M/s. Aravail Power Company (P) Ltd., New Delhi V. ACIT, New Delhi

CO 153/DEL/2013

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9561 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 1 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 13-05-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 11-09-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: Y KAKKAR
• Assessee Lawyers: VENKTESH; RENU JAIN
• Keywords: Business income; Capital receipt; Revised return; Capital expenditure
• Section: 244A; 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A: NEW DELHI) BEFORE SHRI I. C. SUDHIR, JUDICIAL MEMBER AND SHRI T. S. KAPOOR, ACCOUNTANT MEMBER ITA NOS. 1918/DEL/2013 (ASSESSMENT YEAR: 2009-10) ACIT, VS. ARAVALI POWER CO MPANY (P) LTD. CIRCLE-2(1), NTPC BH AWAN, CORE-7, ROOM NO. 398D, SCOPE COMPLEX -7, C.R. BUILDING, INSTITUT IONAL AREA, LODHI ROAD NEW DELHI. NEW DELH I. (PA N AAGCA2437E) (APPELLANT) (RESPONDENT) AND C.O. NO. 153/DEL/2013 (IN ITA NO. 1918/DEL/2013 (ASSESSMENT YEAR: 2009-10) ARAVALI POWER COMPANY (P) LTD. ACIT, NTPC BHAWAN, CORE-7, CIRC LE-2(1) SCOPE COMPLEX-7, R OOM NO. 398D, INSTITUTIONAL AREA, LODHI ROAD C.R. BUILDING, NEW DELHI. NEW DELHI. (PAN AAGCA2437E) (APPELLANT) (RESPONDENT) REVENUE BY :MS. Y. KAKKAR, DR ASSESSEE BY :RENU JAIN, CA & SHRI VENKT ESH, CA ORDER PER I. C. SUDHIR, JUDICIAL MEMBER: THE REVENUE HAS QUESTIONED FIRST APPELL ATE ORDER ON THE SOLE GROUND THAT THE LD. CIT(A) HAS ERRED IN DELETING TH E ADDITION MADE ON ITA NO. 1918/DEL/2013 & CO. NO. 153/DEL/2013 2 ACCOUNT OF PRE-OPERATIVE BANK INTEREST RECEIPTS AM OUNTING TO RS. 2,46,27,834/- IGNORING THE FACT THAT (A) THE INTEREST DURING RE-OPERATIVE PERIOD IS A REVENUE RECEIPT TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES (B) CAPITAL EXPENDITURE OF BUSINESS CANNOT BE SET OFF AGAINST REVENUE RECEIPTS UNDER ANY OTHER HEAD(S) OF INCOME. 2. AT THE OUTSET OF HEARING THE LD. AR POIN TED OUT THAT AN IDENTICAL ISSUE HAS ALREADY BEEN DECIDED IN FAVOUR OF THE ASS ESSEE BY DELHI BENCH OF THE TRIBUNAL FOR THE ASSTT. YEAR 2008-09 IN ITA NO. 2953/D/2010 VIDE ORDER DATED 26.4.2013, COPY THEREOF HAS BEEN FURNIS HED. 3. THE LD. DR HOWEVER TRIED TO JUSTIFY THE A SSESSMENT ORDER ON THE ISSUE. SHE ALSO PLACED RELIANCE ON THE FOLLOWING DE CISIONS :- 1. MARUTI UDYOG LTD. VS. CIT (2010) 1 TAXMANN. COM 207 (DELHI) 2. BHARAT OMAN REFINERIES LTD. VS. CIT (2013) 356 ITR 399 (MP) 3. CIT VS. MADHYA BHARAT ENERGY CORPORATION LTD. (2011) 337 ITR 389 (DELHI) 4. CIT VS. DELHI BRASS AND METAL WORKS LTD. (20 09)313 ITR 352 (DELHI) 5. CIT VS. VENAD CONDUCTORS P. LTD. (2010) 326 ITR 513 (KERALA) 4. HAVING