H.U.L. Hydro Power Pvt.Ltd., Hyd, Hyderabad V. DCIT, Cir-2(2), Hyd, Hyderabad

ITA 477/HYD/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6107 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 13-06-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 04-04-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: U MINICHANDRAN
• Assessee Lawyers: S RAMA RAO
• Keywords: Business income; Business expenditure
• Section: 143(3)

Judgement Text

ITA NO 477 OF 2016 HUL HYDRO POWER P LTD HYDERABAD PAGE 1 OF 3 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.477/HYD/2016 (ASSESSMENT YEAR: 2009-10) M/S. HUL HYDRO POWER PRIVATE LIMITED HYDERABAD PAN: AABCH 3809 E VS DY. COMMISSIONER OF INCOME TAX, CIRCLE 2(2) HYDERABAD FOR ASSESSEE : SHRI S. RAMA RAO FOR REVENUE : SHRI U. MINICHANDRAN, DR O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y 2009-10. IN TH IS APPEAL THE ASSESSEE IS AGGRIEVED BY THE ORDER OF TH E CIT (A) IN CONFIRMING THE ASSESSMENT ORDER TREATING THE INTERE ST INCOME OF RS.17,78,651 AS INCOME FROM OTHER SOURCES AND NOT BUSINESS INCOME AS CLAIMED BY THE ASSESSEE. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY IS IN THE BUSINESS OF POWER GENERATION. IT HAS FILED I TS RETURN OF INCOME ON 30.09.2009 ADMITTING NIL INCOME. DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, THE A O CALLED FOR VARIOUS DETAILS AND THE ASSESSEE FURNISHED THE SAME . ON PERUSAL OF THE P&L A/C, THE AO OBSERVED THAT DURING THE REL EVANT FINANCIAL DATE OF HEARING : 18.10.2016 DATE OF PRONOUNCEMENT : 26.10.2016 ITA NO 477 OF 2016 HUL HYDRO POWER P LTD HYDERABAD PAGE 2 OF 3 YEAR, THE ASSESSEE HAD ADMITTED ONLY INTEREST INCOM E TO THE TUNE OF RS.17,78,651 AGAINST WHICH, THE ASSESSEE HAS DEB ITED VARIOUS EXPENDITURE TO THE TUNE OF RS.1,98,62,486 AS BUSINE SS EXPENDITURE. AO OBSERVED THAT THE ASSESSEE HAS NOT COMMENCED ITS BUSINESS AND THE ONLY INCOME DERIVED IS INTERES T ON F.DS. HE ALSO OBSERVED THAT THE ASSESSEE HAS OBTAINED UNSECU RED LOANS BY WAY OF COMPULSORILY CONVERTIBLE DEBENTURES TO THE T UNE OF RS.16.41 CRORES AND THESE FUNDS ARE PARKED AS FIXED DEPOSITS TO THE TUNE OF RS.12.00 CRORES. THEREFORE, HE WAS OF T HE OPINION THAT THE INTEREST INCOME EARNED IS NOT BUSINESS INCOME A ND CANNOT BE SET OFF AGAINST THE BUSINESS EXPENDITURE AND THAT T HIS INCOME IS TO BE TREATED AS INCOME FROM OTHER SOURCES. FOR COMIN G TO THIS CONCLUSION, THE AO FOLLOWED THE DECISION OF THE HON 'BLE SUPREME COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS & FE RTILIZERS LTD VS. CIT REPORTED IN (1997) 227 ITR 172 (S.C). AGAIN ST THIS ORDER OF THE AO, ASSESSEE FILED APPEAL BEFORE THE CIT (A) WH O CONFIRMED THE ORDER OF THE AO AND THE ASSESSEE IS IN SECOND APPEA L BEFORE US. 3. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND S UBMITTED THAT THE ASSESSEE HAD SET UP THE BUSINESS, THOUGH H AD NOT STARTED THE POWER GENERATION AND THEREFORE, ACCORDING TO HI M, THE INTEREST INCOME IS ALSO BUSINESS INCOME AND THE BUSINESS EXP ENDITURE HAS TO BE SET OFF AGAINST THE INTEREST INCOME. HOWEVER, ON A QUERY BY THE BENCH, THE LEARNED COUNSEL FOR THE ASSESSEE SUB MITTED THAT THE UNUSED AND THE EXCESS FUNDS AVAILABLE WITH THE ASSESSEE ONLY WERE PARKED WITH THE BANKS AS FIXED DEPOSITS AND TH E INTEREST INCOME IS DERIVED THEREFROM. SINCE THE FIXED DEPOSI TS ARE NOT MADE BY THE ASSESSEE AS A PRE-CONDITION FOR CARRYING ON ASSESSEES ITA NO 477 OF 2016 HUL HYDRO POWER P LTD HYDERABAD PAGE 3 OF 3 BUSINESS, BUT ARE MADE OUT OF UNUSED FUNDS AVAILABL E WITH THE ASSESSEE, THE INTEREST INCOME CANNOT BE TREATED AS BUSINESS INCOME OF THE ASSESSEE. THEREFORE, IN OUR OPINION, THE AO HAS RIGHTLY BROUGHT IT TO TAX UNDER THE HEAD INCOME FR OM OTHER SOURCES. THEREFORE, WE SEE NO MERIT IN THE ASSESSE ES APPEAL AND THE APPEAL IS DISMISSED. 4. IN THE RESULT, ASSESSEES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH OCTOBER, 2016. SD/- SD/- (S. RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 26 TH OCTOBER, 2016. VINODAN/SPS COPY TO: 1 SHRI S. RAMA RAO, ADVOCATE, FLAT NO.102, SHRIYAS ELEGANCE, 3-6- 643 STREET NO.9, HIMAYATNAGAR, HYDERABAD 500029 2 DY. COMMISSIONER OF INCOME TAX, CIRCLE 2(2) HYDER ABAD 3 CIT (A)-2 HYDERABAD 4 PR. CIT 2 HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER