Gujarat Industries Power Co.Ltd., Baroda V. The ACIT.,Circle-1(1), Baroda

ITA 3048/AHD/2010

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5986 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 27-02-2017
• Assessment Year: 1997-1998
• Appeal Filed On: 11-11-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Business income; Depreciation; Tangible material; Difference of opinion; Change of opinion
• Section: 143(3); 234B; 147; 148

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER !# I.T.A. NO.3048, 3049, 3050 & 3051/AHD/2010 ( / ASSESSMENT YEAR : 1997-98, 1998-99, 1999-2000 & 200 0-01 ) GUJARAT INDUSTRIES POWER COMPANY LTD. P.O. PETROCHEMICALS, BARODA 391 346 # VS. THE ACIT, CIRCLE 1(1), BARODA $ # % & # PAN/GIR NO. : AAACG 7277 Q ( !$' / APPELLANT ) .. ( ($' # RESPONDENT ) !$') # APPELLANT BY : SHRI SANJAY R. SHAH, AR ($'*) / RESPONDENT BY : SHRI SANJAY AGARWAL & ASHISH POPHARE, DR + ,*-. / DATE OF HEARING 27/02/2017 /012*-. / DATE OF PRONOUNCEMENT 24/04/2017 3# O R D E R PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER : THESE FOUR APPEALS HAVE BEEN FILED BY THE ASSESS EE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-I, BARODA, DATED 03/08/2010 (FOR THE AY 1997-98, 1998-99), 09/08/201 0 (FOR THE AY 1999-2000) & 12/08/2010 (FOR THE AY 2000-01). ITA NO. 3048, 3049, 3050 & 3051/AHD/2010 G UJARAT INDUSTRIES POWER COMPANY LTD. VS. ACIT A.Y. 1997-98, 1998-99, 1999-2000 & 2000-01 - 2 - 2. ASSESSEE HAS BEEN TAKEN FOLLOWING GROUNDS OF APP EALS: ITA NO.3048/AHD/2010 FOR A.Y. 1997-98: (I). THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN HOLDING THAT THE AO WAS JUSTIFIED IN REOPENING THE ASSESSME NT U/S 147 AND RE-COMPUTING THE BOOK PROFIT. (I.A) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT FULL AND TRUE PARTICULARS ABOUT THE COMPUTING OF BOOK PROFIT WERE NOT SUBMITTED BY THE APPELLANT. (I.B) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN RELYING ON THE DECISION OF THE HIGH COURT OF ALLAHABAD IN THE CASE OF RENU SUGAR POWER COMPANY VS. ITO 117 ITR 719 (ALL.) . IT IS SUBMITTED THAT THE DECISION IS NOT APPLICABLE IN THE FACTS OF THE CASE OF THE APPELLANT. (I.C) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN RELYING ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN T HE CASE OF PRAFUL CHUNILAL PATEL VS. M.J. MAKWANA, ACIT(1999) 236 ITR 832 (GUJ) SINCE THE SAME IS NOT APPLICABLE IN THE FACTS OF THE CASE. (II). THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT DIVIDEND INCOME OF RS.1,26,14,000/- IS NOT DERIVED FROM THE BUSINESS OF GENERATION OF POWER. (II.A) THE LD. CIT(A) HAD ERRED IN LAW AND ON FACT S IN HOLDING THAT DISCOUNT INCOME ON BILL OF EXCHANGE OF RS.35,0 0,000/- AND CLAIMS RECEIVED OF RS.18,67,000/- ARE NOT DERIV ED FROM THE BUSINESS OF GENERATION OF POWER. (II.B) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN APPLYING THE RATIO OF THE DECISION OF THE HONBLE SUPREME CO URT IN THE CASE OF PANDIAN CHEMICALS VS. CIT 262 ITR 278 W HICH IS INAPPLICABLE IN THE FACTS OF THE APPELLANTS CAS E. (II.C). THE LD. CIT(A) HAS ERRED IN LAW AND FACTS I N NOT