GONE THROUGH THE ORDERS OF THE AUTHO RITIES BELOW, MATERIAL MADE AVAILABLE ON RECORD AND THE DECISIONS RELIED U PON, WE FIND THAT AN IDENTICAL ISSUE HAS BEEN DECIDED IN FAVOUR OF THE A SSESSEE BY THE DELHI ITA NO. 1918/DEL/2013 & CO. NO. 153/DEL/2013 3 BENCH OF THE TRIBUNAL IN CASE OF ASSESSEE ITSELF FO R THE ASSTT. YEAR 2008-09 (SUPRA) FOLLOWING THE DECISION OF HONBLE JURISDICT IONAL DELHI HIGH COURT IN THE CASE OF INDIAN OIL PANIPAT CONSORTIUM LTD. VS. ITO (2009) 315 ITR 255 (DELHI). THE FACTS IN BRIEF ARE THAT THE ASSESSEE , A POWER GENERATION COMPANY WAS SETTING UP A THERMAL POWER PROJECT IN H ARYANA AND HAD NOT COMMENCED ITS BUSINESS OF GENERATION OF POWER. ITS RETURN OF INCOME HAS SHOWN INTEREST INCOME FROM DEPOSITS IN THE BANKS AS REVENUE RECEIPT. HOWEVER, IN VIEW OF THE DECISION OF HONBLE DELHI H IGH COURT IN THE CASE OF INDIAN OIL PANIPAT CONSORTIUM LTD. VS. ITO (SUPRA) THE ASSESSEE FILED REVISED RETURN TREATING THE INTEREST INCOME FROM TH E AFORESAID DEPOSITS AS CAPITAL RECEIPTS. THE AO DID NOT AGREE WITH IT ON T HE BASIS THAT THE REVENUE WAS FILING AN SLP BEFORE THE SUPREME COURT AGAINST THE SAID JUDGMENT OF HONBLE DELHI HIGH COURT. THE LD. CIT(A) HAS HOWEVE R ACCEPTED THE CLAIMED CAPITAL RECEIPT. UNDER THE FACTS OF THE CASE AND CI TED DECISIONS ,WE ARE OF THE VIEW THAT THE ISSUE IS FULLY COVERED BY THE DEC ISION OF TRIBUNAL IN THE CASE OF ASSESSEE ITSELF FOR THE ASSTT. YEAR 2008-09 (SUPRA) WHEREIN UNDER SIMILAR FACTS, THE TRIBUNAL RESPECTFULLY FOLLOWING THE DECISION OF HONBLE JURISDICTIONAL DELHI HIGH COURT IN THE CASE OF INDI AN OIL PANIPAT CONSORTIUM (SUPRA) HAS COME TO THE CONCLUSION THAT THE LD. CIT (A) HAS RIGHTLY ALLOWED THE ASSESSEES CLAIM. IN THE CASE OF INDIAN OIL PAN IPAT CONSORTIUM (SUPRA) THE ASSESSE COMPANY WAS INCORPORATED IN PURSUANCE O F JOINT VENTURE ITA NO. 1918/DEL/2013 & CO. NO. 153/DEL/2013 4 ENTERED INTO BETWEEN INDIAN OIL CORPORATION AND M O F JAPAN TO SET UP A POWER PROJECT. IN ORDER TO EFFECTUATE THE PURPOSE F OR WHICH THE JOINT VENTURE WAS CONCEIVED, SHARE CAPITAL WAS CONTRIBUTE D BY THESE TWO CORPORATIONS WHICH INCLUDED RS. 20 CRORES BY WAY OF ADDITIONAL SHARE CAPITAL. THE AO TREATED THE INTEREST EARNED ON MONI ES RECEIVED AS SHARE CAPITAL BY THE ASSESEE TEMPORALLY PLACED IN A FIXED DEPOSIT AWAITING ACQUISITION OF LAND WHICH HAD RUN INTO LEGAL ENTANG LEMENTS ON ACCOUNTS OF TITLE AS :INCOME FROM OTHER SOURCES. LD. CIT(A) A CCEPTING THE STAND OF THE ASSESSEE THAT THE INTEREST IS IN THE NATURE OF A CA PITAL RECEIPT WHICH WAS LIABLE TO BE SET OFF AGAINST THE PRE OPERATIVE EXPE NSES. THE TRIBUNAL REVERSED THIS ORDER. ON APPEAL IT WAS HELD, ALLOWI