ACIT, Circle , Patiala V. Punjab State Transmission Corporation Ltd., Patiala

ITA 1024/CHANDI/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 7963 (ITAT-CHANDIGARH)
• Duration Of Justice: 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-04-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 04-04-2019
• Assessment Year: 2011-2012
• Appeal Filed On: 02-08-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: G S PHANI KISHORE CIT DR
• Assessee Lawyers: K P BAJAJ
• Keywords: Business income; Opportunity of being heard; Rule of consistency; Revised return; Revenue expenditure; Capital expenditure; Set aside
• Section: 37(1); 143(1)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BEN CH B, CHANDIGARH .., ! '# #$ %, & '( BEFORE: SHRI. N.K.SAINI, VP & SHRI , SANJAY GARG, JM ITA NOS. 1024 TO 1027/CHD/2018 ASSESSMENT YEAR : 2011-12 TO 2014-15 ACIT CIRCLE, PATIALA M/S PUNJAB STATE TRANSMISSION CORPORATION LTD. SHAKTI SADAN, OPP. KALI MATA MANDIR PATIALA PAN NO: AAFCP4714J APPELLANT RESPONDENT & ITA NO. 992/CHD/2018 ASSESSMENT YEAR : 2012-13 M/S PUNJAB STATE TRANSMISSION CORPORATION LTD. SHAKTI SADAN, OPP. KALI MATA MANDIR PATIALA THE ACIT CIRCLE, PATIALA PAN NO: AAFCP4714J APPELLANT RESPONDENT !' ASSESSEE BY : SH. K.P. BAJAJ, ADVOCATE #!' REVENUE BY : SH. G.S. PHANI KISHORE, CIT DR $ %! & DATE OF HEARING : 04/04/2019 '()*! & DATE OF PRONOUNCEMENT : 15.04.2019 ')/ ORDER PER N.K. SAINI, VICE PRESIDENT ALL THE ABOVE APPEALS FILED BY THE REVENUE AND CROS S APPEAL FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE SEPARATE ORDERS OF LD. CIT(A)- I, LUDHIANA DATED 21.06.2018 FOR THE ASSESSMENT YEAR 2011-12 AND OF CIT(A), PATIALA DATE D 03.05.2018, 08.05.2018 & 08.05.2018 FOR THE ASSESSMENT YEARS 2012-13, 2013-1 4 & 2014-15 RESPECTIVELY. 2. SINCE THE ISSUES INVOLVED ARE COMMON AND THE APP EALS WERE HEARD TOGETHER SO THESE ARE BEING DISPOSED OFF BY THIS CONSOLIDATED O RDER FOR THE SAKE OF CONVENIENCE AND BREVITY. 3. AT THE FIRST INSTANCE WE SHALL TAKE UP THE DEPAR TMENTAL APPEAL IN ITA NO. 1025/CHD/2018 FOR THE A.Y. 2012-13. 2 4. REVENUE HAS RAISED THE FOLLOWING GROUNDS IN ITA NO. 1025/CHD/2018 FOR A.Y. 2012- 13 : 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A), PATIALA IS LEGALLY CORRECT IN TREATING INCOME FROM OTHER SOURCES AS IN COME FROM BUSINESS & PROFESSION TO THE TUNE OF RS. 17,31,99,293/-. 2. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A), PATIALA IS LEGALLY CORRECT IN ALLOWING THE CARRY FORWARD OF LOSSES TO THE TUNE OF RS.798,41,88,046/-. 3. IT IS PRAYED THAT THE ORDER OF LD. CIT (A), PATIALA BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 4. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD AND FINALLY DISPOSED OF. 5. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE E-FILED THE RETURN OF INCOME ON 21/09/2012 DECLARING NIL INCOME SHOWING CURRENT YEA R LOSS OF RS. 51,11,31,904/-. SUBSEQUENTLY, THE REVISED RETURN WAS E-FILED DECLAR ING NIL INCOME ON 14/03/2014 SHOWING CURRENT YEAR LOSS AT NIL WHICH WAS PROCESSE D UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS A CT), LATER ON THE CASE WAS SELECTED FOR SCRUTINY. 