FOLLOWING ORDER OF HONBLE ITAT IN APPELLANTS OWN CASE FOR T HE IMMEDIATELY PRECEDING YEAR (A.Y. 1996-97) WITHOUT T HERE BEING ANY CHANGE IN FACTS OR IN LAW IN THE INTERVEN ING PERIOD. ITA NO. 3048, 3049, 3050 & 3051/AHD/2010 G UJARAT INDUSTRIES POWER COMPANY LTD. VS. ACIT A.Y. 1997-98, 1998-99, 1999-2000 & 2000-01 - 3 - (III). THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS HOLDING THAT INTEREST ON FIXED DEPOSIT OF RS. 1,99,24,070/- AND OTHER INTEREST HAS NOT BEEN DERIVED FROM BUSINESS OF GENERATION OF POWER. (IV). THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT LEASE RENTAL OF RS.3,16,20,000/- HAS NOT BEEN DERIV ED FROM THE BUSINESS OF GENERATION OF POWER. (V). THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS I N HOLDING THAT THE SCRAP SALES OF RS. 8,15,000/- IN NOT DERIVED FROM B USINESS OF GENERATION OF POWER. (VI). THE LD. CIT(A) HAS ERRED IN NOT ACCEPTING CON TENTION OF APPELLANT TO REDUCE THE EXPENDITURE SUCH AS STAFF W ELFARE, BANK CHARGES, LEGAL AND PROFESSIONAL FEES, ETC. AGGREGAT ING TO RS.21.16 LACS WHILE COMPUTING PROFIT DERIVED FROM BUSINESS O F GENERATION OF POWER BEING EXPENDITURE WHICH CANNOT BE SAID TO BE EXPENDITURE INCURRED FOR DERIVING PROFIT FROM GENER ATION OF POWER. (VII). THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT INTEREST U/S. 234B IS CHARGEABLE THOUGH THE TAX IS COMPUTED UNDER THE PROVISIONS OF SECTION 115JA. ITA NO.3049/AHD/2010 FOR A.Y. 1998-99: (I ). THE LD. CIT(APPEALS) HAS ERRED IN LAW AS W ELL AS ON FACTS IN HOLDING THAT THE A.O. WAS JUSTIFIED IN REOPENING TH E ASSESSMENT U/S147 AND RE-COMPUTING THE BOOK PROFIT. (I.A) THE LD. CIT(APPEALS) HAS FAILED TO APPRECIATE THAT THERE WAS NO TANGIBLE MATERIAL WHICH JUSTIFY REOPENING OF ASSESSMENT AND THEREFORE REASSESSMENT IS BAD IN LAW . (I.B) THE ID. CIT(A) HAS FAILED TO APPRECIATE THAT THERE WAS MERELY CHANGE OF OPINION AND THEREFORE REASSESSMENT IS BAD IN LAW. ITA NO. 3048, 3049, 3050 & 3051/AHD/2010 G UJARAT INDUSTRIES POWER COMPANY LTD. VS. ACIT A.Y. 1997-98, 1998-99, 1999-2000 & 2000-01 - 4 - (II). THE LD. CIT(APPEALS) HAD ERRED IN LAW AND ON FACTS IN HOLDING THAT DIVIDEND INCOME OF RS. 1,44,50,000/- IS NOT DE RIVED FROM THE BUSINESS OF GENERATION OF POWER. (II.A) THE ID. CIT(APPEALS) HAD ERRED IN LAW AND ON FACTS IN HOLDING THAT DISCOUNT INCOME ON BILL OF EXCHANGE OF RS. 33,32,000/- AND CLAIMS RECEIVED OF RS. 10,48,000/- ARE NOT DERIVED FROM THE BUSINESS OF GENERATION OF POWER. (II.B) THE LD. CIT(APPEALS) HAS ERRED IN LAW AND ON FACTS IN APPLYING THE RATIO OF THE DECISION OF THE HON'BLE S UPREME COURT IN THE CASE OF PANDIAN CHEMICALS VS. CIT 262 ITR 278 WHICH IS INAPPLICABLE IN THE FACTS OF THE APPEL LANT'S CASE. (II.C) THE ID. CIT(A) HAS ERRED IN LAW AND FACTS IN NOT FOLLOWING ORDER OF HON'BLE ITAT IN APPELLANT'S OWN CASE FOR T HE IMMEDIATELY PRECEDING YEAR (A.Y. 1996-97) WITHOUT T HERE BEING ANY CHANGE IN FACTS OR IN LAW IN THE INTERVEN ING PERIOD. (III). THE LD. CIT(APPEALS) HAS ERRED IN LAW AND ON FACTS HOLDING THAT INTEREST ON FIXED DEPOSIT OF RS. 1,48,59,000/- AND OTHER INTEREST HAS NOT BEEN DERIVED FROM BUSINESS OF GENERATION OF POWER. (IV). THE LD. CIT(APPEALS) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT LEASE RENTAL OF RS. 3,16,20,000/- HAS NOT BEEN DERIVED FROM THE BUSINESS OF GENERATION OF POWER. (V). THE LD. CIT(APPEALS) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE SCRAP SALES OF RS. 9,73,984/- IS NOT DERIV ED FROM THE BUSINESS OF GENERATION OF POWER. (VI). THE LD. CIT(APPEALS) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT PROFIT ON SALE OF ASSETS IS NOT DERIVED FROM T HE BUSINESS OF GENERATION OF POWER. (VII). THE LEARNED CIT(A) HAS ERRED IN NOT ACCEP TING CONTENTION OF APPELLANT TO REDUCE THE EXPENDITURE SUCH AS STAFF W ELFARE, BANK CHARGES, LEGAL AND PROFESSIONAL FEES, ETC. WHILE CO MPUTING PROFIT DERIVED FROM BUSINESS OF GENERATION OF POWER BEING EXPENDITURE ITA NO. 3048, 3049, 3050 & 3051/AHD/2010 G UJARAT INDUSTRIES POWER COMPANY LTD. VS. ACIT A.Y. 1997-98, 1998-99, 1999-2000 & 2000-01 - 5 - WHICH CANNOT BE SAID TO BE EXPENDITURE INCURRED FOR DERIVING PROFIT FROM GENERATION OF POWER. (VIII). THE LD. CIT(APPEALS) HAS ERRED IN LAW AND O N FACTS IN HOLDING THAT INTEREST U/S 234B IS CHARGEABLE THOUGH THE TAX IS COMPUTED UNDER THE PROVISIONS OF SECTION 115JA. ITA NO.3050/AHD/2010 FOR A.Y. 1999-00: (I). THE LD. CIT(APPEALS) HAS ERRED IN LAW AS WELL AS ON FACTS IN HOLDING THAT THE A.O. WAS JUSTIFIED IN REOPENING TH E ASSESSMENT U/S 147 AND RE-COMPUTING THE BOOK PROFIT. (I.A) THE LD. CIT(APPEALS) HAS FAILED TO APPRECIA TE THAT THERE WAS NO TANGIBLE MATERIAL WHICH JUSTIFY REOPENING OF ASSESSMENT AND THEREFORE REASSESSMENT IS BAD IN LAW . (I.B) THE ID. CIT(A) HAS FAILED TO APPRECIATE THAT THERE WAS MERELY CHANGE OF OPINION AND THEREFORE REASSESSMENT IS BAD IN LAW. (II). THE LD. CIT(APPEALS) HAD ERRED IN LAW AND ON FACTS IN HOLDING THAT LIQUIDATED DAMAGES OF RS. 23,35,000/- & CLAIMS RECEIVED OF RS. 24,91,000/- ARE NOT DERIVED FROM THE BUSINESS O F GENERATION OF POWER. (II.A) THE LD. CIT(APPEALS) HAS ERRED IN LAW AND ON FACTS IN APPLYING THE RATIO OF THE DECISION OF THE HON'BLE S UPREME COURT IN THE CASE OF PANDIAN CHEMICALS VS. CIT 262 ITR 278 WHICH IS INAPPLICABLE IN THE FACTS OF THE APPEL LANT'S CASE. (III). THE LD. CIT(APPEALS) HAS ERRED IN LAW AND ON FACTS HOLDING THAT INTEREST ON FIXED DEPOSIT OF RS. 2,19,07,000/- AND OTHER INTEREST HAS NOT BEEN DERIVED FROM BUSINESS OF GENERATION OF POWER. (IV). THE LD. CIT(APPEALS) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE SCRAP SALES OF RS. 32,17,912/- IS NOT DERI VED FROM THE BUSINESS OF GENERATION OF POWER. (V). THE LEARNED CIT(A) HAS ERRED IN NOT ACCEPTING CONTENTION OF APPELLANT TO REDUCE THE EXPENDITURE SUCH AS STAFF W ELFARE, BANK CHARGES, LEGAL AND PROFESSIONAL FEES, ETC. WHILE CO MPUTING PROFIT DERIVED FROM BUSINESS OF GENERATION OF POWER BEING EXPENDITURE ITA NO. 3048, 3049, 3050 & 3051/AHD/2010 G UJARAT INDUSTRIES POWER COMPANY LTD. VS. ACIT A.Y. 1997-98, 1998-99, 1999-2000 & 2000-01 - 6 - WHICH CANNOT BE SAID TO BE EXPENDITURE INCURRED FOR DERIVING PROFIT FROM GENERATION OF POWER. 3. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER:- THE APPELLANT COMPANY IS ENGAGED IN THE BUSINESS OF GENERATION OF ELECTRICITY. FOR THE YEAR UNDER CONSIDERATION IT HA S FILED ITS RETURN OF INCOME DECLARING LOSS OF RS. 371,88,182/-. RETURN W AS PROCESSED U/S. 143(1)(A) ON 27/03/1998 AND MADE PRIMA FACIE ADJUST MENT OF RS.12,42,763/- AND THEREBY REDUCE THE RETURNED LOSS OF RS. 3,59,45,419/-. THEREAFTER, THE CASE WAS SELECTED FOR SCRUTINY ASSE SSMENT AND ORDER U/S.143(3) WAS PASSED ON 19/01/2000. THE CASE WAS T HEN REOPENED BY ISSUE OF NOTICE U/S. 148 ON 08/01/2004. GROUND NO.1: 4. THE ASSESSMENT WAS REOPENED ON 08/01/2004 AND BE FORE THE LD. CIT(A) ASSESSEE HAS REQUESTED FOR THE REASONS FOR T HE REOPENING. THE REASONS WERE COMMUNICATED TO THE ASSESSEE VIDE LETT ER DATED 27/09/2004. 5. APPELLANT HAS SUBMITTED BEFORE THE ASSESSING OFF ICER VIDE ITS LETTER DATED 20/10/2004 THAT AS THE REOPENING OF THE ASSES SMENT IS AFTER THE EXPIRY OF THE PERIOD OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR AND THEREFORE, THE SAME IS COVERED BY THE PROVISO T O SECTION 147 AND ITA NO. 3048, 3049, 3050 & 3051/AHD/2010 G UJARAT INDUSTRIES POWER COMPANY LTD. VS. ACIT A.Y. 1997-98, 1998-99, 1999-2000 & 2000-01 - 7 - THERE WAS NO FAILURE ON THE PART OF THE APPELLANT T O DISCLOSE ALL THE DETAILS TRULY AND FULLY AND THEREFORE, REOPENING CANNOT BE MADE BY INVOKING PROVISIONS OF SECTION 147 OF THE INCOME-TAX ACT. 6. THEREAFTER, ASSESSING OFFICER HAS PASSED ORDER D ISPOSING OF THE ASSESSEES OBJECTIONS AGAINST THE ISSUE OF NOTICE U /S. 148 OF THE INCOME- TAX ACT, 1961 ON 28/10/2004, WHICH WAS ALSO REFERRE D TO IN THE ASSESSMENT ORDER PASSED U/S. 143(3) R.W.S. 147. GROUND NO.2 7. APPELLANT HAS RECEIVED AND CREDITED TO THE PROFI T AND LOSS ACCOUNT FOLLOWING INCOMES DURING THE YEAR UNDER CONSIDERATI ON: SR.NO. PARTICULARS AMOUNT (RS.) 1. INTEREST ON DEPOSITS/BONDS 1,99,24,000 2. OTHER INTEREST (INCLUDES INTEREST ON VEHICLE LOAN & HBA RS. 1,69,015, INTEREST ON DELAYED PAYMENTS RS. 1,48,07,870, INTEREST ON LATE PAYMENT OF ALLOTMENT MONEY RS.73,73,111) 2,50,25,000 3. DIVIDEND 1,26,14,000 4. CLAIMS RECEIVED 18,67,000 5. LEASE RENT 3,16,20,000 6. MISCELLANEOUS INCOME 8,94,000 7. DISCOUNT ON BILLS OF EXCHANGE 35,00,000 8. LIQUIDATED DAMAGES 96,000 TOTAL 9,55,40,000 ITA NO. 3048, 3049, 3050 & 3051/AHD/2010 G UJARAT INDUSTRIES POWER COMPANY LTD. VS. ACIT A.Y. 1997-98, 1998-99, 1999-2000 & 2000-01 - 8 - 8. APPELLANT HAS ESTABLISHED AN INDUSTRIAL UNDERTAK ING FOR GENERATION OF POWER AND ITS SOLE ACTIVITY IS TO GENERATE POWER ONLY AND NO OTHER INDUSTRIAL ACTIVITIES OR OTHER ACTIVITIES ARE CARRI ED ON. SINCE POWER GENERATION WAS THE ONLY ACTIVITY AND THEREFORE, ALL INCOME INCLUDING INTEREST, DIVIDEND, INSURANCE CLAIM, SALE OF SCRAP, LEASE RENT ETC. CAN BE SAID TO BE DERIVED FROM INDUSTRIAL UNDERTAKING OF G ENERATION OF POWER AND THEREFORE ELIGIBLE FOR DEDUCTION FROM THE BOOK PROF IT. IT WAS SUBMITTED THAT IN THE ABSENCE OF THE OPERATION OF THE INDUSTR IAL UNDERTAKING, OTHER INCOME WOULD NOT ARISE AS THEY ARE INEXTRICABLY LIN KED TO ITS MAIN ACTIVITY OF GENERATION OF POWER AND THEREFORE, OTHER INCOME ALSO CAN BE SAID TO BE DERIVED FROM THE INDUSTRIAL UNDERTAKING FOR GENERAT ION OF POWER AND THEREFORE, ELIGIBLE FOR DEDUCTION WHILE COMPUTING B OOK PROFIT. HOWEVER, LEARNED ASSESSING OFFICER HAS NOT ACCEPTED THE SUBM ISSIONS MADE BY THE APPELLANT AND MADE THE ADDITIONS FOR THE REASONS GI VEN IN THE BODY OF THE ORDER. 9. FURTHER, THE LEARNED ASSESSING OFFICE CONSIDERED GROSS INCOME AND DID NOT REDUCE ANY EXPENDITURE INCURRED FOR EARNING SUCH INCOME. APPELLANT HAS SPECIFICALLY STATED IN ITS LETTER DAT ED 20/10/2004 THAT APPELLANT HAS INCURRED EXPENSES FOR EARNING THE INC OME AND THE SAME ARE REQUIRED TO BE DEDUCTED WHILE MAKING THE ADDITION. APPELLANT HAS SUBMITTED THAT INTEREST EXPENSES AGAINT THE INTERES T INCOME, REPAIRS AGAINST INSURANCE CLAIM, LEASE DEPRECIATION AGAINST LEASE RENTAL INCOME OUGHT TO HAVE BEEN REDUCED FROM THE GROSS INCOME. H OWEVER, ASSESSING ITA NO. 3048, 3049, 3050 & 3051/AHD/2010 G UJARAT INDUSTRIES POWER COMPANY LTD. VS. ACIT A.Y. 1997-98, 1998-99, 1999-2000 & 2000-01 - 9 - OFFICER HAS NOT DEALT WITH THE CLAIM OF THE APPELLA NT AND MADE ADDITION TO THE INCOME U/S. 115JA OF THE ACT. 10. FINALLY TOTAL INCOME IN VIEW OF THE PROVISION O F SECTION 115JA WAS DETERMINED RS. 2,86,62,000/- AND TOTAL REVISED INCO ME WAS RS.1,16,88,465/-. 11. AGAINST THE SAID ORDER ASSESSEE PREFERRED FIRST STATUTORY APPEAL BEFORE THE LD. CIT(A), WHO PARTLY ALLOWED THE APPEA L OF THE ASSESSEE. 12. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IM PUGNED ORDER AND VOLUMINOUS PAPER BOOK. SAME WAS DISCUSSED UNDER RUL E 18(VI) OF ITAT RULES. SO FAR AS FIRST GROUNDS OF APPEAL IS AGAINST THE REOPENING OF THE ASSESSMENT U/S. 147 IS CONCERNED. 13. IN THIS CASE RETURN WAS FILED ON 28/11/1997 SHO WING LOSS OF RS.3,71,88,182/-. THE RE-ASSESSMENT U/S. 143(3) WAS COMPLETED ON 19/01/2000 AT TOTAL INCOME OF RS.25,02,06,700/-. SU BSEQUENTLY THE CASE WAS REOPENED BY ISSUING OF NOTICE U/S. 148 ON 08/01 /2004 FOR THE REASON THAT AS PER SCHEDULE 15 OF THE ANNUAL ACCOUNTS, THE ASSESSEE HAD SHOWN OTHER INCOME OF RS.9,55,40,000/- COMPRISING OF DIVI DENDS, INTEREST, LIQUIDATED DAMAGES, ETC. WHICH WERE CHARGEABLE TO T AX U/S. 115JA. ITA NO. 3048, 3049, 3050 & 3051/AHD/2010 G UJARAT INDUSTRIES POWER COMPANY LTD. VS. ACIT A.Y. 1997-98, 1998-99, 1999-2000 & 2000-01 - 10 - 14. IN THIS CASE, THE APPELLANT SUBMITS THAT REOPEN ING U/S. 147 WAS NOT AS PER LAW AND COULD NOT BE INVOKED FOR RE-OPENING OF THE ASSESSMENT AFTER EXPIRY OF 4 YEARS FROM THE END OF THE RELEVAN T ASSESSMENT YEAR WHERE THERE WAS NO FAILURE ON THE PART OF THE APPEL LANT TO DISCLOSE TRULY OR FULLY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSME NT. 15. IN THIS CASE, ORIGINAL ASSESSMENT ORDER U/S. 14 3(3) WAS PASSED ON 19/01/2000 AND SAME IS ANNEXED ON PAGE NOS. 1 TO 14 OF THE PAPER BOOK, ORDER OF CIT(A) PASSED ON 23/12/2004 AND SAME IS AN NEXED IN PAGE NOS. 15 TO 27 OF THE PAPER BOOK, COPY OR RETURN FILED AL ONG WITH STATEMENT OF TOTAL INCOME PURSUANT TO NOTICE RECEIVED U/S. 148 W AS PASSED ON 20/01/2004 AND SAME IS ANNEXED ON PAGE NOS. 28 TO 3 0 OF THE PAPER BOOK, COPY OF REASONS RECORDED BY THE ASSESSING OFF ICER FOR REASSESSMENT WAS PASSED ON 08/10/2004 AND SAME IS A NNEXED ON PAGE NO.31 OF THE PAPER BOOK, PROFIT AND LOSS ACCOUNT FO R THE FINANCIAL YEAR 1996-97 AND SCHEDULE OF OTHER INCOME ALSO FILED BY THE ASSESSEE AND SAME IS ANNEXED ON PAGE NO. 32 & 33 OF THE PAPER BO OK, ASSESSEE HAS ALSO FILED COPY OF CIT(A)S ORDER IN APPELLANTS OW N CASE FOR ASSESSMENT YEAR 1996-97 AT PAGE NOS. 34 TO 42. IF WE CALCULATE THE TIME LIMIT FOR REOPENING OF THE CASE AS ORIGINAL ASSESSMENT WAS DO NE ON 19/01/2004 AND FOUR YEARS ELAPSE ON 31/03/2000. FINANCIAL YEAR HAS END ON 31/03/2000 AND FOUR YEARS ELAPSE ON 31/03/2004, BUT NOTICE U/S . 08/10/2004 WAS BEYOND THE PERIOD OF 4 YEARS. SO WE HOLD THAT THE R EASSESSMENT PROCEEDING WERE ILLEGAL AND SAME WAS BEYOND THE PRE SCRIBED PERIOD. ITA NO. 3048, 3049, 3050 & 3051/AHD/2010 G UJARAT INDUSTRIES POWER COMPANY LTD. VS. ACIT A.Y. 1997-98, 1998-99, 1999-2000 & 2000-01 - 11 - 16. IN OUR OPINION LEARNED AO AS WELL CIT WERE NOT JUSTIFIED IN THE REOPENING OF ASSESSMENT U/S.147 AND RE-COMPUTING TH E BOOK PROFIT. 17. NOW WE COME ON GROUNDS RELATED TO DIVIDEND INCO ME OF RS.1,26,14,000/-. 18. IN SUPPORT OF THE CONTENTION LEARNED AR FILED A DOCUMENT CONTAINING ALL THE DETAILS PERTAINING TO EXPENSES, WHICH CANNOT BE SAID TO BE DIRECTLY INCURRED FOR THE PURPOSE OF POWER GENER ATION. LEARNED AR STATED THAT AO ERRED IN DETERMINING THE GENERATION OF POWER IS THE ONLY ACTIVITY OF THE COMPANY AND WHILE PERUSING THIS ACT IVITY IT HAS EARNED INCIDENTALLY INCOME AS WELL. 19. ACCORDINGLY, ENTIRE INCOME BEING EARNED FROM TH E BUSINESS OF GENERATION OR GENERATION AND DISTRIBUTION OF POWER IS TO BE EXCLUDED WHILE COMPUTING BOOK PROFIT U/S. 115JA OF THE ACT. 20. IN ORIGINAL ASSESSMENT INCIDENTAL INCOME WAS CO NSIDERED AS BUSINESS INCOME. THEREFORE, DIFFERENT TREATMENT CAN NOT BE GIVEN TO THE SAID INCOME U/S.115JA OF THE ACT. ITA NO. 3048, 3049, 3050 & 3051/AHD/2010 G UJARAT INDUSTRIES POWER COMPANY LTD. VS. ACIT A.Y. 1997-98, 1998-99, 1999-2000 & 2000-01 - 12 - 21. LEARNED AR CITED THE JUDGMENTS: (I). CIT VS. KELVINATOR OF INDIA LTD. [2010] 187 TAXMAN 312 (SC): IN THIS CASE, IT WAS HELD THAT INCOME ESCAPING ASSE SSMENT GENERAL WHETHER AFTER SUBSTITUTION OF SECTION 147 BY DIRECT TAX LAWS (AMENDMENT) ACT, 1987, CONCEPT OF CHANGE OF OPINIO N MUST BE TREATED AS AN IN-BUILT TEST TO CHECK ABUSE OF POWER BY ASSE SSING OFFICER HELD, YES WHETHER, THEREFORE, AFTER 1/04/1989, ASSESSIN G OFFICER HAS POWER TO REOPEN, PROVIDED THERE IS TANGIBLE MATERIAL TO COME TO CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT; REASONS MUST HAVE A LIVE LINK WITH FORMATION OF BELIEF HELD, YES. (II). IDEA CELLULAR LTD. VS. DCIT [2008] 301 ITR 407 (BOMBAY)/[2008] 215 CTR 288 (BOMBAY): IN THIS CASE, INCOME ESCAPING ASSESSMENT GENERAL ONCE ALL MATERIAL WAS BEFORE ASSESSING OFFICER AND HE CHOSE NOT TO DE AL WITH SEVERAL CONTENTIONS RAISED BY ASSESSEE IN HIS FINAL ASSESSM ENT ORDER, IT COULD NOT BE SAID THAT HE HAD NOT APPLIED HIS MIND; AND IN SU CH A CASE REOPENING OF ASSESSMENT AFTER FOUR YEARS COULD NOT BE SAID TO BE JUSTIFIED. 