The ACIT, Bhopal V. M/s. NHDC Ltd., Bhopal

ITA 229/IND/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 5867 (ITAT-INDORE)
• Duration Of Justice: 7 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 20-10-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 22-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Keywords: Search and seizure; Capital receipt; Revised return
• Section: 143(3)

Judgement Text

1 IN THE INCOME TAX APPELATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JM AND SHRI R.C. SHARMA , AM ITA NOS. 229 & 230/IND/2010 A.YS.2004-05 & 2005-06 ACIT 2(1) BHOPAL ::: APPELLANT VS NHDC LIMITED BHOPAL PAN AABCN 1732G ::: RESPONDENT APPELLANT BY SHRI R.A. VERMA RESPONDENT BY SHRI HITESH CHIMNANI DATE OF HEARING 21.12.2012 DATE OF PRONOUNCEMENT 01.01. 201 3 O R D E R PER R.C. SHARMA, AM THESE ARE THE APPEALS FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(A) DATED 29.1.2010 FOR THE A.YS. 2004-05 AND 2005-06 ON THE FOLLOWING GROUNDS :- 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN I. DEETING THE ADDITION OF RS. 44,00,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INTEREST ON LO AN AND ADVANCES. II. DEETING THE ADDITION OF RS. 61,00,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF MISCELLANEOUS RECEIPTS AND RECOVERIES III DEETING THE ADDITION OF RS. 4,13,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INSURANCE CLAI M. SIMILAR GROUNDS HAVE BEEN TAKEN BY THE REVENUE IN T HE A.Y. 2005-06 WHEREIN FACTS AND CIRCUMSTANCES WERE T HE SAME. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. THE ASSESSEE IS ENGAGED IN CONSTRUCTION OPERATION, TRANSMISSION AND GENERATION OF HYDROLIC ELECTRIC POWER STATION. DURING THE COURSE OF ASSES SMENT, THE ASSESSING OFFICER MADE ADDITION ON ACCOUNT OF INTEREST RECOVERED FROM CONTRACTORS ON THE LOANS AN D ADVANCES, MISCELLANEOUS RECEIPTS AND RECOVERIES FRO M SCRAP SALE AND INSURANCE CLAIM. 3 3. BY THE IMPUGNED ORDER FOR THE A.Y. 2004-05, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DELETE D THESE ADDITIONS AGAINST WHICH THE REVENUE IS IN APP EAL BEFORE US, AFTER HAVING THE FOLLOWING OBSERVATIONS :- 5. I HAVE CAREFULLY CONSIDERED ALL THE SUBMISSIONS AND ARGUMENTS ADVANCED BEFORE ME AND HAVE PERUSED THE APEX COURT DECISIONS IN THE CASES OF CIT VS. BOKARO STEEL LTD. (1999) 151 CTR (SC) 276: (1999) 2 36 ITR 315 (SC) AND TUTICORIN ALKALI CHEMICALS (SUPRA). I AM AFRAID I A M UNABLE TO UPHOLD THE LEARNED A.R 'S CONTENTION THAT PRE-OPERATIVE EXPENS ES AND INCOME SHOULD BE SET OFF AGAINST ONE ANOTHER AND ONLY THE LEFT-OVER OF S UCH INCOME POST EXPENDITURE DURING THE PRE-OPERATIVE PERIOD, SHOULD BE BROUGHT TO TAX AND NOT THE WHOLE OF IT. THE IMPORT OF-THE DECISION OF THE HON 'BLE SUPREME COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS (SUPRA) HAS NOT AT ALL B EEN AFFECTED, DILUTED OR DIMINISHED BY ITS SUBSEQUENT PRONOUNCEMENT IN THE C ASE OF CIT VS. BOKARO STEEL LTD. (SUPRA) IN SO FAR AS INTEREST INCOME ACCRUED O N TEMPORARY FIXED BANK DEPOSITS IS CONCERNED, MUCH LESS SUPERSEDED OR OVER RIDDEN BY THE SAME. THE LATTER DECISION HAS BEEN GIVEN IN AN ENTIRELY DIFFE RENT SETTING OF FACTS. IT WOULD BE WORTHWHILE TO REPRODUCE BELOW THE FOLLOWING IMPORTA NT PARAGRAPH FROM THE BOKARO STEEL LTD DECISION: IN THE ASSESSMENT YEAR 1971-72, THE ASSESSEE HAD SHOWN IN ITS BOOKS OF ACCOUNT A SUM OF RS. 7,39,232 AS INCOME FR OM INTEREST RECEIVED FROM HINDUSTAN STEEL LTD. FOR THE EGHT COC OMOTIVES SUPPLIED BY THE ASSESSEE COMPANY TO THEM. THE ENTRY IN THIS REGARD WAS REVERSED IN THE NEXT YEAR SINCE HINDUSTAN STEEL LTD . HAD REPLACED THE EIGHT LOCOMOTIVES LENT BY THE ASSESSEE COMPANY TO I T BY NEW ONES. THE ENTIRE NATURE OF THE TRANSACTION WAS CHANGED BETWEE N THE PARTIES. THERE WAS A RESOLUTION OF THE ASSESSEE COMPANY IN THIS REGARD AND THE INCOME FROM INTEREST DID NOT RESULT AT ALL AS T HE ORIGINAL AGREEMENT CEASED TO BE OPERATIVE AB INITIO. THE ENTRY IN THE BOOKS WHICH WAS MADE WAS ABOUT A HYPOTHETICAL INCOME WHICH DID NOT MATERIALIZE AND THE ENTRY WAS REVERSED IN THE NEXT YEAR. BOTH THE T RIBUNAL AS WELL AS THE HIGH COURT HAVE HELD THAT SINCE THIS ENTRY REFL ECTED ONLY HYPOTHETICAL INCOME, IT COULD NOT BE BROUGHT TO TAX AS INCOME. ONLY REAL INCOME CAN BE BROUGHT TO TAX . 4 5.1. A MERE PLAIN READING OF THE AFORESAID SELF-EXP LANATORY PARAGRAPH ANSWERS ALL THE ARGUMENTS AND CONTENTIONS ADVANCED ON BEHAL F OF THE APPELLANT AND PUTS THE WHOLE CONTROVERSY WITH REGARD TO THE INTEREST I NCOME ON TEMPORARY FDRS AT COMPLETE REST. IN FACT, THE APEX COURT CITING AP PROVINGLY THE RATIO OF THE DECISION IN THE CASE OF TUTICORIN ALKALI CHEMICALS (SUPRA) OBSERVED THAT IF A PERSON BORROWS MONEY FOR BUSINESS PURPOSES, BUT UTI LIZES THE MONEY TO EARN INTEREST, HOWEVER, TEMPORARILY, THE INTEREST SO GEN ERATED WILL BE HIS INCOME. THE COURT EMPHASIZED THAT MERELY BECAUSE HE UTILIZE D THE INTEREST EARNED TO REPAY THE INTEREST ON THE LOAN TAKEN WILL NOT MAKE THE INTEREST INCOME A CAPITAL RECEIPT. EVEN SO, AS MAY BE SEEN FROM THE ABOVE PAR AGRAPH REPRODUCED FROM THE DECISION IN THE CASE OF CIT VS. BOKARO STEEL LT D. (SUPRA), SO MUCH RELIED UPON BY THE LEARNED A.R., IT SPEAKS OF A DIFFERENT FACTUAL POSITION LIKE SUPERSESSION OF THE ORIGINAL AGREEMENT, REVERSAL OF ENTRIES, HYPOTHETICAL INCOME, CHANGE IN THE VERY NATURE OF TRANSACTION AN D THE LIKE, NONE OF WHICH IS PRESENT THERE IN THE CASE UNDER CONSIDERATION, WHIC H EVENTUALLY CANNOT BUT BE GOVERNED BY THE RATIO OF THE HON 'BLE SUPREME COURT DECISION IN THE CASE OF TUTICORIN ALKALI CHEMICALS (SUPRA) IN SO FAR AS THE INTEREST INCOME FROM THE BANK IS CONCERNED. I HAVE, THEREFORE, NOT A WHIT OF HESITATION IN UPHOLDING THE IMPUGNED ADDITION AND CONFIRMING THE SAME IN ALL TH E THREE APPEALS. 5.2 THE POSITION WITH REGARD TO THE OTHER THREE REC EIPTS IS, HOWEVER, DIFFERENT. INTEREST RECOVERED FROM CONTRACTORS INNP ROJECT UNDER CONSTRUCTION ON TEMPORARY LOANS ADVANCED TO THEM TO FACILITATE EXEC UTION OF THE CONTRACT, EXPENSES RECOVERED AND PROCEEDS OF SCRAP SALE PERTA IN TO THE PROJECT UNDER CONSTRUCTION AND AMOUNT OF INSURANCE CLAIMS PERTAIN ING TO THE PROJECT UNDER THE CONSTRUCTION BEING INTRINSICALLY CONNECTED AND INEX TRICABLY LINKED WITH THE EXECUTION OF THE PROJECT CONSTITUTE CAPITAL RECEIPT S AS HELD BY THE HON'BLEBLE APEX COURT IN THE CASE OF CHALAPALLIO SUGAR LTD. V CIT (1975) 98 ITR 167 (SC) AND RE-AFFIRMED BY IT IN THE CASE OF CIT VS. BOKARO STEEL LTD. (SUPRA). EVIDENTLY, THESE DO NOT CONSTITUTE INCOME AND THE ASSESSING OF FICER HAS ERRED IN GIVING A FINDING TO THAT EFFECT. ALL SUCH CONSEQUENTIAL ADDI TIONS ARE DELETED. ' 4. APART FROM THE ABOVE FINDINGS OF MY PREDECESSOR, IN REGARD TO A. Y. 2003-04, IT MAY ALSO BE MENTIONED THAT THE APPELLANT ITSELF HAD SHO WN THE AMOUNT OF RS.L ,95,56, 177 /- RECEIVED ON ACCOUNT OF INTEREST ON SHORT TERM DEPOS IT WITH THE BANK AS 'INCOME FROM OTHER SOURCES' IN THE RETURN OF INCOME FURNISHED. THE APP ELLANT HAD NOT FILED ANY REVISED RETURN. THE APPELLANT HAD MADE CLAIM DURING THE ASS ESSMENT PROCEEDINGS BY FILING A LETTER BEFORE THE AO THAT THE INTEREST EARNED ON SH ORT TERM DEPOSIT WITH THE BANK WAS NOT INCOME FROM OTHER SOURCES BEING CAPITAL RECEIPT AND REQUIRED TO BE REDUCED FROM CAPITAL COST OF THE PROJECT. AS HELD BY THE HON'BLE SUPREME COURT IN TH E CASE OF GOETZE (INDIA) LTD. VS. CIT (2006) 284 ITR 323 (SC) THAT THERE IS NO PROVISION IN THE INCOME TAX ACT 1961 ALLOWING AN AMENDMENT IN THE RETURN WITHOUT A REVISED RETURN. SINCE, IN THIS CASE, THE APPELLANT HAD NOT FILED REVISED RETURN, THE ASS ESSING OFFICER HAD CORRECTLY REJECTED THE CLAIM MADE BY THE APPELLANT BY WAY OF LETTER ADDRES SED TO THE ASSESSING OFFICER DURING ASSESSMENT PROCEEDINGS THAT THE INTEREST WAS NOT RE VENUE RECEIPT AND WAS NOT CHARGEABLE TO TAX. FURTHER, IT MAY ALSO BE POINTED OUT HERE TH AT IF THE RETURN WAS ONLY PROCESSED U/S 143(1) OF THE ACT AND HAD THE RETURN NOT BEEN SELEC TED FOR SCRUTINY, THERE WOULD HAVE BEEN NO CHANCE / OPPORTUNITY WITH THE APPELLANT TO CLAIM THAT THE INTEREST EARNED WAS NOT CHARGEABLE TO TAX. THE PROCEEDINGS U/S 143(3) CANNO T BE CONSIDERED FOR THE BENEFIT OF AN 5 ASSESSEE. THUS, ON THIS ACCOUNT ALSO, THE CLAIM OF THE APPELLANT ON ACCOUNT OF INTEREST FOR A. Y. 2003-04 DESERVES TO BE REJECTED 4. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. THE ISSUE UNDER CONSIDERATION IS SQUARELY COVERED BY THE DECISION OF THE HON'BLE SUPREME CO URT IN THE CASE OF BOKARO STEELS; 236 ITR 315 WHICH HAS BEEN ELABORATELY DEALT WITH BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IN HIS ORDER BY RECORDING HIS FINDINGS IN PARA 5. THE LEARNED CIT DR ALSO DID NO T DECLINE THE APPLICATION OF JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF BOKARO STEEL (SUPRA) T O THE FACTS OF INSTANT CASE. WE, THEREFORE, DO NOT FIND A NY INFIRMITY IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) BOTH IN A.YS. 2004-05 AND 2005 -06 IN DELETING THE ADDITION MADE ON ACCOUNT OF INTERES T RECOVERED FROM CONTRACTORS IN PROJECT UNDER CONSIDERATION, RECOVERIES FROM SCRAP SALE AND INSUR ANCE CLAIMS PERTAINING TO THE PROJECT UNDER CONSIDERATIO N, BY 6 APPLYING THE PROPOSITION OF LAW LAID DOWN BY THE HO N'BLE SUPREME COURT IN THE CASE OF BOKARO STEEL (SUPRA). 5. IN THE RESULT, BOTH THE APPEALS FILED BY THE REV ENUE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 31.12.2012. SD SD (JOGINDER SINGH) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED - 01.01.2013 COPY TO : APPELLANT, RESPONDENT, CIT, CIT(A), DR, GUARD FILE DN/- 2124