Kaveri Gas Power Limited, CHENNAI V. ACIT, CHENNAI

ITA 2143/CHNY/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8050 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 13-11-2015
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: G BASKAR

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , ! ' . #$ , % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ ITA NOS. 2143 & 2144/MDS/2015 / ASSESSMENT YEARS : 2005-06 & 2006-07 KAVERI GAS POWER LTD., NO.3, RANGANATHAN GARDENS, 15 TH MAIN ROAD EXTENSION, ANNA NAGAR, CHENNAI 40. PAN AABCK4793Q APPELLANT) V. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CORPORATE CIRCLE-4(2), CHENNAI. RESPONDENT) / APPELLANT BY : SHRI G. BASKAR, ADVOCATE / RESPONDENT BY : SHRI A.V.SREEKANTH, JCIT ! / DATE OF HEARING : 06.01.2016 '# ! / DATE OF PRONOUNCEMENT: 29 .01.2016 ( / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAIN ST THE COMMON ORDER OF THE COMMISSIONER OF INCOME-TAX(APPE ALS) DATED 29.9.2015 FOR THE ASST. YEARS 2005-06 AND 200 6-07. - - ITA 2143 & 2144/15 2 2. THE COMMON GROUND RAISED IN THESE APPEALS IS THA T THE CIT(APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN TREATING THE INTEREST INCOME AS INCOME F ROM OTHER SOURCES. 3. THE FACTS OF THE CASE ARE THAT AS THE ASSESSEE H AS NOT FILED ANY DETAILS AND EVIDENCES DURING THE ASSESSME NT PROCEEDINGS FOR THE ASST. YEAR 2005-06, THE ASSESSI NG OFFICER REJECTED THE PLEA OF THE ASSESSEE AND ASSESSED THE INTEREST INCOME OF ` 9,42,265/-. FOR THE ASST. YEAR 2006-07, THE AO STATED THAT THE ASSESSEE ADJUSTED THE INTEREST INCO ME AGAINST PRE-OPERATIVE EXPENSES AND IN EARLIER YEARS ON SIMI LAR ISSUE, THE INTEREST IS ASSESSED AS INCOME FROM OTHER SOURCES. THE LD. AR RELIED ON THE ORDER OF THE TRIBUNAL IN ITA NO.1409/ MDS/2005 DATED 7.2.2008 FOR THE ASST. YEAR 2002-03, WHEREIN THE TRIBUNAL ALLOWED THE CLAIM OF THE ASSESSEE. HOWEVER, THE OR DER OF THE TRIBUNAL WAS NOT ACCEPTED BY THE AO, HE ASSESSED TH E INTEREST INCOME OF ` 11,97,715/- AS INCOME FROM OTHER SOURCES. AGGRIEVED BY THIS, THE ASSESSEE WENT IN APPEAL BEFO RE THE CIT(APPEALS). - - ITA 2143 & 2144/15 3 4. BEFORE THE CIT(APPEALS), THE ASSESSEE CONTENDED THAT INTEREST EARNED FROM FIXED DEPOSIT WITH STATE BANK OF TRAVANCORE TO OPEN BANK GUARANTEE IN FAVOUR OF M/S. GAIL (INDI A) LTD. IS TO BE TREATED AS INCOME FROM OTHER SOURCES. HOWEVER, THE CIT(APPEALS) DISMISSED THE GROUND OF APPEAL BY PLAC ING RELIANCE ON THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF BONGAIGAON REFINERY & PETROCHEMICALS LTD. VS. CIT ( 251 ITR 329) AND OVERLOOKING THE EARLIER ORDER OF THE TRIBU NAL FOR THE ASST. YEAR 2002-03 IN ASSESSEES OWN CASE IN ITA NO.1409/MDS/2005 DATED 7.2.2008, WHEREIN