DCIT, New Delhi V. M/s Indian Oil Panipat Power Consortium Ltd., New Delhi

ITA 1676/DEL/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3730 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 07-06-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 06-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MONA MOHANTY
• Assessee Lawyers: SAURAV ROHATAGI CAS

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH C NEW DELHI) BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO.1676/DEL/2011 ASSESSMENT YEAR : 2007-08 DY. CIT, VS. M/S INDIA OIL PANIPAT POWER CIRCLE 11(1), CONSORTIUM LTD., H-1/204, 2 ND FLOOR NEW DELHI VIKRAMADITYA TOWER, ALAKNANDA SHOPPING COMPLEX, NEW DELHI PAN NO.AAACI 6741B (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. MONA MOHANTY, SR. DR RESPONDENT BY : S/SHRI RAJ KUMAR & SAURAV ROHATAGI, CAS. ORDER PER I.P. BANSAL, JM: THIS IS AN APPEAL FILED BY THE REVENUE. IT IS DIRECTED AGA INST THE ORDER DATED 24 TH JANUARY, 2011 PASSED BY THE LEARNED CIT(A), NEW DELHI FO R ASSESSMENT YEAR 2007-08. THE ONLY GROUND OF APPEAL READS AS UNDER:- ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF `1,31,80,179/- ON ACCOUNT OF RECEIVED AS BANK INTEREST. 2 2. AT THE VERY OUT SET, IT WAS POINTED OUT BY THE LEARNED AR THAT THE ISSUE RAISED BY REVENUE IS NOT ONLY COVERED BY THE EARLIER DECISIONS OF T HE TRIBUNAL IN ASSESSEES OWN CASE BUT IS ALSO COVERED BY THE DECISION OF JURISDIC TIONAL HIGH COURT IN THE CASE OF ASSESSEE, WHICH HAS SINCE BEEN REPORTED AS INDIAN OIL PA NIPAT POWER CONSORTIUM LIMITED VS. INCOME TAX OFFICER 315 ITR 255 (DELHI). IT WAS SUBMITTED THAT THE HONBLE HIGH COURT IN THE CASE OF ASSESSEE HAS HELD THAT THE FUNDS INFUSED IN THE ASSESSEE BY THE JOINT VENTURE PARTNER WERE EXTRICABLY LINKED W ITH THE SETTING UP OF PLANT, THE INTEREST EARNED BY THE ASSESSEE WOULD NOT BE TREATED AS INCOME FROM OTHER SOURCES, AND THE INTEREST EARNED IN THE PRESENT CIRCUM STANCES OUGHT TO BE CAPITALIZED. TO SUBSTANTIATE SO, HE HAS REFERRED TO THE F OLLOWING DECISIONS OF TRIBUNAL IN ASSESSEES OWN CASE:- I) I.T.A. NO.729/D/06 ASSESSMENT YEAR 2003-04 ORDER DATED 1 8 TH SEPTEMBER, 2009, COPIES PLACED AT PAGES 16 TO 19 OF THE PA PER BOOK; II) I.T.A. NOS.4162 & 4163/D/09 FOR ASSESSMENT YEARS 2005 -06 AND 2006-07 ORDER DATED 13 TH MAY, 2011, COPIES PLACED AT PAGES 22 TO 27 OF THE PAPER BOOK. III) I.T.A. NO.3885/D/07 ASSESSMENT YEAR 2004-05 ORDER DATED 27 TH MARCH, 2009, COPY PLACED AT PAGES 12 TO 15 OF THE PAPER BOOK. 2.1 IN THESE ORDERS, THE TRIBUNAL FOLLOWING THE AFOREMENT IONED DECISION OF JURISDICTIONAL HIGH COURT HAS DECIDED THE ISSUE IN FAVO UR OF THE ASSESSEE. HE SUBMITTED THAT FOR THE YEAR UNDER CONSIDERATION ALSO, LEA RNED CIT(A) AFTER FOLLOWING THE AFOREMENTIONED DECISION HAS GRANTED THE RELIEF OF THE AS SESSEE AGAINST WHICH THE DEPARTMENT IS AGGRIEVED. 