Transmission Corporation of AP Limited, Vijayawada V. Dy. Commissioner of Income Tax , Circle-2(2), Hyderabad

CO 14/Hyd/2018

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 3872 (ITAT-HYDERABAD)
• Duration Of Justice: 1 month(s) 19 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 13-06-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 24-04-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R LAXMAN
• Assessee Lawyers: M CHANDRAMOULESWARA RAO
• Keywords: Capital asset; Business income; Depreciation; Capital receipt

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A, HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. A.Y. APPELLANT RESPONDENT 366/HYD/18 2008 - 09 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2(2), HYDERABAD M/S. TRANSMISSION CORPORATION OF AP LTD., VIJAYAWADA [PAN: AABCT0088P] 367/HYD/18 2008 - 09 368/HYD/18 2009 - 10 369/HYD/18 2010 - 11 370/HYD/18 2011 - 12 371/HYD/18 2012 - 13 372/HYD/18 2013 - 14 C.O. NO. A.Y. CROSS-OBJECTOR RESPONDENT 09/HYD/18 IN ITA NO. 366/HYD/18 2008 - 09 M/S. TRANSMISSION CORPORATION OF AP LTD., VIJAYAWADA [PAN: AABCT0088P] THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2(2), HYDERABAD 10/HYD/18 IN ITA NO. 367/HYD/18 2008 - 09 11/HYD/18 IN ITA NO. 368/HYD/18 2009 - 10 12/HYD/18 IN ITA NO. 369/HYD/18 2010 - 11 13/HYD/18 IN ITA NO. 370/HYD/18 2011 - 12 14/HYD/18 IN ITA NO. 371/HYD/18 2012 - 13 15/HYD/1 8 IN ITA NO. 372/HYD/18 2013 - 14 FOR REVENUE : SHRI R. LAXMAN, DR FOR ASSESSEE : SHRI M. CHANDRAMOULESWARA RAO, AR DATE OF HEARING : 01-06-2018 DATE OF PRONOUNCEMENT : 13-06-2018 O R D E R PER BENCH : THESE ARE SEVEN APPEALS BY REVENUE FROM AYS. 2008-0 9 TO 2013-14 AND CROSS-OBJECTIONS BY ASSESSEE. THE LD. CIT(A) HAS PASSED COMMON ORDER VIDE ORDER DT. 20-11-2017 AN D AMONGST VARIOUS ISSUES DECIDED BY THE LD.CIT(A), REVE NUE IS AGGRIEVED ON THE EXCLUSION OF INTEREST ACCRUED ON THE F UNDS M/S. TRANSMISSION CORPORATION OF AP LTD., :- 2 - : RECEIVED FROM THE STATE GOVERNMENT TOWARDS LIFT IRRIGATION SCHEME FUNDS [LIS]. 2. REVENUE HAS RAISED THE COMMON GROUNDS IN ALL THE YEARS. BRIEFLY STATED FACTS ARE THAT ASSESSEE IS A COMPANY ENGA GED IN THE BUSINESS OF TRANSMISSION OF ELECTRICAL ENERGY. DU RING THE COURSE OF ASSESSMENT PROCEEDINGS, AMONGST VARIOUS ADD ITIONS / DISALLOWANCES, THE AO MADE ADDITION TOWARDS INTEREST EARNED ON FIXED DEPOSITS MADE OUT OF UNUTILIZED LIS FUNDS IN ALL THE ASSESSMENT YEARS. 