M/s H.P.Power Transmission Corpration, Shimla V. Income Tax Officer Ward-1, Shimla

ITA 1443/CHANDI/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5230 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-04-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 23-12-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income; Capital expenditure
• Section: 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.1443/CHD/2016 (ASSESSMENT YEAR : 2013-14) M/S H.P. POWER TRANSMISSION VS. THE INCOME TAX OFFICER, CORPORATION LIMITED, BAROWALIA WARD-1, HOUSE, KHALINI, SHIMLA. INCOME TAX OFFICE, RAILWAY BOARD BUILDING, THE MALL, SHIMLA. PAN: AACCH1548M (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TEJ MOHAN SINGH RESPONDENT BY : SHRI SUSHIL KUMAR, CIT DR DATE OF HEARING : 21.02.2017 DATE OF PRONOUNCEMENT : 18.04.2017 O R D E R PER ANNAPURNA GUPTA, A.M . : THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINS T THE ORDER OF CIT(APPEALS), SHIMLA DATED 28.10.2016 RELATING TO ASSESSMENT YEAR 2013-14. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS BEFORE US: 1. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD COMMISSIONER OF INCOME TAX ( APPEALS) IS NOT JUSTIF IED IN UPHOLDING THE INTEREST EARNED ON THE DEPOSITS MADE IN THE PRE OPERATION PERIOD AS INCOME FROM OTHER SOURCES AND THEREBY UPHOLDING THE ADDITION OF R 12,10,11,966/- MADE TO THE TAXABLE INCOME OF THE ASSESSEE. 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD COMMISSIONER OF INCOME TAX ( APPEALS) IS NOT JUSTIF IED IN UPHOLDING THE MISC INCOME OF RS.31,45,494/- AS INCO ME FROM OTHER SOURCES . 2 3. THAT THE ORDER OF LD COMMISSIONER OF INCOME TAX ( APPEALS) IS BAD IN LAW AND FACTS. 3. IN GROUND NO. 1 THE ASSESSEE HAS CONTESTED THE ACTION OF THE LD. CIT(APPEAL) IN UPHOLDING THE INTE REST EARNED ON DEPOSITS MADE IN THE PRE-OPERATIVE PERIOD AS INCOME FROM OTHER SOURCES THEREBY UPHOLDING THE ADD ITION OF RS.12,10,11,966/- MADE TO THE TAXABLE INCOME OF THE ASSESSEE. 4. BRIEF FACTS RELEVANT TO THE ISSUE ARE THAT THE ASSESSEE COMPANY NAMELY, H.P. POWER TRANSMISSION CORPORATION LIMITED (HPPTCL), AN UNDERTAKING OF GOVERNMENT OF HIMACHAL PRADESH WAS ESTABLISHED ON 2 7 TH AUGUST, 2008 WITH A VIEW TO STRENGTHEN THE TRANSMISSION NETWORK IN HIMACHAL PRADESH AND TO FACILITATE EVACU ATION OF POWER FROM UPCOMING GENERATING PLANTS. THE JOBS ENT RUSTED TO CORPORATION BY GOHP INTER-ALIA INCLUDED EXECUTIO N OF ALL NEW WORKS - BOTH TRANSMISSION LINES AND SUBSTATIONS OF 66KV AND ABOVE VOLTAGE RATINGS, FORMULATION, UPDATI ON, EXECUTION OF TRANSMISSION MASTER PLAN OF HP FOR STRENGTHENING OF TRANSMISSION NETWORK AND EVACUATIO