IS NO TRANSACTION BETW EEN 30/03/2000 AND 31/03/2000. HENCE THE FIRST YEAR AFTER COMMENCEMENT OF BUSINESS IS FROM 01/04/2000 TO 31/03/2001. THUS THE PRIOR PERIOD AS PER ACCOUNTS I N THE CASE OF APPELLANT COMPANY RELATES TO THE PRE- INCORPORATION PERIOD DURING WHICH NEITHER THE APPEL LANT COMPANY WAS IN EXISTENCE NOR CARRIED OUT ANY OPERATIONS. FOR ANY NEW COMPANY THERE WOULD NOT BE ANY PRIOR PERIOD INCOME IN THE YEAR OF FORMATION IT SELF. UNDER THESE CIRCUMSTANCES THE ARGUMENT OF THE APPE LLANT COMPANY THAT THE NET PRIOR PERIOD CHARGES HAD BEEN ADJUSTED AGAINST THE PROFIT CANNOT BE ACCEPTED AS THE SAME I S NOT AS PER ORDINARY ACCOUNTING PRINCIPLES. 4.2 THE APPELLANTS ARGUMENT IS THAT THE EXCESS OF INCOME OVER EXPENDITURE HAS BEEN TREATED AS POWER PURCHASE COST PURSUANT TO A CLARIFICATION ISSUED BY TRANSCO. THE SAID CLARIFICATION HAS BEEN ISSUED BY THE DIRECTOR (FINANCE) TRANSCO VIDE LETTER DATED 17/10/2002 WHEREIN IT WAS CLARIFI ED THAT THOUGH THE APPELLANT COMPANY STARTED BUSINESS W.E.F. 1.4.2000 THERE WAS NO RETAIL SUPPLY LICENSE TO THE APPELLANT COMPANY. APTRANSCO WAS HOLDING BOTH BULK SUPPLY AND RETAIL SUPPLY LICENSE FOR FINANCIAL YEAR 2000-0 1. THERE WAS NO BULK SUPPLY TARIFF BETWEEN APTRANSCO TO THE APPE LLANT COMPANY AND THERE WERE NO INTERFACE METERS TO MEASU RE THE QUANTUM OF POWER SUPPLIED TO THE APPELLANT COMPANY. AS SUCH THE APPELLANT COMPANY HAVE ACTED AN AGENT OF APTRAN SCO TO CARRY ON AND CONTINUE TO RETAIL SUPPLY BUSINESS FOR THE FINANCIAL ITA NO 315 OF 07 EASTERN POWER DISTRIBUTION COMPANY OF AP LIMITED VISAKHAPATNAM PAGE 6 OF 22 YEAR 2000-01. THEREFORE THE DIFFERENCE BETWEEN THE APPELLANT COMPANYS REVENUE MINUS ITS OPERATING EXPENDITURE I S TO BE TREATED AS COST OF POWER PURCHASE BY THE APPELLANT COMPANY FROM TRANSCO AND THE SAME IS TO BE ADOPTED IN THE B OOKS OF APTRANSCO AS THE REVENUE FROM SALE OF POWER TO THE APPELLANT COMPANY. AS COULD BE SEEN FROM THE ABOVE THIS DECISION WAS TAKEN MUCH AFTER THE CLOSURE OF THE AN NUAL ACCOUNTS WHICH CLOSED O 31/03/2001. THEREFORE THOU GH THE APPELLANT COMPANY EARNED A PROFIT FOR THE ACCOUNTIN G YEAR ENDING ON 31/03/2001 THE SAME WAS NULLIFIED BY THE ABOVE DECISION WHICH WAS COMMUNICATED ON 17/10/2002. THIS BRINGS IN THE QUESTION WHETHER SUCH TREATMENT OF PROFIT IS AN APPLICATION OF INCOME OR A DIVERSION OF INCOME BY O VERRIDING TITLE. 4.3 AN OBLIGATION TO APPLY THE INCOME IN A PARTICUL AR WAY BEFORE IT IS RECEIVED BY THE ASSESSEE OR BEFORE IT HAS ACCRUED OR ARISEN TO THE ASSESSEE RESULTS IN THE DIVERSION OF THE INCOME. ON THE OTHER HAND AN OBLIGATION TO APPLY INCOME W HICH HAS ACCRUED OR ARISEN OR HAS BEEN RECEIVED AMOUNTS MERE LY TO THE APPORTIONMENT OF THE INCOME AND NOT TO ITS DIVERSIO N. IN ORDER TO DECIDE WHETHER A PARTICULAR DISBURSEMENT AMOUNTS TO DIVERSION OR APPLICATION OF INCOME THE TRUE TEST I S TO PROBE INTO AND DECIDE WHETHER THE AMOUNT SOUGHT TO BE DE DUCTED IN TRUTH DID NOT OR DID REACH THE ASSESSEE AS HIS OWN INCOME. IN EVERY CASE THERE ARE OBLIGATIONS BUT IT IS THE NATURE OF THE OBLIGATION WHICH IS THE DECISIVE FACT. THERE IS A D IFFERENCE BETWEEN AN AMOUNT WHICH A PERSON IS OBLIGED TO APPL Y OUT OF HIS INCOME AND AN AMOUNT WHICH BY THE NATURE OF THE OBLIGATION CANNOT BE SAID TO BE A PART OF HIS INCOM E. WHERE BY THE OBLIGATION INCOME IS DIVERTED BEFORE IT REACHES THE ASSESSEE IT IS DEDUCTIBLE BUT THE WHERE THE INCOME IS REQUIRED TO BE APPLY TO DISCHARGE AN OBLIGATION AFTER SUCH I NCOME REACHES THE ASSESSEE THE SAME CONSEQUENCE IN LAW DOES NOT FALL. IT IS ONLY WHEN INCOME OR A PORTION OF INCOME IS DIVERTED AT THE SOURCE BY AN OVERRIDING TITLE BEFORE IT STAR TED FLOWING INTO THE CHANNEL WHICH WAS TO REACH THE ASSESSEE CO NCERNED THAT IT COULD BE EXCLUDED FROM HIS ASSESSABLE INCOM E. AS AGAINST THE ABOVE TESTS WHICH HAVE BEEN LAID DOWN B Y VARIOUS JUDICIAL PRONOUNCEMENTS THE APPELLANTS CASE IS EXA MINED IT IS SEEN THAT AS ON 31/03/2001 THE APPELLANT HAD EARNED A PROFIT. HOWEVER VIDE A COMMUNICATION FROM TRANSCO DATED 17/10/2002 THE SAID PROFIT WAS DIRECTED TO BE TREA TED AS A PART OF AFTER PURCHASE COST AND HENCE AN EXPENDITUR E. THUS THERE IS NO OVERRIDING TITLE FOR DIVERTING THE SAID PROFIT OF THE APPELLANT COMPANY. THE SAID TREATMENT OF PROFIT EAR NED BY THE ITA NO 315 OF 07 EASTERN POWER DISTRIBUTION COMPANY OF AP LIMITED VISAKHAPATNAM PAGE 7 OF 22 APPELLANT COMPANY WAS THE RESULT OF A MUTUAL AGREEM ENT WHICH WAS REACHED SUBSEQUENT TO THE CLOSURE OF THE ACCOUNT AND DETERMINATION OF THE PROFIT. THIS CANNOT BE TER MED AS AN OBLIGATION IN AS MUCH AS THAT THE OBLIGATION TO USE THE INCOME IN A PARTICULAR MANNER DOES NOT REMOVE IT FROM THE CATEGORY OF INCOME. THEREFORE IN THE CASE OF THE APPELLANT THE FACTS LEAD TO THE CONCLUSION THAT IT IS NOTHING BUT AN APPLICA TION OF INCOME WHICH IS TAXABLE. THUS IT IS NOTICED THAT THE ASSESSEE HAS TAKEN DIF FERENT TYPES OF STANDS IN RESPECT OF CLAIM OF RS.1 12 38 786/- UNDER THE HEAD NET PRIOR PERIOD CREDITS/CHARGES. THE LEARNED CIT(A) HAS ALSO LISTE D OUT THE BREAK UP DETAILS THERE OF. FIRST IT WAS CLAIMED THAT THE AS SESSEE IS THE AGENT OF APTRANSCO AND HENCE THE IMPUGNED PROFIT AMOUNT BELO NGS TO APTRANSCO. HOWEVER IN THE REVENUE ACCOUNT THE AB OVE SAID AMOUNT HAS BEEN CLAIMED AS NET PRIOR PERIOD CHARGES/CREDI TS. BY TAKING ALTOGETHER A NEW STAND DURING THE COURSE OF ARGUMEN TS IT WAS CLAIMED THAT THE SAID AMOUNT REPRESENTS ADDITIONAL PURCHASE COST . THIS ARGUMENT WAS MADE ON THE BASIS OF A LETTER DATED 17.10.2002 ISSU ED BY THE DIRECTOR (FINANCE) OF APTRANSCO TO THE DIRECTOR (FINANCE) OF THE ASSESSEE COMPANY. IT IS NOT UNDERSTANDABLE HOW AN ASSESSEE CAN TAKE DIFFERENT STANDS IN RESPECT OF THE SAME ITEM OF EXPENDITURE C LAIM. IF THE ASSESSEE HAS ACTED ONLY AS AN AGENT THEN THERE IS NO REQUIR EMENT OF PREPARING A REVENUE ACCOUNT DECLARING BOTH PURCHASES AND SALE S. SINCE THE ASSESSEE COMPANY HAS BEEN INCORPORATED ONLY ON 30.3.2000 TH ERE CANNOT BE ANY QUESTION OF PRIOR YEAR AND CONSEQUENTLY ANY PRIO R PERIOD CHARGES/CLAIM. ANOTHER CLAIM OF THE ASSESSEE IS THAT THE SAID AMOU NT IS TO BE TREATED AS ADDITIONAL PURCHASE COST BUT THE SAID CLAIM GOES AGAINST THE ENTRIES PASSED IN THE BOOKS OF ACCOUNT I.E. IN THE BOOKS I T WAS CLAIMED AS NET PRIOR PERIOD CHARGES/CREDITS. THE ASSESSING OFFIC ER AS WELL AS THE LEARNED CIT(A) HAS REJECTED THE CLAIM OF ADDITIONAL PURCHAS E COST BY HOLDING THAT THE SAME IS AN APPLICATION OF INCOME. IN VIEW OF THE ABOVE WE ARE ALSO OF THE VIEW THAT THE CLAIM OF RS.1 12 38 786/- HAS TO BE DISALLOWED AS THE ITA NO 315 OF 07 EASTERN POWER DISTRIBUTION COMPANY OF AP LIMITED VISAKHAPATNAM PAGE 8 OF 22 ASSESSEE COULD NOT GIVE A LEGALLY TENABLE EXPLANATI ON IN THIS REGARD. ACCORDINGLY WE AFFIRM THE DECISION OF LEARNED CIT(A ) ON THIS ISSUE. 5.1 THE NEXT ISSUE IN THE COMPUTATION UNDER NORM AL PROVISIONS OF THE ACT RELATES TO THE DISALLOWANCE OF RS.9 08 06 966/- PER TAINING TO THE PROVISION MADE TOWARDS TERMINAL BENEFITS OF EMPLOYEES. THE A SSESSING OFFICER NOTICED THAT THE GRATUITY FUND OF THE ASSESSEE WA S APPROVED BY LEARNED CIT-I VISAKHAPATNAM ONLY ON 11.9.2002. SINCE THE APPROVAL WAS NOT AVAILABLE DURING THE YEAR UNDER CONSIDERATION THE ASSESSING OFFICER DISALLOWED THE SAID CLAIM BY INVOKING THE PROVISION S OF SEC.40A(7) OF THE ACT. THE ASSESSING OFFICER ALSO DREW SUPPORT FROM THE CIRCULAR NO.146 DATED 26.9.1974 ISSUED BY CBDT IN THAT REGARD. THE LEARNED CIT(A) ALSO CONFIRMED THE SAID DISALLOWED WITH THE FOLLOWING OB SERVATIONS: 4.6 THE NEXT ISSUE PERTAINS TO THE CLAIM OF DEDUCTI ON OF RS.9 08 06 966/- TOWARDS PENSION AND GRATUITY PAYAB LE TO THE EMPLOYEES ON THEIR RETIREMENT. DURING THE RELEVANT PREVIOUS YEAR ADMITTEDLY THE APPELLANT DIDNT HAVE ANY APPRO VED GRATUITY/PENSION FUNDS. THE APPROVAL FOR SUCH FUNDS WAS GIVEN BY THE COMMISSIONER OF INCOME TAX-1 VISAKHAPATNAM W.E.F. 11/09/2002 ONLY. A PERUSAL OF SECTION 40A(7) SHOWS THAT ACCORDING TO CLAUSE (A) NO DEDUCTION IN RESPECT OF ANY PROVISION FOR PAYMENT OF GRATUITY IS ADMISSIBLE. CL AUSE (B) HOWEVER PROVIDES FOR TWO EXCEPTIONS TO THE GENERAL RULE CONTAINED IN CLAUSE (A). ACCORDING TO CLAUSE (B) T HE PROVISION FOR GRATUITY CAN BE ALLOWED (I) IF IT HAS BEEN MADE FOR PAYMENT BY WAY OF CONTRIBUTION TOWARDS AN APPROVED GRATUITY FUND OR (II) IF THE PROVISION IS FOR THE PURPOSE OF PAYMENT OF ANY GRATUITY THAT HAS BECOME PAYABLE DURING THE PREVIOU S YEAR. IN THE INSTANT CASE SINCE THE GRATUITY FUND IS NOT APP ROVED ANY CONTRIBUTION MADE TOWARDS SUCH FUND IS NOT ADMISSIB LE. IN SO FAR AS ACTUAL PAYMENTS ARE CONCERNED AS CLEARLY BRO UGHT OUT BY THE ASSESSING OFFICER IN PARA 5.3.4. OF THE ASSESSM ENT ORDER THERE WAS NO LIABILITY ON THE APPELLANT COMPANY REG ARDING PAYMENT OF ANY GRATUITY. WHATEVER GRATUITY WAS ACTU ALLY PAID WAS RECEIVED FROM TRANSCO AND DISBURSED TO THE RETI RING EMPLOYEES. THEREFORE BOTH THE EXCEPTIONS PROVIDED IN CLAUSE (B) OF SECTION 40A(7) ARE NOT APPLICABLE IN THE CAS E OF THE ITA NO 315 OF 07 EASTERN POWER DISTRIBUTION COMPANY OF AP LIMITED VISAKHAPATNAM PAGE 9 OF 22 APPELLANT T. HENCE THE DISALLOWANCE OF RS.9 08 06 966/- MADE BY THE ASSESSING OFFICER IN THIS REGARD IS HEREBY CONFIRMED. ON A CAREFUL PERUSAL OF THE ORDER OF LEARNED CIT(A) WE NOTICE THAT THE FIRST APPELLATE AUTHORITY HAS CONFIRMED THE IMPUGNED DISA LLOWANCE BY ANALYZING THE RELEVANT PROVISIONS. DURING THE COURSE OF HEAR ING NO CONTRARY DECISION WAS BROUGHT TO OUR NOTICE BY THE ASSESSEE. HENCE WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF LEARNED CIT(A) ON THIS