2.2 ON THE OTHER HAND, LEARNED DR COULD NOT CONTROVERT T HE SUBMISSIONS MADE BY THE LEARNED AR THAT THE ISSUE IN THE PRESENT CASE IS COVERED B Y AFOREMENTIONED 3 DECISION OF THE TRIBUNAL AND THE DECISION OF HONBLE HIG H COURT. IN THIS WAY OF THE SITUATION, AFTER HEARING BOTH THE PARTIES, RESPECTFULLY F OLLOWING AFOREMENTIONED DECISIONS OF THE TRIBUNAL AND DECISION OF HONBLE HIGH COURT, WE DECLINE TO INTERFERE IN THE RELIEF GIVEN BY THE LEARNED CIT(A) VIDE WHICH HE HAS DELETED THE ADDITION OF `1,31,80,179/- WHICH REPRESENT INTEREST RECEIV ED BY THE ASSESSEE FROM BANK. THE REVENUE HAS EXPRESSED ITS GRIEVANCE WITH REGARD T O THIS ADDITION ONLY AND NO OTHER ISSUE HAS BEEN RAISED. THEREFORE, WE UPHOLD TH E ORDER OF LEARNED CIT(A) VIDE WHICH THE ADDITION OF `1,31,80,179/- IS DELETED. FOR THE SAKE OF COMPLETENESS, RELEVANT PORTION OF THE LATEST DECISION OF T HE TRIBUNAL, WHICH IS DATED 13 TH MAY, 2011 IS REPRODUCED BELOW:- 3. THE ASSESSEE COMPANY WAS INCORPORATED ON 6.10.1 999 AS A JOINT VENTURE BETWEEN INDIAN OIL CORPORATION AND MA RUBENI CORPORATION OF JAPAN FOR SETTING UP A POWER PROJECT AT PANIPAT IN HARYANA. SINCE THE LAND FOR AFOREMENTIONED PROJECT COULD NOT BE ACQUIRED THE PROJECT WAS SHELVED AND THERE IS NO AC TIVITY TILL DATE. THE ASSESSEE EARNED INTEREST MENTIONED IN THE GROUN DS OF APPEAL FOR THE RESPECTIVE YEARS SUBSTANTIALLY BY WAY OF FD RS FROM ICICI BANK AND ALSO ON IT REFUNDS WHICH HAS BEEN ASSESSED BY THE AO AS INCOME FROM OTHER SOURCES. THE ADDITION HAS BEE N DELETED BY CIT(A) FOLLOWING THE DECISION OF HONBLE DELHI HIGH COURT IN ASSESSEES OWN CASE PERTAINING TO A.Y. 2001-02 & 20 02-03. IT IS ALSO MENTIONED IN THE ORDER PASSED BY CIT(A) THAT I TAT ALSO DECIDED THE SIMILAR ISSUE IN FAVOUR OF ASSESSEE LAT ESTLY FOR A.Y. 2004-05 IN ITA NO. 3885/D/2007 AND ON THESE SUBMISS IONS OF THE ASSESSEE LD. CIT(A) HAS ALLOWED THE CLAIM OF THE AS SESSEE REGARDING INTEREST ON FDRS. SO AS IT RELATES TO I NTEREST ON INCOME TAX HE HAS UPHELD THE ADDITION. IT WILL BE RELEVAN T TO REPRODUCE THE FOLLOWING OBSERVATIONS OF CIT(A) VIDE WHICH THE REL IEF HAS BEEN GIVEN TO THE ASSESSEE: - DURING THE COURSE OF APPELLATE PROCEEDINGS THE COU NSEL FOR THE ASSESSEE CONTENDS THAT THE ISSUE IN QUESTION IS COVERED IN FAVOUR OF THE ASSESSEE BY ORDER DATED 26.2.2009 OF THE HONBLE DELHI HIGH COURT IN ASSESSEES OWN CASE IN ITA NO. 1156/2007 AND 1157/2007 FOR A.Y. 2001-02 & 2002-03 HOLDING AS UNDER: 6.1 IN OUR VIEW THE SITUATION IN THE INSTANT CASE IS QUITE SIMILAR EXCEPT HERE INSTEAD OF PAYING INTEREST ON F UNDS BROUGHT IN FOR SPECIFIC PURPOSE INTEREST IS EARNED ON FUNDS 4 BROUGHT IN BY WAY OF SHARE CAPITAL FOR A SPECIFIC P URPOSE. COULD IT BE SAID THAT IN THE FORMER SITUATION INTER EST COULD HAVE BEEN CAPITALIZED AND IN THE LATER SITUATION IT CANNOT BE CAPITALIZED. TO TEST THE PRINCIPLE WE COULD EXTEND THE EXAMPLE, THAT IT, WOULD OUR ANSWER BE ANY DIFFERENT HAD ASSESSEE PASSED ON THE INTEREST TO BE RESPECTIVE SHAREHOLDERS. IF NOT, THEN IN OUR VIEW THE ONLY CO NCLUSION POSSIBLE IS THAT INTEREST EARNED IF THE PRESENT CIR CUMSTANCES OUT TO BE CAPITALIZED. 6. IN VIEW OF THE DISCUSSION ABOVE, IN OUR OPINION, THE TRIBUNAL MISDIRECTED ITSELF IN APPLYING THE DECISIO N OF THE SUPREME COURT IN TUTICORIN ALKALI CHEMICALS (SUPRA) IN THE FACTS OF THE PRESENT CASE. IN OUR OPINION ON A CCOUNT OF THE FINDING OF FACT RETURNED BY THE CIT(A) THAT THE FUNDS INFUSED IN THE ASSESSEE BY THE JOINT VENTURE PARTNERS WERE INEXTRICABLY LINKED WITH THE SETTING UP OF THE PLANT, THE INTEREST EARNED BY THE ASSESSEE COUL D NOT BE TREATED AS INCOME FROM OTHER SOURCES. IN THE RE SULT, WE ANSWER THE QUESTION AS FRAMED IN FAVOUR OF THE ASSESSEE AS AGAINST THE REVENUE. THESE APPEALS ARE ALLOWED AND IMPUGNED JUDGMENT IN SET ASIDE. THE ASSESSEES COUNSEL HAS ALSO FILED THE SUBMISSI ONS STATING THAT THE HONBLE ITAT DELHI BENCH IN THE AS SESSEES OWN CASE FOR A.Y. 2004-05 DECIDED THE ISSUE IN FAVOUR O F THE ASSESSEE VIDE ITA NO. 3885/DEL OF 2007. COPY OF THE ORDER O F THE HONBLE TRIBUNAL HAS ALSO BEEN SUBMITTED BY THE ASSESSE. PERUSAL OF THE ORDER OF THE HONBLE DELHI HIGH COU RT ORDER DATED 26.02.09 IN THE ASSESSEES OWN CASE SHOWS THA T THE HIGH COURT HELD THAT INTEREST EARNED ON FDRS BEING PARKI NG OF FUNDS WAS INEXTRICABLY LINKED WITH ASSESSEES BUSINESS AND, T HEREFORE, INTEREST EARNED BY THE ASSESSEE WILL NOT BE INCOME FROM OTHE R SOURCES AND THE SAME WILL GO TO SET OFF THE PRE-OPERATIVE EXPEN SES OF THE ASSESSEE. TO THIS EXTENT, HONBLE HIGH COURTS CAS E IS APPLICABLE TO ASSESSEES CASE. HOWEVER, THE PERUSAL OF THE ORDER OF THE HONBLE I TAT SHOWS THAT THE HONBLE ITAT HAS OBSERVED THAT THE HONBLE HIGH COURT JUDGMENT CANNOT BE EXTENDED TO THE INTEREST ON INCO ME TAX REFUND AND TREATED THE AMOUNT OF INTEREST ON INCOME TAX RE FUND UNDER THE HEAD INCOME FROM OTHER SOURCES. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT FINDINGS OF THE AO AND THE FACTS ON RECORD. RESPECTFULLY FO LLOWING DECISION 5 OF THE HONBLE DELHI HIGH COURT AND THE HONBLE ITA T IN THE ASSESSEES OWN CASE IT IS HELD THAT INTEREST EARNED ON FDR WITH ICICI BANK WILL NOT BE TREATED AS INCOME FROM OTHER SOURCES AND THE SAME WILL GO TO SET OFF THE PRE OPERATIVE EXPEN SES OF THE ASSESSEE. IN VIEW OF THE ABOVE THE ADDITION ON ACC OUNT OF INTEREST INCOME ON FDRS BEING CONSIDERED AS INCOME FROM OTHE R SOURCES AMOUNTING TO RS. 92,06,600/- IS DELETED. AS REGARD S THE INTEREST EARNED ON INCOME TAX REFUND OF RS. 4,09,509/- IT HA S TO BE TREATED AS INCOME FROM OTHER SOURCES AND THE ACTION OF THE AO IS CONFIRMED AND THIS GROUND OF APPEAL IS DISMISSED. 4. FOR A.Y. 2006-07 INTEREST CONSISTS ONLY ON FDRS AND SIMILAR ORDER HAS BEEN PASSED BY LD. CIT(A) VIDE WHICH HE H AS DELETED THE ADDITION OF RS. 1,11,38,993/-. 5. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. T HE COPY OF RELEVANT ORDERS MENTIONED IN THE ORDER OF CIT(A) AR E PLACED IN THE PAPER BOOK FILED BY THE ASSESSEE. ORDER OF HONBLE HIGH COURT IN THE CASE OF ASSESSEE IS REPORTED AS 3 15 ITR 255 AND IT IS AN ORDER DATED 26.2.2009. RELEVANT P ORTION OF THE ORDER OF HONBLE HIGH COURT HAS BEEN REPRODUCED BY THE CIT(A) IN HIS ORDER. IF IT IS SO, THEN IN OUR OPIN ION NO INFIRMITY HAS BEEN COMMITTED BY LD. CIT(A) IN ALLOWING REQUIS ITE RELIEF TO THE ASSESSEE, WE FIND NO MERIT IN THE APPEALS FI LED BY THE DEPARTMENT AND THEY ARE DISMISSED. 6. IN THE RESULT, THE APPEALS ARE DISMISSED. 2.3 IN VIEW OF OUR DISCUSSION MADE ABOVE, THE APPEAL FI LED BY THE REVENUE IS DISMISSED. 3. IN RESULT, APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT ON 10.06.20 11. SD/- SD/- ( SHAMIM YAHYA ) ( I.P. BANSAL ) 6 ACCOUNTANT MEMBER JUDICIAL MEMBER DT.10.06.2011. NS COPY FORWARDED TO:- 1. DCIT, CIRCLE 11(1), NEW DELHI. 2. M/S INDIAN OIL PANIPAT POWER CONSORTIUM LTD., H-1/20 4, 2 ND FLOOR, VIKRAMADITYA TOWER, ALAKNANDA SHOPPING COMPLEX, NEW DELH I. 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. TRUE COPY. BY ORDER (ITAT, NEW DELHI).