UPS Entitled to Depreciation Rate of 60% as Part of Computer System

By | May 22, 2025
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Favorable Rulings for Assessee on Energy Tax, Section 80-IA, and UPS Depreciation

This case combines three distinct rulings, all in favor of the assessee for the assessment year 2010-11.

I. Unpaid Energy Tax Not Disallowable Under Section 43B

  • Issue: Whether unpaid energy tax, which was not payable under the Delhi Municipal Corporation bye-laws, could be disallowed under Section 43B of the Income-tax Act, 1961.
  • Facts: The assessee had an outstanding energy tax. The Assessing Officer sought to disallow this amount under Section 43B, which deals with certain deductions allowed only on actual payment. However, it was found that this specific energy tax was not actually payable under the Delhi Municipal Corporation bye-laws, 1962.
  • Decision: The unpaid energy tax could not be added back under Section 43B.
  • Key Takeaways: Section 43B applies to sums “payable.” If a liability, such as a tax, is not genuinely payable under the relevant laws or regulations, then the provisions of Section 43B for disallowance on non-payment do not apply. The existence of a legal obligation to pay is a prerequisite for disallowance under Section 43B.

II. Section 80-IA Deduction Admissible on Enhanced Profits due to Disallowances

  • Issue: Whether disallowances made under various sections (e.g., 32, 40(a)(ia), 40A(3), 43B) that relate to a business activity for which deduction under Section 80-IA is claimed, result in an enhancement of the profits of the eligible business, and whether the deduction under Section 80-IA is admissible on these enhanced profits.
  • Facts: The Assessing Officer made various disallowances related to the assessee’s business activity, for which a deduction under Section 80-IA (pertaining to profits and gains from infrastructure undertakings) was claimed. The question arose whether these disallowances would increase the ‘profits’ on which the Section 80-IA deduction is calculated.
  • Decision: Yes, disallowances made under various sections (like 32, 40(a)(ia), 40A(3), 43B, etc.) enhance the profits of the eligible business, and the deduction under Section 80-IA is admissible on such enhanced profits.
  • Key Takeaways: Disallowances made in computing the total income under other provisions of the Income-tax Act increase the ‘book profits’ or ‘taxable profits’ of the business. For the purpose of Section 80-IA, the deduction is to be calculated on these enhanced profits, meaning that the benefit of the deduction is effectively applied to the true taxable income of the eligible undertaking, even if it includes amounts initially disallowed under other sections. This prevents a situation where disallowances effectively reduce the Section 80-IA deduction, contrary to legislative intent.

III. UPS Entitled to Higher Depreciation Rate as Part of Computer System

  • Issue: Whether a UPS (Uninterruptible Power Supply) installed by the assessee is eligible for a higher rate of depreciation (60%) or a lower rate (15%).
  • Facts: The assessee had installed a UPS and claimed a higher rate of depreciation. The Assessing Officer, however, granted depreciation at a lower rate of 15%.
  • Decision: Since computer accessories and peripherals such as UPS form an integral part of a computer system, they are entitled to depreciation at the higher rate of 60%.
  • Key Takeaways: This ruling reaffirms the principle that components essential for the functioning of a computer system, such as a UPS, should be treated as part of the computer itself for depreciation purposes. Therefore, they qualify for the higher depreciation rate applicable to computers (which was 60% at the time) rather than the general plant and machinery rate.
IN THE ITAT DELHI BENCH ‘E’
Deputy Commissioner of Income-tax
v.
Tata Power Delhi Distribution Ltd.
ANUBHAV SHARMA, Judicial Member
and M. Balaganesh, Accountant Member
IT Appeal No. 8715 and 8928 (Del) OF 2019
[Assessment year 2010-11]
MAY  7, 2025
Ms. Rajinder Kaur, CIT DR for the Appellant. Pravesh Sharma and Shashi M. Kapila, Advs. for the Respondent.
ORDER
M. Balaganesh, Accountant Member. – The appeals in ITA No.8715/Del/2019 filed by the revenue and ITA No. 8928/Del/2019 for AY 2010-11, arise out of the order of ld. Commissioner of Income Tax (Appeals)-34, Delhi [hereinafter referred to as ‘id. CIT(A)’, in short] in Appeal No. 264/14-15 dated 12.08.2019 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 28.03.2013 by the Assessing Officer, ACIT, Circle-16(1), New Delhi (hereinafter referred to as ‘ld. AO’). As these are cross appeals, they are taken up together and disposed of by this common order for the sake of convenience.
ITA NO. 8928/Del/2019 – Revenue Appeal
2. The Ground No. 2 raised by the revenue is challenging the derecognition of income pertaining to consumer’s portion of over achievement of minimum target or efficiency gain in the sum of Rs 59,18,86,000/-.
2.1. We have heard the rival submissions and perused the materials available on record. Both the parties before us mutually agreed that the issue in dispute is covered in favour of the assessee by the Co-ordinate Bench decision of this Tribunal in assessee’s own case for Assessment Years 2011-12 & 2012-13 in Tata Power Delhi Distribution Ltd. v. Addl. CIT [IT Appeal Nos. 4453 & 4454 (Del) of 2017, dated 5-10-2023] wherein it was observed as under:-
“10. The original ground No. 2 raised by the assessee is challenging the confrmation of addition of Rs. 33,94,62,000/- as income of the assessee company towards de-recognition of income pertaining to consumer’s portion over achievement of minimum target or efficiency gain.
11. We have heard the rival submissions and perused the materials available on record. The assessee is in business of electricity which was transferred to the company in terms of agreement dated 31.05.2002 as per the policy direction issued by GNCTD (Govt. of National Capital Territory) governing the transfer of business of erstwhile Delhi Vidyut Board (DVB) to the company, the company is entitled to an assured return of 14% plus a supply margin up to 2% p.a. on DERC approved Equity subject to achievement of Aggregate Transmission and Commercial (AT&C) loss reduction targets. In the event of overachievement of AT&Closs reduction targets, the Company is entitled to retain a portion of such additional revenue realised which is in addition to the assured return of 16% p.a. on DERC approved Equity. The balance additional profits from overachievement, after adjustments for any amounts recoverable by the Company through future tariffs are required to be transferred to the contingency reserve account or as directed by DERC for utilization in future tariff determinations.
12. This issue is covered in favour of the assessee by the decision of the Hon be jurisdictional High Court in assessee’s own case in ITA 186/2020 dated 11.03.2020 relevant operative portion of the said order of the jurisdictional High Court is reproduced herein :-

