ACIT, Bhubaneswar V. Orissa Power Generation Corporation Ltd, Bhubaneswar

ITA 299/CTK/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4457 (ITAT-CUTTACK)
• Duration Of Justice: 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2011
• Appeal Filed By: Department
• Bench Allotted: DB
• Assessment Year: 2004-2005
• Appeal Filed On: 05-08-2010
• Court: TRIBUNAL
• Section: 2

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. /AND . . . , S HRI K.S.S.PRASAD RAO , JUDICIAL MEMBER / I.T.A.NO. 299/CTK/2010 C.O.NO.26/CTK/2010 (FILED BY THE ASSESSEE) / ASSESSMENT YEAR 2004 - 05 ASST.COMMISSIONER OF INCOME - TAX, CIRCLE 2(2), BHUBANESWAR - - - VERSUS - ORISSA POWER GENE RATION CORPORATION LTD., FORTUNE TOWER, 7 TH FLOOR,CHANDRASEKHAR, BHUBANESWAR PANL:AAAC 04759 R ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI M.R.PANIGARHI, DR / FOR THE RESPONDENT: / SHRI C.R.JENA, DR / ORDER . . , , SHRI K.K.GUPTA, ACCOUNTANT MEMBER. THIS IS AN APPEAL FILED BY THE REVENUE AGITATING THE ACTION OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS ) IN DELETING THE ADDITION ON ACCOUNT OF BO ND ISSUE EXPENSES. THIS IS THE ONLY ISSUE RAISED BY THE REVENUE IN THIS APPEAL. THE ASSESSEE HAS FILED CROSS OBJECTION SUPPORTING THE IMPUGNED ORDER OF THE LEARNED CIT(A). 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF GENERATION OF POWER. IT HAS SET UP ITS POWER PLANTS (THERMAL POWER STATION AND MINI HYDEL PROJECTS) IN ORISSA. DURING THE COURSE OF ASSESSMENT, THE AO FOUND THAT THE ASSESSEE INCURRED EXPENDITURE ON ISSUE OF 16.5% ENERGY BONDS. THESE BONDS WERE ISSUED ON PRIVATE PLACEMENT BASIS TO COLLECT FUND S FOR THE EXPANSION PROGRAMME. THE TOTAL EXPENDITURE ON BONDS WAS RS.4,23,37,563 AND THE SAME WAS AMORTIZED BY THE ASSESSEE OVER A PERIOD OF SEVEN YEARS COMMENCING FROM THE FY 1997 - 98. THE ASSESSING OFFICER WAS OF THE VIEW THAT THERE IS NO BASIS FOR SUCH A MORTIZATION. HE WAS OF FURTHER VIEW THAT EVEN I.T.A.NO. 299/CTK /2010 2 PROVISIONS OF SECTION 35D ARE NOT APPLICABLE TO THE PRESENT CASE BECAUSE THE BONDS WERE ISSUED ON PRIVATE PLACEMENT BASIS. FURTHER R ELYING ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF PUNJAB STATE IN DUSTRIAL DEVELOPMENT CORPORATION LTD V. CIT (225 ITR 792), THE ASSESSING OFFICER HELD THE EXPENDITURE OF 60,48,223 AS NOT ALLOWABLE AS REVENUE DEDUCTION IN THE ASSESSMENT YEAR UNDER CONSIDERATION . ON APPEAL, THE LEARNED CIT(A) DELETED THE DISALLOWANCE OF 60,48,223 FOLLOWING THE DECISION OF ITAT DT.4.12.2007 IN ITA NO.29 TO 31/CTK/2006 IN ASSESSEES OWN CASE FOR THE AYS 1998 - 99 TO 2000 - 01. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 3. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERI AL AVAILABLE ON RECORD . 4. A T THE OUTSET, THE LEARNED AR OF THE ASSESSEE SUBMITTED THAT THE ISSUE INVOLVED IN THE PRESENT APPEAL HAS ALREADY BEEN DECIDED BY THE ITAT IN ASSESSEES OWN CASE STATED SUPRA, WHEREIN VIDE PARAGRAPH 16 OF THE SAID ORDER, DISMIS SED THE DEPARTMENTAL APPEALS ON IDENTICAL ISSUE AS RAISED IN THE PRESENT APPEAL. THE SAID PARAGRAPH READS AS UNDER : 16. ON THE OTHER HAND, THE LD. SR. COUNSEL SUBMITTED THAT THE EXPENSES INCURRED FOR ISSUING THE BOND IS ALLOWABLE AS A REVENUE EXPENDITUR E IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF INDIA CEMENTS LTD. VS. CIT [1 966] 60 ITR 52 (SC). THE BOND ISSUED PARTAKES OF THE SAME CHARACTER AS THE ISSUE OF DEBENTURE. THE BOND ISSUE IS NOTHING BUT A LOAN WHICH THE ASSESSEE HAS O BTAINED AND THEREFORE IT HAS BEEN HELD BY THE HONBLE SUPREME COURT THAT A LOAN OBTAINED IS NOT AN ASSET OR AN ADVANTAGE OF AN ENDURING NATURE, THE EXPENDITURE WAS MADE FOR SECURING THE USE OF MONEY FOR A CERTAIN PERIOD AND IT WAS IRRELEVANT TO CONSIDER TH E OBJECT WITH WHICH THE LOAN WAS OBTAINED. IN VIEW OF THE FORESAID DECISION EXPENDITURE INCURRED FOR OBTAINING THE BOND IS OF REVENUE NATURE AND SHOULD BE ALLOWED. THE ASSESSEE, I.T.A.NO. 299/CTK /2010 3 HOWEVER, IN VIEW OF THE LIFE OF BOND EXTENDING FOR 7 YEARS HAS APPORTIONED THE EXPENDITURE FOR EACH YEAR AMOUNTING TO 1/7 TH OF THE TOTAL EXPENDITURE. THIS METHOD OF CLAIMING THE EXPENDITURE FOR OBTAINING THE LOAN OR DEBENTURE SPREADING OVER A LIFE OF 5 OR 7 YEARS IS FULLY APPROVED AND ALLOWED BY THE HONBLE SUPREME COURT IN THE CASE OF MADRAS INDUSTRIAL INVESTMENT CORPN. LTD. VS. CIT 11997] 225 ITR 802 (SC). IN VIEW OF THE AFORESAID DECISIONS ,THE LD. DEPARTMENTAL APPEALS OF THESE YEARS ARE DISMISSED . THE LEARNED DR DID NOT DISPUTE THE ABOVE FACTS . HE AL SO COULD NOT BRING BEFORE US ANY CONTRARY DECISION SO AS TO TAKE ANOTHER VIEW THEN TAKEN BY THE COORDINATE BENCH ON THE ISSUE IN T HE ASSESSEES OWN CASE FOR THE EARLIER YEARS. THEREFORE, FOLLOWING THE DECISION OF THE COORDINATE BENCH WHEN THE LEARNED CIT(A) HAS DELETED THE DISALLOWANCE, WE FIND NO INFIRMITY IN HIS ORDER. THEREFORE, WE UPHOLD THE SAME AND DISMISS THE APPEAL OF THE REV ENUE. 5. SINCE, WE HAVE UPHELD THE IMPUGNED ORDER OF THE LEARNED CIT(A) ON THE ISSUE BEFORE US, THE C.O. FILED BY THE ASSESSEE SUPPORTING THE ORDER OF THE LEARNED CIT(A) IS ALLOWED. 6 . IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED AND THE C.O. FILE D BY THE ASSESSEE IS ALLOWED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 21 ST APRIL, 2011 S D/ - S D/ - ( . . . ) , ( K.S.S.PRASAD RAO), JUDICIAL MEMBER ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( ) DATE: 21 ST APRIL, 2011 ( ), ( H.K.PADHEE ), SENIOR.PRIVATE SECRETARY. I.T.A.NO. 299/CTK /2010 4 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : ASST.COMMISSIONE R OF INCOME - TAX, CIRCLE 2(2), BHUBANESWAR 2 / THE RESPONDENT: ORISSA POWER GENERATION CORPORATION LTD., FORTUNE TOWER, 7 TH FLOOR,CHANDRASEKHAR, BHUBANESWAR 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY, / BY ORDER, [ ] SENIOR PRIVATE SECRETARY