ISSUE AND ACCORDINGLY UPHOLD THE SAME. 6. NOW WE TAKE UP THE ISSUES RAISED IN CONNECTI ON WITH THE COMPUTATION OF BOOK PROFIT MADE UNDER SECTION 115JB OF THE ACT. THE ASSESSEE HAS ALSO TAKEN A GROUND THAT THE LEARNED CIT(A) SHOULD HAVE DIRECTED THE ASSESSING OFFICER TO PREPARE THE PROFIT AND LOSS ACCOUNT IN A CCORDANCE WITH PARTS II AND III OF SCHEDULE VI OF THE COMPANIES ACT SINCE THE ACCOUNTS OF THE ASSESSEE HAD BEEN PREPARED IN ACCORDANCE WITH ELEC TRICITY (SUPPLY) (ANNUAL ACCOUNTS) RULES. THIS ISSUE HAS BEEN CONSI DERED BY THE HYDERABAD BENCH OF HON'BLE ITAT IN THE CASE OF D.C. I.T VS. NORTHERN POWER DISTRIBUTION CO. OF AP LTD. IN ITA NOS. 239 & 240/HYD/2006 AND THE TRIBUNAL VIDE ITS ORDER DATED 06-06-2008 HAS DECID ED THIS ISSUE AGAINST THE ASSESSEE. WE EXTRACT BELOW THE RELEVANT OBSERVATIO NS MADE AND THE DECISION RENDERED BY THE TRIBUNAL IN THE ABOVE CITE D CASE. 6. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AN D THE MATERIAL ON RECORD. SECTION 115JB(1) MANDATES THAT IN THE CASE OF AN ASSESSEE WHICH IS A COMPANY IF THE TOTAL INC OME AS COMPUTED UNDER THE ACT IS LESS THAN 10% OF ITS BOOK PROFIT SUCH BOOK PROFIT SHALL BE DEEMED TO BE THE TOTAL I NCOME OF THE ASSESSEE. SECTION 115JB(2) PROVIDES THAT FOR THE PU RPOSES OF THIS SECTION EVERY COMPANY SHALL PREPARE ITS PROFI T & LOSS ACCOUNT IN ACCORDANCE WITH THE PROVISIONS OF PARTS II AND III OF SCHEDULE VI TO THE COMPANIES ACT. SECTION 211(2) OF THE COMPANIES ACT PROVIDES THAT EVERY PROFIT & LOSS ACC OUNT OF A COMPANY FOR THE FINANCIAL YEAR AD SHALL SUBJECT AS AFORESAID COMPLY WITH THE REQUIREMENTS OF PART II OF SCHEDULE VI SO FAR AS THEY ARE APPLICABLE THERETO. THE PROVISO TO THE SAID SUB- ITA NO 315 OF 07 EASTERN POWER DISTRIBUTION COMPANY OF AP LIMITED VISAKHAPATNAM PAGE 10 OF 22 SECTION PROVIDES THAT NOTHING CONTAINED IN THE SUB- SECTION SHALL APPLY TO ANY INSURANCE OR BANKING COMPANY OR ANY CO MPANY ENGAGED IN THE GENERATION OR SUPPLY OF ELECTRICITY OR TO ANY OTHER CLASS OF COMPANY FOR WHICH A FORM OF PROFIT & LOSS ACCOUNT HAS BEEN SPECIFIED IN OR UNDER THE ACT GOVE RNING SUCH CLASS OF COMPANY. IN THE PRESENT CASE AS PER NOTE NO.1 IN STATEMENT-5 (NOTES TO ACCOUNTS) AND ALSO AS TAKEN N OTE OF BY THE AUDITORS IN THEIR REPORT THE ANNUAL ACCOUNTS H AVE BEEN PREPARED I THE FORMS PRESCRIBED UNDER THE ELECTRICI TY (SUPPLY) (ANNUAL ACCOUNTS) RULES 1985 (ESSAR 1985) AS NOTIF IED BY THE CENTRAL GOVERNMENT IN ELECTRICITY SUPPLY ACT 1 948. THUS THE ACCOUNTS OF THE ASSESSEE AS PRESENTED ARE IN ACCORDANCE WITH THE PROVISIONS OF SEC.211 OF THE COMPANIES ACT AND IS DEEMED TO HAVE COMPLIED WITH THE PROVISIONS OF PART S II AND III OF SCHEDULE VI. IN FACT THE ASSESSEE HAS NO BU SINESS TO RECAST ITS PROFIT & LOSS ACCOUNT AS PER THE FORMAT PRESCRIBED FOR FORMAL COMPANIES I.E. OTHER THAN THE EXCEPTIONS PRO VIDED IN THE PROVISO TO SEC.211(2). MOREOVER AS PER THE FIRS T PROVISO TO SEC.115JB (2) THE PROFIT & LOSS ACCOUNT HAS TO BE T HE SAME AS HAVE BEEN LAID BEFORE ITS ANNUAL GENERAL MEETING. A CCORDINGLY THE REVENUE ACCOUNT PREPARED BY THE ASSESSEE HAS TO BE TAKEN AS THE PROFIT & LOSS ACCOUNT PREPARED IN ACCORDANCE WITH PARTS II AND III OF SCHEDULE VI TO THE COMPANIES ACT. TO THIS EXTENT WE REJECT THE ARGUMENT OF THE LEARNED COUNSEL AND A CCEPT THAT OF THE EARNED DEPARTMENTAL REPRESENTATIVE. CONSISTENT WITH THE VIEW TAKEN BY THE CO-ORDINATE B ENCH WE ALSO DISMISS THE SAID GROUND OF THE ASSESSEE AND HOLD THAT THE R EVENUE ACCOUNT PREPARED BY THE ASSESSEE SHOULD BE TAKEN AS THE PRO FIT AND LOSS ACCOUNT PREPARED IN ACCORDANCE WITH PARTS II AND III OF SCH EDULE VI OF THE COMPANIES ACT. 7 THE NEXT ISSUE RELATES TO THE DETERMINATION OF THE AMOUNT OF NET PROFIT TO BE CONSIDERED FOR THE PURPOSES OF SEC. 1 15JB OF THE ACT. AS STATED EARLIER THE ASSESSEE HAS DECLARED NIL PROFI T AFTER CLAIMING AN AMOUNT OF RS.1 12 38 786/- UNDER THE HEAD NET PRIO R YEAR CHARGES/CREDITS. HOWEVER THE ASSESSING OFFICER T OOK THE VIEW THAT THE NET PROFIT SHOULD BE TAKEN AS RS.1 12 38 786/-. TH E SAID VIEW WAS ALSO CONFIRMED BY LEARNED CIT(A). ITA NO 315 OF 07 EASTERN POWER DISTRIBUTION COMPANY OF AP LIMITED VISAKHAPATNAM PAGE 11 OF 22 7.1 THE LEARNED A.R BY PLACING RELIANCE ON THE DECISION RENDERED BY THE HYDERABAD BENCH OF HON'BLE ITAT IN THE CASE OF NORTHERN POWER DISTRIBUTION CO. OF AP LTD (SUPRA) CONTENDED THAT THE ASSESSING OFFICER IS NOT ENTITLED TO MAKE ADJUSTMENTS TO BOOK PROFIT SHO WN IN THE AUDITED ACCOUNTS. LEARNED A.R DREW OUR ATTENTION TO THE FO LLOWING OBSERVATIONS MADE IN THE ABOVE CITED CASE. 7. IN THIS PRECEDING PARAGRAPH WE HAVE HELD THAT THE REVENUE ACCOUNT PREPARED BY THE ASSESSEE IS TO BE TAKEN AS THE PROFIT AND LOSS ACCOUNT FOR THE PURPOSE OF SEC.115JB OF TH E ACT. NOW THE QUESTION