The ACIT, GNR Circle, Gandhinagar V. Sardar Sarovar Narmada Nigam Ltd., Gandhinagar

ITA 2106/AHD/2006

• Counselvise Citation: 210620514 RSA 2006
• Duration Of Justice: 6 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 13-12-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 04-10-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV AGARWAL
• Assessee Lawyers: S N SOPARKAR SRAR
• Keywords: Business income
• Section: 143(3); 244A; 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE SHRI, A.K.GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ITA NO.696 & 2106/AHD/2006 C.O. NO.128/AHD/2006 (A/O ITA NO.696/AHD/2006) C.O. NO.271/AHD/2006 (A/O ITA NO.2106/AHD/2006) ASSESSMENT YEARS :2002-03 & 2003-04 ASSTT. COMMISSIONER OF INCOME TAX, GANDHINAGAR CIRCLE, GANDHINAGAR SARDAR SAROVAR NARMADA NIGAM LTD., 7 TH FLOOR, BLOCK NO. 12, NEW SACHIVALAYA COMPLEX, GANDHINAGAR [ PAN NO. AACCS 6704L ] V/S . V/S . SARDAR SAROVAR NARMADA NIGAM LTD., 7 TH FLOOR, BLOCK NO. 12, NEW SACHIVALAYA COMPLEX, GANDHINAGAR ASSTT. COMMISSIONER OF INCOME TAX, GANDHINAGAR CIRCLE, GANDHINAGAR / APPELLANT .. / RESPONDENT) ITA NO.1466/AHD/2007 C.O. NO.140/AHD/2007 (A/O ITA NO.1466/AHD/2007) ASSESSMENT YEAR: 2004-05 ASSTT. COMMISSIONER OF INCOME TAX, GANDHINAGAR CIRCLE, GANDHINAGAR SARDAR SAROVAR NARMADA NIGAM LTD., 7 TH FLOOR, BLOCK NO. 12, NEW SACHIVALAYA COMPLEX, GANDHINAGAR V/S . V/S . SARDAR SAROVAR NARMADA NIGAM LTD., 7 TH FLOOR, BLOCK NO. 12, NEW SACHIVALAYA COMPLEX, GANDHINAGAR ASSTT. COMMISSIONER OF INCOME TAX, GANDHINAGAR CIRCLE, GANDHINAGAR / APPELLANT .. / RESPONDENT) ITA NOS.696, 2106/A/06 & CO128 & 271/A/06 & 1466/A/ 07 & CO140/A/07 A.YS 02-03 TO 04-05 ACIT GNG CIR V. SSNN LTD. PAGE 2 /BY ASSESSEE SHRI S.N. SOPARKAR, SR-AR /BY REVENUE SHRI RAJEEV AGARWAL, CIT-DR /DATE OF HEARING 13-12-2012 ! /DATE OF PRONOUNCEMENT 21-12-2012 ' ' ' ' / // / O R D E R PER BENCH:- THESE ARE THREE SET OF APPEALS FILED BY THE REVENU E AND THREE SET OF CROSS OBJECTION (COS) FILED BY THE ASSESSEE ARE DIR ECTED AGAINST THE DIFFERENT ORDERS OF COMMISSIONER OF INCOME-TAX (APPEALS)-GAND HINAGAR-AHMEDABAD (CIT(A) FOR SHORT) OF DATED 14-12-2005, 24-07-200 6 AND 29-01-2007 PERTAINING TO ASSESSMENT YEARS (AY) 2002-03, 2003-0 4 AND 2004-05. ALL THESE ARE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF COMMON ORDER FOR THE SAKE OF CONVENIENCE. FIRST WE TAKE UP REVENUES APPEAL IN ITA NO.696/AHD /2006 FOR A.Y. 02-03. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE ASSESSEE HAS STARTED HIS BUSINESS ACTIVITIES AND IN CONSEQUENTLY ALLOWING THE CLAIM OF BUSINESS LOSS OF RS.8,96,56,4 3,446/- MADE BY THE ASSESSEE IN ITS RETURN OF INCOME. 