IT WAS HEL D AS FOLLOWS : 4. WE HAVE HEARD BOTH THE COUNSELS AND PERUSED T HE RELEVANT RECORDS. WE FIND THAT THE ISSUE IS COVERE D IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONB LE APEX COURT IN THE CASE OF CIT VS. KARNAL CO-OPERAT IVE SUGAR MILLS LTD. (243 ITR 2). IN THIS CASE, IT WA S HELD THAT INTEREST EARNED DURING CONSTRUCTION PERIOD ON MONEY DEPOSITED TO OPEN LETTERS OF CREDIT FOR PURCHASE OF MACHINERY IS INCIDENTAL TO THE ACQUISITION OF ASSET S AND HAS TO BE CAPITALISED. IT CANNOT BE ASSESSED AS I NCOME FROM OTHER SOURCES. EXAMINING THE PRESENT CASE ON THIS TOUCHSTONE, WE FIND THAT THE BORROWED FUNDS IN THIS CASE HAS BEEN UTILIZED TO OPEN BANK GUARANTEE / LETTERS OF CREDIT IN FAVOUR OF M/S. GAS AUTHORITY OF INDIA LTD . TO OBTAIN ALLOTMENT LETTER AND RIGHTS TO UTILIZE THE N ATURAL GAS TO PRODUCE ELECTRICITY. THE DEPOSIT IN THE BANK WA S MADE TO OBTAIN THE SAID BG/LC. IN THIS VIEW OF THE MATT ER, THE PRECEDENT FROM THE HONBLE APEX COURT WILL APPLY. - - ITA 2143 & 2144/15 4 HENCE, WE AFFIRM THE ORDER OF THE LEARNED COMMISSIO NER OF INCOME TAX(APPEALS) AND DECIDE THE ISSUE AGAINST THE REVENUE. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. THE MAIN CONTENTION OF THE DEPARTMENT I S THAT THE ISSUE WAS CONSIDERED BY THE SUPREME COURT IN THE CA SE OF BONGAIGAON REFINERY & PETROCHEMICALS LTD. VS. CIT(S UPRA), WHEREIN IT WAS HELD THAT THE INTEREST INCOME RECEIV ED PRIOR TO COMMENCEMENT CANNOT BE ADJUSTED AGAINST PROJECT COS T AND THE INTEREST INCOME SHALL BE ASSESSED. IN OUR OPINION, THE DELHI HIGH COURT, AFTER CONSIDERING THE SUPREME COURT DECISION IN THE CASE OF BONGAIGAON REFINERY & PETROCHEMICALS LTD. VS. CI T(SUPRA), IN THE CASE OF CIT V. JAYPEE DSC VENTURES LTD. (335 IT R 132), OBSERVED THAT THE INTEREST EARNED BY THE ASSESSEE O N THE FIXED DEPOSIT MADE FOR PERFORMANCE GUARANTEE OF CONTRACT WAS CAPITAL IN NATURE AND CANNOT BE ASSESSED AS INCOME FROM OTH ER SOURCES. SIMILARLY, THE TRIBUNAL ON ANOTHER OCCASION IN ASSE SSEES CASE, HAS TAKEN THE SAME VIEW. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION TH AT THE DEPOSIT MADE BY THE ASSESSEE HAD AN INEXTRICABLE NEXUS WITH THE - - ITA 2143 & 2144/15 5 IMPLEMENTATION OF THE POWER PROJECT. ACCORDINGLY, WE ARE INCLINED TO ALLOW THE GROUND TAKEN BY THE ASSESSEE. 6. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE A LLOWED. ORDER PRONOUNCED ON FRIDAY, THE 29 TH OF JAN., 2016 AT CHENNAI. SD/- SD/- ( $ % . & '( ) ( ) * + , ) DUVVURU RL REDDY - ./012304556037- 8 9: /JUDICIAL MEMBER ! 9:;<<5=1>01>?@AB@3 )8 /CHENNAI, C9 /DATED, THE 29 TH JAN., 2016. MPO* 9D EFGF /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. H- /CIT(A) 4. H /CIT 5. FIJ K /DR 6. J(L /GF.