IS WHAT IS THE BOOK PROFIT AS PER THE SAID ACCOUNT?. THE REVENUE ACCOUNT ON PAGE 29 OF THE ANN UAL ACCOUNTS SHOW NIL SURPLUS/DEFICIT. THIS HAS BEEN ARRIVED AT AFTER ADJUSTING EXPENDITURE CHARGES OF RS.232.90 LA KHS AGAINST THE PROFIT OF THE LIKE AMOUNT. ACCORDING TO THE ASS ESSING OFFICER THE BOOK PROFIT IS RS.232.90 LAKHS WHEREAS AS PER THE ASSESSEE IT IS NIL. WE ARE INCLINED TO AGREE WITH THE CONTENTION OF THE ASSESSEE. FIRSTLY THOUGH THE ASSESSEE WAS N OT A DIRECT LICENSEE YET AP TRANSCO WAS ALLOWED TO ASSIGN ITS FUNCTION TO THE ASSESSEE IN THE SPECIFIED AREA OF SUPPLY. THUS IN THAT SENSE NO DOUBT IT WAS THE OPERATING PROFIT OF THE ASSESSEE. HOWEVER SINCE THE ASSESSEE WAS NOT A DIRECT LICENS EE THERE WAS NO BULK SUPPLY TARIFF AND TARIFF SUBSIDY WAS RE CEIVED BY APTRANSCO. THEREFORE THE GAP OF DISTRIBUTION BUSIN ESS WAS TRANSFERRED TO APTRANSCO AND THE ASSESSEE WAS LEFT WITH NO PROFIT EITHER ACTUALLY OR AS PER BOOKS. THEREFORE IT CANNOT BE SAID THAT THERE WAS A BOOK PROFIT IN THE REVENUE AC COUNT OF THE ASSESSEE. SECONDLY WE HAVE HELD EARLIER THAT THE R EVENUE ACCOUNT OF THE ASSESSEE IS THE PROFIT & LOSS ACCOUN T FOR THE PURPOSES OF SEC.115JB OF THE ACT AND THE SAME HAS B EEN AUDITED BY THE AUDITORS. AS HELD BY THE SUPREME COU RT IN THE CASE OF APOLLO TYRES (255 ITR 273) THE ASSESSING O FFICER CANNOT MAKE ANY ADJUSTMENTS TO THE BOOK PROFIT SHOW N BY THE AUDITED BOOKS SAVE AS PROVIDED IN THE EXPLANATION T O SEC.115JB. AT PAGE 19 OF THE ANNUAL ACCOUNTS THE A UDITORS HAVE CERTIFIED THAT THE ACCOUNTS GIVE THE INFORMATI ON AS REQUIRED BY THE COMPANIES ACT 1956 IN THE MANNER SO REQUIRED AND GIVE A TRUE AND FAIR VIEW IN SO FAR AS IT RELATES TO THE REVENUE ACCOUNT OF THE NIL SURPLUS/DEFICIT OF THE COMPANY FOR THE PERIOD ENDED 31-3-2001. THUS THE ASSESSING OFFICER CANNOT TINKER WITH THIS BOOK PROFIT WHICH IS NIL AND ACCORDINGLY ITA NO 315 OF 07 EASTERN POWER DISTRIBUTION COMPANY OF AP LIMITED VISAKHAPATNAM PAGE 12 OF 22 WE UPHOLD THE ORDER OF THE CIT (A) DELETING THE ADD ITION OF RS.232.90 LAKHS. 7.2 HOWEVER WE NOTICE THAT THE HYDERABAD BENCH OF ITAT IN THE CASE CITED (SUPRA) HAS ONLY CONSIDERED THE QUESTION OF C OMPUTATION OF INCOME UNDER SEC. 115JB. THE CLAIM MADE BY THAT ASSESSEE UNDER THE HEAD NET PRIOR PERIOD CREDIT/CHARGES WAS NOT EXAMINED BY TH E TRIBUNAL VIS-A-VIS NORMAL PROVISIONS OF THE ACT AND HENCE THE HYDERABA D BENCH DID NOT HAVE AN OCCASION TO EXAMINE THE VALIDITY OF THE SAID CLA IM. 7.3 NOW THE QUESTION THAT ARISES IS WHETHER THE ASSESSING OFFICER IS ENTITLED TO DISTURB THE NET PROFIT SHOWN BY THE ASS ESSEE IN THE PROFIT AND LOSS ACCOUNT PREPARED AS PER THE COMPANIES ACT. 7.4 AN IDENTICAL QUESTION WAS CONSIDERED BY THE HON'BLE SUPREME COURT IN THE CASE OF APOLLO TYRES (SUPRA). THE SAID DEC ISION OF THE APEX COURT WAS CONSIDERED BY THIS BENCH IN THE CASE OF HINDUST AN SHIPYARD LTD. VS. D.C.I.T (6 ITR (TRIB.) 407) AND WE EXTRACT BELOW TH E RELEVANT OBSERVATIONS MADE BY THE TRIBUNAL IN THAT CASE. 8.2 THE NEXT QUESTION THAT ARISES BEFORE US IS WHET HER THE AO IS ENTITLED TO GO BEYOND THE NET PROFIT/LOSS THAT WAS DISCLOSED IN THE ANNUAL ACCOUNTS PREPARED UNDER THE COMPANIES ACT IN THIS KIND OF SITUATION. THE ASSESSEE HAS PLACED ITS RELIANCE HE AVILY ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F APOLLO TYRES LTD. SUPRA. WE HAVE CAREFULLY PERUSED THE SAID DEC ISION. WE EXTRACT THE FOLLOWING OBSERVATIONS OF HONBLE SUPREME COURT IN THAT CASE. SUB-S (1A) OF S.115J DOES NOT EMPOWER THE AO TO EM BARK UPON A FRESH INQUIRY IN REGARD TO THE ENTRIES MADE IN THE BOOKS OF ACCOUNT OF THE COMPANY. THE SAID SUB-SECTI ON AS A MATTER OF FACT MANDATES THE COMPANY TO MAINTAIN IT S ACCOUNT IN ACCORDANCE WITH THE REQUIREMENTS OF THE COMPANIE S ACT WHICH MANDATE ACCORDING TO US IS BODILY LIFTED FR OM THE COMPANIES ACT INTO THE IT ACT FOR THE LIMITED PURPO SE OF MAKING THE SAID ACCOUNT SO MAINTAINED AS A BASIS FO R COMPUTING THE COMPANYS INCOME FOR LEVY OF INCOME-T AX. BEYOND THAT WE DO NOT THINK THAT THE SAID SUB-SECT ION EMPOWERS THE AUTHORITY UNDER THE IT ACT TO PROBE IN TO THE ITA NO 315 OF 07 EASTERN POWER DISTRIBUTION COMPANY OF AP LIMITED VISAKHAPATNAM PAGE 13 OF 22 ACCOUNTS ACCEPTED BY THE AUTHORITIES UNDER THE COMP ANIES ACT. IF THE STATUTE MANDATES THAT INCOME PREPARED I N ACCORDANCE WITH THE COMPANIES ACT SHALL BE DEEMED I NCOME FOR THE PURPOSE OF S.115J OF THE ACT THEN IT SHOUL D BE THAT INCOME WHICH IS ACCEPTABLE TO THE AUTHORITIES UNDER THE COMPANIES ACT. THERE CANNOT BE TWO INCOMES ONE FOR THE PURPOSE OF COMPANIES ACT AND ANOTHER FOR THE PURPOS E OF INCOME-TAX BOTH MAINTAINED UNDER THE SAME ACT. IF T HE LEGISLATURE INTENDED THE AO TO REASSESS THE COMPANY S INCOME THEN IT WOULD HAVE STATED IN S.115J THAT I NCOME OF THE COMPANY AS ACCEPTED BY THE AO. IN THE ABSENCE O F THE SAME AND ON THE LANGUAGE OF S.115J IT WILL HAVE TO HELD THAT VIEW TAKEN BY THE TRIBUNAL IS CORRECT AND THE HIGH COURT HAS ERRED IN REVERSING THE SAID VIEW OF THE TRIBUNAL. THEREFORE WE ARE OF THE OPINION THE AO WHILE COMPUTING THE INCOME UNDER S.115J HAS ONLY THE POWER OF EXAMINING WHETHER THE BOOKS OF ACCOUNT ARE CERTIFIE D BY THE AUTHORITIES UNDER THE COMPANIES ACT AS HAVIN G BEEN PROPERLY MAINTAINED IN ACCORDANCE WITH THE COMPANIES ACT. THE AO THEREAFTER HAS THE LIMITED POWER OF MAKING INCREASES AND REDUCTIONS AS PROVIDED FOR IN THE EXPLANATION TO THE SAID SECTION. TO PUT IT DIFFEREN TLY THE AO DOES NOT HAVE THE JURISDICTION TO GO BEHIND THE NET PROFIT SHOWN IN THE P&L A/C EXCEPT TO THE EXTENT PROVIDED IN THE EXPLANATION TO S.115J A CAREFUL ANALYSIS OF THE DECISION OF THE HONBLE A PEX COURT WOULD SHOW THAT THE AO HAS ONLY THE POWER TO EXAMINE WHET HER THE BOOKS OF ACCOUNTS ARE CERTIFIED BY THE AUTHORITIES UNDER THE COMPANIES ACT AS HAVING BEEN PROPERLY MAINTAINED IN ACCORDANCE WITH THE COMPANIES ACT. THERE CANNOT BE ANY DISPUT E THAT THE AUTHORITY TO GIVE SUCH A CERTIFICATE IS PRIMARILY T HE STATUTORY AUDITORS OF THE COMPANY. HOWEVER IN THE INSTANT CASE THE S TATUTORY AUDITORS HAVE GIVEN A QUALIFIED CERTIFICATE MORE P ARTICULARLY THE NON-INCORPORATION OF WAIVER BENEFITS. THE RELEVANT PART OF THE AUDITORS REPORT IS EXTRACTED IN PARA 8 SUPRA. LD CIT(A) HAS ALSO ANALYSED THE LEGAL POSITION ON THIS ISSUE AND WE EX TRACT HEREUNDER THE OBSERVATIONS OF LD CIT(A) IN PARA 3.3.2 OF HIS ORDER WITH APPROVAL: 3.3.2. UNDER THE PROVISIONS OF SECTION 211(2) OF T HE COMPANIES ACT IT HAS BEEN LAID DOWN THAT THE ACCOU NTS OF A COMPANY MUST GIVE TRUE AND FAIR VIEW OF THE PROFIT OF THE COMPANY. PROVISIONS OF PART II OF SCHEDULES VI TO T HE ITA NO 315 OF 07 EASTERN POWER DISTRIBUTION COMPANY OF AP LIMITED VISAKHAPATNAM PAGE 14 OF 22 COMPANIES ACT ALSO LAID DOWN THAT THE PROFIT AND LO SS ACCOUNT OF A COMPANY SHALL BE SO MADE OUT AS TO DIS CLOSE CLEARLY THE RESULTS OF THE WORKING OF THE COMPANY D URING THE PERIOD COVERED BY THE ACCOUNT. THE PROVISIONS OF PA RT II AND PART III OF SCHEDULE VI ARE THEREFORE SUBSERVIENT TO THE BASIC REQUIREMENT TRUE AND FAIR VIEW OF THE PROFITS OF THE COMPANY. THE JUDGEMENT IN THE CASE OF APPOLLO TYRES LTD LAID DOWN THAT THE ASSESSING OFFICER CANNOT DISPUTE THE ACCOUNTS MAINTAINED IN ACCORDANCE WITH THE PROVISIO NS OF PART II AND PART III OF SCHEDULE VI OF THE COMPANIE S ACT. THUS THE POWER OF THE ASSESSING OFFICER TO DECIDE WHETHER OR NOT THE ACCOUNTS WERE PREPARED IN ACCORDANCE WITH PART II AND PART III OF SCHEDULE VI TO COMPANIES ACT HAS NOT BEEN AFFECTED BY THE JUDGEMENT. THEREFORE IN CASE THE ASSESSING OFFICER FOUND THE PROFIT AND LOSS ACCOUNT HAS NOT BEEN PREPARED I N ACCORDANCE WITH THE PROVISIONS OF PART II AND PART III OF SCHEDULE VI TO THE COMPANIES ACT AND ALSO THAT THE PROFIT AND LOSS ACCOUNT PREPARED BY THE ASSESSEE IS FRAUDU LENT OR MISLEADING GIVING FIGURES WHICH ARE FOUND TO BE FAL SE THE ASSESSING OFFICER IS ENTITLED TO VERIFY AND SATISFY HIMSELF BY RECASTING THE PROFIT AND LOSS ACCOUNT IF THE CIRCUM STANCES SO REQUIRED.. IN THE CASE OF M/S HINDUSTAN SHIPYARD LTD. IT WAS NOTICED THAT THE GOVERNMENT OF INDIA BY AN ORDER DATED 24.3.99 HAD WAIVED LOAN AND INTEREST THEREON TO THE TUNE OF RS.591.13 CRORES WH ICH WAS OTHERWISE PAYABLE BY THAT COMPANY. HOWEVER THE SAID COMPANY DID NOT INCORPORATE THE EFFECT OF SUCH WAIVER IN ITS BOOKS OF ACCOUNTS THOUGH IT DISCLOSED THE DETAILS OF WAIVER IN ITS ANNUAL REPORT PLACED BEFOR E THE SHAREHOLDERS FOR THE FINANCIAL YEAR 1998-99. THE ASSESSING OFFICER NOTI CED THAT THE ASSESSEE WOULD BE LIABLE TO PAY TAX AS PER THE PROVISIONS OF SECTION 115JA OF THE ACT (MINIMUM ALTERNATIVE TAX) IF THE WAIVER BENEFITS A RE INCORPORATED IN THE BOOKS OF ACCOUNTS ACCORDINGLY HE INCLUDED THE WAIVE R BENEFITS IN THE BOOK PROFIT. THE TRIBUNAL AFTER CONSIDERING THE DECISI ON OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. SAIN PROCESSING MILLS (P) LTD. (2010)(325 ITR 565) HELD THAT THE ASSESSING OFFICER IS ENTITLED T O INCLUDE THE WAIVER ITA NO 315 OF 07 EASTERN POWER DISTRIBUTION COMPANY OF AP LIMITED VISAKHAPATNAM PAGE 15 OF 22 BENEFIT THAT WAS DISCLOSED IN THE AUDITORS REPORT AND ALSO IN THE NOTES OF ACCOUNTS. 7.5 THE HON'BLE DELHI HIGH COURT ALSO CONSIDERE D AN IDENTICAL QUESTION IN THE CASE OF CIT VS. SAIN PROCESSING & WEAVING MILLS (P) LTD. (SUPRA). IN THAT CASE THE HIGH COURT CONSIDERED THE SIGNIFICAN CE OF DISCLOSURES MADE IN THE NOTES ON ACCOUNTS VIS--VIS BOOK PROFIT FOR T HE PURPOSE OF S. 115J OF THE ACT. IN THAT CASE THE ASSESSEE THEREIN DID NO T CHARGE THE DEPRECIATION IN THE P&L A/C AND INSTEAD DISCLOSED THE FACT ALONG WITH THE QUANTUM OF DEPRECIATION BY WAY OF NOTE TO THE ACCOUNTS. THE HO NBLE DELHI HIGH COURT HELD THAT THE ASSESSING OFFICER IS ENTITLED TO ADJU ST THE NET PROFIT WITH THE AMOUNT OF DEPRECIATION DISCLOSED IN THE NOTES ON AC COUNTS. THE RELEVANT PROVISIONS OF COMPANIES ACT I.E. SECTIONS 211(6) A ND CLAUSE(3) (IV) TO PART- II OF SCH.VI OF THE COMPANIES ACT THAT WERE CONSIDE RED BY THE HIGH COURT ARE EXTRACTED BELOW: (6) FOR THE PURPOSE OF THIS SECTION EXCEPT WHERE THE CONTEXT OTHERWISE REQUIRES ANY REFERENCE TO A BALANCE SHEET OR PROFIT AND LOSS ACCOUNT SHALL INCLUDE ANY NOTES THEREON OR DOCUMENTS ANNEXED THERETO GIVING INFORMATION REQUIRED BY THIS ACT AND ALLOWED BY THIS ACT TO BE GIVEN IN THE FORM OF SUCH NOTES OR DOCUMENTS. 3. THE PROFIT AND LOSS ACCOUNT SHALL SET OUT THE V ARIOUS ITEMS RELATING TO THE INCOME AND EXPENDITURE OF THE COMPA NY ARRANGED UNDER THE MOST CONVENIENT HEADS AND IN PAR TICULAR SHALL DISCLOSE THE FOLLOWING INFORMATION IN RESPECT OF THE PERIOD COVERED BY THE ACCOUNT. (IV) THE AMOUNT PROVIDED FOR DEPRECIATION RENE WALS OR DIMINUTION IN VALUE OF FIXED ASSETS. IF SUCH PROVIS ION IS NOT MADE BY MEANS OF A DEPRECIATION COMPUTED IN ACCORDANCE W ITH S.205(2) OF THE ACT SHALL BE DISCLOSED BY WAY OF A NOTE. AFTER CONSIDERING THESE TWO PROVISIONS THE HONBLE DELHI HIGH COURT HAS OBSERVED AS UNDER: 4.7 THUS DISCLOSURE ACCORDING TO US IN THE NOTES TO THE ACCOUNT IS OBLIGATORY BY VIRTUE OF THE PROVISION OF SUB-S ( 1A) OF S.115J OF ITA NO 315 OF 07 EASTERN POWER DISTRIBUTION COMPANY OF AP LIMITED VISAKHAPATNAM PAGE 16 OF 22 THE ACT WHICH REQUIRES THAT EVERY ASSESSEE SHALL PR EPARE P&L A/C IN ACCORDANCE WITH THE PROVISION OF PARTS II AND II I OF SCH.VI OF THE COMPANIES ACT 1956. 4.8 HAVING SAID THAT THE ISSUE STILL REMAINS AS TO WHETHER NOTES TO ACCOUNTS FORM PART OF THE ACCOUNTS AND WHETHER THE FACT THAT THE CURRENT YEAR DEPRECIATION WHICH HAS NOT BEEN DE BITED TO THE P&L A/C WOULD IN ANY WAY DEPRIVE THE ASSESSEE OF IT S CLAIM FOR THE DEDUCTION FROM THE NET PROFIT IN ARRIVING AT THE FIGURE OF BOOK PROFIT FOR THE PURPOSES OF S.115J OF THE ACT . 4.9 THE ANSWER TO THIS POSER IS FOUND IN SUB-S (6) OF S.211 OF THE COMPANIES ACT WHICH PROVIDES THAT EXCEPT WHERE THE CONTEXT OTHERWISE REQUIRES ANY REFERENCE TO A BALANCE SHEET OR P&L A/C SHALL INCLUDE THE NOTES THEREON OR DOCUMENTS ANNEXED THERETO GIVING INFORMATION REQUIRED TO BE GIVEN AN D/OR ALLOWED TO BE GIVEN IN THE FORM OF NOTES OR DOCUMENTS BY TH E COMPANIES ACT. AS ALREADY NOTED IT IS OBLIGATORY UNDER CL.3( IV) OF PART II OF SCH.VI TO COMPANIES ACT TO GIVE INFORMATION WITH RE GARD TO DEPRECIATION WHICH HAS NOT BEEN PROVIDED FOR ALONG WITH THE QUANTUM OF ARREARS. ACCORDING TO US ONCE THIS INFO RMATION IS DISCLOSED IN THE NOTES TO THE ACCOUNT IT WOULD CLEA RLY FALL WITHIN THE AMBIT OF THE EXPLANATION TO S.115J OF THE ACT W HICH DEFINES BOOK PROFIT TO MEAN NET PROFIT AS SHOWN IN TH E P&L A/C FOR THE RELEVANT ASSESSMENT YEAR 7.6 AS PER THE PROVISIONS OF SEC. 211 OF THE CO MPANIES ACT THE COMPANIES HAVE TO FOLLOW THE APPLICABLE ACCOUNTING STANDARDS. HOWEVER IF THE PROFIT AND LOSS ACCOUNT AND THE BALANCE SHEET D O NOT COMPLY WITH THE ACCOUNTING STANDARDS SUCH COMPANIES ARE REQUIRED T O DISCLOSE ABOUT THE DEVIATION REASONS THERE OF AND THE FINANCIAL IMPAC T THERE ON. THIS IS PROVIDED SO IN SUB. SEC. 3A AND 3B OF SEC 211 OF TH E COMPANIES ACT. FOR THE SAKE OF CONVENIENCE WE EXTRACT THE SAID PROVIS IONS BELOW: (3A) EVERY PROFIT AND LOSS ACCOUNT AND BALANCE SHEE T OF THE COMPANY SHALL COMPLY WITH THE ACCOUNTING STANDARDS. (3B) WHERE THE PROFIT AND LOSS ACCOUNT AND THE BALA NCE SHEET OF THE COMPANY DO NOT COMPLY WITH THE ACCOUNTING STANDARDS SUCH C OMPANIES SHALL DISCLOSE IN ITS PROFIT AND LOSS ACCOUNT AND BALANCE SHEET THE FOLLOWING NAMELY:- (A) THE DEVIATION FROM THE ACCOUNTING STANDARDS ITA NO 315 OF 07 EASTERN POWER DISTRIBUTION COMPANY OF AP LIMITED VISAKHAPATNAM PAGE 17 OF 22 (B) THE REASONS FOR SUCH DEVIATION; AND (C) THE FINANCIAL EFFECT IF ANY ARISING DUE TO SU CH DEVIATION THE ACCOUNTING STANDARDS PRESCRIBE THE METHOD OF TR EATING VARIOUS TYPES ITEMS OF INCOME AND EXPENDITURE FOR THE PURPOSE OF PREPARING THE FINANCIAL STATEMENTS. HENCE IN ORDER TO ENSURE UNIFORM ACCOU NTING PRACTICES AND DISCLOSURES THE ACCOUNTING STANDARDS HAVE BEEN MAD E MANDATORY FOR THE COMPANIES AND HENCE THEY ARE REQUIRED TO FOLLOW THE M WHILE PREPARING THE FINANCIAL STATEMENTS. IF ANY COMPANY DEVIATES FROM THE PRESCRIBED ACCOUNTING STANDARDS IT HAS TO DISCLOSE INTER ALI A THE FINANCIAL EFFECT ARISING DUE TO SUCH DEVIATION. THUS THERE IS AN OP TION FOR THE COMPANIES NOT TO FOLLOW THE ACCOUNTING STANDARDS IF IT FEELS SO FOR ANY REASON. SUCH DEVIATION MAY HAVE IMPACT TO THE PROFIT DISCLOSED I N THE PROFIT AND LOSS ACCOUNT PREPARED IN ACCORDANCE WITH THE PART II AND PART III OF SCHEDULE VI OF THE COMPANIES ACT. HENCE IN ORDER TO ENABLE AN Y BODY TO UNDERSTAND THE IMPLICATION OF SUCH DEVIATION IT WAS MADE MAND ATORY FOR THE COMPANIES TO DISCLOSE THE FINANCIAL IMPLICATIONS OF SUCH DEVIATION. 7.7 SUCH KIND OF DEVIATIONS ARE ACCEPTABLE UNDER T HE COMPANIES ACT HOWEVER THEY ARE NOT ALWAYS ACCEPTABLE TO THE INCOM E TAX AUTHORITIES. UNDER THE INCOME TAX THE ASSESSING OFFICER IS ENTI TLED TO EXAMINE THE SAID DEVIATIONS PARTICULARLY WHEN IT HAS AN IMPACT ON T HE BOOK PROFIT. TAKING SUCH A VIEW ONLY IT WAS HELD IN THE CASE OF SAIN P ROCESSING & WEAVINGS (SUPRA) AND HINDUSTAN SHIPYARD LTD. (SUPRA) THAT T HE ASSESSING OFFICER SHALL BE ENTITLED TO ADJUST THE BOOK PROFIT WITH TH E FINANCIAL IMPLICATIONS OF SUCH KIND OF DEVIATIONS FOR THE PURPOSES OF SEC. 11 5J/115JA. 7.8 IN THE CASE OF APOLLO TYRES LTD THE HON'BL E SUPREME COURT HAS HELD THAT THE ASSESSING OFFICER IS HAVING LIMITED POWER OF EXAMINING WHETHER THE BOOKS OF ACCOUNT ARE CERTIFIED BY THE AUTHORITIES U NDER THE COMPANIES ACT AS HAVING BEEN PROPERLY MAINTAINED IN ACCORDANCE WI TH THE COMPANIES ACT. ITA NO 315 OF 07 EASTERN POWER DISTRIBUTION COMPANY OF AP LIMITED VISAKHAPATNAM PAGE 18 OF 22 THE COROLLARY IS THAT ON MAKING SUCH EXAMINATION I F THE ASSESSING OFFICER FINDS THAT THERE IS DEVIATION FROM THE ESTABLISHED ACCOUNTING PRACTICES THEN HE SHALL BE ENTITLED TO MAKE SUITABLE ADJUSTMENTS T O THE PROFIT AMOUNT DISCLOSED IN THE PROFIT AND LOSS ACCOUNT. 7.9 NOW TURNING TO THE FACTS OF THE INSTANT CASE WE NOTICE FROM THE REVENUE ACCOUNT THAT THE ASSESSEE COMPANY FIRST COM PUTED THE PROFIT AFTER TAX AT RS.1 12 38 786/-. THEN IT HAS DEBITED THE SAID REVENUE ACCOUNT WITH AN EQUAL AMOUNT UNDER THE HEAD NET PRIOR PERI OD CREDITS/CHARGES AND FINALLY ARRIVED AT THE SURPLUS AT NIL FIGURE. THE DETAILS OF NET PRIOR PERIOD CREDITS/CHARGES ARE GIVEN IN SCHEDULE 18 AS UNDER: INCOME RELATING TO PREVIOUS YEAR: RECEIPTS PRIOR PERIODS RS. 42 83 407 EXCESS PROVISION OF INTEREST AND FINANCE CHARGES RS. 1 15 636 OTHER INCOME PRIOR PERIODS (-) RS. 1 71 289 SUB TOTAL RS.42 27 754 PRIOR PERIOD EXPENSES SHORT PROVISION FOR POWER RS. 63 24 788 INTEREST AND OTHER FINANCE CHARGES RS. 22 19 297 OTHER CHARGES RS. 69 22 455 SUB TOTAL RS.1 54 66 540 NET PRIOR PERIOD CHARGES (RS.15466540 RS.4227754) RS.1 12 38 786 THERE CANNOT BE ANY DISPUTE THAT IT IS THE RESPONSI BILITY OF THE ASSESSEE TO SUBSTANTIATE THE LEGALITY OF ANY ITEM OF EXPENDITUR E/INCOME FOUND DEBITED/CREDITED IN THE PROFIT AND LOSS ACCOUNT BY DRAWING SUPPORT FROM ANY DOCUMENT OR BUSINESS PRACTICES OR ACCOUNTING RE QUIREMENT. WITH REGARD TO THE CLAIM OF NET PRIOR PERIOD CHARGES/CR EDITS WHICH WAS EQUIVALENT TO THE AMOUNT OF NET PROFIT WE HAVE ALR EADY NOTICED IN PARAGRAPH 5 (SUPRA) THAT THE ASSESSEE HAS GIVEN AL TOGETHER DIFFERENT KINDS ITA NO 315 OF 07 EASTERN POWER DISTRIBUTION COMPANY OF AP LIMITED VISAKHAPATNAM PAGE 19 OF 22 OF EXPLANATIONS. AT THE COST OF REPETITION WE MAY LIST OUT BELOW THE EXPLANATIONS SO GIVEN. (A) THE ASSESSEE IS THE AGENT OF APTRANSCO AND HENCE TH E ENTIRE PROFIT HAS TO BE TRANSFERRED TO APTRANSCO. THIS EX PLANATION IS TOTALLY IN CONTRADICTION WITH THE REVENUE ACCOUNT P REPARED BY THE ASSESSEE. (B) THE AMOUNT OF RS.1 12 38 786/- REPRESENTS NET PRIO R PERIOD CHARGES. SINCE THE ASSESSEE HAS BEEN INCORPORATED ONLY 30-3- 2000 AND THE INSTANT YEAR IS THE FIRST YEAR OF OPER ATION THERE CANNOT BE ANY CLAIM RELATING TO THE PRIOR PERIOD. THE ACCOUNTING NAME ASSIGNED TO THE ABOVE SAID CLAIM GOES AGAINST THE FACTS PREVAILING IN THE CASE OF THE ASS ESSEE. (C) THE SAID AMOUNT REPRESENTS ADDITIONAL PURCHASE COST . IN THIS REGARD RELIANCE WAS PLACED ON THE LETTER DATED 17.1 0.2002 ISSUED BY THE DIRECTOR (FINANCE) OF APTRANSCO TO TH E ASSESSEE. HOWEVER IT COULD BE SEEN THAT THE ANNUA L ACCOUNTS HAVE BEEN CERTIFIED ON 07.06.2003 I.E. SUBSEQUENT TO THE DATE OF ABOVE CITED LETTER. EVEN THOUGH THE ACCOUNTS HA VE BEEN PREPARED SUBSEQUENT TO THE DATE OF THE SAID LETTER YET THE ASSESSEE COMPANY HAS TREATED THE NET PROFIT AS NET PRIOR PERIOD CHARGES INSTEAD OF ADDING THE SAME TO THE PURCHASE COST. HENCE THE SANCTITY OF THE ABOVE SAID LETTER BECOMES DOUBTFUL. WE HAVE SUSTAINED THE ADDITION OF THE ABOVE SAID CL AIM WHILE COMPUTING THE INCOME UNDER NORMAL PROVISIONS OF THE ACT SINC E THE ASSESSEE COULD NOT GIVE A LEGALLY TENABLE EXPLANATION IN RESPECT O F THE SAID CLAIM. 