ITO, New Delhi V. M/s. Coastal Andhra Power Ltd., New Delhi

ITA 1604/DEL/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65818 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 25-10-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 04-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DEEPAK SEHGAL SENIOR
• Keywords: Capital receipt; Capital expenditure
• Section: 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B : NEW DELHI) BEFORE SHRI B.C. MEENA, ACCOUNTANT MEMEBR AND SHRI C.M. GARG, JUDICIAL MEMBER ITA NO.1604/DEL./2012 (ASSESSMENT YEAR : 2008-09) ITO, WARD 3 (4), VS. M/S. COASTAL ANDHRA POWER L TD., NEW DELHI. M 68, 2 ND FLOOR, GREATER KAILASH-1, NEW DELHI 110 048. (PAN : AACCC8749D) (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : SHRI DEEPAK SEHGAL, SENIOR DR O R D E R PER B.C. MEENA, ACCOUNTANT MEMBER THIS APPEAL FILED BY THE REVENUE EMANATES FROM THE ORDER OF THE CIT (APPEALS)-VI, NEW DELHI DATED 30.01.2012. THE GROUNDS OF APPEAL TAKEN BY THE REVENUE READ AS UNDER:- 1. THE LD. CIT (A) HAS ERRED ON FACTS AND IN DELET ING ADDITION OF RS.66,01,913/- MADE BY THE A.O. U/S 56 OF THE IT AC T ON ACCOUNT OF INTEREST. 2. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RIG HT TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUND(S) OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. ITA NO.1604/DEL/2012 2 2. AT THE OUTSET OF THE HEARING, THE LD. DR SUBMITT ED THAT THE CIT (A) HAS GRANTED THE RELIEF ON THE BASIS OF DECISION OF HON'BLE ITAT CON FIRMED BY THE DECISION OF HON'BLE DELHI HIGH COURT IN ASSESSEES OWN CASE IN THE IMME DIATE PRECEDING ASSESSMENT YEAR 2007-08. THE CIT (A) HAS GRANTED THE RELIEF TO THE ASSESSEE BY HOLDING AS UNDER :- 5. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MA D BY THE LD. AR AND HAVE GONE THROUGH THE ASSESSMENT ORDER. I HAVE ALSO PERUSED THE ORDER OF THE HON'BLE ITAT 'B' BENCH DELHI IN APPELLANT'S OWN CASE FOR THE A.Y. 2007-08 WHEREIN THE HON'BLE ITAT DELHI HAS DELETED THE ADDITION MADE BY THE AO ON SAME FACTS AND CIRCUMSTANCES AS IN THE RE LEVANT A.Y. THE RELEVANT EXTRACTS OF THE AFORESAID ORDER OF HON'BLE ITAT DELHI IN APPELLANT'S CASE FOR THE IMMEDIATELY PRECEDING AY. 2007-08 (ITA NO.3831/DEL/2010) DT. 15.07.2011 IS REPRODUCED BELOW FOR READY REFERE NCE :- '5. AFTER HEARING BOTH THE SIDES, WE FIND THAT THE ITAT IN THE CASE OF ITO VS. SASAN POWER LIMITED, CITED SUPRA, HAS DECIDED T HE ISSUE AS UNDER :- 10. WE HAVE HEARD BOTH THE PARTIES AND HAVE PERUSE D THE MATERIAL ON RECORD. IT IS SEEN THAT THE MINUTES OF THE MEET ING BETWEEN THE SECRETARY, POWER WITH THE MEMBER SECRETARIES OF VAR IOUS STATES, IT WAS AGREED THAT THE STATES WOULD PROVIDE FUNDS @ RS . 1 CRORE PER 100 MG FOR STATE-WISE ALLOCATION REGARDING ACQUISIT ION OF LAND FOR POWER PROJECTS AND COALMINES. THESE FUNDS WERE TO B E PROVIDED TO THE SPV IN THE FORM OF COMMITMENT ADVANCE. ALSO, AN AGREEMENT HAD BEEN ENTERED INTO BETWEEN PFC AND THE ASSESSEE. AS PER THIS AGREEMENT, THE ENTIRE EXPENDITURE ON DEVELOPMENT OF THE PROJECT WAS TO BE INCURRED BY PFC OUT OF ITS OWN FUNDS, TILL IT RECEIVED THE COMMITMENT ADVANCE FROM THE POWER UTILITIES, AS PRO VIDED FOR IN SCHEDULE VIII TO THE BALANCE SHEET OF THE ASSESSEE. THE COMMITMENT ADVANCE RECEIVED HAD BEEN GIVEN TO THE H OLDING COMPANY FOR INCURRING EXPENDITURE FOR THE PROJECT O N BEHALF OF THE COMPANY, FOR INVESTMENT OF THE UNUTILIZED PORTION O F THE ADVANCE. THIS UNUTILIZED PORTION OF THE ADVANCE, WAS PLACED WITH PFC AS AN INTER-CORPORATE LOAN, FOR WHICH, THE INTEREST WAS R ECEIVABLE FROM PFC AT THE MONTHLY AVERAGE SHORT TERM DEPOSIT RATE OF PFC. THE ASSESSEE WAS TO PAY INTEREST TO PFC ON THE EXPENDIT URE INCURRED BY IT, OUT OF ITS OWN FUNDS, WHEN THE EXPENDITURE WAS INCU RRED OUT OF THE COMMITMENT ADVANCE. THE AO TREATED BOTH, THE RECEIP T, AS WELL AS THE EXPENDITURE, AS CAPITAL IN NATURE. THE INTEREST INCOME HAD BEEN INADVERTENTLY SHOWN BY THE ASSESSEE AS INCOME FROM OTHER SOURCES ITA NO.1604/DEL/2012 3 AND DEDUCTION WAS CLAIMED U/S 57 OF THE ACT CONCERN ING THE INTEREST PAYMENT. 11. IN 'INDIAN OIL PANIPAT POWER CONSORTIUM LTD.' (SUPRA), IT HAS BEEN HELD THAT WHERE INTEREST IS ON MONEY RECEIVED AS SHARE CAPITAL, WHICH IS TEMPORARILY PLACED IN FIXED DEPOSIT AWAITI NG ACQUISITION OF LAND, THE CLAIM THAT THE INTEREST IS IN THE NATURE OF A CAPITAL RECEIPT LIABLE TO BE SET OFF AGAINST PRE-OPERATIVE EXPENSES IS ACCEPTABLE, SINCE THE FUNDS INFUSED IN THE ASSESSEE COMPANY BY THE JO INT VENTURE PARTNERS ARE INEXTRICABLY LINKED WITH THE SETTING U P OF THE PLANT AND THE INTEREST EARNED CANNOT BE TREATED AS INCOME FRO M OTHER SOURCES. 'INDIAN OIL PANIPAT POWER CONSORTIUM LTD,' (SUPRA) IS SQUARELY APPLICABLE TO THE PRESENT CASE, AS DISCUSSED. THIS IS IN CONSONANCE WITH 'BOKARO STEEL LTD. '(SUPRA), 'KARNAL COOPERATI VE SUGAR MILK (SUPRA), 'CIT VS. KARNATAKA POWER CORPORATION', 247 I.T.R. 268(SC) AND ''BONGAIGAON REFINERY AND PETRO CHEMICAL CO. LT D. VS. CIT', 251 ITR 329(SC), WHEREIN ALSO, IT HAS BEEN LAID DOW N THAT ANY RECEIPT INEXTRICABLY LINKED TO THE SETTING UP OF TH E PROJECT IS CAPITAL RECEIPT NOT LIABLE TO TAX AND GOING TO REDUCE THE C OST OF THE PROJECT. IN THE PRESENT CASE TOO, THE FUNDS INFUSED BY THE ASSE SSEE COMPANY WERE INEXTRICABLY LINKED WITH THE SETTING UP OF THE POWE R PLANT. LIKEWISE, THE INTEREST PAYMENT WAS ALSO CAPITAL EXPENDITURE, WHICH FACT WAS CONFIRMED BY THE AO, WHILE OBSERVING THE ENTIRE INC OME OF THE ENTIRE EXPENDITURE WAS CAPITAL IN NATURE. 12. ALL THESE FACTS HAVE BEEN DULY TAKEN INTO CONS IDERATION BY THE CIT(A) WHILE PASSING THE ORDER UNDER APPEAL. THEREF ORE, THERE IS NO MERIT IN THE GRIEVANCE RAISED BY THE DEPARTMENT BY WAY OF GROUND NOS. 1 & 2. ACCORDINGLY, GROUND NOS. 1 & 2 ARE REJE CTED. SINCE THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE A FORESAID ORDER, RESPECTFULLY FOLLOWING THE SAME, WE ALLOW THE RELIE F TO THE ASSESSEE.' 5.1 IT IS FURTHER SEEN THAT THE AFORESAID ORDER OF THE HON'BLE ITAT DELHI HAS BEEN CONFIRMED BY THE HON'BLE HIGH COURT OF DEL HI IN APPEAL NO. ITA 10/2012 VIDE ORDER DATED 6.01.2012. SINCE THE FACTS AND THE CIRCUMSTANCES OF THE PRESENT CASE ARE SIMILAR TO THE FACTS AND CI RCUMSTANCES OF THE APPELLANT COMPANY FOR THE IMMEDIATELY A.Y. 2007-08, RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF THE HON'BLE ITA T IN APPELLANT'S OWN CASE, THE AO IS DIRECT TO DELETE THE IMPUGNED ADDIT ION OF RS.66,01,913/-. SINCE THIS ISSUE IS COVERED BY THE DECISION OF HON' BLE ITAT IN ITA NO.3831/DEL/2010 DATED 15.07.2011, WHICH HAD BEEN CONFIRMED BY HON'B LE DELHI HIGH COURT, WHEREIN THE ITA NO.1604/DEL/2012 4 HON'BLE ITAT HAS HELD THAT FUND INFUSED BY THE ASSE SSEE COMPANY WERE INEXTRICABLY LINKED WITH THE SETTING OF POWER PLANT, SO INTEREST EARNED BEING CAPITAL IN NATURE COULD NOT BE TREATED AS INCOME FROM OTHER SOURCES. RESPECTFU LLY FOLLOWING THE DECISION OF THE ITAT, WE DISMISS THE REVENUES APPEAL. 3. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 25 TH DAY OF OCTOBER, 2012. SD/- SD/- (C.M. GARG) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 25 TH DAY OF OCTOBER, 2012 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-VI, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR/ITAT NEW DELHI