“4. We have given thoughtful consideration to the submissions advanced by the learned counsel for the Revenue. The questions of law that have been urged for our consideration as also the gounds of challenge made out in the memorandum of appeal are relating only to (i) additions made on account of derecognised revenue and (ii) for deleting the disallowance deduction made under Section 80 IA of the Act. No other ground has been urged and we have therefore proceeded to consider the merits of the submissions with respect to the a forenoted issues only. The first addition relating to recognition of the revenue is on account of efficiency gain. The learned Tribunal after considering the facts of the case have applied the ratio of the decision of the Supreme Court in Poona Electric Supply Company Limited v. CIT 1965) 57 ITR 521, wherein the Apex Court has deliberated upon the concept of commercial profits viz-a-viz clear profits. On the basis of this principle, the Court has held that the amount transferable for the benefit of the consumers do not form part of the assesee’s real profit and for the purpose of calculating the taxable income, such amount has to be deducted from its total income. On the strength of this reasoning, the Tribunal has relied upon the decision of the Coordinate Bench in Assessment Year 2006- 07 and held that since the Respondent-assessee has no right to appropriate the efficiency gain amount and that such amount is at the disposal of DERC, the amount has to be reduced from the profits and loss account. The observations of the Tribunal on this aspect are as under

“15. We find that similar facts were considered by the coordinate bench in assessment year 2006-07 in ITA N.o. 4848/DEL/2010 and 5026/DEL/2010. The relevant findings of the co-ordinate bench read as under:

“17. It is, therefore, clear from the arguments advanced before us that the question involved in this matter is whether the disputed Rs.91.13 crores could be brought to tax by treating it as the application of the income after its accrual. This aspect requires a reading of the provisions of the Delhi Electricity Reforms Act, 2000 with the notifications issued and the orders passed by the DERC As could be seen from the Delhi Electricity Reforms Act, 2000, it received the assent of the President of India on 6.3.2001 and promulgated by way of Notification dated 8.3.2001. Section 2(c) of the Act defines the commission to mean the Delhi Electricity Regulatory Commission. The Act constitutes the Commission. It empowers the Government to issue directions to the Commission in the matter of policy involving pubic interest from time of time regulating the discharge of the commission functions. In turn, by virtue of Section 28 of the Act, the holder of the license (1.e. assessee) is under obligation to observe the methodologies and procedure specified by the Commission from time to time in calculating the expected revenue from charges which it is permitted to recover pursuant to the terms of its license and in designing tariffs to collect those revenues. The Commission is also empowered to prescribe the terms and conditions for determination of the licensee’s revenues and tariffs by regulations duly published in the official Gazette and in such other manner as the Commission considers appropriate. In this respect, it is provided that the Commission shall be guided by the following parameters, namely:-

the financial principles and their application provided in the Sixth Schedule to the Act, 1948 read with sections 57 and 57- A of the said Act, the factors which would encourage efficiency, economic use of the resources, good performance, optimum investments and other matters which the Commission considers appropriate keeping in view the salient objects and purposes of the provisions of this Act, and the interest of the consumers.

18. In exercise of the powers conferred by Section 12 and other applicable provisions of the Act, the GNCTD issued Notification No. F.11(119/(8)/2001- Power in the month of November 2001. In this Notification vide paragraph 8, the Government considered the necessity of effective reorganization of the DVB and the sale of 51% equity shares in the distribution companies. The assessee is one of the entities, who participated in the bid, became successful for the lowest annual target loss was awarded 51% of equity. Vide para 12, this Notification prescribes that in the years between 2002-03 and 2006-07 in the event of actual AT &C loss of a distribution licensee for any particular year is better ie lower than the level proposed in the bid, the distribution licensee shall be allowed to retain 50%o of the additional revenue resulting from such better performance and the balance 50% of additional revenue from such better performance shall be counted for the purpose of tariff fixation. Para 13 of such Notification provides that all expenses that shall be permitted by the Commission, tariffs shall be determined in such a way that the distribution licensees earn, at least, 16%o return on the issued and paid up capital and free reserves (excluding consumer contribution and revaluation reserves but including share premium and retained profits outstanding at the end of any particular year) provided that such share capital and free reserves have been invested into fixed or any other assets etc.

19. Para 16 of this Notification sums up the mandate in this Notification in the following terms: (a) The AT&C loss programme is to be as per the bid submitted by the purchaser (selected bidder) as per para 11 above.

(b) Distribution licensees shall be entitled to retain 50% of the additional revenues from any AT&C loss reduction over and above then level proposed in the bid by the Purchaser (selected bidder) and this shall not be counted as revenue for the purpose of tariff fixation for the succeeding years. The balance 50% of the excess efficiency gain shall be counted as revenue for the purpose of tariff fixation.

(c) Distribution licensees earn at least, 16% return on the issued and paid up capital and free reserves (d) The amount agreed to be made available by the Government to TRANSCO will be as a loan for the particular year.

20. In deference to this Notification, the DERC in its order passed in July 2005 at paragraph 4.2 observed that for the Asstt Year 2004-05, the assessee had achieved AT&C loss level lower than the minimum bid level specified by the GNCTD, accordingly the provisions of the policy directigns and the GNCID’s clarification have been applied to determine the extent of additional revenue to be retained by the DISCOM and that it will be passed down to the consumers while determining the annual revenue requirement the utilities. It is further observed that in case of the assessee as the over achievement in AT&C loss reduction is more than the minimum level target the entire additional revenue as a result of AT and C loss reduction up to minimum level with respect to bid level, and 50% of the additional revenue beyond minimum level has been considered as additional revenue for the purpose of ARR determination and balance 50% of the savings beyond minimum level has been approved to be retained by the assessee.

21. Basing on this, we are convinced that the assessee is under statutory obligation to meet the targets of reduction of A&TC losses and when the AT&C loss level reached by the assessee in that particular year is better i.e. lower than the level prescribed in the bid, the assessee shall be entitled to 50% of the additional revenue resulting from such purpose. This 50%o becomes the regular taxable income of the assessee and insofar as this income is concerned, for this Asstt. Year 2006-07 also, there is no dispute. The balance 50% of this additional revenue, which is mandatory to be counted for the purpose of tariff fixation, which is called as the efficiency gain will be taken into consideration by the DERC while permitting the tariff of the future years to be determined so as to see that the assessee would earn at least 16%o return on the issued and paid up capital and free reserves. The Notification issued in November 2001, referred to above, is clear in its mandate that this 50% efficiency gain shall be reckoned as revenue for the purpose of tariff fixation and the assessee is under obligation to follow the mechanism of fixation of tariff by the DERC

22. In Puna Electricity Supply Company Ltd v. CIT (1965) 56 ITR 521 (SC), the Hon’ble Apex Court considered a similar situation where the licensee like the assessee was obligation to set apart some amount and transfer it to the consumer benefit reserve account which represents a rebate to the customers of the excess amount collected from them. Hon’ble Apex Court held that there are two types profits in such cases ie. Commercial profits and clear profits governed by two different enactments. Commercial profits are arrived at on commercial principle whereas the other is regulated by the statute. The clear profits could be determined only after excluding the amount statutorily transferred to represent the rebate to the customers of the excess amount collected from them. Finally the Hon’ be Apex Court held that the amount transferrable for the benefit of the consumers do not form part of the assessee’s real profit; and for the purpose of calculating the taxable income, such amount have to be deducted from its total income.

23. Record speaks that this decision was brought to the notice of the learned CIT(A) but he distinguished the same stating that in such case the assessee was crediting the excess amount in a separate account called “Consumer Benefit Reserve Account” and they were part of the excess amount paid to it and reserve to be returned to the consumers; whereas in the case of the assessee, the assessee is not required to return the excess amount to the consumers and on the contrary, the assessee is the beneficial owner of the amount which it could use the way it likes. On this premise, learned CIT(A) held that the decision in the case of Puna Electricity Supply Co. Ltd (supra) has no application to the facts of the present case.

24. On a careful consideration the factual matrix involved in both the cases and the reasoning of the Hon be Apex Court in reaching the conclusion, we are of the considered opinion that the approach of the learned CIT(A) is incorrect. In the preceding paragraphs, we have noted that the assessee is under a statutory obligation to set apart 50% of the excess amount generated due to the overreaching of the targets for the purpose of the consideration of the DERC to fix the future tariffs either to give relief to the consumers or otherwise. A reading of the statute, notification and the orders of the DERC clearly indicates that the assessee is not free to use this efficiency gain amount the way it likes. Whether or not a separate account is opened, when this amount is separately shown under this head in the books, it makes little difference in so far as the application of the ratio of Puna Electricity Supply Co. Ltd. (supra) is concerned. Crux of the matter is that the assessee in both the cases has no right to appropriate the efficiency gain’ amount and such amount is at the disposal of the DERC though not physically but in respect of utilization thereof. We, therefore, are convinced that the ratio of Puna Electricity Supply Co. Ltd (supra) is squarely applicable to the case of the assessee before us and on that score, we allow the contention of the assessee that they have rightly reduced the efficiency gain amount their profit and loss account”

5. We feel that in view of the factual situation discussed above, the approach adopted by the Tribunal in applying the ratio of the decision of the Supreme Court in Poona Electric Supply Company Limited v. CIT (supra) is wholly justified and does not call for any interference. Accordingly the ground of challenge urged by the revenue on this aspect is rejected.”

13. Respectfully following the same the original ground No. 2 raised by the assessee is hereby allowed.”
2.2. Respectfully following the judicial precedent, the Ground No. 2 raised by the revenue is dismissed.
3. The Ground No. 3 raised by the revenue is challenging the deletion of addition under section 43B of the Act on account of unpayable portion of Energy Tax.
3.1. We have heard the rival submissions and perused the materials available on record. In the tax audit report, the tax auditor had mentioned in the particulars of sums referred to section 43B of the Act that the figure reflected thereon does not include energy tax of Rs 13,45,26,097/- which was outstanding at the year end. The energy tax assessed is payable to MCD as and when the amount is collected from the customers. The learned AO asked the assessee to explain why the sum of Rs 13,45,26,097/- should not be added back in view of provisions of section 43B of the Act. The assessee submitted that this sum of Rs 13,45,26,097/- is the closing balance in the balance sheet during the year under consideration and that the increase in the energy tax during the year is only Rs 0.40 crores (Rs 13.45 crores minus Rs 13.05 crores). The assessee collected Rs 10,94,93,917/- as energy tax and the same was duly deposited before the due date for filing the income tax return. The balance of Rs 13,45,26,097/- is a balance sheet item and was not payable under the Delhi Municipal Corporation bye laws 1962 and hence the same is also not covered under section 43B of the Act. The assessee further submitted that as per section 43B of the Act, the assessee company has to incur a liability to pay the tax. In the case of energy tax, the liability is not on the assessee company to pay it from its own resources. The learned AO did not accept the contentions of the assessee on the ground that assessee failed to distinguish the payment of electricity tax due from the customers with the list of debtors and has failed to recognize the bifurcation of amount of electricity tax due under each bill to be collected from the customers, the unpaid Energy tax was sought to be added under section 43B of the Act.
3.2. The learned CITA granted relief to the assessee by observing as under:-
“7.4 I have considered the facts of the case, finding of the AO and Submissions of the appellant. Energy tax is levied on energy bills raised by the appellant u/s 113(2) of the Delhi Municipal Corporation Act 1957. As per the clause (2) of provisions relating to collection of electricity tax under the Delhi Municipal Corporation Bye Laws 1962, energy tax is payable to MCD only after collection. The auditor has also disclosed in exhibit 7 of the audit report that particulars of sum referred to section 43B of the Act does not include energy tax of Rs.13,45,26,097/- which was outstanding at the year end. The energy tax assessed is payable to MCD as an when the amount is collected from the customers. From the above provisions of Delhi Municipal Corporation Bye Laws and the audit note it is evident that the energy tax is payable when collected and the entire amount collected as on 31.03.2010 have been paid before the due date of filing of return of income. The AO has disallowed the amount of Rs.13,45,26,097/- which was outstanding at the year end and was not collected as on 31.03.2010. Therefore the same is not payable to Delhi Municipal Corporation. As per the provisions of section 43B the appellant company has to incur a liability to pay the tax. In case of energy tax, the liability is not on the appellant company. The appellant company not to pay it from its own resources. It has to pay it to the MCD when it collect the energy tax from the customers. Therefore only the sum payable by way of tax etc. can be disallowed u/s 43B. Since the balance of Rs.13.45 Crore is not payable as on 31.03.2010 therefore same cannot be added by way of disallowance u/s 43B. On the similar issue CIT(A) has allowed the relief to the appellant in AY 2007-08, 200809 & 2009-10 and no disallowance was made by the AO in other assessment years. Considering the above facts, addition made by the AO at Rs.13,45,26,097/- is not) sustainable and it is hereby deleted “
3.3. We find that this issue was subject matter of adjudication by the Hon’ble Punjab & Haryana High Court in the case of Pr. CIT v. Dakshin Haryana Bijli Vitran Nigam Ltd.ITR 605 wherein it was held as under:-
“14. The argument raised by counsel for the appellant(s) that Section 43B will be attracted merely for the reason that the appellant(s) is following mercantile system of accounting deserves to be rejected. The revenue is required to show that the duty, tax, cess or fee (in the present case electricity duty) is payable by the assessee. The reliance placed on judgment passed by Gujarat High Court in Ahmedabad Electricity Co. Ltd. ‘s case (supra) is misplaced. In the said case, after examining the provision of Bombay Electricity Duty Act, 1958 it was found that the clear liability of the licensee is made out. It was under those circumstances that the Court found that since electricity duty was payable by the assessee and thus Section 43B was attracted. In the present case, there is no such provision contained in 1958 Act which shows that the liability to pay the electricity duty rests upon the assessee. Rather Section 4 of the 1958 Act read with provisions contained in 1958 Rules makes it abundantly clear that assessee is merely an agency assigned with a statutory function to collect electricity duty from the consumers and to pay the same to the State Government Calcutta High Court in ITA No. 82 of2004, decided on 14-5-2015 titled as CESE Ltd. v. CIT CTR 501 (Cal.), after examining provision of Bengal Electricity Duty Act, 1935 held that:—
” ** ** **