7.10 FROM THE CONTRADICTORY EXPLANATIONS FURNISH ED BY THE ASSESSEE IT IS EVIDENT THAT THE ASSESSEE HAS PASSED THE ENTRY FOR NET PRIOR PERIOD CREDITS/CHARGES ONLY TO ENSURE THAT THE FINAL PRO FIT (SURPLUS) IS SHOWN AT NIL FIGURES. ON MAKING A CURSORY LOOK OF THE REVEN UE ACCOUNT THE SAID INTENTION OF THE ASSESSEE IS VERY MUCH APPARENT AND GLARING. BESIDES THE ASSESSEE ALSO COULD NOT SUBSTANTIATE THE SAID CLAIM WITH A LEGALLY TENABLE EXPLANATION. IT WAS ALSO NOT SHOWN THAT THE BOOKING OF SUCH KIND OF ENTRIES ARE PERMITTED UNDER THE ACCOUNTING PRINCIPLES. NOW THE QUESTION THAT WOULD ITA NO 315 OF 07 EASTERN POWER DISTRIBUTION COMPANY OF AP LIMITED VISAKHAPATNAM PAGE 20 OF 22 ARISE IS WHETHER THE ASSESSING OFFICER IS STILL DEB ARRED FROM MAKING ANY ADJUSTMENT TO THE NET PROFIT SHOWN IN THE PROFIT AN D LOSS ACCOUNT EVEN IF ANY ENTRY MADE THEREIN COULD NOT BE PROPERLY EXPLAI NED IN ACCORDANCE WITH THE ACCOUNTING PRINCIPLES/BUSINESS PRACTICES. IN O UR VIEW THE ANSWER SHOULD BE NO ONLY. THIS IS IN VIEW OF THE FACT THA T WHEN THE ASSESSEE COULD NOT FURNISH LEGALLY TENABLE EXPLANATION AND ALSO CO ULD NOT SHOW THAT IT IS IN ACCORDANCE WITH ESTABLISHED ACCOUNTING PRINCIPLES THEN IT CANNOT BE SAID THAT THE FINANCIAL STATEMENTS HAVE BEEN PREPARED IN ACCORDANCE WITH THE PROVISIONS OF COMPANIES ACT EVEN IF THE MANAGEMENT /AUDITORS ARE SILENT ON THAT POINT. IN THIS KIND OF SITUATIONS THE ASS ESSING OFFICER WOULD DEFINITELY BE ENTITLED TO MAKE SUITABLE ADJUSTMENT TO THE NET PROFIT SHOWN BY THE ASSESSEE TO NULLIFY THE EFFECT OF SUCH KIND OF ACCOUNTING ENTRIES. IN VIEW OF THE FOREGOING DISCUSSIONS WE ARE OF THE VI EW THAT THE ASSESSING OFFICER IS ENTITLED TO ADOPT THE NET PROFIT AT RS.1 12 38 786/- FOR THE PURPOSE OF COMPUTING THE BOOK PROFIT UNDER SECTION 115JB OF THE ACT. 8. THE NEXT RELATES TO THE DISALLOWANCE OF RS.9 08 06 966/- PERTAINING TO THE PROVISION MADE FOR TERMINAL BENEFITS OF EMPLOYE ES. THE ASSESSEE DEBITED THE PROFIT AND LOSS ACCOUNT WITH THE SAID P ROVISION AND CREDITED THE SAME TO A RESERVE ACCOUNT. SINCE IT HAS BEEN TR ANSFERRED TO A RESERVE ACCOUNT BOTH THE ASSESSING OFFICER AND THE LEARNED CIT(A) TOOK THE VIEW THAT THE SAID AMOUNT HAS TO BE ADDED TO THE NET PRO FIT AS PER THE PROVISIONS OF SEC. 115JB AS IT MANDATES THE ADDITION OF ANY AM OUNT CARRIED TO ANY RESERVES BY WHAT EVER NAME CALLED. 8.1 WE ARE UNABLE TO AGREE WITH THE DECISION OF LEARNED CIT(A) IN THIS REGARD. THERE IS MUCH DIFFERENCE BETWEEN A PROVIS ION MADE AND A RESERVE CREATED. WHILE THE PROVISION IS CREATED FOR A KNOWN LIABILITY A RESERVE IS CREATED TO TAKE CARE OF ANY UNFORESEEN E VENTS. IT IS A WELL SETTLED PROPOSITION OF LAW THAT ONE SHOULD NOT BE CARRIED A WAY BY THE NOMENCLATURE GIVEN TO A PARTICULAR ITEM/TRANSACTI ON. ITA NO 315 OF 07 EASTERN POWER DISTRIBUTION COMPANY OF AP LIMITED VISAKHAPATNAM PAGE 21 OF 22 8.2 IT IS NOT IN DISPUTE THAT IN THE INSTANT C ASE THE IMPUGNED AMOUNT OF RS.9.08 CRORES HAS BEEN APPROPRIATED TOWARDS THE TE RMINAL BENEFITS OF THE EMPLOYEES OF THE ASSESSEE COMPANY VIZ. GRATURITY A ND PENSION PAYABLE ON THE BASIS OF ACTUARIAL VALUATION. IN THE FOLLOWING CASES IT HAS BEEN HELD THAT SUCH KIND OF PROVISION FALLS UNDER THE CATEGORY OF ASCERTAINED LIABILITY. A) CIT VS. ILPEA PARAMOUNT (P) LTD (2010) (233 CTR (DEL) 545) B) CIT VS. NATIONAL HYDRO ELECTRIC POWER CORPORATI ON LTD (2010 (45 DTR (P&H) 117) IN BOTH THE CASES IT HAS BEEN HELD THAT THE PROVISI ON MADE FOR GRATUITY IS AN ASCERTAINED LIABILITY AND HENCE THE SAME IS DEDUCTI BLE WHILE COMPUTING BOOK PROFIT UNDER SECTION 115JA/115JB. IN THE SECOND ME NTIONED CASE IT HAS BEEN HELD THAT THE PROVISION MADE FOR LEAVE ENCASHM ENT POST-RETIREMENT MEDICAL BENEFIT ARE ALSO ASCERTAINED LIABILITIES W HICH ARE DEDUCTIBLE UNDER SECTION 115JB FROM THE BOOK PROFITS. IN THE INSTANT CASE THOUGH THE AMOUNT PROVIDED FOR THE TERMINAL BENEFITS HAS BEEN TRANSFERRED TO A RESERVE FUND IN OUR VIEW THE AMOUNT SO PROVIDED RELATES TO A PROVISION ONLY. SINCE THE SAID PROVISIONS FALLS IN THE CATEG ORY OF ASCERTAINED LIABILITY THE SAME IS ALLOWABLE WHILE COMPUTING T HE BOOK PROFIT UNDER SECTION 115JB. IN VIEW OF THE ABOVE WE REVERSE THE ORDER OF LEARNED CIT(A) AND DIRECT THE ASSESSING OFFICER TO EXCLUDE THE AMOUNT RELATING TO PROVISION MADE FOR TERMINAL BENEFITS WHILE COMPUTIN G THE PROFITS UNDER SECTION 115JB OF THE ACT. 9. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 14.3.2011. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM DATE: 14 TH MARCH 2011 ITA NO 315 OF 07 EASTERN POWER DISTRIBUTION COMPANY OF AP LIMITED VISAKHAPATNAM PAGE 22 OF 22 COPY TO 1 EASTERN POWER DISTRIBUTION COMPANY OF AP LIMITED TPT COLONY SEETHAMMADHARA VISAKHAPATNAM 2 THE ASSTT. COMMISSIONER OF INCOME TAX CIRCLE-3(1) VISAKHAPATNAM 3 4. THE CIT 1 VISAKHAPATNAM THE CIT(A)-1 VISAKHAPATNAM 5 THE DR ITAT VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM FIT FOR PUBLICATION (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER AC COUNTANT MEMBER