N OF POWER BESIDES COORDINATING THE TRANSMISSION RELATED ISSUES WITH CTU, CEA/OP (GOI), HP GOVERNMENT AND HPSEBL. HPPTCL WAS ALSO RESPONSIBLE FOR PLANNING AND CO-ORD INATION OF TRANSMISSION RELATED ISSUES WITH IPPS, CPSUS, ST ATE PSUS, HPPCL AND OTHER STATE/CENTRAL GOVERNMENT AGENCIES. THE ASSESSEE COMPANY HAD NOT PREPARED PRO FIT AND LOSS ACCOUNT, AS THE COMPANY WAS YET TO START 3 COMMERCIAL OPERATION. HOWEVER, THE STATEMENT SHOWIN G INCIDENTAL EXPENDITURE DURING CONSTRUCTION (PENDING ALLOTMENT) HAD BEEN PREPARED. THUS, IT IS AN UNDISP UTED FACT THAT BUSINESS OF THE ASSESSEE COMPANY WAS YET IN PRE- OPERATIVE STAGE AND IT HAD NOT COMMENCED BUSINESS OPERATIONS. NOR IT HAD UNDERTAKEN ANY PRODUCTION IN THE RELEVANT ASSESSMENT YEAR. THE ASSESSEE COMPANY HAD EARNED INTEREST INCOME OF RS.12,10,11,966/- IN THE ASSESSMENT YEAR 2013-14. THE INTEREST WAS EARNED ON SURPLUS FUNDS AVAILABLE WITH THE ASSESSEE COMPANY. THIS FACT WAS DULY NOTED BY THE STATUTORY AUDITORS OF TH E ASSESSEE COMPANY IN THEIR AUDIT REPORT DATED 23/12/ 2013. THE STATUTORY AUDITORS COMMENTED ON THE ACCOUNTING POLICIES AS UNDER: 'THE ASSESSMENT FOR F.Y. 2009-10 HAS BEEN COMPLETED BY THE ASSESSING AUTHORITY (ACIT) AND DEMAND OF RS.52.66 LAC WAS RAISED WHICH STANDS DEPOSITED AGAINST ADVANCE TAX. HPPTCL HAS FILED AN APPEAL BEFORE CIT AGAINST THE ORDERS OF THE A CIT AND MATTER IS PENDING'. 5. THE AUDITORS FURTHER IN PARA (IV) OF THEI R 'AUDITOR'S REPORTS ' HAD CATEGORICALLY MENTIONED ABOUT THE CHANGE OF ACCOUNTING POLICIES AND ACCOUNTING ASSUMP TION DURING THE PREVIOUS YEAR AND REPORTED AS UNDER: - 'AS PER NOTE 21 DURING THE YEAR THE CORPORATION HAS NOT MADE ANY INCOME -TAX PROVISIONS ON THE BASIS OF VARIOUS JUDGMENTS OF HON'BLE COURTS. HOWEVER, THE CORPORATION HAS DEPOSITED ADVANCE INCOME-TAX OF RS.2,70,00,000/-ONLY. 'DURING THE YEAR ON THE BASIS OF VARIOUS JUDGMENTS OF HONORABLE COURTS THE CORPORATION HAS NOT MADE 4 ANY INCOME TAX PROVISION WHICH IS AN CONTRAVENTION TO ACCOUNTING STANDARD AS-22 'ACCOUNTING FOR TAXES ON INCOME' WHICH STATES INCOME TAX PROVISIONS TO BE CALCULATED ON THE BASIS OF PREVAILING TAX LAWS, (REFER NOTE 15.5 & 21).' 6. THUS DURING THE YEAR UNDER CONSIDERATION INTEREST EARNED ON FUNDS RECEIVED FROM GOVERNMENT H AD BEEN SET OFF AGAINST THE CAPITAL EXPENDITURE INCURR ED ON PROJECTS AS EARNINGS OF INTEREST BEING INCIDENTAL TO MAIN ACTIVITY OF COMPANY AND COMPANY INDISPUTABLY WAS IN PREOPERATIVE STAGE I.E. COMPANY HAD NOT COMMENCED H IS OPERATIONS. 