3. BRIEFLY STATED FACTS ARE THAT ASSESSEE IS A COMP ANY WHOLLY OWNED BY THE GOVERNMENT OF GUJARAT (GOG FOR SHORT) WAS ESTABLISH ED FOR EXECUTION OF SARDAR SAROVAR PROJECT COMPRISING OF A DAM ACROSS T HE RIVER NARMADA, ELECTRICITY GENERATION PROJECT OUT OF THE RESERVOIR AND PROJECTS FOR PROVIDING WATER FOR DRINKING AND IRRIGATION IN THE FOUR STATE S OF GUJARAT, MAHARASHTRA, MADHYA PRADESH AND RAJASTHAN. THE CASE OF ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRA MED THEREBY THE TOTAL INCOME OF THE ASSESSEE WAS ASSESSED TO TAX AT RS.6,74,13,7 30/- AGAINST THIS BUSINESS LOSS OF RS.8,96,56,43,446/-. AGAINST THIS, ASSESSEE FEELING AGGRIEVED BY THIS ITA NOS.696, 2106/A/06 & CO128 & 271/A/06 & 1466/A/ 07 & CO140/A/07 A.YS 02-03 TO 04-05 ACIT GNG CIR V. SSNN LTD. PAGE 3 ORDER OF ASSESSING OFFICER PREFERRED APPEAL BEFORE LD. CIT(A) WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE PARTLY ALLOWED THE APPEAL. 4. BOTH THE REVENUE AND ASSESSEE HAVE CHALLENGED TH E ORDER OF LD. CIT(A) BY FILING APPEALS AND COS RESPECTIVELY BEFOR E THE TRIBUNAL. 5. LD. CIT-DR, SHRI RAJEEV AGARWAL WHO REPRESENTING FOR THE REVENUE STRONGLY SUPPORTED THE ORDER OF LD. CIT(A). ON THE CONTRARY, LD. SENIOR COUNSEL, SHRI S.N.SOPARKAR, WHO REPRESENTING FOR TH E ASSESSEE SUBMITTED THAT THIS ISSUE IS COVERED BY THE DECISION OF HONBLE SP ECIAL BENCH OF ITAT AHMEDABAD IN ASSESSEES OWN CASE IN ITA NO.2654/AHD /2004 FOR AY 2001- 02 AND SUBMITTED THAT GROUND NO.2 IS GENERAL IN NAT URE. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD AND THE DECISION CITED BY LD. C OUNSEL FOR THE ASSESSEE. WE FIND THAT HONBLE SPECIAL BENCH OF ITAT AHMEDABA D BENCHES IN ASSESSEES OWN CASE (SUPRA) FOR AY 2001-02 HAS DECI DED THIS ISSUE IN FAVOUR OF ASSESSEE. IN THIS VIEW OF THIS MATTER AND RESPEC TFULLY FOLLOWING THE DECISION OF HONBLE SPECIAL BENCH OF THIS TRIBUNAL WE DO NOT FIND ANY MERIT IN THE GROUNDS OF REVENUES APPEAL. HENCE, THIS GROUND OF REVENUES APPEAL IS DISMISSED. 7. IN THE RESULT, REVENUES APPEAL IS DISMISSED. COMING TO ASSESSEES CO NO.128/AHD.2006 FOR A.Y 02- 03. 8. THE ASSESSEE HAS RAISED FOLLOWING GROUND OF ITS CO:- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN NOT HOLDING THAT BUSINESS WAS COMMENCED IN THE EARLIER YEARS. IT IS SUBMITTED THAT IN THE FACTS AND CIRCUMSTANCES OF TH E CASE, THE BUSINESS HAS ALREADY COMMENCED IN THE EARLIER YEARS AND CONT INUED DURING THE YEAR. IT IS SUBMITTED THAT IT BE SO HELD NOW. ITA NOS.696, 2106/A/06 & CO128 & 271/A/06 & 1466/A/ 07 & CO140/A/07 A.YS 02-03 TO 04-05 ACIT GNG CIR V. SSNN LTD. PAGE 4 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN TREATING INTEREST INCOME ON DEPOSITS WITH BANK OF R S.2,12,19,801, AND INTEREST ON INVESTMENT AMOUNTING TO RS.4,60,55,677, AS INCOME FROM OTHER SOURCES . IT IS SUBMITTED THAT THE INCOME WAS IN THE NATUR E OF BUSINESS INCOME AND OUGHT TO HAVE BEEN TREATED AS S UCH. IT BE SO HELD NOW. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN HOLDING THAT INTEREST U/S. 234B OF THE ACT FOR RS.9 6,47,699, INTEREST U/S. 234D OF THE ACT FOR RS.14,108 AND WITHDRAWAL OF INT EREST US. 244A OF THE ACT FOR RS.7,239 ARE CONSEQUENTIAL IN NATURE. 9. RESPECTFULLY FOLLOWING THE DECISION OF HONBLE S PECIAL BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE (SUPRA) WHILE WE DI SMISS THE REVENUES APPEAL AND AS THE GROUND OF ASSESSEES CO IS INTER- CONNECTED, WE DISMISS THE GROUND RAISED BY ASSESSEE IN ITS CO. 10. SECOND GROUND OF ASSESSEES CO IS CONSEQUENTIAL IN NATURE AND DOES NOT REQUIRE ANY ADJUDICATION. THIS GROUND OF ASSESS EES CO IS DISMISSED. 11. IN THE RESULT, ASSESSEES CO IS DISMISSED. COMING TO REVENUES APPEAL IN ITA NO.2106/AHD/2006 FOR AY 03-04. 12. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE CLAIM OF THE ASS ESSEE UNDER THE HEAD INCIDENTAL EXPENDITURE PENDING CAPITALIZATION HOL DING THAT THE ASSESSEE CORPORATION WAS ALREADY SET UP AND COMMENCED BUSINE SS. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DIRECTING THE AO TO TREAT THE INCOME FROM OTHER SOURCES OF RS .733,78,358/- AS BUSINESS INCOME AND ALLOW EXPENDITURE BEING INCIDEN TAL EXPENDITURE PENDING CAPITALIZATION IN COMPUTING INCOME/LOSS UND ER THE HEAD BUSINESS. 13. WE HAVE ALREADY DISCUSSED THIS GROUND OF REVENU ES APPEAL IN ITA NO.696/AHD/2006 AND RESPECTFULLY FOLLOWING THE DECI SION OF HONBLE SPECIAL BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE (SUPR A) AND TAKING A CONSISTENT ITA NOS.696, 2106/A/06 & CO128 & 271/A/06 & 1466/A/ 07 & CO140/A/07 A.YS 02-03 TO 04-05 ACIT GNG CIR V. SSNN LTD. PAGE 5 VIEW IN TERMS OF DECISION OF HONBLE SPECIAL BENCH IN ASSESSEES OWN CASE (SUPRA). HENCE, THIS GROUND OF REVENUES APPEAL IS DISMISSED. 14. IN THE RESULT, REVENUES APPEAL IS DISMISSED. COMING TO ASSESSEES CO NO. 271/AHD/2006 FOR AY 03 -04. 15. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF IT S CO:- 1. IN EVENT IT IS HELD THAT THE APPELLANT HAS NOT COMMENCED ITS BUSINESS, RECEIPTS IN FORM OF TENDER FEES, RENT OF NIGAMS PREMISES, RECOVERIES FROM EMPLOYEES, PROFIT ON SALE OF ASSETS , INTEREST (INCLUDING INTEREST ON COMPULSORY DEPOSITS) AND OTHER MISCELLA NEOUS RECEIPTS SHOULD BE TREATED S RECEIPTS INEXTRICABLY LINKED TO THE PROJECT AND THEREFORE THE SAME OUGHT TO HAVE BEEN SET OF AGAINS T PROJECT COST. 2. THE LEARNED COMMISSIONER (APPEALS) ERRED IN NOT DELETING THE INTEREST CHARGED U/S. 234B. IT IS SUBMITTED THAT NO