19. Thus, in our view, the electricity duty, not being a sum payable by the assessee as a primary liability by way of tax, duty, cess or fee, Section 43B is not attracted to the licensee/assessee in respect of electricity duty collected by it for being passed on the State Government”

15. In view of the discussion held hereinabove, we find that the question w.r.t the applicability of section 43B on the electricity duty, needs to be answered against the revenue and in favour of the assessee.”
3.4. It is pertinent to note that the Special Leave Petition (SLP) preferred by the Revenue against this decision was dismissed by the Hon’ble Supreme Court which is reported in Pr. CIT v. Dakshin Haryana Bijli Vitran Nigam Ltd. ITR 801 The ratio laid down in the aforesaid Hon’ble High Court decision is squarely applicable to the facts of the instant case. Respectfully following the same, we do not find any infirmity in the order of the learned CITA granting relief to the assessee. Accordingly, the Ground No. 3 raised by the revenue is dismissed.
4. The Ground Nos. 1 & 4 raised by the revenue are general in nature and does not require any specific adjudication.
5. In the result, the appeal of the revenue is dismissed.
ITA No. 8928/Del/2019 – Assessee Appeal
6. The Ground No. 1 raised by the assessee is challenging the action of the learned CITA in confirming the addition made on account of statutory obligation to pay interest on additional consumer security deposit to consumers.
6.1. We have heard the rival submissions and perused the materials available on record. Both the parties mutually agreed that this issue is covered in favour of the assessee by the Co-ordinate Bench decision of this Tribunal in assessee’s own case for Assessment Years 2011-12 & 2012-13 in ITA Nos. 4097 & 4098/Del/2017 ; ITA Nos. 4453 & 4454/Del/2017 dated 5-10-2023 wherein it was observed as under:-
“14 Ground No. 3 is challenging the confrmation of addition of Rs. 1,92,07,000/- being interest liability on additional consumer security deposits under the normal provisions of the Act as well as in the computation of book profit u/s 115JB of the Act.
15. We have heard the rival submissions and perused the materials available on record. This ground relates to the addition made by the AO by disallowing appellant’s claim of interest amounting to Rs.1,92,07,000/- in respect of additional consumer security deposits brought on record by the assessee as a result of validation exercise carried out through an independent agency as per which consumer security deposits to the tune of Rs.6244 lakhs were brought on record as against security deposits of Rs.1000 lakhs transferred to the assessee from the erstwhile Delhi Vidyut Board (DVB) as per the transfer scheme. It was submitted that as and when a consumer applies for an electric connection, he is required to make a refundable security deposit with the assessee company. In accordance with the transfer scheme, the opening balance sheet of the assessee company prepared as on 1.7.2002 recognized the liability towards ‘refundable consumer security deposit’ to the tune of Rs. 1000 lakhs. The said sum of Rs. 1000 lakhs represents the ‘refundable consumer security deposit’ collected by the erstwhile Delhi Vidyut Board (DVB), which pursuant to the transfer scheme stood transferred to the assessee company on the ground that the consumers has also been taken over by the assessee company. However, later on when the assessee company engaged an independent agency to validate the sample data in digitized form of consumer security deposit received by the erstwhile DVB from its consumers, the amount of liability came as a huge surprise to the assessee company, which was to the tune of Rs. 6244 lakhs. The assessee company is of the view that it is not liable for the ‘consumer security deposit’ received by the erstwhile DVB in excess of the ‘consumer security deposit’ transferred to it by way of the transfer scheme i.e. Rs. 5244 lakhs (Rs. 6244 lakhs reduced by Rs. 1000 lakhs). Thereafter, the assessee company agitated the issue before the Delhi Electricity Regulatory Commission (DERC), which by its order dated 24.4.2007 upheld the contention of the assessee company and asked the Government of NCT of Delhi (GNCTD) to direct the Delhi Power Company