22. IN OUR OPINION THESE ARE THE FIT CASE IN FAVOUR OF THE ASSESSEE. IN THE RESULT, ITA NOS. 3048, 3049 & 3050/AHD/2010 ARE ALL OWED IN FAVOUR OF THE ASSESSEE BECAUSE REASSESSMENT WAS DONE AFTER TH E PERIOD OF 4 YEARS. 23. NOW WE TAKE UP ITA NO. 3051/AHD/2010, IN THIS C ASE APPELLANT HAS TAKEN FOLLOWING GROUNDS OF APPEALS. (I). THE LD. CIT(APPEALS) HAS ERRED IN LAW AND FACT S IN HOLDING THAT DISALLOWANCE OF LEGAL, PROFESSIONAL AND CONSULTANCY FEES AMOUNTING TO RS. 11,69,450/-. ITA NO. 3048, 3049, 3050 & 3051/AHD/2010 G UJARAT INDUSTRIES POWER COMPANY LTD. VS. ACIT A.Y. 1997-98, 1998-99, 1999-2000 & 2000-01 - 13 - (II). THE LD. CIT(APPEALS) HAD ERRED IN LAW AND ON FACTS IN HOLDING THAT DIVIDEND INCOME OF RS. 97,54,000/- IS NOT DERI VED FROM THE BUSINESS OF GENERATION OF POWER. (IIA). THE LD. CIT(APPEALS) HAD ERRED IN LAW AND ON FACTS IN HOLDING THAT LIQUIDATED DAMAGES OF RS. 1,53,000/- & CLAIMS RECEIVED OF RS. 55,000/- ARE NOT DERIVED FRO M THE BUSINESS OF GENERATION OF POWER. (IIB). THE LD. CIT(APPEALS) HAS ERRED IN LAW AND O N FACTS IN APPLYING THE RATIO OF THE DECISION OF THE HON'BLE S UPREME COURT IN THE CASE OF PANDIAN CHEMICALS VS. CIT 262 ITR 278 WHICH IS INAPPLICABLE IN THE FACTS OF THE APPEL LANT'S CASE. (III). THE LD. CIT (APPEALS) HAS ERRED IN LAW AND O N FACTS HOLDING THAT INTEREST ON FIXED DEPOSIT OF RS. 2,69,96,000 - AND OTHER INTEREST OF RS. 21,04,000/- HAS NOT BEEN DERIVED FROM BUSINESS OF GENERATION OF POWER. (IV). THE LD. CIT(APPEALS) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT LEASE RENTAL OF RS. 3,16,20,000/- IS NOT INCOM E DERIVED FROM BUSINESS OF GENERATION OF POWER GENERATION. (V). THE LD. CIT(APPEALS) HAS ERRED IN LAW AND ON F ACTS IN HOLDING THAT THE SCRAP SALES OF RS. 74,80,163/- IS NOT INCO ME DERIVED FROM BUSINESS OF GENERATION OF POWER GENERATION. 24. DURING THE COURSE OF FIRST APPEAL, LEARNED CIT( A) CONFIRMED THAT ASSESSEE HAS INCURRED EXPENDITURE UNDER THIS HEAD F OR SOFTWARE DEVELOPMENT FEE ETC. AS PER THE AUTHORITIES BELOW C APITAL EXPENDITURE SINCE IT WAS RELATED TO THE COMMISSIONING OF PLANT AND MACHINERY OF THE ASSESSEE COMPANY. THE DETAILS OF THESE EXPENDITURES ARE PRODUCE BELOW: SR. NO DATE PARTICULARS AMOUNT(RS) 1. 29.05.1999 SOFTWARE DEVELOPMENT FEE 3,15,000 2. 11.06.1999 REPORT ON EVALUATION OF INTERNAL SYSTEM 1,99,500 3. 10.07.1999 - DO - 1,99,500 ITA NO. 3048, 3049, 3050 & 3051/AHD/2010 G UJARAT INDUSTRIES POWER COMPANY LTD. VS. ACIT A.Y. 1997-98, 1998-99, 1999-2000 & 2000-01 - 14 - 4. 01.12.1999 PAYROLL/PERSONNEL INFORMATION SYSTEM 1,25,450 5. 31.03.2000 DEVELOPMENT OF FAS/MMS SYSTEM 2,25,00 0 6. 31.03.2000 DEVELOPMENT OF FAS/MMS SYSTEM 1,05,00 0 TOTAL 11,69,450 25. LOW AUTHORITY HELD THAT AS A BENEFIT OF EXPENDI TURE IS SPREAD OVER A PERIOD OF YEARS, THE SAME WAS TREATED AS WELL CAPIT AL EXPENDITURE AND SUM OF RS.11,69,450/- WAS DELETED AND ADDED BACK TO THE TOTAL INCOME . 26. WE HAVE SEEN THE RECORD AND ORDER, WHICH WAS SU BMITTED BY THE LEARNED AR, DISALLOWANCE OUT OF LEGAL AND PROFESSIONAL AND CONSULTING FEES RS.11,69,450/- WAS ALLOWED BY THE TRIBUNAL IN A.Y. 1999-00 AT PAGE NO. 15, PARA 20 OF THE ORDER. 27. SO FAR AS GROUND RELATED TO THE DIVIDEND OF RS. 97,54,000/- IS CONCERNED IN TRIBUNAL IN OWN CASE IN A.Y. 1996-97 HAS HELD TH AT DIVIDEND IS ELIGIBLE FOR DEDUCTION U/S. 80IA, NET INTEREST TO BE EXCLUDED, M ISC EXPENSES WERE ELIGIBLE FOR DEDUCTION, LEASE RENT WAS TO BE EXCLUDED NET OF DEPRECIATION. PAGE NO. 40- 41, PARA 45 OF THE TRIBUNALS ORDER. 28. SO FAR AS INTEREST ON DEPOSIT ETC OF RS.2,69,96 ,779/- AND OTHER INTEREST OF RS.21,02,573/- ARE CONCERNED THE DETAILED BREAK UP OF INTEREST IS ENCLOSED MARKED ANNEXURE B. ON PERUSAL OF THE SAME, IT CAN B E SEEN THAT THE ASSESSEE COMPANY HAS EARNED INTEREST FROM SCHEDULED BANKS ON SHORT TERM DEPOSITS AGGREGATING TO RS 1,79,99,237/-. THIS INTEREST IS EARNED BY DEPLOYING THE TEMPORARY SURPLUS FUNDS TO GENERATE R EVENUE. IT CAN BE ITA NO. 3048, 3049, 3050 & 3051/AHD/2010 G UJARAT INDUSTRIES POWER COMPANY LTD. VS. ACIT A.Y. 1997-98, 1998-99, 1999-2000 & 2000-01 - 15 - APPRECIATED THAT THE TEMPORARY SURPLUS FUNDS ARE GE NERATED FROM THE PROFIT DERIVED FROM THE BUSINESS OF GENERATION OF P OWER AS THAT IS THE ONLY SOURCE OF INCOME GENERATION. SIMILARLY, THE COMPANY JUDICIOUSLY INVESTED THE SURPLUS GENERATED FROM THE BUSINESS OF GENERATION OF POWER IN BONDS AS ALSO BY PLACING SHORT TERM INTER CORPOR ATE DEPOSITS WITH VARIOUS CORPORATION / COMPANIES. HOWEVER, AS STATED ABOVE THESE FUNDS WERE GENERATED FROM THIS BUSINESS OF GENERATION OF POWER. THE COMPANY HAS ALSO EARNED INTEREST ON VEHICLE LOANS AND HOUSE BUILDING ADVANCE LOANS TO ITS EMPLOYEES WHICH ARE ADVANCED TO EMPLOY EES AT VERY NOMINAL RATE OF INTEREST NOT WITH THE OBJECTIVE OF EARNING INCOME BUT BY WAY OF WELFARE MEASURES FOR BETTER HUMAN RESOURCE MANAGEME NT WHICH IS THE BACK BONE FOR ANY BUSINESS TO SURVIVE. 29. SO FAR AS GROUND RELATED UNDER SECTION 234B OF THE INCOME-TAX ACT, 1961, WHILE COMPUTING INCOME 115JA IS CONCERNE D. LEARNED AR CITED A JUDGMENT: JOINT COMMISSIONER OF INCOME-TAX VS. ROLTA INDIA LT D. [2011] 196 TAXMAN 594 (SC) : SECTION 234B OF THE INCOME-TAX ACT, 1961 INTEREST , CHARGEABLE AS WHETHER INTEREST UNDER SECTION 234B AND 234C SHALL BE PAYABLE ON FAILURE TO PAY ADVANCE TAX IN RESPECT OF TAX PAYABL E UNDER SECTION 115JA/115JB HELD, YES. ITA NO. 3048, 3049, 3050 & 3051/AHD/2010 G UJARAT INDUSTRIES POWER COMPANY LTD. VS. ACIT A.Y. 1997-98, 1998-99, 1999-2000 & 2000-01 - 16 - 30. RESPECTFULLY, FOLLOWING THESE SUPREME COURT JUD GMENT, THIS GROUND WAS AGAINST ASSESSEE. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO.3051/AHD/2010 IS PARTLY ALLOWED. 31. IN THE RESULT, ALL FOUR APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 24/04/2017 SD/- SD/- ( ) 4 5 (N.K. BILLAIYA) (MA HAVIR PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 24/04/2017 PRITI YADAV, SR. PS !'#$ %$' # COPY OF THE ORDER FORWARDED TO : 1. !$' / THE APPELLANT 2. ($' / THE RESPONDENT. 3. 67- + 8- / CONCERNED CIT 4. + 8- 4!5 / THE CIT(A)-I, BARODA. 5. 9:;-67 !.!672 ! / DR, ITAT, AHMEDABAD 6. ;<=, # GUARD FILE. & ' / BY ORDER, (9-- //TRUE COPY// (/' )* ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD TRUE COPY