NG THE APPEALS THAT THE FUNDS IN THE FORM OF SHARE CAPITAL WERE INFUSED FOR THE SPECIFIC PURPOSE OF ACQUIRING LAND AND THE DEVELOPMENT OF INFRASTRUCTUR E, THEREFORE THE INTEREST EARNED ON FUNDS PRIMARILY BROUGHT FOR INFUSION IN T HE BUSINESS COULD NOT BE CLASSIFIED AS INCOME FROM OTHER SOURCES. SINCE TH E INCOME WAS EARNED IN A PERIOD PRIOR TO COMMENCEMENT OF BUSINESS, IT WAS IN THE NATURE OF CAPITAL RECEIPT AND WAS REQUIRED TO BE SET OFF AGAINST PRE- OPERATIVE EXPENSES. SIMILAR ARE THE FACTS OF THE PRESENT CASE BEFORE US . IN THIS CASE ALSO THE ASSESSEE COMPANY HAD NOT COMMENCED ITS BUSINESS AND IT HAD DEPOSITED ITS SHARE CAPITAL RECEIPTS AND OTHER MONEY FOR SHORT TE RM DEPOSITS IN BANKS AND HAD EARNED INTEREST INCOME OF RS. 2,46,27,834/-. TH E AO HELD THAT THE ITA NO. 1918/DEL/2013 & CO. NO. 153/DEL/2013 5 INTEREST EARNED DURING PRE OPERATIVE PERIOD IS A RE VENUE RECEIPT TAXABLE UNDER THE HEAD INCOME FM OTHER SOURCES. THE LD. C IT(A) HAS HOWEVER ACCEPTED THE CONTENTION OF THE ASSESSEE THAT THE IN TEREST EARNED WAS CAPITAL RECEIPT. BEFORE THE LD. CIT(A) ASSESSEE HAS ALSO FU RNISHED A CERTIFICATE TO THIS EFFECT THAT THE ASSESSEE HAD NOT COMMENCED ITS BUSINESS DURING THE PERIOD. WE THUS FOLLOWING THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF ASSESSEE ITSELF ON AN IDENTICAL ISSUE F OR THE ASSTT. YEAR 2008-09 HOLD THAT THE LD. CIT(A) HAS RIGHTLY HELD THE INTER EST INCOME IN QUESTION AS CAPITAL RECEIPT. THE SAME IS UPHELD. GROUND IS ACCO RDINGLY REJECTED. 5. THE DECISIONS RELIED UPON BY THE LD. DR H AVING DISTINGUISHABLE FACTS ARE NOT HELPFUL TO THE REVENUE. AS IN THE CASE OF C IT VS. MADHYA BHARAT ENERGY CORPORATION LTD. (2011) 337 ITR 389 (DELHI) THE ACT OF THE ASSESSEE OF MAKING FIXED DEPOSITS AND EARNING INTEREST THERE ON AS PER HONBLE HIGH COURT COULD NOT BE SAID TO BE IN THE ONLY DEFINITE PURPOSE AND PROJECT OF SETTING UP OF THE UNIT. IT WAS HELD THAT SINCE THE UNIT HAS ALREADY BEEN STARTED THE INVESTMENT COULD NOT BE SAID TO BE FOR SETTING UP OF THE SAID UNIT. IT WAS CASE OF DEPOSITING UNUTILISED AND SUR PLUS MONEY BY THE ASSESSEE TO EARN INTEREST AND THEREFORE THE INTERES T EARNED BY THE ASSESSEE BEING REVENUE IN NATURE WAS LIABLE TO BE ASSESSED AS INCOME FROM OTHER SOURCES. AGAIN IN THE CASE OF COMMISSIONER OF INCOM E-TAX V. DELHI BRASS AND METAL WORKS LTD. [2009] 313 ITR 352 (DEL) [2009 ] 178 TAXMAN 215 ITA NO. 1918/DEL/2013 & CO. NO. 153/DEL/2013 6 (DEL) (SUPRA) THE ASSESSEE A 100 % EXPORTER OF READ YMADE GARMENTS HAD SURPLUS FUNDS WHICH WERE PUT IN A FIXED DEPOSIT WIT H THE BANK AND EARNED INTEREST. SINCE THERE WAS NO NEXUS WITH EXPORT THE INTEREST ON FIXED