ACIT Central Circle 3(1) , CHENNAI V. PN Power Generating Company P Ltd. , CHENNAI

ITA 1631/CHNY/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7197 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 6 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 23-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A SUNDARARAJANADDL
• Assessee Lawyers: S VIDYA
• Keywords: Earning of tax free income
• Section: 13

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: CHENNAI , , BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ./ ITA NO.16 31/CHNY/2017 ASSESSMENT YEAR: 20 11 - 12 THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 3 (1) , NO.46, NUNGAMBAKKAM HIGH ROAD, CHENNAI 600 034. VS. M/S. PPN POWER GENERATING COMPANY P. LIMITED, JHAVER PLAZA, III FLOOR, NO.1A, NUNGAMBAKKAM HIGH ROAD, C HENNAI 600 0 34 [PAN: AA BCP 8131D ] ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. A. S U NDARARAJAN, ADD L .CIT /RESPONDENT BY : MR. S. VIDYA, ADVOCATE / DATE OF HEARING : 0 6 .01.2020 / DATE OF PRONOUNCEMENT : 0 6 .01.2020 / O R D E R PER GEORGE MATHAN, JUD ICIAL MEMBER : TH IS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED COMMIS SIONER OF INCOME TAX (APPEALS) - 3 CHENNAI I N I.T.A. NO. 98/2015 - 16/CIT(A) - 3 DATED 28.03.2017 FOR THE ASSESSMENT YEAR 20 11 - 12 . 2. MR. A. SUNDARARAJAN, ADDITIONAL CI T REPRESENTED ON BEHALF OF THE REVENUE AND MR. S. VIDYA REPRESENTED ON BEHALF OF THE ASSESSEE. ITA NO. 1631 /CHNY /201 7 : - 2 - : 3. IT WAS SUBMITTED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT THE ASSESSEE IS A COMPANY WHICH IS IN THE BUSINESS OF P OWER GENERATION (ELECTRICITY). F OR TH E RELEVANT ASSESSMENT YEAR, THE ASSESSEE HAD FILED IT S RETURN OF INCOME DECLAR ING AN INCOME OF RS.1,06,19,920/ - . IN THE COURSE OF SCRUTINY, IT WAS NOTICED THAT THE ASSESSEE HAD DISCLOSED AN AMOUNT OF RS.566.64 CRORES, AS THE REVENUE OF THE ASSESSEE ON ACC OUNT OF THE ORDER RECEIVED FROM TAMIL NADU ELECTRICITY REGULATORY COMMISSION [TNERC ] VIDE ORDER DATED 17.06.2011. THE SAID AMOUNT OF RS.566.64 CRORES RELATED TO THE ASSESSMENT YEAR 2009 - 10 AND THE EARLIER ASSESSMENT YEAR S . I N RESPECT OF THE WRITE BACK OF THE REBATE TO THE EXTENT OF RS.90.00 CRORES , THE BALANCE REPRESENTING RS.88.00 CRORES WAS THE SALE OF POWER FOR THE TAMIL NADU ELECTRICITY BOARD DURING THE PERIOD 2001 TO 2009 AND THE BALANCE OF RS.388.64 CRORES REPRESENTED THE INTEREST COMPENSATION ON THE DELAYED COMPENSATION FROM THE TAMIL NADU ELECTRICITY BOARD FOR THE SAME PERIOD OF 2001 TO 2009. IT WAS A SUBMISSION THAT AS THE ORDER OF THE TAMIL NADU ELECTRICITY REGULATORY COMMISSION WAS PASSED ON 06.11.2009 RELEVANT TO THE ASSESSMENT YEAR 2012 - 13 , T H E ASSESSING OFFICER ON A SUBSTANTIAL BASIS ASSESSED