2.1. FOR THE SAKE OF CONVENIENCE, THE ADDITIONS MADE BY AO ON THE ISSUE INVOLVED IN VARIOUS ASSESSMENT YEARS IS TABULATED HEREUNDER: SL.NO ISSUE OF ADDITION / ASST. YEARS INTEREST ACCRUED ON DEPOSITS MADE FROM FUNDS OF STAGE GOVT. GIVEN FOR IMPLEMENTING LIFT IRRIGATION SCHEMES (TAGGED GRANTS) (RS) 1 2008-09 15,62,52,360 2 2008-09* 29,32,67,935 3 2009-10 68,81,34,162 4 2010-11 41,86,12,212 5 2011-12 34,17,18,508 6 2012-13 67,90,14,762 7 2013-14 1,26,87,93,701 * U/S 147. M/S. TRANSMISSION CORPORATION OF AP LTD., :- 3 - : NOTICING THAT ASSESSEE HAS RECEIVED RS. 2516.90 CRORE S FROM 16 LI SCHEMES AND ALSO NOTICING THAT ASSESSEE HAS KE PT THE AMOUNTS IN FIXED DEPOSITS AND EARNED INTEREST THEREON, A O ASKED ASSESSEE TO EXPLAIN WHY THE SAID INTEREST CANNOT B E BROUGHT TO TAX AS ACCRUED INCOME OF ASSESSEE. ASSESSE E CONTENDED THAT THE AMOUNTS ARE SPECIAL GRANTS IN THE NATURE OF CAPITAL GRANTS AND THEY ARE DEPOSITED IN A SEPARATE BAN K ACCOUNT AND THE STATE GOVERNMENT DIRECTED THE ASSESSEE- COMPANY TO UTILIZE ANY INTEREST EARNED/ACCRUED ON SUC H DEPOSIT IN UN-UTILISED GRANT FUNDS ONLY TOWARDS IMPLEMENTATION OF LIS PROJECTS AND BY VARIOUS COMMUNICATIONS, THE GOVERNMENT HAS DIRECTED TO RENDER ACCOUNT FOR SUCH INTEREST AND TO REFUND UNUSED INTEREST AMOUNT TO THE GOVERNMENT. AO DID NOT AGREE AND HELD THA T INTEREST HAS ACCRUED TO ASSESSEE-COMPANY AND BROUGHT TH E AMOUNTS TO TAX. 3. BEFORE THE LD.CIT(A) IT WAS SUBMITTED THAT THE FUNDS A RE TAGGED GRANTS AND THE INTEREST ACCRUED/ EARNED ON THE AMOUNT OF SUCH GRANTS CAN ONLY BE USED FOR LIS PROJEC TS AND ASSESSEE CANNOT USE AT ITS DISCRETION. IT HAS RELIED ON VARIOUS COMMUNICATIONS FROM THE GOVERNMENT. THE FACTS AND CONTENTIONS ARE LISTED BY THE CIT(A) IN PARA 6 AS UNDER : THE CAPITAL GRANT AMOUNTS HAVE TO BE TREATED AS TAG GED GRANTS AND AN OBLIGATION IS ATTACHED TO IT TO UTILI SE THE AMOUNTS ONLY FOR THE IMPLEMENTATION OF LIS PROJECTS. THE LIS GRANT AMOUNT HAS TO BE DEPOSITED IN A SEPAR ATE BANK ACCOUNT AND MAINTAINED SEPARATELY FOR RENDERING ACC OUNT TO THE STATE GOVERNMENT. THE SAME HAS BEEN TREATED AS A CURRENT M/S. TRANSMISSION CORPORATION OF AP LTD., :- 4 - : LIABILITY IN THE BALANCE SHEET TO THE EXTENT OF UNU TILISED GRANT AMOUNT. INTEREST EARNED/ ACCRUED ON THE DEPOSITS OF LIS GRA NT AMOUNTS IS ALSO TO BE UTILISED FOR THE IMPLEMENTATION OF TH E SCHEMES ONLY AND THEREFORE, THE SAME IS ALSO SHOWN UNDER THE CUR RENT LIABILITIES AS AN ACCESSION TO THE LIS GRANT FUNDS. THE APPELLANT CANNOT EXERCISE ANY DISCRETION OR RIG HT OVER SUCH INTEREST AMOUNTS EXCEPT TO UTILISE THE SAME FOR THE LIS PROJECTS AND AS DIRECTED BY THE STATE GOVERNMENT OF ANDHRA P RADESH. THE APPELLANT HAS FURNISHED COMMUNICATION RECEIVED FROM SPECIAL SECRETARY TO GOVERNMENT, ENERGY DEPARTMENT, GOVERNMENT OF A.P. DATED 21/10/2011 THROUGH WHICH T HE SECRETARY DIRECTED