ACIT, CHENNAI V. M/s. Trident Textile Mills Limited, CHENNAI

ITA 1169/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64664 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 10-12-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 28-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: M KARUNAKARAN
• Keywords: Cost of acquisition
• Section: 143(3); 28

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL A BENCH, CHENNAI. BEFORE ABRAHAM P. GEORGE, ACCOUNTANT MEMBER & SHRI S.S. GODARA, JUDICIAL MEMBER I.T.A. NO.1169/MDS/2012 ASSESSMENT YEAR: 2008-09 THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE III(2), NEW BLOCK, 4 TH FLOOR, 121, MAHATMA GANDHI ROAD, NUNGAMBAKKAM, CHENNAI 600 034. VS. M/S. TRIDENT TEXTILE MILLS LIMITED, NELSON TOWER, 117A, IV WING, AMINJIKARAI, CHENNAI 600 029. [PAN:AAACT1291R] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SHAJI P. JACOB, CIT RESPONDENT BY : SHRI M. KARUNAKARAN, ADVOCATE DATE OF HEARING : 1 0 . 1 2 .201 2 DATE OF PRONOUNCEMENT : 17.12.2012 ORDER PER S.S. GODARA, JUDICIAL MEMBER THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) I II, CHENNAI DATED 24.02.2012 IN ITA NO. 558/10-11/A.III FOR THE ASSES SMENT YEAR 2008-09 IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961 [IN SHORT THE ACT]. 2. THE SUBSTANTIVE GROUND, INTER ALIA, AS PLEADED BY THE REVENUE READS AS UNDER: I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 1169 169169 169/M/ /M/ /M/ /M/12 1212 12 2 1. XXXXXXXXXXXX 2.1 THE CIT(A) ERRED IN DELETING THE ADDITION OF ` .17,58,014 MADE U/S 28 IN RESPECT OF COMPENSATION DUE FROM M/S. SUZ LON ENERGY LIMITED. 2.2 XXXXXXXXXXXXX 2.3 XXXXXXXXXXXXX 3. XXXXXXXXXXXXX 3. BRIEF FACTS PERTAINING TO THE CASE ARE THAT THE ASSESSEE COMPANY; WHO IS MANUFACTURER AND DOMESTIC SELLER OF GREY FABRIC, HAD FILED ITS RETURN FOR THE IMPUGNED ASSESSMENT YEAR ON 30.09.2008 DECLARING LO SS OF ` .31,31,568/-. DURING SCRUTINY PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT IN THE FINANCIAL YEAR 2004-05, THE ASSESSEE HAD ACQUIRED 1 250 MW WINDMILL FOR CAPTIVE CONSUMPTION FROM M/S. SUZLON ENERGY LTD. FO R AGREED CONSIDERATION OF ` .426.50 LAKHS. PER HIM, THE ASSESSEES PURCHASE ORD ER ALSO CONTAINED COMPENSATION CLAUSE APPLICABLE, IN CASE OF ANY LOSS OF GENERATION ON ACCOUNT OF NON-AVAILABILITY OF MACHINE BELOW 95% @ 3.67/KWH OR AS PER THE TNEB TARIFF DURING THE WARRANTY PERIOD. HE ALSO TOO K COGNIZANCE OF THE FACT THAT SINCE THE GENERATION OF POWER UNIT DID NOT TOU CH THE ASSURED LEVEL OF 37 LAKHS UNITS, THE ASSESSEE HAD FILED COMPENSATION CA SE BEFORE THE HONBLE JURISDICTIONAL HIGH COURT RAISING CLAIM OF ` .17,58,014/- UPTO 15.09.2007 FOR THE SHORTFALL IN POWER GENERATION. WHEN ASKED, THE ASSESSEE STATED BEFORE THE ASSESSING OFFICER THAT SINCE ITS COMPENSATION C ASE WAS PENDING BEFORE THE HONBLE JURISDICTIONAL HIGH COURT, IT WAS NOT L IABLE TO DECLARE THE AMOUNT CLAIMED AS ITS INCOME FOR THE IMPUGNED ASSESSMENT Y EAR. HOWEVER, THE I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 1169 169169 169/M/ /M/ /M/ /M/12 1212 12 3 ASSESSING OFFICER WAS NOT CONVINCED, IN WHOSE OPINI ON THE ASSESSEES CLAIM WAS VALID AS PER CLAUSE IN THE AGREEMENT. HE ALSO O BSERVED THAT THE ASSESSEE HAD ALSO WITHHELD AN AMOUNT OF ` .25 LAKHS DUE TO M/S. SUZLON ENERGY LTD. OUT OF THE PROJECT COST OF ` .539.22 LAKHS CAPITALIZED IN ITS BOOKS AND SUBSEQUENTLY, DUE TO CLOSURE, IT HAD SOLD ITS W IND MILL ON 16.05.2009 FOR CONSIDERATION OF ` .4.10 CRORES AND ALSO PAID CAPITAL GAINS, AND STILL THE COST OF ACQUISITION WAS COMPUTED AS ` .539.22 LAKHS. ACCORDINGLY, VIDE ASSESSMENT ORDER DATED 27.12.2010, THE ASSESSING OF FICER MADE ADDITION OF COMPENSATION AMOUNT CLAIMED BY THE ASSESSEE AS ` .17,58,014/- AND REDUCED THE SAME FROM THE ASSESSEES LOSS DECLARED, THEREBY COMPUTING TAXABLE INCOME AS ` .(-) 13,73,554/-. 4. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL, WHERE IN ITS ARGUMENTS CHALLENGING THE ADDITION MADE BY THE ASSESSING OFFI CER HAVE BEEN ACCEPTED BY THE CIT(A) BY HOLDING THAT THOUGH THE ASSESSEE H AD FILED THE COMPENSATION CASE BEFORE THE HONBLE JURISDICTIONAL HIGH COURT, BUT TILL DATE NEITHER ANY DAMAGES HAD BEEN RECEIVED NOR THE OTHER PARTY HAD AGREED TO PAY ANY COMPENSATION TO THE ASSESSEE. IT HAS ALSO B EEN OBSERVED BY THE CIT(A) THAT THE INCOME ARISING OUT OF ASSESSEES CL AIM OF COMPENSATION HAS NOT BEEN RECEIVED, ACCRUED OR CRYSTALLIZED. IN THI S MANNER, THE ADDITION MADE BY THE ASSESSING OFFICER STANDS DELETED BY THE CIT(A). IN THIS BACKDROP, THE REVENUE IS AGGRIEVED. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 1169 169169 169/M/ /M/ /M/ /M/12 1212 12 4 5. THE DR REPRESENTING REVENUE HAS VEHEMENTLY ARGU ED THAT THE CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE ASSE SSING OFFICER, MORE SO, WHEN THE FINDINGS OF THE ASSESSING OFFICER ARE BASE D ON SOUND REASONS. IN ADDITION TO THIS, HE HAS ALSO REITERATED THE SUBMIS SIONS AS RAISED IN THE GROUNDS OF APPEAL AND PRAYED FOR RESTORATION OF THE ADDITION MADE BY THE ASSESSING OFFICER. 6. ON THE OTHER HAND, IT HAS BEEN SUBMITTED BY THE AR REPRESENTING THE ASSESSEE THAT TILL DATE NEITHER THE OTHER PARTY NAM ELY M/S. SUZLON ENERGY LTD. HAS ADMITTED ANY PART OF ASSESSEES CLAIM NOR IT HAS RECEIVED ANY COMPENSATION BY WAY OF DAMAGES FROM THE SAID ENTITY . HE HAS ALSO PLACED ON RECORD SOME DOCUMENTS AND STATED THAT THE ASSESS EES CLAIM FOR COMPENSATION WAS REFERRED TO AN ARBITRATOR NAMELY H ONBLE JUSTICE MR. K. VENKATASWAMI, RETD. JUDGE OF HONBLE SUPREME COURT , WHO EXPIRED ON 26.09.2008 BEFORE THE ARBITRATION CLAIM COULD BE FI NALIZED. TO BUTTRESS HIS SUBMISSION, HE HAS ALSO FILED ON RECORD OF ARBITRAT ION PROCEEDINGS WHICH INDICATE THAT THE ARBITRATION PROCEEDINGS WERE AT T HE STAGE OF CROSS EXAMINATION OF WITNESSES WHEN THE SOLE ARBITRATOR ( SUPRA) EXPIRED. PLACING RELIANCE OF CIT(A)S ORDER, IT IS THE CONTENTION OF THE AR THAT SINCE THE ASSESSEE HAS NEITHER RECEIVED ANY COMPENSATION NOR THE OTHER PARTY HAS ADMITTED THE LIABILITY, MERE FILING OF CLAIM OR INS TITUTION OF LEGAL PROCEEDINGS CANNOT BE CALLED AS INCOME UNDER THE PROVISIONS O F THE ACT. HE ALSO PLACED RELIANCE ON THE FOLLOWING CASE LAW: I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 1169 169169 169/M/ /M/ /M/ /M/12 1212 12 5 1. CIT VS. BHARAT PETROLEUM CORPORATION LTD. (202 ITR 492 CAL.) 2. CIT VS. HINDUSTAN HOUSING & LAND DEVELOPMENT TR UST LGTD. (161 ITR 524 SC) 3. CIT VS. HERCULES TRADING CORPORATION (143 ITR 5 04 - CALCUTTA) 4. CIT VS. PALAKOL CO-OP. AGRICULTURAL & INDUSTRIA L SOCIETY (171 ITR 607 AP). 5. B.P.R. CONSTRUCTIONS VS. CIT 192 ITR 534 @ 537 ORISSA) 6. CIT VS. REHMAT KHAN (213 ITR 134 RAJASTHAN) AND PRAYED FOR UPHOLDING CIT(A)S ORDER. IN REBUTTAL, THE REVENUE HAS NOT CONTROVERTED THE F ACTUAL POSITION AS STATED ON BEHALF OF THE ASSESSEE. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AT LEN GTH AND ALSO GONE THROUGH THE RELEVANT FINDINGS OF THE ASSESSING OFFI CER AS WELL AS CIT(A). UNDISPUTED FACTS ARE THAT THE ASSESSEE HAD PURCHASE D WIND MILL IN QUESTION BY WAY OF PURCHASE ORDER; WHICH STIPULATED THAT IN CASE, THE POWER GENERATION FROM THE WIND MILL WOULD NOT TOUCH THE A SSURED LEVEL OF 37 LAKHS UNITS, THE ASSESSEE WOULD BE ENTITLED FOR COMPENSAT ION. THE SAID CAPACITY WAS NEVER ACHIEVED; WHICH COMPELLED THE ASSESSEE TO INITIATE COMPENSATION PROCEEDINGS BEFORE THE HONBLE JURISDICTIONAL HIGH COURT. AS THE RECORDS INDICATE THAT THE HONBLE HIGH COURT REFERRED THE C ASE TO THE SOLE ARBITRATOR (SUPRA), WHO EXPIRED DURING THE PENDENCY OF THE ARB ITRATION PROCEEDINGS. THE STAND OF THE REVENUE IS THAT MERELY BY INITIATING T HE COMPENSATION SUIT, THE AMOUNT CLAIMED THEREIN IS LIABLE TO BE TREATED AS A SSESSEES INCOME. WE ARE UNABLE TO CONCUR WITH THE ABOVE SAID STAND, MORE SO , BECAUSE NEITHER THE OTHER PARTY M/S. SUZLON ENERGY LIMITED HAS ADMITTED ANY COMPENSATION OR I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 1169 169169 169/M/ /M/ /M/ /M/12 1212 12 6 ITS PART AS PAYABLE TO THE ASSESSEE NOR THERE IS AN Y DECREE IN FAVOUR OF THE ASSESSEE SO AS TO REALIZE THE AMOUNT. ONCE THE ARBI TRATION PROCEEDINGS ARE PENDING, IN OUR OPINION, THE OUTCOME OF ASSESSEES CLAIM INVOLVED STILL HANGS IN BALANCE. ONCE THAT IS SO, WE REJECT THE CONTENTI ON OF THE REVENUE THAT THE SAME CAN BE TAKEN AS INCOME OF THE ASSESSEE. IT IS A TRITE PREPOSITION OF LAW WHEN THERE IS NO ACTUAL RECEIPT OF ANY AMOUNT OR AC CRUAL, THE SAME CANNOT BE TAKEN AS INCOME OF THE CONCERNED ASSESSEE. HENCE , WE HOLD THAT ASSESSEES CLAIMED AMOUNT CANNOT BE TAKEN AS ITS IN COME, AS RIGHTLY HELD SO BY THE CIT(A). 8. ACCORDINGLY, WE FIND NO INFIRMITY IN THE WELL R EASONED ORDER OF THE CIT(A). HENCE, WE UPHOLD THE SAME AND DISMISS REVEN UES APPEAL BEING DEVOID OF MERITS. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED ON MONDAY, THE 17 TH OF DECEMBER, 2012 AT CHENNAI. SD/ - SD/ - (ABRAHAM P. GEORGE) ACCOUNTANT MEMBER (S.S. GODARA) JUDICIAL MEMBER CHENNAI, DATED, THE 17.12.2012 VM/- TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.