THE SAID AMOUNT OF RS.566.64 CRORES FOR THE ASSESSMENT YEAR 2012 - 13 BUT AS THE SAID AMOUNT HAD BEEN SHOWN BY THE ASSESSEE AS THE INCOME FOR THE RELEVANT ASSESSMENT YEAR, THE SAME WAS ASSESSED ON THE PROTE CTIVE BASIS. IT WAS A SUBMISSION THAT ON APPEAL THE LEARNED CIT(A) HAD ITA NO. 1631 /CHNY /201 7 : - 3 - : FOLLOWED THE PRINCIPLES LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. M/S. MADRAS MOTORS LIMITED /M.M. FORGINGS LIMITED REPORTED IN 25 7 ITR 60 (MAD.) , WHEREIN IT HAS BEEN HELD THAT THE INTEREST BEING DIRECTLY RELATABLE ONLY TO THE AMOUNT RECEIVABLE BY THE ASSESSEE DURING THE COURSE OF ITS BUSINESS ON ACCOUNT OF THE SALE OF FORGING, THE SAID INTEREST WOULD HAVE TO BE INCLUDED AS THE PROF IT AND GAINS DERIVED FROM THE BUSINESS OF THE ASSESSEE. CONSEQUENTLY, THE LEARNED CIT(A) HAS HELD THAT THE APPELLANT WAS CORRECT IN ADMITTING THE INCOME OF RS.566.64 CRORES IN THE ASSESSMENT YEAR 2011 - 12. IT WAS A SUBMISSION THAT THE ORDER OF THE TAMIL N ADU ELECTRICITY REGULATORY COMMISSION WAS DATED 17.06.2011 AND CONSEQUENTLY THE AMOUNT WAS LIABLE TO BE ASSESSED ONLY FOR THE ASSESSMENT YEAR 2012 - 13. 4. IN REPLY, THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE DISPUTE AS TO WHETHER THE AMOUNT I S LIABLE TO BE ASSESSED DURING THE ASSESSMENT YEAR 2011 - 12 OR 2012 - 13 WAS ON ACCOUNT OF THE FACT THAT THE ASSESSEE WAS ENJOYING THE TAX HOLIDAY ON ACCOUNT OF ITS BUSINESS OF GENERATION OF POWER . T HE TAX HOLIDAY EXPIRED WITH THE ASSESSMENT YEAR 2011 - 12. I T WAS A SUBMISSION THAT THE ASSESSEE HAD ENTERED INTO THE POWER PURCHASE AGREEMENT WITH TAMIL NADU ELECTRICITY BOARD. AS PER THE POWER PURCHASE AGREEMENT [PPA] IT HAD BEEN ENTERED ON 03.01.1997. CONSEQUENT TO THE SETTING UP OF THE PPA, THE ASSESSEE HAS S ET UP A 330.5 ITA NO. 1631 /CHNY /201 7 : - 4 - : MEGAWATTS [MW] POWER GENERATING STATION AND HAD BEEN GENERATING POWER THROUGH THE COMBINED CYCLE GAS TURBINE [CCGT] POWER STATION SITUATED AT NAGAPATTIANAM DISTRICT, TAMIL NADU . THE ASSESSEE HAD COMMENCED COMMERCIAL OPERATIONS ON 26.04.2001. THE ASSESSEE HAD BEEN RAISING MONTHLY INVOICES EVER SINCE 26.04.2001 AND ANNUAL INVOICES FOR THE YEARS 2001 TO 2007 AS CONTEMPLATED UNDER THE PPA. SINCE 2001, THE TAMIL NADU ELECTRICITY BOARD HAS BEEN PAYING ADHOC PAYMENT WITHOUT PROVIDING ANY DETAILS F OR SUCH PAYMENTS , IN CONTRAVENTION OF THE PPA. THE ASSESSEE HAD BEEN ADJUSTING THE AD HOC PAYMENT RECEIVED ON A F IRST I N F IRST O UT BASIS, WHEREBY THE PAYMENTS MADE WERE ADJUSTED ON CHRONOLOGICAL ORDER WITH THE PAYMENTS FIRST BEING APPROPRIATED TO THE FIRS T PENDING INVOICES AND THE BALANCE TO THE NEXT INVOICE AND SO ON. THESE FACTS ARE COMING OUT OF THE ORDER O F THE TAMIL NADU ELECTRICITY REGULATORY COMMISSION DATED 17.06.2011 . CONSEQUENT TO THE ORDER OF THE TAMIL NADU ELECTRICITY REGULATORY COMMISSION, T HE AMOUNTS HAD BEEN QUANTIFIED AND PAID TO THE ASSESSEE. IT WAS THUS A SUBMISSION THAT THE AMOUNTS RELATE TO THE PERIOD 2001 TO 2007 AND CONSEQUENTLY THE SAME WAS LIABLE TO BE ASSESSED ONLY FOR THE RELEVANT PERIOD I N SO FAR AS THE ASSESSEE IS A COMPANY AN D THE ASSESSEE IS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING AND THE ASSESSEE HAS ALSO RAISED THE NECESSARY INVOICES FOR WHICH THE PAYMENTS ITA NO. 1631 /CHNY /201 7 : - 5 - : HA D NOT BEEN RECEIVED DURING THESE PERIODS . IT WAS THUS A SUBMISSION THAT THE ORDER OF THE LEARNED CIT(A) ON THI S ISSUE WAS LIABLE TO BE UPHELD. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. 6. A PERUSAL OF THE FACTS IN THE PRESENT CASE CLEARLY SHOWS THAT THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS ARGUED ON GROUND NOS.4, 3.1 TO 3.7 OF THE REVENUES GROUNDS. A PERUSAL OF THE ORDER OF THE TAMIL NADU ELECTRICITY REGULATORY COMMISSION CLEARLY SHOWS THAT THE DISPUTE RELATES TO THE PERIOD RIGHT FROM 2001 TO 2007. IT WAS ALSO AN UNDISPUTED FACT THAT THE NECESSARY INVOICES HAD BEEN RAI SED BY THE ASSESSEE AT THE APPROPRIATE TIME AS PER THE POWER PURCHASE AGREEMENT [PPA] . THERE IS NO MURMUR BY THE ELECTRICITY BOARD WHO IS THE RESPONDENT IN THE SAID PETITION THAT THE ASSESSEE HAS NOT RAISED THE INVOICES. THUS, CLEARLY THE ORDER PASSED B Y THE TAMIL NADU ELECTRICITY REGULATORY COMMISSION VIDE ORDER DATED 17.06.2007 IS IN RESPECT OF THE BILLS RAISED BY THE ASSESSEE ON THE TAMIL NADU ELECTRICITY BOARD FOR THE PERIOD FROM 2001 2007 AND THE INTEREST ACCRUED THEREON. THUS IT CLEARLY SHOWS TH AT THESE AMOUNTS RELATE TO THE INVOICES WHICH HAVE BEEN OFFERED BY THE ASSESSEE AND DISCLOSED BY THE ASSESSEE FOR THE RELEVANT ASSESSMENT YEAR. THE QUANTIFICATION HAS ALSO BEEN CLEARLY MADE. IT IS NOT A CONTINGENCY CLAIM AS THE FIGURES ARE ABSOLUTE. THI S BEING SO, THE ITA NO. 1631 /CHNY /201 7 : - 6 - : AMOUNTS RECEIVED BY THE ASSESSEE IS A CONSEQUENCE OF THE ORDER OF THE TAMIL NADU ELECTRICITY REGULATORY COMMISSION RELATE TO THE ASSESSMENT YEARS TO WHICH THOSE INVOICES HAVE BEEN RAISED. ADMITTEDLY, THESE YEARS ARE NOT OPEN FOR ASSESSMENT NOW, NOR ARE THE ACCOUNTS OPEN FOR SETTING OF F THE AMOUNTS RECEIVED AGAINST THE DEBTS RECORDED. THE AMOUNTS HAVING BEEN RECEIVED BY THE ASSESSEE WHEN THE ACCOUNTS ARE OPEN, THE ASSESSEE IS RIGHT OFFERING THE SAME FOR THE ASSESSMENT YEAR 2011 - 12, ESPECIAL LY IN VIEW OF THE FACT THAT THE AMOUNT RELATE TO THE PERIOD WHEN THE ASSESSEE WAS ENJOYING THE TAX HOLIDAY. FURTHER, THE REVENUE HAS NOT BEEN ABLE TO DISLODGE ANY OF THE FINDINGS ON THE FACTS AS HAS BEEN ARRIVED BY THE LEARNED CIT(A) IN HIS ORDER IN PARAS - 6.18 TO 6.28 OF HIS ORDER. IN THE CIRCUMSTANCES, THE FINDINGS OF THE LEARNED CIT(A) ON THIS ISSUE STANDS CONFIRMED. IN THE RESULT , THE APPEAL OF THE REVENUE IN GROUND NOS.4 AND 3.1 TO 3.7 STANDS DISMISSED. 7. IN RESPECT OF THE GROUND NO.3 AND 2.1 TO 2. 2, IT WAS SUBMITTED BY THE LEARNED AUTHORIZED REPRESENTATIVE THAT THE ISSUE WAS AGAINST THE ACTION OF THE LEARNED CIT(A) IN RESTRICTING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER U/S.14A OF THE ACT TO THE EXTENT OF THE DIVIDEND INCOME EARNED BY THE ASS ESSEE. ITA NO. 1631 /CHNY /201 7 : - 7 - : 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED ASSESSING OFFICER. THE AUTHORIZED REPRESENTATIVE SUPPORTED THE ORDER OF THE LEARNED CIT(A). 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATER IALS AVAILABLE ON RECORD. 10. THE FACT OF THE PRESENT CASE CLEARLY SHOWS THAT THE ASSESSEE HAS INVESTED AN AMOUNT OF RS.32.15 CRORES IN MUTUAL FUNDS. THE ASSESSEE HAD EARNED AN EXEMPT INCOME TO AN EXTENT OF RS.1,54,664/ - . THE ASSESSING OFFICER HAS MADE A DISALLOWANCE U/S.14A TO THE EXTENT OF RS.8,41,250/ - . IT IS NOTICED THAT THE LEARNED CIT(A) FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S. RAYALLA CORPORATION PRIVATE LIMITED VS. THE DEPUTY COMMISSIONER OF INCOME TAX REPORTED IN I.T.A. NO.908/MDS/2015 RESTRICTED THE DISALLOWANCE U/S.14A TO THE EXTENT OF THE DIVIDEND INCOME EARNED. NOW, THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ABCAUS BY THE DISMISSAL OF THE S.L.P FILE D BY THE REVENUE. CONSEQUENTLY, THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF ABCAUS REPORTED IN 2639 (2018)(11) SC, WHEREIN IT HAS BEEN HELD THAT THE DISALLOWANCE U/S.14A SHOULD NOT EXCEED THE EXEMPT INCOME ITSELF AS ATTAINED FINALITY. THE ISSUE IS ALSO SQUARELY COVERED BY THE ITA NO. 1631 /CHNY /201 7 : - 8 - : DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF JOINT INVESTMENT PRIVATE LIMITED VS. COMMISSIONER OF INCOME TAX REPORTED IN 372 ITR 694. IN THE CIRCUMSTANCES, AS IT IS THAT THE LEARNED CIT(A) HAS FOLLOWED JUD ICIAL DISCIPLINE IN FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH OF THIS TRIBUNAL, AS ALSO IT IS NOTICED THAT THE ISSUE IS NOW SQUARELY COVERED BY THE DECISION OF THE HON BLE DELHI HIGH COURT AND AGAINST WHICH THE S.L.P BY THE REVENUE IS ALSO DISMISSED, THE FINDINGS OF THE LEARNED CIT(A) ON THIS ISSUE STANDS CONFIRMED. IN THE RESULT, GROUND NOS.2.1 AND 2.2 OF THE REVENUES APPEAL STANDS DISMISSED. 11 . IN THE RESULT, THE A PPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH JANUARY, 2020 IN CHENNAI. SD/ - ( ) (INTURI RAMA RAO) / ACCOUNTANT MEMBER /CHENNAI, / DATED: 6 TH J ANUARY , 2 0 20 IA, SR. PS SD/ - ( ) (GEORGE MATH AN) / JUDICIAL MEMBER /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. ( ) /CIT(A) 4. /CIT 5. /DR 6. /GF