The ACIT, 1 (1), V. M/s Bharat Oman Refinaries .Ltd,

ITA 140/IND/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1393 (ITAT-INDORE)
• Duration Of Justice: 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 24-11-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 18-03-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN
• Keywords: Advance ruling; Capital receipt; Liquidation
• Section: 143(3); 143(2); 208; 28

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JM AND SHRI V.K. GUPTA, AM ITA NO.140/IND/2009 AY: 2005-06 ACIT-1(1), BHOPAL ..APPELLANT V/S. M/S. BHARAT OMAN REFINERIES LTD., A-BLOCK, OFFICE COMPLEX, GAUTAM NAGAR, BHOPAL (PAN AABCB 7084 M) ..RESPONDENT CO NO.33/IND/2009 (ARISING OUT OF ITA NO.140/IND/2009) AY: 2005-06 M/S. BHARAT OMAN REFINERIES LTD., A-BLOCK, OFFICE COMPLEX, GAUTAM NAGAR, BHOPAL (PAN AABCB 7084 M) ..APPELLANT V/S. ACIT-1(1), BHOPAL ..RESPONDENT DEPARTMENT BY : SMT. APARNA KARAN, SR. DR ASSESSEE BY : SHRI SUMIT NEMA, ADV. 2 ORDER PER JOGINDER SINGH, JM THE REVENUE HAS PREFERRED APPEAL AND CO BY THE ASS ESSEE AGAINST THE ORDER DATED 16.12.2008 OF LD. CIT(A)-I, BHOPAL. FIR ST WE SHALL TAKE UP APPEAL OF THE REVENUE WHEREIN THE ONLY GROUND RAISED IS TH AT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN DELETING THE ADDITION OF RS.36,81,538/- MA DE ON ACCOUNT OF MISCELLANEOUS INCOME NOT OFFERED FOR TAXATION. 2. DURING HEARING OF THE APPEAL, WE HAVE HEARD SMT. APARNA KARAN, LD. SR. DR AND SHRI SUMIT NEMA, LD. COUNSEL FOR ASSESSEE. T HE CRUX OF ARGUMENT ON BEHALF OF THE REVENUE IS THAT THE LD. FIRST APPELLA TE AUTHORITY DELETED THE IMPUGNED ADDITION WITHOUT CONSIDERING THE TRUE FACT S AND ASSIGNING ANY REASON. THE ASSESSMENT ORDER WAS STRONGLY DEFENDED. ON THE OTHER HAND, THE LD. COUNSEL FOR ASSESSEE STRONGLY DEFENDED THE IMPU GNED ORDER BY CONTENDING THAT THE REPLY OF THE ASSESSEE DATED 6.9.2007 WAS D ULY CONSIDERED BY THE LD. FIRST APPELLATE AUTHORITY. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATERIAL AVAILABLE ON THE FIL E. BRIEF FACTS ARE THAT PURSUANT TO A JOINT VENTURE AGREEMENT DATED 23.12.1 993, THE ASSESSEE COMPANY WAS INCORPORATED ON 25.2.1994, AS A JOINT V ENTURE COMPANY, FORMED 3 BY BHARAT PETROLEUM CORPORATION LTD. (A PUBLIC SECT OR ENTERPRISE) AND M/S. OMAN OIL CO. LTD. THE ASSESSEE FILED ITS RETURN FOR THE IMPUGNED ASSESSMENT YEAR ON 2.9.2005 DECLARING INCOME OF RS.12,76,133/- AND CAPITAL RECEIPT OF RS.45,47,337/-, NOT LIABLE FOR INCOME-TAX. THE CAPI TAL RECEIPT COMPRISED OF LIQUIDATED DAMAGES, STAFF RECOVERIES AND INTEREST O N DEPOSITS PLACED WITH STATE BANK OF PATIALA FOR CARRYING OUT COMPANYS PR OJECT WORK. THE RETURN WAS ASSESSED U/S 143(1), CONSEQUENTLY, REFUND OF RS.3,9 5,714/- WAS ATTACHED U/S 281B OF THE ACT. SINCE THE CASE WAS SELECTED FOR SC RUTINY, CONSEQUENTLY, NOTICE U/S 143(2) ALONG WITH DETAILED QUESTIONNAIRE WERE I SSUED TO THE ASSESSEE TO WHICH THE ASSESSEE PREFERRED WRITTEN REPLY DATED 6. 9.2007. THE LD. ACIT IN ITS ORDER FRAMED U/S 143(3) WAS OF THE VIEW THAT SINCE THE ASSESSEE CO. HAS NOT COMMENCED ANY BUSINESS ACTIVITY DURING THE YEAR REL EVANT TO ASSESSMENT YEAR UNDER CONSIDERATION, THEREFORE, THE MISCELLANEOUS I NCOME TO THE TUNE OF RS.36,81,538/- IS TAXABLE, THEREFORE, IT WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. ON APPEAL, THE LD. FIRST APPELLATE AUTHOR ITY HELD THAT IT IS A CAPITAL RECEIPT, THEREFORE, NOT TAXABLE, AGAINST WHICH, THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THIS TRIBUNAL. ADMITTEDLY, THE AMOUNT OF RS.36,34,018/- REPRESENTS LIQUIDATED DAMAGES FOR LATE DELIVERY OF WORK FROM CONTRACTORS. SEC. 43(1) PROVIDES FOR DETERMINATION OF ACTUAL COST AS PER WHICH ACTUAL COST MEANS THE ACTUAL COST OF ASSET TO THE ASSESSEE REDU CED BY THAT PORTION OF COST THEREOF, IF ANY, AS HAS BEEN MADE DIRECTLY OR INDIR ECTLY BY ANY OTHER PERSON OR AUTHORITY SUBJECT TO EXPLANATION. IT IS NOT THE CAS E THAT THE ASSESSEE HAS TRIED 4 TO REDUCE THE LIABILITY OF INCOME-TAX. IT IS A CASE OF LIQUIDATED DAMAGES, THEREFORE, THE NATURE OF RECEIPT WILL TAKE ITS COLO UR FROM THE RECEIPT ITSELF. IF THE LIQUIDATED DAMAGES HAVE BEEN RECEIVED AGAINST A CAPITAL WORK, DEFINITELY IT WILL CONSTITUTE A CAPITAL RECEIPT. IF THE LIQUIDATE D DAMAGES HAVE BEEN RECEIVED ON ACCOUNT OF COMPENSATION OF LATE DELIVERY OF TRAD ING GOODS, THESE WILL TAKE THE COLOUR OF REVENUE RECEIPTS. THE ASSESSEE IS SUP PORTED BY THE DECISION IN SAURASHTRA CEMENT AND CHEMICAL INDUSTRIES LTD. (253 ITR 373) AND ALSO THE RATIO LAID DOWN IN THE OBSERVATION OF AUTHORITY OF ADVANCE RULING IN MAHANAGAR TELEPHONE LTD. (AAR NO.651 OF 2004); TRAVANCORE RUB BER & TEA CO. LTD. (243 ITR 158); CIT VS. BOKARO STEEL LTD. (236 ITR 3 15) (SC) AND CIT VS. M/S. SOM POWER LTD. (ITA NO.230/IND/2004, 207, 208 & 473 /IND/2005, ORDER DATED 12.1.2007). THE ASSESSEE FOR ENSURING TIMELY EXECUTION OF WORK BY THE CONTRACTORS AND IN COMPLIANCE WITH THE CONDITIONS/S TANDARDS, PUT FORTH IN THE CONTRACTS, PUT CERTAIN CONDITIONS FOR LIQUIDATION O F DAMAGES IN THE CONTRACTS. SEC. 43 DEFINES CERTAIN TERMS RELEVANT TO INCOME FR OM PROFIT AND GAIN FROM BUSINESS AND THEREFORE, THE SAID SEC. COMMENCE WITH THE WORD IN SECTION 28 TO 41 AND UNLESS THE CONTEXT OTHERWISE REQUIRES AC TUAL COST SHALL MEAN THE ACTUAL COST OF ASSET TO THE ASSESSEE REDUCING OF TH AT PORTION OF THE COST THEREOF, IF ANY, AS HAS BEEN MADE DIRECTLY OR INDIR ECTLY BY ANY OTHER PERSON OR AUTHORITY. IN VIEW OF THESE FACTS, WE HAVE NOT FOU ND ANY INFIRMITY IN THE IMPUGNED ORDER. IT IS UPHELD. THIS APPEAL OF THE RE VENUE IS DISMISSED. 5 4. THE CO RAISED BY THE ASSESSEE IS IN SUPPORT TO T HE IMPUGNED ORDER. SINCE WE HAVE UPHELD THE ORDER OF THE LD. FIRST APP ELLATE AUTHORITY, CONSEQUENTLY, THIS CO OF THE ASSESSEE HAS BECOME IN FRUCTUOUS, THEREFORE, DISMISSED AS INFRUCTUOUS. IN THE RESULT, APPEAL OF THE REVENUE AS WELL AS CO OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26.11.2009 . SD/- SD/- (V.K. GUPTA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 26.11.2009 !VYAS! COPY TO: APPELLANT/RESPONDENT/CIT/CIT(A)/DR