INTEREST OUGHT TO HAVE BEEN CHARGED. IT BE SO DONE NOW. 3. THE LEARNED COMMISSIONER (APPEALS) ERRED IN NOT DELETING THE INTEREST CHARGED U/S. 234D. IT IS SUBMITTED THAT NO INTEREST OUGHT TO HAVE BEEN CHARGED. IT BE SO DONE NOW. 4. THE LEARNED COMMISSIONER (APPEALS) ERRED IN NOT DELETING WITHDRAWAL OF INTEREST U/S. 244A. IT IS SUBMITTED THAT NO INTE REST OUGHT TO HAVE BEEN WITHDRAWN. IT BE SO DONE NOW. 16. IN TERMS OF THE DECISION OF HONBLE SPECIAL BEN CH OF THIS TRIBUNAL IN ASSESSEES OWN CASE (SUPRA) AND AS WE HAVE ALREADY DISMISSED THE REVENUES APPEAL IN ITA NO.2106/AHD/2006, HENCE, TH ESE GROUNDS OF ASSESSEES CO ARE ALSO DISMISSED. 17. IN THE RESULT, ASSESSEES CO IS DISMISSED. COMING TO REVENUES APPEAL IN ITA NO.1466/AHD/2007 FOR AY 04-05. 18. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DIRECTING THE AO TO ALLOW THE CLAIM OF THE ASSESSEE UNDER THE HEAD INCIDENTAL ITA NOS.696, 2106/A/06 & CO128 & 271/A/06 & 1466/A/ 07 & CO140/A/07 A.YS 02-03 TO 04-05 ACIT GNG CIR V. SSNN LTD. PAGE 6 EXPENDITURE PENDING CAPITALIZATION HOLDING THAT TH E ASSESSEE CORPORATION WAS ALREADY SET UP AND COMMENCED BUSINE SS. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DIRECTING THE AO TO TREAT THE INCOME FROM OTHER SOURCES OF RS .3,17,06,703/- AS BUSINESS INCOME AND ALLOW EXPENDITURE BEING INCIDEN TAL EXPENDITURE PENDING CAPITALIZATION IN COMPUTING INCOME/LOSS UND ER THE HEAD BUSINESS. 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DIRECTING THE AO TO QUANTIFY THE LOSS AND UNABSORBED DEPRECIA TION TO BE SET OFF AND CARRY FORWARD. 19. WE HAVE ALREADY DISCUSSED THIS GROUND OF REVENU ES APPEAL IN ITA NO.696/AHD/2006 AND RESPECTFULLY FOLLOWING THE DECI SION OF HONBLE SPECIAL BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE (SUPR A) AND TAKING A CONSISTENT VIEW IN TERMS OF DECISION OF HONBLE SPECIAL BENCH IN ASSESSEES OWN CASE (SUPRA). HENCE, THIS GROUND OF REVENUES APPEAL IS DISMISSED. 20. IN THE RESULT, REVENUES APPEAL IS DISMISSED. COMING TO ASSESSEES CO NO.140/AHD/2007 FOR AY 04-0 5. 21. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF IT S CO:- 1] THE LD. C.I.T.(A) HAS ERRED ON FACTS AND IN LAW IN HOLDING THAT INCOME FROM INVESTMENTS/BANK DEPOSITS OF RS.7,39,24,625/- AND INTEREST ON DEPOSITS AMOUNTING TO RS.72,46,846/- AND BALANCE OF MISC. RECEIPTS AFTER DETERMINING BUSINESS CONNECTED RECEIPTS FROM RS.1,36,62,083/- IS TO BE TAXED AS INCOME FROM OTHER SOURCES AS AGAIN ST BUSINESS INCOME CLAIMED. 2] THE LD. C.I.T.(A) HAS ON FACTS AND IN LAW FAILED TO CONSIDER AND ADJUDICATE THE DECISION ON THE PLEA OF THE APPELLAN T CO. THAT THE ABOVE MENTIONED RECEIPTS WERE INEXTRICABLY LINKED TO THE PROJECT AND AS SUCH SHOULD HAVE BEEN SET OFF AGAINST THE PROJECT COST. 3] LIKEWISE, THE LD. C.I.T.