7. THE ASSESSEE WAS CONFRONTED BY THE ASSESSING OFFICER WITH A SHOW CAUSE AS TO WHY THE INTEREST EA RNED BY IT ON SURPLUS AND BORROWED FUNDS SHOULD NOT BE BROU GHT TO TAX UNDER THE HEAD 'INCOME FROM OTHER SOURCES', IN VIEW OF THE RATIO OF JUDGMENT OF THE HON'BLE SUPREME COU RT IN TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. VS. C IT (1997) 227 ITR 172 (SC). IN RESPONSE, THE ASSESSEE COMPANY HAD FILED REPLY VIDE COUNSEL'S LETTER DATED 16.09.2015. THE REPLY OF THE ASSESSEE WAS NOT FOUND SATISFACTORY AND AFTER ELABORATE DISCUSSION AND REL YING ON JUDGMENT OF THE HON'BLE SUPREME COURT IN TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. VS. CIT (1997) 227 ITR 172 (SC) APEX COURT, MADE IN THE ASSESSMENT ORDER, THE A.O. HELD THAT THE GROSS INTEREST EARNED BY ASSESSEE WAS ASSE SSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. THEREFORE , IT WAS CONCLUDED THAT INTEREST OF RS.12,10,11,966/-WAS 5 ASSESSABLE IN THE HANDS OF HPPTCL FOR ASSESSMENT YE AR 2013-14 AS INCOME FROM THE OTHER SOURCES AND ADDITI ON MADE THEREOF TO THE INCOME OF THE ASSESSEE. 8. THE MATTER WAS CARRIED IN APPEAL BEFORE THE LD. CIT (APPEALS) WHO UPHELD THE ORDER OF THE ASSESSING OFF ICER FOLLOWING THE DECISION OF THE ITAT IN THE ASSESSEE S OWN CASE IN ASSESSMENT YEAR 2011-12 AND ASSESSMENT YEAR 2010-11. 9. DURING THE COURSE OF HEARING BEFORE US LD. COUNSEL FOR THE ASSESSEE FAIRLY CONCEDED THAT THE I SSUE WAS COVERED AGAINST IT. LD. COUNSEL FOR THE ASSESSEE AL SO SUBMITTED THAT IN ASSESSMENT YEAR 2012-13 ALSO THE ISSUE HAD BEEN DECIDED AGAINST IT BY THE ITAT. COPY OF TH E ORDER WAS PLACED BEFORE US. 10. CONSIDERING THE ABOVE FACTS WE ARE OF THE VIEW THAT THE ISSUE IS COVERED AGAINST THE ASSESSEE BY V ARIOUS ORDERS OF THE ITAT, CHANDIGARH BENCH IN THE CASE OF THE ASSESSEE ITSELF. THE LATEST ORDER OF 7 TH DECEMBER 2016 HAS BEEN PLACED ON RECORD IN WHICH THE TRIBUNAL, FOLLOW ING EARLIER ORDERS IN THE CASE OF THE ASSESSEE, HAS DEC IDED THE ISSUE AGAINST THE ASSESSEE. NO DISTINGUISHING FACTS HAVE BEEN BROUGHT TO OUR NOTICE NOR ANY ERROR POINTED OU T IN THE ORDER OF THE LD. CIT (APPEALS) IN FOLLOWING THE ORD ER OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE. THE GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE, THEREFORE, WE HOLD HAS NO MERIT. THE SAME IS ACCORDINGLY DISMISSED. 6 11. GROUND NO. 2 RAISED BY THE ASSESSEE IS AGAINST THE ACTION OF THE LD. CIT (APPEALS) IN UPHOLDING TH E ACTION OF THE ASSESSING OFFICER IN TREATING THE MISCELLANE OUS INCOME OF RS. 31,45,494/- AS INCOME FROM OTHER SOUR CES. 12. BRIEFLY STATED, DURING THE COURSE OF ASSESSME NT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT ASS ESSEE HAD EARNED MISC. INCOME OF RS.31,45,494/-. THE ASSE SSEE WAS CONFRONTED BY THE ASSESSING OFFICER WITH A SHOW CAUSE AS TO WHY AN AMOUNT