Limited (DPCL, a new avatar of erstwhile DVB) to transfer such excess amount of ‘consumer security deposit’ to the assessee company; and till the time such direction is issued, to transfer an amount equivalent to 6 per cent on an annual basis, being a specified rate in the supply code, on such excess amount of security deposit, to the assessee company Note: As per clause 16(vi) of the Delhi Electric Supply Code and Performance Standards Regulations, 2007 issued by DERC, through a notification in the official gazette, which came into force from 18.4.2007 interest @6 per cent is payable on consumer security deposit received from all consumers. The GNCTD refused to honour the advice of DERC on the ground that they are not bound by it. Consequently, the assessee company has preferred a writ petition before the Hon’ble Delhi High Court. Pursuant to above, the assessee company has provided for an interest expense aggregating to Rs. 1640.99 lakhs for the previous year ending on 31.3.2011 on the opening balance of security deposit, security deposit received by TPDDL (formerly NDPL) itself on or after 1.7.2002 and on the such excess ‘consumer security deposit’ for which a writ-petition has been preferred by the assessee company before the Hon’ble Delhi High Court. In case, the assessee company’s contention is upheld by the Hon’ble Delhi High Court, an amount of Rs. 192.07 lakhs would stand recoverable from DPCL towards the interest cost of such excess amount of ‘consumer security deposit’. Moreover, if the assessee company’s contention is upheld by the Hon’ble Delhi High Court, then whole of the interest recoverable from DPCL would be offered for tax as income in that year itself.
16. Further, it was submitted that the assessee company was bound to pay and has actually paid such interest (as per the DERC regulations) to the consumers by way of giving its credit in the next month’s electricity bill. Appropriate tax has been deducted from such interest and has been duly deposited with the central government.
17. The Id AR also drew our attention to section 47 of Electricity Act, 2003 more especially to section 47(4) thereon, wherein, it was mandated to pay interest on additional security deposit to the consumers. For the sake of convenience, the relevant section 47 of the Electricity Act are reproduced hereunder:-

“Settion 47. (Power to require security): (1) Subject to the provisions of this section, a distribution licensee may require any person, who requires a supply of electricity in pursuance of section 43, to give him reasonable security, as may be determined by regulations, for the payment to him of all monies which may become due to him –

(a) in respect of the electricity supplied to such persons; or

(b) where any electric line or electrical plant or electric meter is to be provided for supplying electricity to person, in respect of the provision of such line or plant or meter, and if that person fails to give such security, the distribution licensee may, if he thinks ft, refuse to give the supply of electricity or to provide the line or plant or meter for the period during which the failure continues.

(2) Where any person has not given such security as is mentioned in sub- section (1) or the security given by any person has become invalid or insufficient the distribution licensee may, by notice, require that person, within thirty days after the service of the notice, to give him reasonable security for the payment of all monies which may become due to him in respect of the supply of electricity or provision of such line or plant or meter.

(3) If the person referred to in sub-section (2) fails to give such security, the distribution licensee may, if he thinks ft, discontinue the supply of electricity for the period during which the failure continues.

(4) The distribution licensee shall pay interest equivalent to the bank rate or more, as may be specified by the concerned State Commission, on the security referred to in sub-section (1) and refund such security on the request of the person who gave such security.

(5) A distribution licensee shall not be entitled to require security in pursuance of clause (a) of sub-section (1) if the person requiring the supply is prepared to take the supply through a prepayment meter.”

