ITO, New Delhi V. M/s. Indian Oil Panipat Power Consortium Ltd, New Delhi

ITA 4162/DEL/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3962 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 13-05-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 22-10-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S GILL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: C, NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER & SHRI K.D. RANJAN, ACCOUNTANT MEMBER ITA NOS. 4162 & 4163/DEL/2009 ASSESSMENT YEARS: 2005-06 & 2006-07 ITO, WARD 11(4), NEW DELHI. VS. INDIAN OIL PANIPAT POWER CONSORTIUM LTD., H-1/204, 2 ND FLOOR, VIKRAMADITYA TOWER, ALAKNANDA SHOPPING COMPLEX, NEW DELHI. AAACI 6741B [APPELLANT] [RESPONDENT] APPELLANT BY : SH. R.I.S. GILL, CIT(DR) RESPONDENT BY : SH. RAJ KUMAR, CA & SH. SAURAV ROHTAGI, CA O R D E R PER BENCH : BOTH THESE APPEALS ARE FILED BY THE REVENUE. THE Y ARE DIRECTED AGAINST TWO SEPARATE ORDERS PASSED BY LD. CIT(A) DA TED 25 TH AUGUST, 2009 FOR ASSESSMENT YEARS 2005-06 & 2006-07. 2. GROUNDS OF APPEAL FOR BOTH THE YEARS READ AS UND ER: - GROUNDS OF ITA NO. 4162GROUNDS OF ITA NO. 4162 : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE ORDER OF THE LD. CIT(A) IS WRONG, PERVERSE, ILLEGAL AND A GAINST THE PROVISIONS OF LAW WHICH IS LIABLE TO BE SET ASIDE. ITA NOS. 4162 & 4163/D/2009 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE INTEREST INCOME OF RS. 92 ,06,608/- ON FDR WITH ICICI BANK TREATING AS INCOME FROM OTHER SOURCES MADE BY THE AO BY IGNORING THE FACT THAT THE PROMOT ERS OF THE COMPANY HAVE DECIDED TO ABANDON THE IDEA OF PROJECT DEVELOPMENT AND HENCE THERE WAS NEITHER ANY COMMERC IAL PRODUCTION NOR ANY COMMERCIAL OPERATION DURING THE PERIODS UNDER CONSIDERATION AND ACCORDINGLY, THE INTEREST I NCOME EARNED IN THIS CASE WAS AN INDEPENDENT INCOME EARNED. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND A NY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARING. GROUNDS OF ITA NO. 4163 : - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE ORDER OF THE LD. CIT(A) IS WRONG, PERVERSE, ILLEGAL AND A GAINST THE PROVISIONS OF LAW WHICH IS LIABLE TO BE SET ASIDE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE INTEREST INCOME OF RS. 1, 11,80,993/- ON FDR WITH ICICI BANK TREATING AS INCOME FROM OTHER SOURCES MADE BY THE AO BY IGNORING THE FACT THAT THE PROMOT ERS OF THE COMPANY HAVE DECIDED TO ABANDON THE IDEA OF PROJECT DEVELOPMENT AND HENCE THERE WAS NEITHER ANY COMMERC IAL PRODUCTION NOR ANY COMMERCIAL OPERATION DURING THE PERIODS UNDER CONSIDERATION AND ACCORDINGLY, THE INTEREST INCOME EARNED IN THIS CASE WAS AN INDEPENDENT INCOME EARNED. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND A NY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARING. 3. THE ASSESSEE COMPANY WAS INCORPORATED ON 6.10.19 99 AS A JOINT VENTURE BETWEEN INDIAN OIL CORPORATION AND MARUBENI CORPORATION OF JAPAN FOR SETTING UP A POWER PROJECT AT PANIPAT IN HARYANA. SINCE THE LAND FOR AFOREMENTIONED PROJECT COULD NOT BE ACQUIR ED THE PROJECT WAS SHELVED AND THERE IS NO ACTIVITY TILL DATE. THE AS SESSEE EARNED INTEREST ITA NOS. 4162 & 4163/D/2009 3 MENTIONED IN THE GROUNDS OF APPEAL FOR THE RESPECTI VE YEARS SUBSTANTIALLY BY WAY OF FDRS FROM ICICI BANK AND ALSO ON IT REFU NDS WHICH HAS BEEN ASSESSED BY THE AO AS INCOME FROM OTHER SOURCES. T HE ADDITION HAS BEEN DELETED BY CIT(A) FOLLOWING THE DECISION OF HO NBLE DELHI HIGH COURT IN ASSESSEES OWN CASE PERTAINING TO A.Y. 200 1-02 & 2002-03. IT IS ALSO MENTIONED IN THE ORDER PASSED BY CIT(A) THA T ITAT ALSO DECIDED THE SIMILAR ISSUE IN FAVOUR OF ASSESSEE LATESTLY FO R A.Y. 2004-05 IN ITA NO. 3885/D/2007 AND ON THESE SUBMISSIONS OF THE ASS ESSEE LD. CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE REGARDING INT EREST ON FDRS. SO AS IT RELATES TO INTEREST ON INCOME TAX HE HAS UPHE LD THE ADDITION. IT WILL BE RELEVANT TO REPRODUCE THE FOLLOWING OBSERVATIONS OF CIT(A) VIDE WHICH THE RELIEF HAS BEEN GIVEN TO THE ASSESSEE: - DURING THE COURSE OF APPELLATE PROCEEDINGS THE COUNSEL FOR THE ASSESSEE CONTENDS THAT THE ISSUE IN QUESTION IS COVERED IN FAVOUR OF THE ASSESSEE BY ORDER DATED 26.2.2009 OF THE HONBLE DELHI HIGH COURT IN ASSESS EES OWN CASE IN ITA NO. 1156/2007 AND 1157/2007 FOR A.Y. 20 01-02 & 2002-03 HOLDING AS UNDER: 6.1 IN OUR VIEW THE SITUATION IN THE INSTANT CAS E IS QUITE SIMILAR EXCEPT HERE INSTEAD OF PAYING INTERES T ON FUNDS BROUGHT IN FOR SPECIFIC PURPOSE INTEREST IS EARNED ON FUNDS BROUGHT IN BY WAY OF SHARE CAPITAL FOR A SPECIFIC P URPOSE. COULD IT BE SAID THAT IN THE FORMER SITUATION INTER EST COULD HAVE BEEN CAPITALIZED AND IN THE LATER SITUATION IT CANNOT BE CAPITALIZED. TO TEST THE PRINCIPLE WE COULD EXTEND THE EXAMPLE, THAT IT, WOULD OUR ANSWER BE ANY DIFFERENT HAD ASSESSEE PASSED ON THE INTEREST TO BE RESPECTIVE SHAREHOLDERS. IF NOT, THEN IN OUR VIEW THE ONLY CO NCLUSION POSSIBLE IS THAT INTEREST EARNED IF THE PRESENT CIR CUMSTANCES OUT TO BE CAPITALIZED. ITA NOS. 4162 & 4163/D/2009 4 6. IN VIEW OF THE DISCUSSION ABOVE, IN OUR OPINIO N, THE TRIBUNAL MISDIRECTED ITSELF IN APPLYING THE DECISIO N OF THE SUPREME COURT IN TUTICORIN ALKALI CHEMICALS (SUPRA) IN THE FACTS OF THE PRESENT CASE. IN OUR OPINION ON ACCOU NT OF THE FINDING OF FACT RETURNED BY THE CIT(A) THAT THE FUN DS INFUSED IN THE ASSESSEE BY THE JOINT VENTURE PARTNERS WERE INEXTRICABLY LINKED WITH THE SETTING UP OF THE PLAN T, THE INTEREST EARNED BY THE ASSESSEE COULD NOT BE TREATED AS INCO ME FROM OTHER SOURCES. IN THE RESULT, WE ANSWER THE QUESTI ON AS FRAMED IN FAVOUR OF THE ASSESSEE AS AGAINST THE REV ENUE. THESE APPEALS ARE ALLOWED AND IMPUGNED JUDGMENT IN SET ASIDE. THE ASSESSEES COUNSEL HAS ALSO FILED THE SUBMISSIONS