6. THE ASSESSING OFFICER DURING THE COURSE OF ASSES SMENT PROCEEDINGS NOTICED THAT THE ASSESSEE HAD DECLARED FOLLOWING INCOME AS OTHER INCOME: (A) INTEREST ON STAFF LOANS & ADVANCES RS. 68,168 /- (B) INCOME FROM STAFF WELFARE ACTIVITIES RS. 51,659 /- (C) RENTAL FOR STAFF QUARTERS RS. 53,15,740/- (D) SALE OF TENDER FORMS RS. 22,43,283/- (E) SUNDRY CREDIT BALANCES WRITTEN BACK RS. 1,00,32 0/- (F) OTHER INCOME RS. 12,95,93,597/- (G) RECEIPT FROM PSEB-GUEST HOUSES RS. 10,045/- (H) MISC. RECEIPT UNDER OPEN ACCESS RS. 8,74,746/- (J) FEE RECEIVED UNDER RIGHT TO INFORMATION ACT RS. 479/- (K) MISC. INCOME NOC CHARGES OPEN ACCESS RS. 3,49,4 0,986/- TOTAL RS. 17,31,99,293/- 6.1 THE ASSESSING OFFICER WAS OF THE VIEW THAT THE AFORESAID INCOME WERE TO BE TREATED AS INCOME FROM OTHER SOURCES AND NOT UNDE R THE HEAD BUSINESS INCOME AS CLAIMED BY THE ASSESSEE. THE ASSESSING OFFICER ACCO RDINGLY TREATED THE AFORESAID INCOME AS INCOME FROM OTHER SOURCES. 7. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED AS UNDER: THAT THE ID. A.O WAS NOT JUSTIFIED IN TREATING INCO ME FROM BUSINESS AT RS. 17,31,99,293/- AS INCOME UNDER THE HEAD 'OTHER SOURCES' IGNORING THE DECISIONS IN APPEALS. 3 THE CASE OF THE ID. A.O IS GIVEN IN PARA 2 AT PAGES 2 & 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSE WAS REQUIRED TO EXPLAIN AS TO WHY THE INCOME FROM INTEREST ON STAFF LOANS AND ADVANCES, STAFF WELFARE ACTIVITIES, RENTAL OF STAFF QUARTERS, SALE OF TENDER FORMS, SUNDRY CREDIT BALANCES WRITTEN BACK, OTHER INCOME, RECEIPT FROM PSEB GUEST HOUSE, RECEIPT FROM OPEN ACCESS AND FEES UNDER RIGH T TO INFORMATION ACT MAY NOT BE TREATED AS INCOME UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. VIDE REPLY DATED 20.01.2015_IT WAS CLAIMED THAT ALL THE ABOVE EXPENSES ARE INCIDENTAL TO THE BUSINESS OF THE ASSESSE. IN THE C ASE OF THE PARENT BODY I.E., PSEB THIS ISSUE CAME BEFORE THE APPELLATE AUTHORITIES AND THE NATUR E OF ABOVE INCOME WAS HELD TO BE OF THE NATURE OF BUSINESS INCOME. HENCE THE INCOME FRO M BUSINESS COULD NOT BE TREATED AS INCOME FROM OTHER SOURCES. ALTHOUGH, AS LONG AS INT ER HEAD AND INTRA HEAD ADJUSTMENT OF INCOME IS PERMISSIBLE UNDER THE ACT AND ADJUSTMENT OF THE INCOME IS ALSO PERMISSIBLE FOR THE PURPOSE OF ADJUSTMENT OF CARRIED FORWARD LOSSES , YET THE ASSESSMENT HAS TO BE MADE IN THE RIGHT MANNER AND DETERMINATION OF THE INCOME HA S TO BE IN ACCORDANCE WITH THE PROVISIONS OF THE INCOME-TAX ACT. WITHOUT CONSIDERING THE REPLY OF THE ASSESSE THE ID . A.O., VIDE PARA 1 AT PAGE 3 OF THE ASSESSMENT ORDER TREATED THE BUSINESS INCOME AM OUNTING TO RS. 17,31,99,293/-AS INCOME UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. IT MAY BE ARGUED THAT THE ISSUE OF ASSESSMENT OF IN COME EARNED UNDER VARIOUS HEADS MENTIONED IN THE ASSESSMENT ORDER CAME UP FOR ADJUDICATION BEFORE THE WORTHY CIT(APPEALS), PATIALA IN THE CASE OF THE PARENT BOA RD FOR THE ASSESSMENT YEARS 1996-97 AND 1997-98 AND INCOME FROM ALL THE SOURCES, AS MENTION ED IN THE ORDER OF ASSESSMENT, WAS HELD TO BE INCOME FROM BUSINESS. COPIES OF THE RELE VANT ORDERS WERE FILED BEFORE THE ID. A.O AND COPIES THEREOF ALSO FORM PART OF THESE SUBM ISSIONS. THE ISSUE IS NOT, THEREFORE, RES INTEGRA. IT IS TRITE LAW THAT THERE SHOULD BE CONSI STENCY IN THE DECISIONS OF THE JUDICIAL AS WELL AS QUASI JUDICIAL AUTHORITIES. THE CARDINAL RULE OF CONSISTENCY WHILE ON ONE PART IS ONE LEG OF JUDICIAL DISCIPLINE AND, ON THE OTHER, INCARNATION OF THE RULE OF STARE DECISIS. THE HON'BLE SUPREME COURT, IN THE CASE OF BALIRAM WAMAN HIRAY V . LENTIN, REPORTED IN (1989) 176ITR 1, HAS HELD AS UNDER:-'LAW MUST BE DEFINITE AND CERTAI N. IF ANY OF THE FEATURES OF THE LAW CAN USEFULLY BE REGARDED AS NORMATIVE, IT IS SUCH BASIC POSTULATES AS THE REQUIREMENT OF CONSISTENCY IN JUDICIAL DECISION MAKING. IT IS THIS REQUIREMENT OF CONSISTENCY THAT GIVES TO LAW MUCH OF IT RIGOUR. AT THE SAME TIME, THERE IS A LSO A NEED FOR FLEXIBILITY.' IN VIEW OF THE ABOVE DISCUSSION, THE ID. A.O MAY KI NDLY BE DIRECTED TO ASSESS THE INCOME ASSESSED UNDER THE HEAD 'OTHER SOURCES' AS B USINESS INCOME. 7.1 LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DIRECTED THE ASSESSING OFFICER TO TREAT THE INCOME IN QUESTION A S INCOME FROM BUSINESS BY FOLLOWING THE EARLIER ORDER OF HIS PREDECESSORS FOR THE A.Y. 1996-97 AND 1997-98. 8. NOW THE DEPARTMENT IS IN APPEAL. 9. DURING THE COURSE OF HEARING THE LD. CIT DR SUBM ITTED THAT THE SIMILAR ISSUE WAS A SUBJECT MATTER OF THE DEPARTMENTAL APPEAL IN ITA NO . 446/CHD/1999 FOR A.Y. 1996-97 AND 520/CHD/2000 FOR A.Y. 1997-98 WHEREIN THE ISSUE HAS BEEN SET ASIDE TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION BY FOL LOWING THE EARLIER ORDER DT. 04/01/2004 IN ITA NO. 412/CHD/1999 FOR A.Y. 1996-97 IN THE CAS E OF PEPSU ROAD TRANSPORT CORP. VS. JCIT, SPECIAL RANGE, VIDE ORDER DT. 02/01/2004, COP Y OF THE SAID ORDER WAS FURNISHED WHICH IS PLACED ON RECORD. 10. IN HIS RIVAL SUBMISSIONS THE LD. COUNSEL FOR TH E ASSESSEE SUBMITTED THAT AFTER DIRECTION GIVEN BY THE ITAT VIDE AFORESAID REFERRED TO ORDER DT. 02/01/2004, THE ASSESSING 4 OFFICER PASSED THE ASSESSMENT ORDER DT. 28/02/2005 AND CONSIDERED ALL THE INCOME IN QUESTION EXCEPT INTEREST ON FIXED DEPOSITS UNDER TH E HEAD BUSINESS INCOME AND THAT THE INTEREST INCOME ON FIXED DEPOSITS WAS CONSIDERE D UNDER THE HEAD INCOME FROM OTHER SOURCES. COPY OF THE SAID ORDER WAS FURNISHE D WHICH IS PLACED ON RECORD. 11. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE P ARTIES AND THE MATERIAL AVAILABLE ON THE RECORD, IT IS NOTICED THAT THIS ISSUE IS COV ERED VIDE AFORESAID REFERRED TO ORDER DT. 22/01/2004 IN ITA NO. 446/CHD/1999 & ITA NO. 520/CH D/2000 FOR THE A.Y. 1996-97 AND 1997-98 RESPECTIVELY IN ASSESSEES OWN CASE. THE R ELEVANT FINDINGS HAVE BEEN GIVEN IN THE SAID ORDER AT PARA 16 WHICH READ AS UNDER: 16. KEEPING IN VIEW THE DECISION OF THE ITAT CHAND IGARH BENCH DT. 02/01/2004 (SUPRA) IN THE CASE OF PEPSU ROAD TRANSPORT CORP. VS. JCIT SPL. RANGE, WHERE THE IDENTICAL ISSUES WERE INVOLVED AS INVOLVED IN THE INSTANT CASES OF T HE ASSESSEE, SO THE JUDICIAL PROPRIETY DEMANDS THAT IN ORDER TO MAINTAIN CONSISTENCY IN TH E APPROACH OF THE BENCH, WE SHOULD FOLLOW OUR OWN ORDERS AND SO KEEPING IN VIEW THIS F ACT, WE DO NOT FIND ANY FORCE IN THE CONTENTION OF THE LD. DR FOR THE REVENUE AND ACCORD INGLY REJECT THE SAME. HENCE RESPECTFULLY FOLLOWING THE ORDER DT. 02/01/2004 (SU PRA) PASSED BY THE ITAT CHANDIGARH BENCH IN THE CASE OF PEPSU ROAD TRANSPORT CORP. VS. JCIT SPL. RANGE, WE SET ASIDE THE ORDERS PASSED BY THE TAX AUTHORITIES BELOW AND REST ORE BACK THE ENTIRE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR PASSING A DENOVO ASSESSME NT ORDER IN COMPLIANCE WITH THE OBSERVATIONS OF THE ITAT CHANDIGARH, THE RELEVANT P ORTION OF WHICH WE HAVE REPRODUCED HEREIN ABOVE IN THIS ORDER. ACCORDINGLY, BY RESPECTFULLY FOLLOWING THE AFORESAI D ORDER DATED 22.01.2014, THIS ISSUE IS SET ASIDE TO THE FILE OF THE ASSESSING OFF ICER TO BE ADJUDICATED AFRESH IN ACCORDANCE WITH LAW BY KEEPING IN VIEW THE DIRECTIO N GIVEN IN AFORESAID REFER TO ORDER DT. 22/01/2004. 12. VIDE GROUND NO. 2 THE GRIEVANCE OF THE DEPARTME NT RELATES TO THE DIRECTION GIVEN BY THE LD. CIT(A) TO ALLOW THE CARRY FORWARD LOSSE S. 13. THE LD. CIT DR AT THE VERY OUTSET STATED THAT T HE FACTS RELATING TO THIS ISSUE ARE NOT CLEAR, THEREFORE, THIS ISSUE MAY BE SET ASIDE TO TH E FILE OF THE ASSESSING OFFICER TO BE DECIDED IN ACCORDANCE WITH LAW AFTER CONSIDERING TH E PROPORTIONATE TRANSFER OF ASSETS FROM THE ERSTWHILE COMPANY TO THE SUCCESSOR COMPANY I.E; ASSESSEE. 14. LD. COUNSEL FOR THE ASSESSEE DID NOT OBJECT, IF THIS ISSUE IS TO BE SET ASIDE TO THE ASSESSING OFFICER FOR VERIFICATION AND TO BE DECIDE D IN ACCORDANCE WITH LAW. ACCORDINGLY, THE ISSUE RELATING TO THE ADJUSTMENT O F THE CARRY FORWARD OF LOSSES, IS SET ASIDE TO THE FILE OF THE ASSESSING OFFICER TO BE DE CIDED IN ACCORDANCE WITH LAW AFTER PROVIDING DUE AND REASONABLE OPPORTUNITY OF BEING H EARD TO THE ASSESSEE. 5 15. IN OTHER APPEALS OF THE DEPARTMENT, IDENTICAL I SSUES ARE RAISED THE ONLY DIFFERENCE IS IN THE AMOUNT INVOLVED THEREFORE OUR FINDINGS GIVEN IN RESPECT OF A.Y. 2012- 13 SHALL APPLY MUTATIS MUTANDIS FOR THE A.Y. 2011-1 2, 2013-14 AND 2014-15. 16. IN THE ASSESSEES CROSS APPEAL FOR A.Y. 2012-13 , THE ONLY GROUND RAISED, RELATES TO THE UPHOLDING THE ADDITION MADE BY THE ASSESSING OF FICER ON ACCOUNT OF EXPENSES INCURRED ON CURRENT REPAIRS, WITHOUT ANY BASIS FOR QUANTIFICATION THEREOF. 17. THE FACTS RELATING TO THIS ISSUE IN BRIEF ARE T HAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT THE A SSESSEE HAD CLAIMED MAJOR REPLACEMENT OF PLANT AND MACHINERY EQUIPMENT AS REV ENUE EXPENSES. HE WAS OF THE VIEW THAT THE REPLACEMENT WAS NOT REPAIR AND MAINTE NANCE RATHER IT WAS REPLACEMENT OF OLD ASSETS WITH NEW ONE, THE ASSESSEE WAS WRITIN G OFF THE OLD ASSETS AND THAT THE REPLACEMENT WAS ALTOGETHER PUTTING IN USE THE NEW A SSETS WHICH ENHANCED THE EFFICIENCY OF THE ASSESSEE COMPANY. HE ACCORDINGLY TREATED THE AMOUNT OF RS. 5,19,49,953/- AS CAPITAL EXPENDITURE AND NOT AS REV ENUE EXPENDITURE AS CLAIMED BY THE ASSESSEE. THE RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: DCIT VS. S.T.N TEXTILES LTD. 257 ITR 161 (KER) BALLIMAL NAVAL KISHORE & ANR. VS. CIT 224 ITR 414(S C) MODI SPINNING & WEAVING MILLS CO. LTD. VS. CIT 200 ITR 544 (DEL) CIT VS. SARAVANA SPINNING MILLS P. LTD. 293 ITR 201 (SC) CIT VS. MANGAYARKARASI MILLS PVT. LTD. 315 ITR 114( SC) 18. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED AS UNDER: THE REPLACED MACHINERY CANNOT BE TREATED AS INDEPEN DENT AS IT ENTAILS MERELY REPLACING THE OLD AND WORN OUT PARTS OF THE MACHINERY OF SPINNING MIL L WHICH IS IN TURN DEPENDENT ON OTHER PARTS OF THE TEXTILE MILL. APPELLANT RELIED ON CIRCULAR NO. 69 DATED 27 NOVEMB ER 1957 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES, AS PER WHICH REPLACEMENT OF WORN OUT PARTS I N A TEXTILE MILL WOULD CONSTITUTE REVENUE EXPENDITURE. ARGUMENT OF THE REVENUE OF ENDURING BENEFIT IS NO L ONGER A GOOD LAW. IT WAS FURTHER SUBMITTED THAT THE REPAIRS, FALL WIT HIN THE AMBIT OF OBSOLESCENT PARTS WHICH WERE REPLACED. THE LD. CIT(A) HOWEVER DID NOT FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE AND HELD THAT CURRENT REPAIRS WHICH INVOLV ED REPLACEMENT OF WORN OUT PARTS 6 COULD NOT BE TREATED AS CURRENT REPAIRS UNDER SECTI ON 37(1) OF THE ACT. ACCORDINGLY ADDITION MADE BY THE ASSESSING OFFICER WAS CONFIRME D. 19. NOW THE ASSESSEE IS IN APPEAL. 20. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT NO NEW MACHINERY WAS ACQUIRED BY THE ASSESSEE AND OLD ONE WERE REPLACED WHICH WER E EARLIER CAPITALIZED, THEREFORE, EXPENDITURE INCURRED ON THE EXISTING ASSETS WITHOUT COMING INTO BACK A FRESH ASSET WAS REVENUE IN NATURE. THEREFORE THE LD.CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE VIEW TAKEN BY THE ASSESSING OFFICER. 21. IN HIS RIVAL SUBMISSIONS THE LD. CIT DR STRONGL Y SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 22. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CA SE THE FACTS ARE NOT CLEAR AS TO WHETHER THE NEW ASSETS WERE RECEIVED OR THE PART OF THE ASSETS WERE REPLACED, THEREFORE THIS ISSUE REQUIRES THE FRESH ADJUDICATIO N AT THE LEVEL OF THE ASSESSING OFFICER. ACCORDINGLY, THIS ISSUE IS ALSO SET ASIDE TO THE FI LE OF THE ASSESSING OFFICER TO BE ADJUDICATED AFRESH IN ACCORDANCE WITH LAW AFTER PRO VIDING DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 23. IN THE RESULT, APPEALS OF THE DEPARTMENT AND CR OSS APPEAL OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. (ORDER PRONOUNCED IN THE OPEN COURT ON 15/04/2019 ) SD/- SD/- #$ % .., (SANJAY GARG ) ( N.K. SAI NI) & '(/ JUDICIAL MEMBER ! / VICE PRESIDENT DATED : 15 / 04/2019 AG/RK (+! ,-.- COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. $ / CIT 4. $ / 01 THE CIT(A) 5. -2 45&456789 DR, ITAT, CHANDIGARH 6. 8:% GUARD FILE