(emphasis supplied by us)
18. From the above, it could be seen that the interest is payable by the assessee as a discharge of its statutory obligation. Further, the Hon’be Delhi High Court pursuant to the Writ had passed an interim order in WP(C) NO. 2395/2008 dated 26.03.2008 by directing the petitioner (i.e. assessee) to continue to refund the security deposit and pay interest to consumer in accordance with law. The assessee herein had merely discharge its statutory obligation in consonance with the provisions of section 47 of the Electricity Act, 2003 and in consonance with the directions of the Hon’be Delhi High Court. This certainly would become an expenditure incurred wholly and exclusively for the purpose of business of the assessee and hence, allowable as deduction. Accordingly, ground Nos. 3(1) and 3(2) raised by the assessee are allowed.”
6.2. Respectfully following the same, the Ground No. 1 raised by the assessee is allowed.
7. The Ground Nos. 2 &3 raised by the assessee is with regard to dispute in the rate of depreciation claimed on UPS at a higher rate as against 15% granted by the learned AO.
7.1. We have heard the rival submissions and perused the materials available on record. It is not in dispute that the assessee had installed UPS and eligible for higher rate of depreciation thereon. The short dispute is whether the UPS would be entitled for higher rate of depreciation or not ? Both the parties mutually agreed that the issue is covered by the decision of Hon’ble Jurisdictional High Court in favour of the assessee in the case of CIT v. BSES Rajdhani Power Limited(Mag.)/358 ITR 47 (Delhi)/ITA No. 1267 of 2010 dated 31-8-2010, wherein it was observed as under:-
“4. We are in agreement with the view of the Tribunal that computer accessories and peripherals such as, printers, scanners and server etc. form an integral part of the computer system. In fact, the computer accessories and peripherals cannot be used without the computer. Consequently, as they are the part of the computer system, they are entitled to depreciation at the higher rate of 60%.
5. In view of aforesaid, present appeal is dismissed in limine.”
7.2. Respectfully following the same, the Ground No. 3 is allowed. In view of this decision on Ground No. 3, the Ground No. 2 raised by the assessee is dismissed. The learned AO is directed to recompute the depreciation accordingly.
8. The Ground No. 4 raised by the assessee is challenging the disallowance of claim of deduction under section 80IA of the Act.
8.1. We have heard the rival submissions and perused the materials available on record. Both the parties mutually agreed that this issue is covered in favour of the assessee by the Co-ordinate Bench decision of this Tribunal in assessee’s own case for Assessment Years 2011-12 & 2012-13 in ITA Nos. 4097 & 4098/Del/2017 ; 4453 & 4454/Del/2017 dated 5-10-2023 wherein it was observed as under:-
“24. Ground No. 5 raised by the assessee is only seeking enhancement of claim of deduction u/s 80IA of the Act on additions made to the income of the eligible unit towards commission, maintenance charges and miscellaneous income totaling to Rs. 2499.84 lakhs. This issue is no longer res integra in view of the decision of the Hon’ble Delhi High Court in assessee’s own case in ITA No. 186/2020 dated 11.03.2020 and also by the CBDT Circular No. 37/2016 dated 02.11.2016 wherein, it had been categorically stated that any disallowance and additions to the total income of an eligible unit would only give rise to enhancement of profit of the eligible unit and hence consequentially would be eligible for deduction u/s 80IA of the Act. Respectfully following the aforesaid CBDT Circular and the decision of the Hon’ble Delhi High Court referred (supra), we direct the Id AO to grant enhanced deduction u/s 80IA of the Act for the additions made in the sum of Rs. 2499.84 lakhs. Accordingly, original ground no. 5 raised by assessee is allowed.
29. The only ground raised by the revenue for AY 2011-12 in ITA No. 4453/Del/2017 is challenging the grant of deduction u/s 80IA of the Act on account of late payment of surcharge collected in the sum of Rs. 17,43,87,000/-.
30. We have heard the rival submissions and perused the materials available on record. We find that that the said late payment of surcharge collected by the assessee pertains to the eligible unit of the assessee. We have already narrated the purpose behind the collection of late payment of surcharge by the assessee. The only purpose of making this recovery is to ensure collection of electricity dues in time and hence this receipt is also having possible nexus with the profit derived by the eligible unit and consequentially eligible for deduction u/s 80IA of the Act. We do not find any infirmity in the order of the Id CIT(A) granting relief in this regard. Accordingly, grounds raised by the revenue are dismissed.”
8.2. Further the issue is also covered by the decision of Hon’ble Jurisdictional High Court in assessee’s own case for the Assessment Year 2009-10 in ITA 186/2020 dated 11-3-2020/Dy. CIT v. Tata Power Delhi Distribution Ltd Delhi) wherein it was observed as under:-
“6. With respect to the deductions under Section 80 IA of the Act, the Tribunal has referred to the circular no. 37/2016 dated 2nd November, 2016 issuesd by the Central Board of Direct Taxes (hereinafter referrerd to as “CDDT”). On the basis of the said circular, the Tribunal has observed that the issue has become redundant and academic in nature. The relevant portion of the impugned order is extracted herein below:

“22. In our considered opinion, the issue is now well settled by the Circular No. 37/2016 dated 02.11.2016 issued by the Central Board of Direct Taxes, which reads as under:

“‘Chapter VI-A of the Income-tax Act, 1961 (“the Act”), provides for deductions in respect of certain incomes. In computing the profits and gains of a business activity, the Assessing Officer may make certain disallowances, such: as disallowances pertaining to sections 32, 40(a)(ia), 40A(3), 43B etc, of the Act. At times disallowance out of specific ‘expenditure claimed may also be made. The effect of such disallowances is an increase in the profits. Doubts have been raised as to whether such higher profits would also result in claim for a higher profit-linked deduction under Chapter VI-A.

2. The issue of the claim of higher deduction on the enhanced profits has been a contentious one. However, the courts have generally held that if the expenditure disallowed is related to the business activity against which the Chapter VI-A deduction has been claimed, the deduction needs to be allowed on the enhanced profits. Some illustrative cases upholding this view are as follows:

(i) if an expenditure incurred by assessee for the puupose of developing a housing project was not allowable on account of non-deduction of TDS under law, such disallowance would ultimately increase assessee’s profits from business of developing housing project. The ultimate profits of assessee after adjusting disallowance under section 40(a)(ia) of the Act would qualify for deduction under section 80-IB of the Act. This view was taken by the courts in the following cases:

• Income-tax Officer – Ward 5(1) v. Keval Construction, Tax Appeal No. 443 of 2012, December 10, 2012, Gujarat High Court.

• Commissioner of Income-tax-IV, Nagpur v. Suni Vishwambharnath Tiwari, IT Appeal No. 2 of 2011, September 11, 2015, Bombay High Court.

(ii) deduction under section 40A(3) of the Act. is not allowed, the same would be added to the profits of the undertaking on which the assessee would do for deduction under section 80- IB of the Act. This view was taken by the. court in the following cases:

“Principal CIT. Kanpur v. Sonya Merchants Ltd. I.T. Appeal No. 248 of 2015, May 03, 2016 Allahabad High Court The above views have attained finality as these judgments of the High Courts of Bombay, Gujara:t and Allahabad have been accepted by the Department.

3. In view of the above, the Board has accepted the settled position that the disallowance made under sections 32, 40 (a) (ia), 40A (3), 43B, etc of the Act and other specific disallowance, relted to the business activity against which the Chapter VI-A deduction has been claimed, result in enhancement of the profits of the eligible business, and that deduction under Chapter VI-A is admissible on the profits so enhanced by the disallowance.

4. Accordingly, henceforth, appeals may not be filed on this ground by officers of the Department and appeals already filed in Courts/ Tribunals may be withdrawn/ not pressed upon. The above may be brought to the notice of all concerned.”

23. In view of the above Circular, disallowances made by the Assessing. Officer are related to the business activity against which deduction u/s 801A of the Act has been claimed which resulted in enhancement of the profits of the eligible business and hence deduction under Chapter VIA is admissible on the profit so enhanced by the disallowances.

24. In light of the above. CBDT Circular, all the issues become academic in nature and therefore, need no separate adjudication, though it would be pertinent to mention chere that all the disputed issues remain open for both the parties in case the deduction u/s 801 A is denied by the Hon’ble Superior Court. In the light of the above discussion and finding, all the appeals of the assessee are allowed whereas those of the revenue are dismissed.”

7. We do not find any perversity in the view taken by the Tribunal. The circular of CBDThas been issued in view of the decisions of various High Courts that find mention therein. The issue is no longer res integra. The Board has accepted the settled position “that the disallowances made underSection 32, 40(a)(ia), 40A(3), 43B, etc. of the Act and other specific disallowances, related to the business activity against which the Chapter VI-A deduction has been claimed, result in enhancement of the profits of the eligible business, and that deduction under Chapter VI-A is admissible on the profits so enhanced by the disallowance”.
8. For the foregoing reasons, we find no question of law much less substantial question of law arises for our consideration.
9. Accordingly, the appeal is dismissed.”
8.3. Respectfully following the same, the Ground No. 4 raised by the assessee is allowed.
9. The Ground Nos. 5 & 6 raised by the assessee are general in nature and does not require any specific adjudication.
10. In the result, the appeal of the assessee is allowed for statistical purposes and appeal of the revenue is dismissed.