DEPOSIT WAS TREATED AS INCOME FROM OTHER SOURCES. THE INTER EST PAID TO BANK ON OVERDRAFT FACILITY WERE HELD NOT EXPENDITURE LIAD O UT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING INTEREST ON FIXED DEPOSI T. HENCE BENEFIT OF NETTING WAS NOT ALLOWABLE. IN THIS REGARD THE HON BLE HIGH COURT HAS FOLLOWING ITS EARLIER DECISION IN THE CASE OF SHRI RAM HONDA POWER EQUIP (2007) 289 ITR 475. IN THE CASE OF MARUTI UDYOG L TD. VS. CIT (SUPRA) THE FACTS WERE ALSO DIFFERENT AS IN THAT CASE INTEREST WAS EARNED ON TEMPORARY DEPOSIT OF SURPLUS FUNDS OF BUSINESS. IT HAS BEEN T REATED BY THE HONBLE HIGH COURT AS INCOME FROM OTHER SOURCES AS AGAINST BUSINESS INCOME CLAIMED BY THE ASSESSEE FOLLOWING THE DECISION IN T HE CASE OF CIT VS. SHRI RAM HONDA POWER EQUIP. THUS THESE CASES OF HONBLE JURISDICTIONAL HIGH COURT ARE NOT HELPFUL TO THE REVENUE. CONSEQUENTLY APPEAL IS DISMISSED. CO NO. 153/DEL/2013 6. THE OBJECTIONS OF THE ASSESSEE THAT THE LD. C IT(A) HAS NOT GIVEN APPROPRIATE AND SPECIFIC DIRECTIONS TO THE AO I) O N CHARGING OF INTEREST U/S 234B AMOUNTING TO RS. 4,18,550/- AND II) IN WITHDR AWING INTEREST U/S 244A AMOUNTING TO RS. 9,20,810/-. ITA NO. 1918/DEL/2013 & CO. NO. 153/DEL/2013 7 7. HAVING GONE THROUGH THE FIRST APPELLATE ORD ER WE FIND THAT THE ISSUE OF CHARGING OF INTEREST U/S 234B RAISED BEFORE THE AO HAS BEEN DISPOSED OFF BY THE LD. CIT(A) WITH THIS FINDING THAT IT IS CONS EQUENTIAL IN NATURE HENCE DOES NOT REQUIRE ADJUDICATION. WE FULLY AGREE WITH THE APPROACH OF LD. CIT(A) AND WHILE GIVING EFFECT TO THE FIRST APPELLA TE ORDER THE AO IS BOUND TO DECIDE THE ISSUE OF CHARGING OF INTEREST U/S 234B O F THE ACT AFRESH IN CONSEQUENCE. WE THUS DO NOT FIND REASON TO INTERFER E WITH THE FIRST APPELLATE ORDER IN THIS REGARD. SO FAR AS CHARGING OF INTEREST U/S 244A OF THE ACT, THE LD. CIT(A) HAS OBSERVED THAT THE ISSUE DOE S NOT EMERGE FROM THE ASSESSMENT ORDER AND SINCE THE AO HAD NOT AFFORDED OPPORTUNITY TO THE ASSESSEE BEFORE WITHDRAWING THE INTEREST, THE LD. C IT(A) IN VIEW HAS RIGHTLY DIRECTED THE AO TO LOOK INTO THE DETAILS / RECORD A ND TAKE ACTION ACCORDINGLY. WE THUS DO NOT FIND ANY REASON TO INTERFERE WITH TH E FIRST APPELLATE ORDER IN THIS REGARD. THE SAME IS UPHELD. THE CROSS OBJECTIO N IS ACCORDINGLY DISMISSED. 8. IN THE RESULT APPEAL AS WELL AS CROSS O BJECTION BOTH ARE DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COU RT ON 13 TH MAY, 2014. SD/- SD/- (T.S. KAPOOR) ( I.C. SUDHIR ) ACCOUNTANT MEMBER J UDICIAL MEMBER DATE 13 TH .MAY,, 2014 VEENA ITA NO. 1918/DEL/2013 & CO. NO. 153/DEL/2013 8 COPY OF ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR, ITAT