Dy. Commissioner of Income Tax , Circle-1(1), Hyderabad V. Andhra Pradesh Power Generation Corporation Limited , Hyderabad

ITA 1638/Hyd/2018

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 0863 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB-A
• Next Hearing Date: 27-04-2021
• Assessment Year: 2014-2015
• Appeal Filed On: 06-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R DIPAK
• Assessee Lawyers: M CHANDRAMOULESWARA RAO
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A; 250; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD (THROUGH VIRTUAL CONFERENCE) BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER IT A NO. 1602 /H/20 1 8 ASSESSMENT YEAR: 2 0 1 4 - 1 5 ANDHRA PRADESH POWER GENERATION CORPORATION LTD., HYDERABAD. PAN AACCA 2734J VS. DY. COMMISSIONER OF INCOME - TAX, CIRCLE 1(1), HYDERABAD. (APPELLANT) (RESPONDENT) ITA NO. 16 38 /H/2018 ASSESSMENT YEAR: 2014 - 15 DY. COMMISSIONER OF INCOME - TAX, CIRCLE 1(1), HYDERABAD. VS. ANDHRA PRADESH POWER GENERATION CORPORATION LTD., HYDERABAD. PAN AACCA 2734J (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI M. CHANDRA MOULESWARA RAO REVENUE BY: SHRI R. DIPA K DATE OF HEARING: 27/04/2021 DATE OF PRONOUNCEMENT: 13 /07/2021 O R D E R PER L.P. SAHU, A.M. : TH E S E ARE CROSS APPEAL S FILED BY THE ASSESSEE AS WELL AS REVENUE DIRECTED AGAINST CIT(A) - 1 , HYDERABAD S ORDER I TA NO S . 1602 & 1638 /HYD /20 1 8 M/S ANDHRA PRADESH POWER GENERATION CORPORATION LTD., HYD. : - 2 - : DATED 21 / 05 /2018 FOR AY 20 1 4 - 1 5 INVOLVING PROCEEDINGS U/S 14 3(3) OF THE INCOME - TAX ACT, 1961; IN SHORT THE ACT . 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY ENGAGED IN THE BUSINESS OF GENERATION OF POWER FILED ITS RETURN OF INCOME FOR THE A.Y 2014 - 15 ON 26.09.2014 ADMITTING INCOME AT NIL AFTER SET OFF OF BROUGHT FORWARD LOSSES OF RS.682,00,30,935/ - AN D DEDUCTION CLAIMED U/S.80IA OF RS. 492,98,90,687/ - UNDER NORMAL PROVISIONS AND RS.912,25,66,330/ - UNDER THE PROVISIONS OF SECTION 115JB. THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND NOTICES U/S.143(2) & U/S.142(1) WERE ISSUED. THE ASSESSMENT WAS COMP LETED U/S.143(3) ON 30,12,2016 BY MAKING THE FOLLOWING ADDITIONS: 1. ADDITION OF RS. 19,07,83,746/ - U/S 14A OF THE ACT. 2. ADDITION OF RS. 83,00,000/ - ON ACCOUNT OF EXPENDITURE. 3. WHEN THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A), THE CIT(A) DELET ED THE ADDITION MADE U/S 14A AND CONFIRMED THE ADDITION OF RS. 83,00,000/ - . 4. AGGRIEVED BY THE ORDER OF CIT(A), BOTH THE ASSESSEE AND REVENUE ARE IN APPEAL BEFORE THE ITAT. I TA NO S . 