(A) ON FACTS AND IN LAW FAILED TO CONSIDER AND ADJUDICATE THE DECISION ON AN ALTERNATIVE PLEA OF T HE APPELLANT CO. TO ALLOW THE DEDUCTION U/S. 57 OF THE I.T. ACT OF THE EXPENSES INCURRED FOR EARNING THE ABOVE MENTIONED INCOME. ITA NOS.696, 2106/A/06 & CO128 & 271/A/06 & 1466/A/ 07 & CO140/A/07 A.YS 02-03 TO 04-05 ACIT GNG CIR V. SSNN LTD. PAGE 7 4] THE LD. C.I.T.(A) IN VIEW OF FACTS AND CIRCUMSTA NCES OF THE CASE OUGHT TO HAVE HELD RECEIPTS AS REFERRED UNDER PARA-1 ABOV E AS BUSINESS RECEIPTS AND NOT AS INCOME FROM OTHER SOURCES. 5] THE LD. C.I.T.(A) IN VIEW OF AN ALTERNATIVE PLEA OUGHT TO HAVE HELD & DIRECTED THE AO TO ALLOW DEDUCTION OF EXPENSES U/S 57 OF THE I.T. ACT OUT OF INCIDENTAL EXPENDITURE PENDING CAPITALISATION WHICH ARE INCURRED FOR EARNING INCOME HELD TO BE TAXED UNDER OTHER SOURCES . 6] IN EVENT, IF IT IS HELD THAT THE APPELLANT HAS N OT COMMENCED ITS BUSINESS, RECEIPTS IN FORM OF TENDER FEES, RENT OF NIGAMS RESIDENTIAL BUILDING, INCOME ON INVESTMENTS/BANK DEPOSITS, OTHE R MISC. RECEIPTS AND INCOME ON DEPOSITS SHOULD BE TREATED AS RECEIPT S INEXTRICABLY LINKED TO THE PROJECT AND HENCE THE SAME OUGHT TO H AVE BEEN SET-OFF AGAINST PROJECT COST. 22. IN TERMS OF THE DECISION OF HONBLE SPECIAL BEN CH OF THIS TRIBUNAL IN ASSESSEES OWN CASE (SUPRA) AND AS WE HAVE ALREADY DISMISSED THE REVENUES APPEAL IN ITA NO.1466/AHD/2007, HENCE, TH ESE GROUNDS OF ASSESSEES CO ARE ALSO DISMISSED. 23. IN THE RESULT, ASSESSEES CO IS DISMISSED. 24. IN COMBINED RESULT, ALL THE APPEALS OF REVENUE AND THAT OF ASSESSEES COS ARE DISMISSED AS INDICATED ABOVE. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE. SD/- SD/- (A.K.GARODIA) (KUL BHARAT) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, *DKP #$%- 21/12/2012 *+, - ' ' ' ' ../ ../ ../ ../ 0/ 0/ 0/ 0/ / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. $,$.3 4 / CONCERNED CIT ITA NOS.696, 2106/A/06 & CO128 & 271/A/06 & 1466/A/ 07 & CO140/A/07 A.YS 02-03 TO 04-05 ACIT GNG CIR V. SSNN LTD. PAGE 8 4. 4- / CIT (A) 5. / 78 ...3, .3!, *+, / DR, ITAT, AHMEDABAD 6. 8;< => / GUARD FILE. BY ORDER/ ' , /TRUE COPY/ ?/* $ .3!, *+, - STRENGTHEN PREPARATION & DELIVERY O F ORDERS IN THE ITAT 1) DATE OF TAKING DICTATION 19/12 2) DIRECT DICTATION BY MEMBER STRAIGHT ON COMPUTER/LAPTOP/DRAGON DICTATE NO 3) DATE OF TYPING & DRAFT ORDER PLACE BEFORE MEMBER 19/12, 20/12 4) DATE OF CORRECTION - - 5) DATE OF FURTHER CORRECTION - - 6) DATE OF INITIAL SIGN BY MEMBERS 20/12 7) ORDER UPLOADED ON 21/12 8) ORIGINAL DICTATION PAD-PART HAS BEEN ENCLOSED IN THE FILE YES 9) FINAL ORDER AND 2 ND COPY SEND TO BENCH CLERK ON 21/12