THE APPELLANT COMPANY TO REMIT T O GOVERNMENT ACCOUNT THE AMOUNT OF INTEREST ACCRUED O N DEPOSITS. THE APPELLANT COMPANY IS A STATE GOVERNMENT PUBLIC SECTOR UNDERTAKING AND IS BOUND TO FOLLOW THE GOVERNMENT D IRECTIONS IN TOTO. 3.1. ASSESSEE HAS RELIED ON THE JUDICIAL PRINCIPLES ALSO AS UNDER: I. TAX APPEAL NO. 855 OF 2013 IN THE CASE OF COMMISSION ER OF INCOME TAX-II V/S. SAR INFRACON P LTD.,; II. GUJARAT MUNICIPAL FINANCE BOARD V/S. DY. CIT REPORTED IN (1996) 318 ITR 317; III. GUJARAT POWER CORPORATION LIMITED V/S. INCOME TAX OFFICER REPORTED IN (2013) 354 ITR 201 (GUJ.); IV. KARNATAKA URBAN INFRASTRUCTURE DEVELOPMENT AND FINANCE CORPORATION 150 ITR 533; V. HYDERABAD INFRASTRUCTURE & TECHNOLOGIES LIMITED V/S. ADDL. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)- 1, HYDERABAD REPORTED IN (2014) 45 TAXMANN.COM 339; M/S. TRANSMISSION CORPORATION OF AP LTD., :- 5 - : VI. CIT VS. PUNJAB STATE E-GOVERNANCE SOCIETY IN ITA NO. 75 OF 2011; 3.2. LD.CIT(A) HAS CONSIDERED THE SUBMISSIONS AND DE LETED THE ADDITION, HOLDING AS UNDER: 7. I HAVE GONE THROUGH THE CONTENTIONS OF THE APPE LLANT VIS-A- VIS ORDER PASSED BY THE ASSESSING OFFICER. THE ISSU E IS COMMON TO ALL THE ASSESSMENT YEARS UNDER APPEAL. THOUGH THE ADDIT ION IS MADE IN ALL THE ASSESSMENT YEARS FROM 2008-09 ONWARDS, THE DETAILED ORDER WITH IN-DEPTH EXAMINATION OF THE ISSUE IS PASSED FO R THE ASST. YEARS 2013-14. THE ISSUE IS DEALT WITH AT PAGES 2 TO 11 O F THE ORDER. AFTER EXAMINATION OF VARIOUS CORRESPONDENCE AVAILABLE ON RECORD, THE ASSESSING OFFICER CONCLUDED THAT THERE IS NO CONDIT ION PUT BY THE GOAP THAT THE INTEREST EARNED ON DEPOSIT IS TO BE T REATED AS PART OF THE GRANT. FURTHER, THE ASSESSING OFFICER BROUGHT OUT THAT THE ASSESSEE NEVER REFUNDED ANY EXCESS GRANT OR INTERES T ON DEPOSITS TO THE GOVERNMENT. THE EVIDENCE FILED BY THE ASSESSEE TO CLAIM SO WAS AGREED TO/PERMITTED BY THE GOVERNMENT WAS LETTER IS SUED ONLY AT THE SPECIFIC REQUEST OF THE ASSESSEE. THE ASSESSEE HAS CLAIMED CREDIT FOR THE TDS ON THE INTEREST. 7.1 THE ASSESSEE CONTENDS THAT THE ASSESSEE RIGHT F ROM THE BEGINNING I.E, FROM ASST.YEAR 2008-09 ONWARDS TREATED THE INT EREST EARNED AS PART OF THE GRANT AND ACCOUNTED FOR ACCORDINGLY. TH E SAME WAS DISCUSSED IN THE 74 TH BOARD MEETING OF THE COMPANY ON 28-06-2008 WHILE FINALIZING THE ACCOUNTS FOR ASST. YEAR 2008-0 9. THE SAME IS REPRESENTED BY THE DIRECTORS REPRESENTING GOAP ALSO . THE FUNDS ARE GIVEN AS GRANTS FOR LIFT IRRIGATION WORKS AND ARE C APITAL GRANTS IN NATURE. THE ASSESSEE RELIED ON THE RATIO LAID DOWN IN THE FOLLOWING CASES TO CONTEND THAT INTEREST EARNED ON DEPOSITS M ADE FROM 'SPECIFIC OR TAGGED GRANTS' CAN NOT BE TAXED AS REVENUE RECEI PT. 1. TAX APPEAL NO.855 OF 2013 IN THE CASE OF COMMISS IONER OF INCOME TAX-II V/S. SAR INFRACON P LTD. 2. GUJARAT MUNICIPAL FINANCE BOARD V/S. DY. CIT REP ORTED IN (1996) 318 ITR 317. 