STATING THAT THE HONBLE ITAT DELHI BEN CH IN THE ASSESSEES OWN CASE FOR A.Y. 2004-05 DECIDED THE IS SUE IN FAVOUR OF THE ASSESSEE VIDE ITA NO. 3885/DEL OF 200 7. COPY OF THE ORDER OF THE HONBLE TRIBUNAL HAS ALSO BEEN SUBMITTED BY THE ASSESSE. PERUSAL OF THE ORDER OF THE HONBLE DELHI HIGH COU RT ORDER DATED 26.02.09 IN THE ASSESSEES OWN CASE SHO WS THAT THE HIGH COURT HELD THAT INTEREST EARNED ON FDRS BE ING PARKING OF FUNDS WAS INEXTRICABLY LINKED WITH ASSES SEES BUSINESS AND, THEREFORE, INTEREST EARNED BY THE ASS ESSEE WILL NOT BE INCOME FROM OTHER SOURCES AND THE SAME WILL GO TO SET OFF THE PRE-OPERATIVE EXPENSES OF THE ASSESSEE. TO THIS EXTENT, HONBLE HIGH COURTS CASE IS APPLICABLE TO ASSESSEES CASE. HOWEVER, THE PERUSAL OF THE ORDER OF THE HONBLE I TAT SHOWS THAT THE HONBLE ITAT HAS OBSERVED THAT THE H ONBLE HIGH COURT JUDGMENT CANNOT BE EXTENDED TO THE INTER EST ON INCOME TAX REFUND AND TREATED THE AMOUNT OF INTERES T ON INCOME TAX REFUND UNDER THE HEAD INCOME FROM OTHER SOURCES. ITA NOS. 4162 & 4163/D/2009 5 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT FINDINGS OF THE AO AND THE FACTS ON RECORD. RESPEC TFULLY FOLLOWING DECISION OF THE HONBLE DELHI HIGH COURT AND THE HONBLE ITAT IN THE ASSESSEES OWN CASE IT IS HELD THAT INTEREST EARNED ON FDR WITH ICICI BANK WILL NOT BE TREATED AS INCOME FROM OTHER SOURCES AND THE SAME WILL GO T O SET OFF THE PRE OPERATIVE EXPENSES OF THE ASSESSEE. IN VIE W OF THE ABOVE THE ADDITION ON ACCOUNT OF INTEREST INCOME ON FDRS BEING CONSIDERED AS INCOME FROM OTHER SOURCES AMOUN TING TO RS. 92,06,600/- IS DELETED. AS REGARDS THE INTE REST EARNED ON INCOME TAX REFUND OF RS. 4,09,509/- IT HAS TO BE TREATED AS INCOME FROM OTHER SOURCES AND THE ACTION OF THE AO IS CONFIRMED AND THIS GROUND OF APPEAL IS DISMISSED. 4. FOR A.Y. 2006-07 INTEREST CONSISTS ONLY ON FDRS AND SIMILAR ORDER HAS BEEN PASSED BY LD. CIT(A) VIDE WHICH HE H AS DELETED THE ADDITION OF RS. 1,11,38,993/-. 5. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. T HE COPY OF RELEVANT ORDERS MENTIONED IN THE ORDER OF CIT(A) AR E PLACED IN THE PAPER BOOK FILED BY THE ASSESSEE. ORDER OF HONBLE HIGH COURT IN THE CASE OF ASSESSEE IS REPORTED AS 315 ITR 255 AND IT IS AN OR DER DATED 26.2.2009. RELEVANT PORTION OF THE ORDER OF HONBLE HIGH COURT HAS BEEN REPRODUCED BY THE CIT(A) IN HIS ORDER. IF IT IS SO, THEN IN O UR OPINION NO INFIRMITY HAS BEEN COMMITTED BY LD. CIT(A) IN ALLOWING REQUISITE RELIEF TO THE ASSESSEE, WE FIND NO MERIT IN THE APPEALS FILED BY THE DEPART MENT AND THEY ARE DISMISSED. ITA NOS. 4162 & 4163/D/2009 6 6. IN THE RESULT, THE APPEALS ARE DISMISSED. THE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 13.5 .2011 SD/- SD/- ( K.D. RANJAN ) (I.P. BANSAL) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 13.5.11 *KAVITA COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR ITAT