Jhabua Power Ltd., Kolkata V. The DCIT, Circle-12, Kolkata, Kolkata

ITA 2074/KOL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1243 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 27-10-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SALLONG YADEN CIT D R DEPARTME
• Keywords: Capital receipt

Judgement Text

I.T.A. NO. 2074/KOL./2016 ASSESSMENT YEAR: 2011-2012 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO. 2074/KOL/ 2016 ASSESSMENT YEAR: 2011-2012 JHABUA POWER LIMITED,.............................. .........................APPELLANT 6B, PRETORIA STREET, GROUND FLOOR, KOLKATA-700 071 [PAN: AABCK 3364 R] -VS.- DEPUTY COMMISSIONER OF INCOME TAX,................. ..............RESPONDENT CIRCLE-12, KOLKATA APPEARANCES BY: SHRI SANJAY BHATTACHARYA, FCA, FOR THE ASSESSEE SHRI SALLONG YADEN, ADDL. CIT, D.R.., FOR THE DEPARTMENT DATE OF CONCLUDING THE HEARING : MARCH 14, 2018 DATE OF PRONOUNCING THE ORDER : MARCH 23, 2018 O R D E R PER SHRI P.M. JAGTAP, A.M. . : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF ID. COMMISSIONER OF INCOME TAX (APPEALS)-4, KOLKATA DAT ED 24.08.2016 AND THE GROUNDS RAISED THEREIN BY THE ASSESSEE READ AS UNDER:- (1) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(APPEALS)-4, KOLKATA WAS WRONG IN HOLDING THAT INT EREST (RS.9,87,836/-) EARNED ON SECURITY DEPOSIT INEXTRIC ABLY LINKED TO THE CONSTRUCTION OF POWER PLANT FOR GENERATION OF POWER AS INCOME FROM OTHER SOURCES OF THE INCOME TAX ACT, 1961. (2) THAT THE LD. CIT(A)-4, KOLKATA WAS WRONG IN CONST RUING THE FACT THAT THE APPELLANT COMPANY IS ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION IN PLACE OF GENERATION OF POWER UPON E RECTION AND COMMISSIONING OF POWER PLANT AND HELD THAT INCOME OF DEPOSITS I.T.A. NO. 2074/KOL./2016 ASSESSMENT YEAR: 2011-2012 PAGE 2 OF 4 HAVING DIRECT NEXUS WITH THE CAPITAL COST (WORK IN PR OGRESS) AS INCOME FROM OTHER SOURCE. 2. AT THE TIME OF HEARING BEFORE THE TRIBUNAL, THE LD. COUNSEL FOR THE ASSESSEE HAS NOT PRESSED GROUND NO. 2 RAISED IN THE APPEAL OF TH E ASSESSEE. THE SAME IS ACCORDINGLY DISMISSED AS NOT PRESSED. 3. APROPOS THE ISSUE INVOLVED IN GROUND NO. 1, THE RELEVANT FACTS ARE THAT THE ASSESSEE IS A COMPANY, WHICH WAS SETTING UP A THERM AL POWER PLANT AT SEONI IN MADHYA PRADESH DURING THE YEAR UNDER CONSIDERATION. THE RE TURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 28.09.2011 DECLARI NG TOTAL INCOME OF RS.2,37,54,826/-, WHICH COMPRISED OF INTEREST INCOME, CAPITAL GAIN FR OM SALE OF MUTUAL FUNDS, ETC. AS FOUND BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD EARNED INTEREST INCOME OF RS.9,87,836/ - DURING THE YEAR UNDER CONSIDERATION, WHICH WAS NOT OFFERED TO TAX. IN THI S REGARD, IT WAS EXPLAINED ON BEHALF OF THE ASSESSEE-COMPANY THAT THE SAID INTEREST INCOME WAS EARNED ON THE DEPOSITS GIVEN TO THE VARIOUS GOVERNMENT ORGANISATIONS IN CONNECTION WITH CONSTRUCTION OF ITS POWER PLANT AND THE SAME, THEREFORE, WAS A CAPITAL RECEIP T NOT CHARGEABLE TO TAX. THIS EXPLANATION OF THE ASSESSEE WAS NOT FOUND ACCEPTABL E BY THE ASSESSING OFFICER AND TREATING THE INTEREST EARNED BY THE ASSESSEE AS A R EVENUE RECEIPT CHARGEABLE TO TAX, HE MADE AN ADDITION OF RS.9,87,836/- TO THE TOTAL INCO ME OF THE ASSESSEE UNDER THE HEAD INCOME FROM OTHER SOURCES. ON APPEAL, THE LD. CIT (APPEALS) CONFIRMED THE SAID ADDITION MADE BY THE ASSESSING OFFICER. 4. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE INTEREST OF RS.9,87,836/- IN QUESTION WAS EARNED BY THE ASSESSEE ON THE SECURITY DEPOSITS KEPT WITH GOVERNMENT ORGANISATION IN CONNECTION OF THE CONSTRUCTION OF I TS POWER PLANT. HE CONTENDED THAT THE SAID INTEREST INCOME THUS WAS INEXTRICABLY LINKED W ITH THE PROJECT OF CONSTRUCTION OF THE POWER PLANT OF THE ASSESSEE-COMPANY AND THE SAME WA S RIGHTLY REDUCED FROM THE PROJECT DEVELOPMENT EXPENDITURE INCURRED BY THE ASS ESSEE-COMPANY DURING THE YEAR UNDER CONSIDERATION. HE CONTENDED THAT THIS FACTUAL POSITION WAS DULY DISCLOSED BY THE ASSESSEE IN NOTES TO ACCOUNTS AND THE SAME WAS SPEC IFICALLY BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER VIDE LETTER DATED 11.02.2014 (COP Y AT PAGES NO. 20 & 21 OF THE PAPER BOOK) DURING THE COURSE OF ASSESSMENT PROCEEDINGS. RELYING, INTER ALIA, ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS.- JAYPEE DSC VENTURES LIMITED I.T.A. NO. 2074/KOL./2016 ASSESSMENT YEAR: 2011-2012 PAGE 3 OF 4 (335 ITR 132), HE CONTENDED THAT THE INTEREST EARNE D BY THE ASSESSEE ON THE FDRS HAVING INTRINSIC AND INSEGGREGABLE NEXUS WITH THE WORK UNDERTAKEN WAS THE CAPITAL RECEIPT AND THE SAME WAS LIABLE TO BE ADJUSTED AGAI NST THE PROJECT EXPENDITURE AND COULD NOT BE ASSESSED AS INCOME FROM OTHER SOURCES. THE L D. D.R., ON THE OTHER HAND, RELIED ON THE ORDERS OF THE AUTHORITIES BELOW IN SUPPORT OF T HE ASSESSEES CASE ON THIS ISSUE. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND AL SO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERVED THAT T HE CONSTRUCTION OF POWER PLANT OF THE ASSESSEE-COMPANY WAS UNDER PROGRESS DURING THE YEAR UNDER CONSIDERATION AND IN CONNECTION WITH THE SAME, SECURITY DEPOSIT WAS REQU IRED TO BE KEPT BY THE ASSESSEE TO COMMERCIAL TAX OFFICER FOR SALES-TAX REGISTRATION A S WELL AS WITH EXECUTIVE ENGINEER FOR SUPPLY OF WATER. THE SAID DEPOSITS THUS WERE INEXTR ICABLY LINKED WITH THE CONSTRUCTION OF POWER PLANT OF THE ASSESSEE AND AS HELD BY THE H ONBLE DELHI HIGH COURT IN THE CASE OF JAYPEE DSC VENTURES LIMITED (SUPRA) CITED BY THE LD . COUNSEL FOR THE ASSESSEE, INTEREST EARNED BY THE ASSESSEE ON THE SAID DEPOSITS WAS LIA BLE TO BE ADJUSTED AGAINST THE PROJECT CONSTRUCTION EXPENDITURE AND THE SAME COULD NOT BE ASSESSED AS INCOME FROM OTHER SOURCES. THE LD. CIT(APPEALS), IN OUR OPINION, THUS IS JUSTIFIED IN CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER TO THE TOTAL INCOME O F THE ASSESSEE BY TREATING THE SAID INTEREST INCOME AS CHARGEABLE TO TAX IN THE HANDS O F THE ASSESSEE-COMPANY UNDER THE HEAD INCOME FROM OTHER SOURCES AND DELETING THE S AID ADDITION, WE ALLOW THE GROUND NO.1 OF THE ASSESSEES APPEAL. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD DAY OF MARCH, 2018. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEM BER KOLKATA, THE 23 RD DAY OF MARCH, 2018 COPIES TO : (1) JHABUA POWER LIMITED, 6B, PRETORIA STREET, GROUND FLOOR, KOLKATA-700 071 (2) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-12, KOLKATA, I.T.A. NO. 2074/KOL./2016 ASSESSMENT YEAR: 2011-2012 PAGE 4 OF 4 (3) COMMISSIONER OF INCOME TAX(APPEALS)-4, KOLKAT A; (4) COMMISSIONER OF INCOME TAX- , (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, HEAD OF OFFICE/DDO, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.