· The AO made an addition of Rs.131.81 Crores on account of Advance Against Depreciation (AAD), which was deleted by the CIT(A), and the order of the CIT(A) was further upheld by the Tribunal.
· The High Court was of the view that the matter was covered in favour of the assessee by the judgment of the Supreme Court in assessee’s case cited as National Hydroeletric Power Corporation Ltd. v. CIT [2010] 320 ITR 374.
· The Court was of the view that though the Apex Court had considered the effect of Explanation 1 to Section 115JB in the said case, however, the moot question which was answered was whether AAD constitutes income of the assessee.
· The Court has further followed the ratio laid down by the Apex Court and has reiterated that AAD is income received in advance, i.e. it is not the income received for the relevant accounting year, but represents the adjustment to be made in future and thus, is not even carried through the Profit and Loss Account.
· Therefore, the appeal of the Revenue was dismissed.
For further reading, refer the attachment.
Further Reading