3. GUJARAT POWER CORPORATION LIMITED V/S. INCOME TA X OFFICER REPORTED IN (2013) 354 ITR 201(GUJ.) M/S. TRANSMISSION CORPORATION OF AP LTD., :- 6 - : 4. KARNATAKA URBAN INFRASTRUCTURE DEVELOPMENT AND F INANCE CORPORATION 150 ITR 533. 5. HYDERABAD INFRASTRUCTURE & TECHNOLOGIES LIMITED V/S. ADDL. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)-L, HYDERABAD REPORTED IN-(2014) 45 TAXMANN.COM 339. 6. CIT V PUNJAB STATE E-GOVERNANCE SOCIETY IN ITA N O. 75 OF 2011. THE ASSESSEE ALSO RELIED ON THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF M/S BOKARO STEEL 236 I TR 315 (SC) TO CONTEND THAT INTEREST WHICH IS INEXTRICABLY CONNECT ED TO THE CAPITAL GRANT IS TO BE TREATED AS CAPITAL RECEIPT ONLY WHIC H WILL GO TO REDUCE THE COST OF THE CAPITAL ASSET THAT IS CORNING INTO EXISTENCE BY THE UTILISATION OF THE CAPITAL GRANT ALONG WITH THE INT EREST THEREON. FURTHER, IT WAS POINTED OUT THAT THE INTEREST EARNE D WAS REDUCED WHILE CALCULATING DEPRECIATION ON THE ASSET BY SHOW ING THE SAME AS PART OF THE GRANTS AS RECEIVED FROM THE GOVERNMENT OF ANDHRA PRADESH. 7.2 ON CONSIDERATION OF THE FACTUAL POSITION AS BRO UGHT OUT IN THE ASSESSMENT ORDER, SUBMISSIONS OF THE ASSESSEE AND M ATERIAL PLACED ON RECORD AND ALSO THE LEGAL ISSUES RAISED, THE FOL LOWING POSITION EMERGES: I) THE ASSESSEE IS IN RECEIPT OF TOTAL OF THE 2,516.9 CRORES FOR 16 LIFT IRRIGATION WORKS FROM TIME TO TIME AS C APITAL GRANTS. II) NO SPECIFIC DIRECTION IS PLACED ON RECORD AS RECEIV ED FROM THE GOAP BY THE ASSESSEE AS TO THE TERMS AND CONDIT IONS INCLUDING TREATMENT OF INTEREST ON DEPOSITS. III) THE UNUTILIZED AMOUNT IS KEPT IN FIXED DEPOSITS. TH E SAME ARE NOT MIXED WITH OTHER FUNDS OF THE ASSESSEE . IV) THE 'TREATMENT' TO BE GIVEN TO THE INTEREST EARNED ON DEPOSITS IS BEING DISCUSSED IN THE BOARD MEETINGS O F THE ASSESSEE COMPANY WHICH IS A STATE GOVERNMENT UNDERTAKING. THE BOARD HAS NOMINEES OF THE STATE GOVERNMENT. THE IMPLICIT CONSENT/ DIRECTION OF THE GOAP CAN BE INFERRED FROM THE DECISIONS IN THE BOARD MEE TING. THIS IS CONTEMPORANEOUS RECORD DATING BACK TO 28-06 - 2008. M/S. TRANSMISSION CORPORATION OF AP LTD., :- 7 - : V) THERE IS NO FINDING THAT THE INTEREST WAS USED FOR ANY PURPOSE OTHER THAN FOR THE LIFT IRRIGATION WORKS FO R WHICH CAPITAL GRANTS ARE GIVEN BY GOAP. VI) THE ABOVE FUNDS ARE GIVEN BY THE GOAP AS GRANTS-IN- AID FOR THE SPECIFIC PROJECTS (ELECTRICAL WORKS) TO BE EXECUTED BY THE ASSESSEE AND THE SAME FUNDS ARE SEPARATELY PLACED IN FIXED DEPOSITS BY THE ASSESSEE. THE ABOVE CANNOT BE UTILIZED BY THE ASSESSEE FOR ANY OTHER PU RPOSE. 7.3 CONSIDERING THE FACTUAL POSITION EMERGING FROM THE RECORDS AS ABOVE, IT IS SEEN THAT THE AMOUNTS GIVEN BY THE GOV ERNMENT ARE GRANTS FOR SPECIFIC PURPOSE AND INTEREST EARNED THE REON IS INEXTRICABLY CONNECTED TO SUCH GRANTS. THE FACTS OF THE CASE ARE SIMILAR TO THE VARIOUS CASES RELIED ON BY THE ASSESSEE AS AT PARA- 6.1 AND THE RATIO LAID DOWN IN CASE OF M/S BOKARO STEEL 236 ITR 315 ( SC) IS SQUARELY APPLICABLE. ACCORDINGLY, IT IS HELD THAT THE INTERE ST INCOME CANNOT BE ASSESSED AS 'BUSINESS INCOME' OF THE ASSESSEE AND W OULD GO TO INCREASE THE GRANTS RECEIVED FROM THE GOAP. IN VIEW OF THE ABOVE, THE GROUNDS RAISED AS REGARDS TO THIS ISSUE ARE ALLOWED . 4. LD.DR, REITERATED THE CONTENTIONS OF AO, WHEREAS LD . COUNSEL FOR ASSESSEE REFERRED TO THE DETAILED SUBMISS IONS MADE BEFORE THE CIT(A). 5. AFTER CONSIDERING THE RIVAL CONTENTIONS, WE DO NOT FI ND ANY MERIT IN REVENUE GROUNDS. AS CAN BE SEEN, THE FU NDS ARE CLEARLY ALLOCATED FOR A SPECIFIC PURPOSE AND ASSESSE E HAS NO CONTROL OVER THE FUNDS, EXCEPT UTILIZING THEM FOR THE SCH EME FOR WHICH IT WAS GRANTED. THESE FUNDS ARE ALSO KEPT SEPA RATELY AND THE INTEREST WAS ALSO ACCOUNTED FOR ON BEHALF OF THE GOVERNMENT AND HAS KEPT SEPARATELY FROM ASSESSEES TRANSACTIONS. HENCE, ON THE PRINCIPLES LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF M/S BOKARO STEEL [236 ITR 315] (SC) AND ALSO RELYING ON VARIOUS CASE LAW ON THE ISSUE, WE ARE OF THE OPINION THAT THE DECISION OF LD .CIT(A) DOES M/S. TRANSMISSION CORPORATION OF AP LTD., :- 8 - : NOT REQUIRE ANY MODIFICATION. NOTHING WAS PLACED ON RECORD TO COUNTER THE FINDINGS OF CIT(A) BOTH ON FACTS AND ON LA W. IN THE RESULT, ALL THE REVENUE APPEALS ARE DISMISSED. 6. THE CROSS-OBJECTIONS ARE IN SUPPORT OF THE ORDER OF LD.CIT(A), HENCE NO SEPARATE DISCUSSION IS REQUIRED . ACCORDINGLY, ALL THE CROSS-OBJECTIONS ARE CONSIDERED DISMISSED. 7. TO SUM-UP, ALL REVENUE APPEALS AND CROSS-OBJECTIO NS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH JUNE, 2018 SD/- SD/- (D. MANMOHAN) (B. RAMAKOTAIAH) VICE PRESIDENT ACCOUNTANT MEMBER HYDERABAD, DATED 13 TH JUNE, 2018 TNMM M/S. TRANSMISSION CORPORATION OF AP LTD., :- 9 - : COPY TO : 1. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2 (2), HYDERABAD. 2. M/S. TRANSMISSION CORPORATION OF AP LTD., 4 TH FLOOR, SLDC BLOCK, VIDYUT SOUDHA, GUNADALA, VIJAYAWADA. 3. CIT(APPEALS)-11, HYDERABAD. 4. PR.CIT-2, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.