1602 & 1638 /HYD /20 1 8 M/S ANDHRA PRADESH POWER GENERATION CORPORATION LTD., HYD. : - 3 - : 5. AS REGARDS THE GROUND RAISED BY THE ASSESSEE WITH REGARD TO THE ADDITION O F RS. 83,00,000/ - , DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD DEBITED AN AMOUNT OF RS. 5,12,00,000/ - TOWARDS OBSOLESCENCE OF STORES IN THE P&L A/C AS OBSOLESCENCE MATERIAL WAS INCREASED. HOWEVER, CREDITED AN AMOU NT OF RS .4,29,00,000/ -- AS OBSOLESCENCE MATERIAL WAS DECREASED. HENCE, THERE IS A DIFFERENCE OF RS.83,00,000/ - . THE ASSESSING OFFICER DISALLOWED RS.83,00,000/ - AND ADDED TO THE INCOME RETURNED. 6. BEFORE THE CIT(A), THE ASSESSEE, INTER - ALIA, SUBMITTED T HAT THE OUT OF THE CLAIM OF RS. 5.12 CRORES, RS. 4.29 CRORES WAS TOWARDS OBSOLESCENCE OF STORES OF STOCK AND RS. 0.83 CRORES IS DUE REVERSAL OF ENTRY MADE TO ACCOUNT FOR CANCELLATION OF A LAND LEASE TRANSACTION. HE FURTHER SUBMITTED THAT RS. 83 LAKHS WAS D UE TO WRITE OFF OF RECEIVABLES DUE FROM M/S APPDCL, HOWEVER, THE AO DISALLOWED THE CLAIM OF WRITING OFF THE RECEIVABLES AMOUNTING TO RS. 82 LAKHS. 7. THE CIT(A) AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSEE, CONFIRMED THE ADDITION OF RS. 83,00,000/ - BY OBSERVING AS UNDER: I TA NO S . 1602 & 1638 /HYD /20 1 8 M/S ANDHRA PRADESH POWER GENERATION CORPORATION LTD., HYD. : - 4 - : 7.3 THE SUBMISSIONS OF THE APPELLANT HAVE BEEN CAREFULLY CONSIDERED. BEFORE ME, THE APPELLANT SUBMITTED THAT THE AMOUNT OF RS.83,00,000/ - WERE WRITTEN OFF AS IT DID NOT RECEIVE RENTAL AGREEMENT FROM M / S APPDCL. APPELLANT SUBMITTED THAT THERE WAS NO WRITTEN AGREEMENT OR ANY WRITTEN UNDERSTANDING REGARDING THE RENT PAYMENT. THE APPELLANT HAS ALSO NOT SHOWN THAT THESE AMOUNTS WERE RECEIVABLES IN ANY OF THE ASSESSMENT YEAR IN THE BALANCE SHEET. APPELLANT HAS ALSO NOT SUBMITTED THAT THIS INCOME WAS OFFERED TO TAX IN ANY OF THE PRECEDING YEARS. DESPITE GIVING OPPORTUNITI ES, THE APPELLANT COULD NOT SUBMIT A CONFIRMATION LETTER FROM THE OTHER PARTY (WHO HAS TAKEN ON RENT) TO SHOW THAT THIS AMOUNT WAS PAYABLE AND NOW NOT RECEIVABLE. IN LIGHT OF THE ABOVE, THE SUBMISSION OF THE APPELLANT THAT THIS AMOUNT WAS RENT RECEIVABLE AS NOT BEEN SUBSTANTIATED BY THE APPELLANT BEFORE ME . ALSO, THE AMOUNT HAS BEEN SHOWN UNDER 'OBSOLESCENCE OF STORES', WHICH DOES NOT CONFER WITH ACCOUNTING PRINCIPLES. HENCE, THE SUBMISSION OF THE APPELLANT IS NOT ACCEPTABLE. THE ADDITION MADE BY THE ASSE SSING OFFICER IS UPHELD. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD AS WELL AS GONE THROUGH THE ORDERS OF REVENUE AUTHORITIES. THE CIT(A) CONFIRMED THE ADDITION MADE BY THE AO ON THE GROUND THAT THE ASSESSEE DID NOT SUBSTANTIATE ITS CLAIM BY WAY OF DOCUMENTARY I TA NO S . 1602 & 1638 /HYD /20 1 8 M/S ANDHRA PRADESH POWER GENERATION CORPORATION LTD., HYD. : - 5 - : EVIDENCE. EVEN BEFORE US, THE LD. AR OF THE ASSESSEE FAILED TO SUBSTANTIATE ITS CLAIM. THEREFORE, WE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE GROUNDS RAISED BY THE ASSESSEE ON THIS ISSUE. 9. AS REGARDS T HE GROUND RAISED BY THE REVENUE IN ITA NO. 1638/HYD/2018 AGAINST THE ACTION OF THE CIT(A) IN DELETING THE ADDITION MADE U/S 14A BY THE AO, T HE AO MADE THE DISALLOWANCE OF EXPENDITURE AS PER RULE 8D OF RS. 19,90,83,746/ - . 10. BEFORE THE CIT(A), THE ASSESSEE, INTER - ALIA, SUBMITTED THAT THE DURING THE RELEVANT PREVIOUS YEAR IT HAD NOT EARNED/RECEIVED ANY EXEMPT INCOME. FURTHER, IT WAS SUBMITTED THAT AO STATED THAT INVESTMENT IN BONDS WHICH HAVE YIELDED INTEREST INCOME HAS BEEN OF FERED TO TAX, HOWEVER THERE IS NO FINDING BY THE AO TO CONTROVERT THE FACT THAT IT HAS NOT EARNED ANY EXEMPT INCOME ON THE INVESTED SHARE CAPITAL. 11. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT THE CONTENTION OF THE ASSESS EE THAT THE INVESTMENTS IN THE EQUITY SHARE CAPITAL OF ITS SUBSIDIARY COMPANY OUT OF ITS OWN FUNDS GENERATED FORM ITS BUSINESS OPERATIONS AND IT HAD NOT INCURRED ANY ADDITIONAL EXPENDITURE. ALSO, DURING THE YEAR NO DIVIDENDS WERE I TA NO S . 1602 & 1638 /HYD /20 1 8 M/S ANDHRA PRADESH POWER GENERATION CORPORATION LTD., HYD. : - 6 - : RECEIVED. FOLLOWING THE JU DGMENT OF THE HONBLE HIGH COURT OF DELHI IN THE CASE OF PR. CIT VS. IL & FS ENERGY DEVELOPMENT COMPANY LTD., 250 TAXMAN 174, DELETED THE DISALLOWANCE MADE BY THE AO ON THE GROUND THAT NO DISALLOWANCE U/S 14A CAN BE MADE IF THERE IS NO EXEMPT EARNED DURIN G THE YEAR. 12. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS IN APPEAL BEFORE ITAT. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD AS WELL AS GONE THROUGH THE ORDERS OF REVENUE AUTHORITIES. IT IS A SETTLED POSITIO N OF LAW THAT WHEN THERE IS NO EXEMPT INCOME IS RECEIVED, THERE CAN BE NO DISALLOWANCE. THE HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD., REPORTED IN (2015) 378 ITR 33 (DEL.) HAS HELD THAT SECTION 14A WILL NOT APPLY WHERE NO EXEMPT INCOME IS RE CEIVED OR RECEIVABLE DURING THE RELEVANT ASSESSMENT YEAR. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) IN DELETING THE DISALLOWANCE MADE U/S 14A BY THE AO AND UPHOLDING THE ORDER OF CIT(A), WE DISMISS THE GROUNDS RAISED BY THE REVENUE ON THIS ISSUE. I TA NO S . 1602 & 1638 /HYD /20 1 8 M/S ANDHRA PRADESH POWER GENERATION CORPORATION LTD., HYD. : - 7 - : 14. IN THE RESULT, BOTH THE APPEALS OF ASSESSEE AS WELL AS REVENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 13 TH JU LY , 2021 . SD/ - SD/ - ( S.S. GODARA ) (L . P . SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDE RABAD, DATED : 13 TH JU LY , 20 2 1 . K V C OPY TO : 1 M/S ANDHRA PRADESH POWER GENERATION CORPORATION LTD., VIDYUT SOUDHA, KHAIRATHABAD, HYDERABAD 500 08 2 2 DCIT, CIRCLE 1(1), 8 TH FLOOR, C BLOCK, ROOM NO. 836, IT TOWERS, HYDERABAD 500 004 3 C I T(A) 1 , HYDERABAD. 4 PR. CIT - 1 , HYDERABAD. 5 ITAT, DR, HYDERABAD. 6 GUARD FILE.