OF RS.31,45,494/-SHOULD NOT BE BROUGHT TO TAX UNDER THE HEAD 'INCOME FROM OTHER SO URCES'. IN RESPONSE, THE ASSESSEE COMPANY HAD FILED REPLY V IDE THEIR COUNSELS LETTER DATED 29.1.2016 STATING THAT THE I NCOME SHOWN UNDER THE HEAD MISCELLANEOUS INCOME COMPRISED OF SALE OF TENDER FORMS, INTEREST ON ADVANCES TO CONTA CTORS, LD CHARGES ETC. THE ASSESSEE HAD FURTHER PLEADED THAT THE SAID RECEIPTS BEING INCIDENTAL TO THE CONSTRUCTION OF PR OJECT, SHOULD BE DEDUCTED FROM PREOPERATIVE EXPENSES INCUR RED.. THE ASSESSING OFFICER DID NOT FIND THE REPLY OF THE ASSESSEE TO BE SATISFACTORY AND AN AMOUNT OF RS.31,45,494/- WAS BROUGHT TO TAX U/S 56 OF THE INCOME TAX ACT. THE M ATTER WAS CARRIED IN APPEAL BEFORE THE LD.CIT(APPEALS) WH O REJECTED THE CONTENTIONS OF THE ASSESSEE STATING TH AT NOTHING HAD BEEN BROUGHT ON RECORD TO SUBSTANTIATE THE SUBMISSIONS WITH RESPECT TO THE MISCELLANEOUS INCOM E OR THE CONTENTION TO RELATE THE INCOME TO THE PROJEC TS BEING UNDERTAKEN BY THE ASSESSEE. RELYING UPON HIS FIND INGS VIS 7 A VIS THE ISSUE OF INTEREST EARNED ON SURPLUS DEPOS ITS, LD. CIT (APPEALS) UPHELD THE ACTION OF THE ASSESSING OF FICER, TREATING THE MISCELLANEOUS INCOME EARNED AS INCOME FROM OTHER SOURCES. 13. BEFORE US LD. COUNSEL FOR THE ASSESSEE RELIED UPON SUBMISSIONS MADE BEFORE THE LD. CIT (APPEALS). LD.D R ON THE OTHER HAND RELIED UPON THE ORDER OF THE CIT (AP PEALS). 14. WE HAVE HEARD BOTH THE PARTIES. WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT (APPEALS). W E ARE IN AGREEMENT WITH THE LD. CIT (APPEALS) THAT THOUGH TH E ASSESSEE HAS CONTENDED THAT THE SAID RECEIPTS ARE INCIDENTAL TO THE CONSTRUCTION OF THE PROJECT AND B Y VIRTUE OF THE PROPOSITION LAID DOWN BY THE HONBLE APEX COURT IN THE CASE OF CIT VS BOKARO STEEL LIMITED 236 ITR 315 THE SAME SHOULD BE TREATED AS ITS BUSINESS INCOME AND DEDUCT ED FROM THE PREOPERATIVE EXPENSES INCURRED BY I.T.A.T., AT THE SAME TIME WE FIND THAT NO EVIDENCES TO SUBSTANTIATE THE SUBMISSIONS HAVE BEEN FILED EITHER BEFORE THE LOWER AUTHORITIES OR EVEN BEFORE US. IN VIEW OF THE SAME WE HAVE NO OPTION BUT TO CONCUR WITH THE LD. CIT (APPEALS) THAT THE ASSESSEE HAS NOT DISCHARGED THE ONUS CAST UPON HIM AND ACCORDINGLY THE ACTION OF THE LD. CIT (APPEALS) IS UPHELD TREATING THE IMPUGNED INCOME AS INCOME FROM OTHER SOURCES. 8 15. IN VIEW OF THE ABOVE THE GROUND OF APPEAL RAIS ED BY THE ASSESSEE IS DISMISSED. 16. IN EFFECT THE APPEAL OF THE ASSESSEE IS DISMIS SED ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (BHAVNESH SAINI) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 18 TH APRIL, 2017 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH