ACIT, Hyderabad V. GVK Industries, Hyderabad

ITA 508/HYD/2005

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61865 (ITAT-HYDERABAD)
• Duration Of Justice: 7 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 19-05-2011
• Assessment Year: 2000-2001
• Appeal Filed On: 09-05-2005
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T LUCAS PETER
• Assessee Lawyers: V SIVA KUMAR
• Keywords: Business income; Principle of natural justice; Deemed to accrue or arise in india; Additional evidence
• Section: 12; 10; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER. ITA NO.508/HYD/2005 : ASSESSMENT YEAR 20 00-01 ASSTT. COMM ISSIONER OF INCOME - TAX CIRCLE 1(4), HYDERABAD V/S. M/S. G.V.K. INDUSTRIES LTD. , SECUNDERABAD. (PAN AAACG 7499 J) (APPELLANT) (RESPONDENT) AND ITA NO.299/HYD/2008 : ASSESSMENT YEAR 2004-05 M/S. G.V.K. INDUSTRIES L TD. , SECUNDERABAD. (PAN AAACG 7499 J) V/S. DY. COMMISSIONER OF INCOME - TAX CIRCLE 2(2), HYDERABAD (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI T.LUCAS PETER ASSESSEE BY : SHRI V.SIVAKUMAR DATE OF HEARING 14.3.2012 DATE OF PRONOUNCEMENT 11.5.2012 O R D E R PER D.KARUNAKARA RAO, ACCOUNTANT MEMBER: THESE APPEALS ONE BY THE DEPARTMENT AND THE OTHE R BY THE ASSESSEE- ARE DIRECTED AGAINST THE ORDERS OF THE C IT(A) II, HYDERABAD DATED 4.2.2005 FOR THE ASSESSMENT YEAR 2000-01 AND OF THE CIT(A)-III, HYDERABAD DATED 22.1.2008 FOR THE ASSESSMENT YEAR 2 004-05. SINCE COMMON ISSUES ARE INVOLVED, THESE APPEALS ARE BEING DISPOSED OFF WITH THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO.299/HYD/08 & ANR. M/S. G.V.K. INDUSTRIES LTD. , SECUNDERABAD. 2 ASSESSEES APPEAL: ITA NO.299/HYD/2008 : ASSESSMENT YEAR 2004-05. 2. AT THE OUTSET, LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT GROUNDS NO.1 AND 5 ARE GENERAL AND THEY DO NOT CALL FOR SPECIFIC ADJUDICATION. THEY ARE AS SUCH REJECTED. 3. GROUND OF APPEAL NO.2, TOGETHER WITH ITS SUB-G ROUNDS (A) TO (C) READS AS FOLLOWS- 2(A) THE COMMISSIONER OF INCOME-TAX(APPEALS) GROS SLY ERRED IN CONFIRMING THE ACTION OF THE AO IN MAKING ADDITION OF RS 2,25,25,104/- REPRESENTING INCOME TAX RECEIVABLE FR OM AP TRANSCO AS INCOME FOR THE AY 2004-05 IGNORING THE S UBMISSIONS OF THE APPELLANT. (B) THE COMMISSIONER OF INCOME-TAX(APPEALS) GROSSLY OUGHT TO HAVE SEEN THAT THE REIMBURSEMENT OF THE INCOME TAX IS DISPUTED BY AP TRANSCO AND SINCE IT IS NOT REIMBURSED SO FOR, THE SAID AMOUNT HAS NEITHER ACCRUED NOT CRYSTALISED AND THEREFORE CANNOT BE TAKEN AS THE APPELLANTS INCOME FOR THE A Y 2004-05. (C) THE COMMISSIONER OF INCOME-TAX(APPEALS) GROSSLY ERRED IN HOLDING THAT THE INCOME TAX RECEIVABLE FROM AP TRAN SCO IS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES BUT NOT AS INCOME FROM BUSINESS. THE LEARNED COUNSEL FOR THE ASSESSEE MENTIONED THAT , BUT FOR THE AMOUNT AND THE ASSESSMENT YEAR NOTED IN THE ABOVE GROUNDS , THE GROUND NO.2 WITH ITS SUB-GROUNDS (A), (B) AND (C) ARE IDENTICAL TO THE CORRESPONDING GROUNDS RAISED AND ADJUDICATED IN CONNECTION WITH T HE ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2002-03 (ITA NO.1659/HYD/20 08). BOTH THE PARTIES MENTIONED THAT THE ARGUMENTS ADVANCED BY TH EM IN CONNECTION WITH THE SAID APPEAL FOR ASSESSMENT YEAR 2002-03 HO LD GOOD EVEN IN THE CONTEXT OF THE PRESENT APPEAL FOR THE ASSESSMENT YE AR 2004-05. ITA NO.299/HYD/08 & ANR. M/S. G.V.K. INDUSTRIES LTD. , SECUNDERABAD. 3 4. WE HEARD THE PARTIES AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. INASMUCH AS THE FACTS AND CIRCUMSTANC ES OF THE CASE RELATING TO THE GROUND 2 WITH ITS SUB-GROUNDS (A), (B) AND ( C) HEREIN, EXCEPT FOR THE AMOUNT INVOLVED IN THE YEAR UNDER CONSIDERATION , ARE IDENTICAL TO THE ONES CONSIDERED BY US IN THE CONTEXT OF ASSESSEES APPEAL FOR ASSESSMENT YEAR 2002-03 AND THE ARGUMENTS OF THE PARTIES ADVAN CED BY THE PARTIES FOR THAT YEAR, AS SUBMITTED BY THE PARTIES BEFORE U S, ARE EQUALLY APPLICABLE TO THE YEAR UNDER APPEAL, OUR DECISION F OR THE ASSESSMENT YEAR 2002-03 HOLDS GOOD EVEN FOR THE YEAR UNDER APPEAL. HENCE, WE MAY REPRODUCE OUR DECISION FOR THAT YEAR AS CONTAINED I N PARA-8 TO 11 OF OUR ORDER DATED 30.3.2012 FOR THE ASSESSMENT YEAR 2002- 03 HEREUNDER, FOR READY REFERENCE- 8. WE HEARD BOTH THE PARTIES AND PERUSED THE ORDER S OF THE REVENUE AUTHORITIES AND THE DOCUMENTS FILED BEFORE US. WE HAVE ALSO CONSIDERED THE WRITTEN SUBMISSIONS ON THE MERI TS OF THE ISSUE FILED BEFORE US. ON CONSIDERATION, WE FIND IT RELEV ANT TO FIRST ADJUDICATE IF THE ADDITIONAL EVIDENCES SHOULD BE EN TERTAINED AND THE CONSEQUENCES OF THE SAID DECISION THEREOF. WITH OUT GOING INTO THE MERITS OF THE ISSUE, THE PRELIMINARY MATTER TO BE DECIDED RELATES TO THE ADMISSIBILITY OF THE IMPUGNED ADDITI ONAL EVIDENCE AND THE REQUEST OF THE ASSESSEES COUNSEL FOR SETTI NG ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFICER. IN THI S REGARD, WE HAVE EXAMINED THE ADDITIONAL EVIDENCES FURNISHED BEFORE US. THESE PAPERS CONSTITUTE THE CORRESPONDENCE THAT TOOK PLAC E BETWEEN THE ASSESSEE AND THE APTRANSCO. FURTHER, THERE IS CATEG ORICAL SUBMISSION BY THE LD COUNSEL THAT THE MATTER IS SUB-JUDICE UNLIKE THE WAY THE CIT(A) MISTAKENLY CONCLUDED STATING THA T THERE IS NO DISPUTE ON THE ISSUE OF REIMBURSEBILITY OF THE MAT PAID BY THE ASSESSEE. CONSIDERING THE NATURE OF THE PAPERS FILE D BEFORE US, WE FIND THAT THE SAID DOCUMENTS DO NOT REQUIRE ANY INV ESTIGATION INTO THE BASIC FACTS OF THE ISSUE AS THEY ARE MERELY THE CORRESPONDENCE BETWEEN THE ASSESSEE AND THE APTRANSCO. IN FACT, T HESE DOCUMENTS WILL HELP IN ARRIVING AT A RIGHT DECISION REGARDING THE ACCRUAL OR OTHERWISE OF THE RECEIVABLE. CONSIDERIN G THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF NTPC (299 ITR 383), WE ARE OF THE OPINION THAT THE PAPERS FILED BEFORE US SHOULD BE ADMITTED. 9. THE OTHER LIMB OF THE PRAYER RELATES TO IS THE R EQUEST FOR REMANDING TO THE AO IS TO BE ALLOWED OR NOT. IN THI S REGARD, WE FIND THAT THE SAME SHOULD BE CONSIDERED FAVORABLY C ONSIDERING THE PRINCIPLES OF NATURAL JUSTICE. IN THIS VIEW OF THE MATTER, WE SET ASIDE THE IMPUGNED ORDER OF THE CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING THE ISSUE, DULY CONSIDERING, AMONG OTHER THINGS, THE ADDITIONAL EVI DENCE FILED ITA NO.299/HYD/08 & ANR. M/S. G.V.K. INDUSTRIES LTD. , SECUNDERABAD. 4 BEFORE US, IN ACCORDANCE WITH LAW, AND GIVING REASO NABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 10. REGARDING THE ISSUE RELATING TO THE CORRECT HEA D OF INCOME (SUB GROUND 2C), THE ASSESSEE CLAIMED THAT THE SAID INCOME TAX RECEIVABLE IN PRINCIPLE IS A BUSINESS RECEIPT AND A CCORDINGLY, IT SHOULD BE DEALT UNDER THE HEAD PROFITS AND GAINS FROM BUSINESS OR PROFESSION. ASSESSEE RELIES HEAVILY ON THE PURCHAS E PRICE AGREEMENT AND VARIOUS CLAUSES EMBEDDED IN IT. ON TH E OTHER HAND, THE AO IS OF THE VIEW THE SAID INCOME IS NOT ONLY A CCRUED BUT ALSO IT IS UNRELATED TO THE BUSINESS OF THE ASSESSEE IE POWER GENERATION AND TRANSMISSION. THEREFORE, IT IS TAXABLE UNDER HE AD INCOME FROM OTHER SOURCES. SRI SHIV KUMAR, LD COUNSEL FOR THE ASSESSEE MADE EXHAUSTIVE SUBMISSION ON THE MERITS OF DECISIO N OF THE AO ON THIS ISSUE AND FINALLY MENTIONED THAT THIS ISSUE SUCCEEDS THE CORE ISSUE IE WHETHER THE SAID INCOME TAX RECEIVAB LE INDEED IS CHARGEABLE TO TAX AT ALL OR NOT. HE ALSO SUBMITTED THAT THE ISSUE RAISED IN GROUND 2(C) IS CONTINGENT ON THE DECISION ON THE SAID CORE ISSUE RAISED IN SUB GROUND 2(A) AND 2(B). LD DR RE LIED HEAVILY ON THE ORDERS OF THE AO AND THE CIT(A). 11. WE HAVE HEARD THE PARTIES AND PERUSED THE ORDER S AND THE WRITTEN SUBMISSIONS OF THE PARTIES. IT IS TRUE THAT THE ISSUE OF HEAD OF INCOME SUCCEEDS THE ISSUE OF CHARGEABILITY OF A RECEIPT IE INCOME TAX RECEIVABLE FROM THE APTRANSCO. ON THE IS SUE OF CHARGEABILITY, WE HAVE SET ASIDE THE RELEVANT SUB G ROUNDS 2(A) AND 2(B) OF THIS APPEAL. THEREFORE, WE AGREE WITH THE V IEW OF LD COUNSEL THAT SUB-GROUND 2(C) MUST ALSO BE SET ASIDE FOR FRESH LOOK INTO ALL THE ISSUES RAISED IN THE GROUNDS AND IN TH E ARGUMENTS BEFORE US. IN THAT SENSE OF THE MATTER, IN OUR OPI NION, THIS ISSUE IS CONSEQUENTIAL TO THE CORE ISSUE OF TAXABILITY OF TH E SUM OF THE INCOME TAX RECEIVABLE. ACCORDINGLY, ALL THE SUB-GR OUNDS EXTRACTED ABOVE ARE SET ASIDE. FOLLOWING OUR DECISION FOR THE ASSESSMENT YEAR 2002 -03, FOR THE ASSESSMENT YEAR 2004-05 AS WELL, WE SET ASIDE THE I MPUGNED ORDER OF THE CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE AS SESSING OFFICER FOR REDECIDING THE ISSUE, DULY CONSIDERING, AMONG OTHER THINGS, THE ADDITIONAL EVIDENCE FILED BEFORE US, IN ACCORDANCE WITH LAW, A ND AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 5. GROUND NO.3, TOGETHER WITH ITS SUBGROUNDS, REA DS AS FOLLOWS- 3. A) THE COMMISSIONER OF INCOME-TAX(APPEALS) GRO SSLY ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFF ICER IN TREATING EXCESS INTEREST OF RS.2,46,34,667/- COLLECTED FROM A.P. TRANSCO AS INCOME OF THE APPELLANT IGNORING ITS SUBMISSIONS. ITA NO.299/HYD/08 & ANR. M/S. G.V.K. INDUSTRIES LTD. , SECUNDERABAD. 5 B) THE COMMISSIONER OF INCOME-TAX(APPEALS) OUGHT T O HAVE SEEN THAT EXCESS INTEREST COLLECTION HAS TO B E PAID BACK TO A.P. TRANSCO AS SOON AS A.P. TRANSCO AGREES FOR REIM BURSEMENT OF PREPAYMENT PREMIUM AND OTHER EXPENDITURE INCURRED IN CONNECTION WITH RAISING OF LOANS AT LOWER INTEREST RATES, AND HENCE THE DIFFERENTIAL INTEREST OF RS.2,46,34,667/- CANNOT BE TREATED AS INCOM E OF THE APPELLANT. C) THE COMMISSIONER OF INCOME-TAX(APPEALS) OUGHT TO HAVE SEEN THAT DURING THE FINANCIAL YEAR 2004-05 A. P. TRANSCO HAS ACCEPTED FOR PAYMENT OF PREPAYMENT OF PREMIUM AND OTHER EXPENSES AND IN FACT ADJUSTED THE SAME AGAINST THE INTEREST EXCESS PAID EARLIER TO T HE APPELLANT COMPANY AND THEREFORE THE SAID AMOUNT CANNOT BE TREATED AS INCOME OF THE APPELLANT. 6. RELEVANT FACTS IN RELATION TO THIS GROUND ARE G IVEN IN PARA 6 OF THE ASSESSMENT ORDER. IN BRIEF, DURING THE ASSESSM ENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE CLAIMED DEDUCTION OF RS.2,46,34,667 FROM THE SALES ACCOUNT AND PAID TO THE LIABILITIES ACCOUNT. THE SAID AMOUNT WAS EXPLAINED TO BE THE AMOUNT COLL ECTED BY THE ASSESSEE IN CONNECTION WITH THE HUGE INTEREST LIABI LITIES PAYABLE TO THE INSTITUTIONS, WHO PROVIDED LOANS AT HIGHER RATE OF INTEREST. CONSEQUENT TO THE PREPAYMENT OF THE SAID LOANS, ASSESSEE WAS REQU IRED TO INCUR REPAYMENT PREMIUM. THE INTEREST RECEIVED WAS REQUIR ED TO BE ADJUSTED TOWARDS THE PRE-PAYMENT UNDER THE ASSUMPTION THAT T HE AP TRANSCO SHALL NOT REIMBURSE THE SAID PREPAYMENT PREMIUM AFTER EXAMINING THE MATERIAL, ASSESSING OFFICER CAME TO THE CONCLUSION THAT THE SAID INTEREST COLLECTED, SINCE ALREADY RECEIVED WOULD FORM PART O F THE INCOME OF THE ASSESSEE. HE STRENGTHENED HIS VIEWS BY STATING THA T AP TRANSCO NEVER REJECTED THE REIMBURSEMENT OF THE PREPAYMENT PREMIU M. IN THE PROCESS, THE ASSESSING OFFICER REJECTED THE EXPLANATION. HO WEVER, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE OFFERED SIMILAR EXC ESS PREMIUM COLLECTED AS INCOME OF THE ASSESSEE IN EARLIER YEARS. 7. THE MATTER TRAVELLED TO THE FIRST APPELLATE AUT HORITY, WHO CONFIRMED THE VIEWS OF THE ASSESSING OFFICER, RELYI NG ON THE SUPREME ITA NO.299/HYD/08 & ANR. M/S. G.V.K. INDUSTRIES LTD. , SECUNDERABAD. 6 COURT JUDGMENT IN THE CASE OF KCP LIMITED V/S. CIT( 225 ITR 421) WHEREIN IT HAS BEEN HELD THAT THE INCOME ACCRUED AND RECEIV ED IN A PREVIOUS YEAR HAS TO BE TAXED IN THE RELEVANT ASSESSMENT YEAR. ON THE ISSUE OF LIKELY NON-REPAYMENT BY THE AP TRANSCO IN THE NEXT YEAR, THE CIT(A) IS OF THE OPINION THAT IN THE EVENT OF THAT CONTINGENCY, THE ASSESSEE IS ALWAYS AT LIBERTY TO MAKE A CLAIM FOR SUCH DEDUCTION IN THE Y EAR OF SUCH EVENT. HE REFERRED TO THE JUDGMENT OF THE SUPREME COURT IN TH E CASE OF CHOWRANGHEE SALES BUREAU PVT. LTD. 87 ITR 542 AND A NOTHER JUDGMENT IN THE CASE OF SYNCLAIRE MURRAY AND CO. PVT. LTD. (97 ITR 615) FOR THE PROPOSITION THAT IF THE RECEIPT IS A TRADING RECEI PT, IT IS TAXABLE IN THE YEAR OF RECEIPT. CONSIDERING THE PRINCIPLE INVOLVED IN THE SAID DECISIONS THAT INCOME ACCRUED OR RECEIVED IN ANY YEAR HAS TO BE BR OUGHT TO TAX, EVEN IF THE SAME HAVE TO BE REPAID OR ADJUSTED SUBSEQUENTLY , THE CIT(A) CONFIRMED THE TAXABILITY OF THE EXCESS INTEREST IN THE YEAR UNDER CONSIDERATION. IN VIEW OF THE SAME, ASSESSEE RAISE D THE PRESENT APPEAL BEFORE US ON THIS ISSUE. 8. THE LEARNED COUNSEL SUBMITTED AT THE OUTSET THA T AS IS EVIDENT FROM THE POWER PURCHASE AGREEMENT ENTERED INTO BY T HE ASSESSEE WITH APSEB(NOW TRANSCO PARTLY), THERE ARE DIFFERENT COMP ONENTS IN POWER TARIFF TO BE CHARGED BY ASSESSEE TO AP TRANSCO. ON E OF SUCH ITEMS IS INTEREST ON LOANS RAISED AS PER ARTICLE 3.2.1 OF PO WER PURCHASE AGREEMENT. NARRATING THE FACTUAL BACKGROUND OF THE CASE, HE SUBMITTED THAT THE SAID LOANS WERE BORROWED FROM DIFFERENT IN STITUTIONS AT DIFFERENT RATES RANGING FROM 10.2% TO 21.65% IN THE YEARS 199 4-95 TO 1997-98. SINCE THEN, THE MARKET RATES OF INTEREST HAVE COME DOWN AND THEREFORE, THE ASSESSEE NEGOTIATED WITH THE SAID INSTITUTIONS FOR PREPAYMENT OF THESE LOANS WHICH WAS ACCEPTED BY THEM AFTER NEGOTIATIONS , SUBJECT TO PAYMENT OF CERTAIN AMOUNT AS PREPAYMENT PREMIUM. THE ASSES SEE HAS REPAID THE ORIGINAL LOANS BY AVAILING LOANS FROM VARIOUS OTHER INSTITUTIONS AT LOWER RATES OF INTEREST BECAUSE OF WHICH AP TRANSCO WOULD BE BENEFITTED ITA NO.299/HYD/08 & ANR. M/S. G.V.K. INDUSTRIES LTD. , SECUNDERABAD. 7 BECAUSE THEY HAVE TO PAY THE ASSESSEE LESS INTEREST AS PART OF LOWER TARIFF THAN WHAT THEY WERE PAYING AT THE OLD RATES OF INTE REST. SINCE THE ASSESSEE INCURRED PREPAYMENT PREMIUM AND OTHER EXPE NDITURE IN CONNECTION WITH REDUCTION IN RATES OF INTEREST, THE ASSESSEE REQUESTED THE AP TRANSCO TO REIMBURSE THE EXPENDITURE INCURRED BY IT IN GETTING THE INTEREST RATES REDUCED. HOWEVER, THE AP TRANSCO DI D NOT ACCEPT REIMBURSEMENT OF SUCH EXPENSES AS ON 31.3.2004. HE NCE, THE ASSESSEE COLLECTED INTEREST AT THE RATES APPLICABLE TO ORIGI NAL LOANS AND EXCESS INTEREST COLLECTED WAS CREDITED TO AP TRANSCO ACCOU NT AS THE SAME HAS TO BE PAID BACK TO AP TRANSCO IF THEY AGREE FOR REI MBURSEMENT OF PREPAYMENT PREMIUM AND OTHER EXPENDITURE INCURRED I N CONNECTION WITH DEDUCTION IN RATES OF INTEREST. HE FURTHER SUBMITTE D THAT DURING THE FINANCIAL YEAR 2004-05, AP TRANSCO HAS ACCEPTED FOR REIMBURSEMENT OF PREPAYMENT PREMIUM AND OTHER EXPENSES AND IN FACT A DJUSTED THE SAID EXPENSES AND THE INTEREST EXCESS PAID BY THEM EARLI ER TO THE ASSESSEE COMPANY VIDE THEIR LETTER NO.612 DATED 16.6.2004 WH ILE MAKING PAYMENT OF ASSESSEES POWER BILL FOR THE TARIFF PERIOD FROM 10.5.2004 TO 9.6.2004. HE SUBMITTED THAT THE ASSESSING OFFICER REJECTED TH E PLEA OF THE ASSESSEE ON THE GROUND THAT THE BURDEN OF PREPAYMENT PREMIUM IS ON AP TRANSCO AND NOT ON THE ASSESSEE. HE ALSO HELD THA T SINCE AP TRANSCO HAS NOT ACCEPTED RESTRUCTURING OF LOANS, THE EXPEND ITURE HAS NOT CRYSTALISED AND THAT, AT BEST, THE EXPENDITURE CAN BE TREATED AS PREPAID EXPENDITURE AND AS AND WHEN AP TRANSCO AGREES TO R EIMBURSES THE AMOUNT, THE ASSESSEE CAN ADJUST THE SAME. THE CIT( A), HE SUBMITTED, CONFIRMED THE VIEW TAKEN BY THE ASSESSING OFFICER M ERELY FOLLOWING HIS DECISION FOR ASSESSMENT YEAR 2003-04 IN ASSESSEE-S OWN CASE. 9. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LOWER AUTHORITIES HAVE NOT PROPERLY APPRECIATED THE FACTS OF THE CASE, AS THE AP TRANSCO ADJUSTED THE EXCESS INTEREST OF RS.2,46,34, 6678 PAID TO THEM EARLIER IN THE BILL FOR THE TARIFF PERIOD FROM 10.5 .2004 TO 9.6.2004 AND THEY ITA NO.299/HYD/08 & ANR. M/S. G.V.K. INDUSTRIES LTD. , SECUNDERABAD. 8 ALSO PAID THE PREPAYMENT PREMIUM DUE TO THE ASSESSE E BY ADJUSTMENT IN THE SAME BILL. THE ASSESSEE THUS PAID BACK THE EXCE SS INTEREST COLLECTED AS EVIDENCED BY THE SAID BILL. IN THE LIGHT OF THES E CRYSTALISED FACTS PLACED BEFORE THE CIT(A), HE SUBMITTED, THE CLAIM OF THE A SSESSEE OUGHT TO HAVE BEEN ACCEPTED AND THE AMOUNTS OF EXCESS INTEREST BI LLED AND COLLECTED IN THE PERIODICAL BILLS WERE, IN FACT AND ALSO IN LAW, HELD BY THE ASSESSEE IN TRUST ON ACCOUNT OF AP TRANSCO. IN THIS VIEW OF TH E MATTER, HE SUBMITTED THAT THE ADDITION OF RS.2,46,34,667 MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE CIT(A) BE DELETED. 10. IT IS ALSO SUBMITTED THAT WHILE BRINGING TO T AX SUCH EXCESS INTEREST RECEIVED, THE ASSESSING OFFICER HAS EXCLUD ED THE SAME FROM ELIGIBLE PROFITS FOR THE PURPOSE OF COMPUTING DEDUC TION UNDER S.80IA OF THE ACT. IT IS SUBMITTED THAT FOR THE SUBSEQUENT A ND EARLIER YEARS, THE DEPARTMENT HAS RIGHTLY TREATED THE INTEREST RECEIVA BLE AS INCOME FROM ELIGIBLE BUSINESS FOR THE REASON THAT THE INTEREST RECEIVABLE IS AN INTEGRAL PART OF THE POWER PURCHASE TARIFF FOR SALE OF POWER GENERATED BY THE ASSESSEE AS PER THE POWER PURCHASE AGREEMENT AND TH EREFORE, IN CASE IT IS HELD THAT THE EXCESS INTEREST OF RS.2,46,34,667 IS ASSESSABLE AS INCOME, THE SAME MAY BE HELD AS ELIGIBLE FOR DEDUCT ION UNDER S.80IA. 11. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL RE PRESENTATIVE FOR THE REVENUE RELIED ENTIRELY ON THE SPEAKING ORD ER OF THE CIT(A) FOR THE ASSESSMENT YEAR 2002-03, WHERE IDENTICAL ISSUE WAS RAISED IN THE APPEAL FOR THAT YEAR ALSO 12. WE HEARD BOTH SIDES AND PERUSED THE ORDERS OF THE REVENUE AND THE ARGUMENTS RAISED BY THE PARTIES TO THE LITI GATION. IT IS A FACT THAT AS PER THE POWER PURCHASE AGREEMENT, THE INTER EST ON LOANS RAISED FORM PART OF THE POWER TARIFF TO BE CHARGED BY THE ASSESSEE ON AP TRANSCO. IT IS ALSO A FACT THAT THE ASSESSEE HAD BEEN CHARGING INTEREST ITA NO.299/HYD/08 & ANR. M/S. G.V.K. INDUSTRIES LTD. , SECUNDERABAD. 9 AT THE PREVAILING RATES ON LOANS IT HAD TAKEN IN IT S BILLS RAISED ON AP TRANSCO. WHEN SUBSEQUENTLY, THE RATES OF INTEREST CAME DOWN, THE ASSESSEE NEGOTIATED WITH THE LENDING INSTITUTIONS F OR PRE-PAYMENT OF LOANS, SUBJECT TO PAYMENT OF CERTAIN AMOUNT OF PRE- PAYMENT PREMIUM. THE ASSESSEE REPAID THE LOANS TAKEN AT HIGHER RATE OF INTEREST, BY AVAILING LOANS AT LOWER RATES OF INTEREST. THE ASSESSEE ASKE D AP TRANSCO FOR REIMBURSEMENT OF EXPENDITURE INCURRED IN CONNECTION WITH AVAILING OF LOANS AT LOWER RATES OF INTEREST AND ALSO PREPAYMEN T PREMIUM. THE AP TRANSCO, HOWEVER, DID NOT AGREE TO REIMBURSE THE SA ID EXPENDITURE. HENCE, THE ASSESSEE CONTINUED TO RAISE THE BILLS CH ARGING INTEREST AT THE HIGHER RATES APPLICABLE TO THE ORIGINAL LOANS, WHIC H WERE ALSO PAID BY THE AP TRANSCO. 13. THE INTEREST ON LOAN BEING A COMPONENT FORMIN G PART OF THE POWER TARIFF TO BE CHARGED BY THE ASSESSEE, THE EXC ESS INTEREST PAID BY THE AP TRANSCO TO THE ASSESSEE SHOULD FORM PART OF ASSESSEES BUSINESS INCOME, NOTWITHSTANDING THE CLAIM OF THE ASSESSEE T HAT THE EXCESS INTEREST COLLECTED WAS HELD IN TRUST ON ACCOUNT OF AP TRANSCO. THE HONBLE SUPREME COURT IN KCP LIMITED V/S. CIT (SUPR A), AFTER CONSIDERING ITS EARLIER DECISIONS IN CHOWRANGHEE SALES BUREAU P VT. LTD. (SUPRA) AND SYNCLAIRE MURRAY AND CO. PVT. LTD (SUPRA) HAS OBSER VED THAT A RECEIPT HAS TO BE TREATED AS A TRADING RECEIPT IRRESPECTIVE OF THE TREATMENT SHOWN IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. CONSIDERIN G THE FACT THAT THE INTEREST ON LOAN FORMS PART OF THE POWER TARIFF CHA RGED IN THE PRESENT CASE, IT IS ALSO A TRADING RECEIPT AT THE HANDS OF THE ASSESSEE. IT IS ALSO AN ADMITTED FACT THAT AS ON 31.3.2004, AP TRANSCO H AS NOT AGREED FOR REIMBURSEMENT OF THE PREPAYMENT PREMIUM AND OTHER E XPENDITURE INCURRED BY THE ASSESSEE. IN THIS VIEW OF THE MATT ER, IT HAS TO BE HELD THAT THE EXCESS INTEREST HAVING BEEN RECEIVED BY TH E ASSESSEE IN THE ORDINARY COURSE OF ITS BUSINESS ACTIVITY, SHOULD FO RM PART OF THE POWER ITA NO.299/HYD/08 & ANR. M/S. G.V.K. INDUSTRIES LTD. , SECUNDERABAD. 10 TARIFF CHARGED BY THE ASSESSEE, AND IT HAS TO BE TREATED AS INCOM E FROM BUSINESS OF THE ASSESSEE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. 14. THE ASSESSEE IN THE WRITTEN SUBMISSIONS HAS S UBMITTED THAT AP TRANSCO HAS ADJUSTED THE ENTIRE EXCESS INTEREST COLLECTED BY THE ASSESSEE AMOUNTING TO RS.2,46,34,667 FROM ITS BILLS RAISED FOR THE TARIFF PERIOD FROM 10.5.2004 TO 9.6.2004. IF THE EXCESS I NTEREST, IN FACT, HAS BEEN PAID BY WAY OF ADJUSTMENT TO THE AP TRANSCO AS CLAIMED BY THE ASSESSEE, THEN DEDUCTION OF THE SAID AMOUNT HAS TO BE ALLOWED TO THE ASSESSEE IN THE YEAR IN WHICH IT WAS PAID. WE DIRE CT THE ASSESSING OFFICER TO VERIFY THE CLAIM OF THE ASSESSEE IN THAT BEHALF, AND ALLOW CONSEQUENTIAL RELIEF IN THE RELEVANT YEAR. SUBJECT TO THIS ADJUST MENT FOR CONSEQUENTIAL RELIEF, IF ANY IN THE RELEVANT YEAR, IMPUGNED ADDIT ION IN THE YEAR UNDER APPEAL IS CONFIRMED . 15. IN CONNECTION WITH GROUND NO.4 WITH ITS SUB-GR OUNDS (A) TO (F), LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THA T THE ASSESSEE WAS DENIED BENEFIT OF DEDUCTION UNDER S.80IA OF THE ACT , IN RELATION TO (A) REFUND OF EXCESS INSURANCE PREMIUM (B) INCOME TAX RECEIVABLE (C) EXCESS INTEREST RECEIVED; (D) GAIN ON ACCOUNT OF FOREIGN EXCHANGE VARIATION; (E) INSURANCE CLAIMS RECEIVED THE ASSESSING OFFICER AND THE CIT(A) ARE OF THE OPI NION THAT THE ASSESSEE IS NOT ENTITLED TO DEDUCTION IN RESPECT OF THE ABOV E ITEMS FOR THE REASON THAT THESE RECEIPTS DO NOT CONSTITUTE INCOME DERIVE D FROM THE INDUSTRIAL UNDERTAKING FOR THE PURPOSES OF COMPUTING DEDUCTION . IN THIS REGARD, LEARNED COUNSEL FOR THE ASSESSEE ARGUED STATING THA T THESE RECEIPTS FORM PART AND PARCEL OF THE BILLS RAISED BY THE ASSESSEE IN THE NAME OF AP TRANSCO, AND AS SUCH, THEY FORM PART OF THE PROFITS DERIVED FROM THE ITA NO.299/HYD/08 & ANR. M/S. G.V.K. INDUSTRIES LTD. , SECUNDERABAD. 11 INDUSTRIAL UNDERTAKING. THE ARGUMENTS OF THE ASSES SEE THAT THE RECEIPTS SUCH AS EXCESS INSURANCE PREMIUM SINCE ACCOUNTED AS DEEMED INCOME UNDER S.41(1) OF THE ACT, IT MUST FORM PART OF BUS INESS PROFITS. IN CONNECTION WITH THE INCOME-TAX RECEIVABLE, THE REVE NUE WAS OF THE VIEW THAT SUCH AMOUNT SHOULD BE TAXED UNDER THE HEAD INC OME FROM OTHER SOURCES, AND THEREFORE THE SAME FALLS OUTSIDE THE S COPE OF DEDUCTION UNDER S.80IA. THE CIT(A) UPHELD THE VIEWS OF THE AS SESSING OFFICER IN THIS REGARD. AS FOR OTHER ITEMS, SUCH AS EXCESS INTERES T RECEIVED, GAINS ON ACCOUNT OF FOREIGN EXCHANGE VARIATION, BOTH THE ASS ESSING OFFICER AND THE CIT(A) HELD THEM AS NOT ELIGIBLE FOR DEDUCTION, REL YING ON THE DECISION OF THE SUPREME COURT IN THE CASE OF PANDIAN CHEMICALS (267 ITR 278). 16. DURING THE PROCEEDINGS BEFORE US, BOTH THE PAR TIES HAVE AGREED BY STATING THAT THESE ISSUES HAVE ALSO TO BE SET ASIDE TO THE FILE OF THE ASSESSING OFFICER FOR EXAMINING THE ISSUE IN AC CORDANCE WITH LAW IN THE LIGHT OF THE RATIO OF THE HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA LTD. V/S. CIT (317 ITR 218). FURTHER, THE LEARNED COUNSEL FOR THE ASSESSEE MADE WRITTEN SUBMISSIONS AND THE RELEVANT PORTIONS READ AS FOLLOWS- REFUND OF EXCESS INSURANCE PREMIUM: 5.2 THE ASSESSING OFFICER AS WELL AS THE COMMISSION ER OF INCOME- TAX(APPEALS) HELD THAT REFUND OF EXCESS INSURANCE P REMIUM IS NOT INCOME DERIVED FROM THE BUSINESS OF GENERATION OF POWER FO R PURPOSES OF COMPUTING DEDUCTION U/S. 80IA. THE ASSESSEE SUBMITS THAT EXPENDITURE ON INSURANCE PREM IUM IS DEBITED TO ITS PROFIT AND LOSS ACCOUNT AND A PART OF SUCH DEBIT IS RECEIVED AS REFUND. NET INCOME FO R THE YEAR IS ARRIVED AT AFTER CONSIDERING SUCH EXPENDITURE AS DEDUCTION AND REFUND AS INCOME. AND THEREFORE THE REFUND IS TO BE CONSIDERED AS INC OM E FROM THE GENERATION OF POWER ONLY OR THE EXPENDITURE ON INSU RANCE FOR THE YEAR HAS TO BE REDUCED TO THE EXTENT OF THE REFUND RECEI VED LATER. 5.3 THE INDUSTRIAL ALL RISK INSURANCE POLICY TAKEN BY THE ASSESSEE FORM UNITED INDIA INSURANCE CO. LTD. CONTAINS A PROVISIO N VIDE MEMO2 RETURN OF PREMIUM . IT MAY THUS BE SEEN THAT THE REFUND ARISES ON ACCOUNT OF RECOMPUTATION OF PREMIUM UNDER THE POLIC Y AFTER THE ACTUAL PROFIT OF THE YEAR ARE ASCERTAINED. IT IS SUBMITT ED THAT THE DECISION OF CIT(APPEALS ) MAY BE REVERSED. ITA NO.299/HYD/08 & ANR. M/S. G.V.K. INDUSTRIES LTD. , SECUNDERABAD. 12 5,4 IN THIS CONNECTION, IT IS FURTHER BROUGHT TO THE KIND NOTICE OF THE HONBLE ITAT THAT IDENTICAL ISSUE HAS BEEN ADJUDICA TED UPON FOR ASST. YEAR 2002-03 IN THE ASSESSEES OWN CASE VIDE CONSOL IDATED ORDER IN ITA NOS.1659 AND 1660/H/08 AND 1579 AND 1580/H/08 DATED 30-03-2012 WHEREIN THE MAIN ISSUE OF ELIGIBILITY OF THE IMPUGN ED MOUNTS FOR DEDUCTION U/S. 80IA HAS BEEN DEALT IN PARA NOS.17 T O 21 OF THE ORDER. INCOME TAX RECEIVABLE: 5.4 THE ASSESSING OFFICER AS WELL AS THE COMMISSION ER OF INCOME- TAX(APPEALS) HELD THAT INCOME TAX RECEIVABLE IS NOT INCOME DERIVED FROM THE BUSINESS OF GENERATION OF POWER FOR PURPOSES OF COMPUTING DEDUCTION U/S. 80IA,. IN THIS CONNECTION IT IS SUBM ITTED THAT THE POWER PURCHASE AGREEMENT THE ASSESSEE ENTERED INTO WITH APSEB CON TAINS AN ARTICLE NO.3 RELATING TO TARIFF. TARIFF, WHICH IS THE RATE FOR PURCHASE OF POWER TO BE PAID BY THE APSEB (NOW APTRANSCO) CONSISTS OF FI XED CHARGE, (ARTICLE 3.2), VARIABLE CHARGE (ARTICLE 3.5 AND 3.8 ), INCENTIVE/DISINCENTIVE PAYMENTS (ARTICLE 3.10) AND TAXES ON INCOME (ARTICL E 3.4) AS THE MAIN COMPONENTS. IT MAY THUS BE SEEN THAT THE AMOUNT OF TAXES ON INCOM E IS AN INTEGRAL COMPONENT OF THE PRICE OF POWER GENERAT ED AND SOLD BY THE ASSESSEE. THEREFORE THE VIEW TAKEN BY THE A.O AND U PHELD BY THE CIT(A) IS UNTENABLE. IT IS SUBMITTED THAT THE DECISION OF CIT(APPEALS) MAY BE REVERSED. EXCESS INTEREST RECEIVED: 5.5 THE ASSESSING OFFICER AS WELL AS THE COMMISSION ER OF INCOME- TAX(APPEALS) HELD THAT EXCESS INTEREST RECEIVED IS NOT INCOM E DERIVED FROM THE BUSINESS OF GENERATION OF POWER FOR PURPOS ES OF COMPUTING DEDUCTION U/S. 80IA. IN THIS CONNECTION, KIND ATTE NTION IS INVITED TO THE SUBMISSIONS MADE IN PARAS 4.1 TO 4.8 ABOVE, WHEREIN THE ASSESSEE HAS PRAYED FOR DELETION OF THIS AMOUNT REPRESENTING EXC ESS INTEREST RECEIVED. HOWEVER, FOR ANY REASONS THE SAME IS CONSIDERED AS INCOME, SUCH AMOUNT OF EXCESS INTEREST BEARS THE SAME CHARACTER AS SALE PRICE OF POWER UNDER CLAUSE 3.2.1(I) OF THE PPA. IT IS THERE FORE SUBMITTED THAT THERE IS NO WARRANT TO TREAT THE EXCESS INTEREST DI FFERENTLY ONCE IT IS HELD LIABLE FOR INCLUSION IN TOTAL INCOME. THE ASSESSEE THEREFORE PLEADS THAT THE DEDUCTION OF CIT(APPEALS) MAY BE REVERSED. GAIN ON FOREIGN EXCHANGE VARIATION: 5.6 THE AOP AS WELL AS THE COMMISSIONER OF INCOM E TAX (APPEALS) HELD THAT GAIN ON FOREIGN EXCHANGE VARIATION IS NOT INCOME DERIVED FROM THE BUSINESS OF GENERATION OF POWER FOR PURPOSES OF COMPUTING DEDUCTION U/S. 8IA. IN THIS CONNECTION THE ASSESSEE SUBMITS T HAT AS PER THE POWER PURCHASE AGREEMENT, APTRANSCO HAS TO PAY FOREIGN EX CHANGE VARIATION TOWARDS PRINCIPAL REPAYMENTS OF FOREIGN CURRENCY LO ANS ON MONTHLY BASIS. HENCE, THE FOREIGN EXCHANGE VARIATION COMPON ENT IN BILL WILL BE CREDITED TO FOREIGN EXCHANGE VARIATION ACCOUNT EVER Y MONTH AND WILL BE UTILIZED FOR PAYMENT OF PRINCIPAL DEBT TO FOREIGN C URRENCY LENDERS ON QUARTERLY DUE DATES OF PAYMENT. THE SURPLUS OR DEFI CIT IN THE FOREIGN EXCHANGE VARIATION ACCOUNT WILL BE CREDITED/DEBITED TO PROFIT AND LOSS ACCOUNT AT THE END OF THE FINANCIAL YEAR. THEREFOR E, THE ASSESSEE SUBMITS THAT PAYMENT OF FOREIGN EXCHANGE VARIATION BY APTRA NSCO TO THE ASSESSEE IS FORMING PART OF SALES REVENUE. THE SAID AMOUNT IS THEREFORE TO BE TREATED AS ELIGIBLE FOR DEDUCTION U/S. 80IA. THE ASSESSEE RELIES ON ITA NO.299/HYD/08 & ANR. M/S. G.V.K. INDUSTRIES LTD. , SECUNDERABAD. 13 THE DECISION OF THE ITAT, MUMBAI BENCH G IN THE C ASE OF RENNAISSANCE JEWELLERY (P)LTD. VS. ITO, WARD 8(3)(3) MUMBAI 101 ITD 380 MUM IN THIS REGARD. THE ASSESSEE THEREFORE PELADS THAT THE DECISION OF CIT(A) MAY BE REVERSED. 17. WE HEARD BOTH THE PARTIES. THE MAIN QUESTION BEFORE US IS WHETHER THE SPECIFIC ITEMS OF RECEIPTS MENTIONED AT (A) TO (F) ABOVE. CONSTITUTE THE INCOME DERIVED FROM THE INDUSTRIAL U NDERTAKING, ELIGIBLE FOR DEDUCTION UNDER S.80IA OF THE ACT, OR NOT. DESPITE THE FINDING OF THE REVENUE AUTHORITY WITH REGARD TO OTHER RECEIPTS THA T THEY ARE NOT DERIVED FROM THE BUSINESS OF THE UNDERTAKING, THERE IS NO C LARITY AS TO WHETHER THE SAID ITEMS OF INCOME FALL AS OPERATIONAL INCOME OR INELIGIBLE ANCILLARY PROFIT, WHICH IS THE EXPRESSION USED BY THE APEX CO URT IN THE CASE OF LIBERTY INDIA (SUPRA). WE FIND THAT THE JUDGMENT O F THE APEX COURT IN THE CASE OF LIBERTY INDIA (SUPRA) WAS NOT IN EXISTENCE AT THE RELEVANT POINT OF TIME. IN THIS VIEW OF THE MATTER AND IN VIEW OF TH E MUTUALLY AGREED POSITION, WE ARE OF THE OPINION THAT THIS ISSUE MUS T ALSO BE SET ASIDE TO THE FILE OF THE ASSESSING OFFICER FOR WANT OF CLEAR FINDING AS TO WHETHER THE SPECIFIC ITEMS OF INCOME OF THE ASSESSEE CONSTITUTE OPERATIONAL INCOME OF THE ASSESSEE ELIGIBLE FOR RELIEF UNDER S.80IA OF TH E ACT OR INELIGIBLE ANCILLARY PROFITS OF THE ASSESSEE. WE DO SO ACCORD INGLY, AND SET ASIDE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A D IRECTION TO REDECIDE THE SAME IN THE LIGHT OF OUR OBSERVATIONS, IN ACCORDANC E WITH LAW AND AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASS ESSEE. 18. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED FOR STATISTICAL PURPOSES. REVENUES APPEAL: ITA NO.508/HYD/2005 : ASSESSMENT YEAR 2000-01 19. THIS IS REVENUES APPEAL FOR THE ASSESSMENT YE AR 2000-01, WHEREIN THE GROUNDS RAISED ARE AS UNDER- ITA NO.299/HYD/08 & ANR. M/S. G.V.K. INDUSTRIES LTD. , SECUNDERABAD. 14 1. THE ORDER OF THE CIT(A) IS ERRONEOUS IN LAW AND FACTS. 2. THE CIT(A) IS ERRED IN REDUCING THE INTEREST INC OME OF RS.22,91582 FROM THE INTEREST EARNED OF RS.5,45,85, 383 3. THE DECISION OF THE ITAT, DELHI IN THE CASE OF L ALSON ENTERPRISES V/S. DY.CIT IS NOT APPLICABLE IN THIS C ASE SINCE THE FACTS AND CIRCUMSTANCES OF THE ASSESSEES CASE ARE DIFFERENT. 4. THE CIT(A) ERRED IN REDUCING THE PRIOR PERIOD E XPENSES OF RS.96,72,866 WHILE COMPUTING THE INCOME UNDER MAT PROVISIONS SINCE AS PER THE PROVISIONS OF SEC,.115 JA(2) NO AMOUNT SHALL BE REDUCED OTHER THAN THE AMOUNTS REFE RRED TO IN CLAUSES (I) TO (IX) OF SEC.115JA(2). 20. LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE RE VENUE SUMMED UP BY STATING THAT THERE ARE COUPLE OF ISSUE S EMANATING FROM THE ABOVE GROUNDS AND THEY ARE- (1) NETTING OF INTEREST PAYMENT OF RS.22,91,582/- AGAINST INCOME OF FIXED DEPOSITS AMO UNTING TO RS.2374280; (2)ALLOWABILITY OF PRIOR PERIOD EXPENSE S OF RS.9672866, FOR THE PURPOSE OF COMPUTING NET PROFIT UNDER S.80IA OF THE ACT. ON THE ISSUE RELATING TO GROUND NO.2, LEARNED DEPARTMENTAL REPRESENTATIVE FAIRLY MENTIONED THAT GROUND HAS BEEN ERRONEOUSLY RAISED A ND REQUIRES CORRECTION TO THAT EFFECT. HE FURTHER MENTIONED TH AT THE ORDERS OF THE REVENUE AUTHORITIES DO NOT CONTAIN DISCUSSION ABOUT THE INTEREST PAYMENTS AND THE RELATABILITY OF THE SAME TO THE IN TEREST INCOME EARNED ON THE FIXED DEPOSITS. REFERRING TO DISCUSSION GIV EN IN PARAS 2 TO 4 OF THE IMPUGNED ORDER, THE LEARNED DEPARTMENTAL REPRESENTA TIVE MENTIONED THAT THE CIT(A) HAS ERRONEOUSLY ADOPTED THE RATIO OF THE SPECIAL BENCH DECISION OF THE TRIBUNAL IN THE CASE OF LALSON ENTE RPRISES (89 ITD 250). 21. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE CLARIFIED STATING THAT THE ASSESSEE EARNED INTEREST INCOME OF RS.5,45,85,383 WHICH ALSO INCLUDES INTEREST EARNE D ON FIXED DEPOSITS. LEARNED COUNSEL MENTIONED THAT THE INTEREST EXPENDI TURE OF RS.22,91,582 INCURRED BY THE ASSESSEE IS DIRECTLY RELATABLE TO T HE INTEREST EARNED OF RS.5,45,85,383. ON GIVING A FINDING AS TO THE NATU RE OF THE SAID INTEREST, ITA NO.299/HYD/08 & ANR. M/S. G.V.K. INDUSTRIES LTD. , SECUNDERABAD. 15 HE SUBMITTED THAT THE CIT(A) RIGHTLY ALLOWED NETTIN G OF INTEREST PAYMENT AGAINST INTEREST EARNINGS RELYING ON THE SPECIAL B ENCH DECISION IN THE CASE OF LALSON ENTERPRISES (SUPRA). 22. ON HEARING THE PARTIES, WE FIND THAT THE CIT( A) REJECTED THE ASSESSEES CLAIM OF NOT ONLY IT BEING A BUSINESS RE CEIPT/EXPENDITURE AND IN THE ALTERNATIVE, HE GRANTED RELIEF AS PER THE PROVI SIONS OF S.56 OF THE ACT. IN OUR OPINION, THE DECISION OF THE CIT(A) IS FAIR AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUND NO.2 OF THE R EVENUE IS DISMISSED. 23. REGARDING THE ISSUE RAISED IN GROUND HNO.4 OF THE APPEAL, RELATING TO PRIOR PERIOD EXPENDITURE, BOTH THE PART IES HAVE AGREED WITH THE VIEW THAT THIS ISSUE HAS TO BE SET ASIDE TO THE FIL E OF THE ASSESSING OFFICER FOR EXAMINING THE ISSUE WHETHER THE SAID PRIOR PERI OD EXPENSES SHOULD BE ADJUSTED TO THE NET PROFIT FOR THE PURPOSES OF S.11 5JA OF THE ACT, CONSIDERING THE CONTENTS OF PARTS II AND III OF SCH EDULE VI OF THE COMPANIES ACT, 1956. WE DO SO ACCORDINGLY, AND DIR ECT THE ASSESSING OFFICER TO EXAMINE THE ITEMS MENTIONED IN SAID PART II AND III OF SCHEDULE VI OF THE COMPANIES ACT, 1956 AND DECIDE AFRESH AS TO THE CORRECT TREATMENT TO BE GIVEN TO THE IMPUGNED PRIOR PERIOD EXPENSES FOR THE PURPOSES OF COMPUTING THE BOOK PROFIT, AND ITS ADJU STMENT FOR THE PURPOSES UNDER S.115JA OF THE ACT. ACCORDINGLY, GRO UND NO.4 IS SET ASIDE. 24. IN THE RESULT, REVENUES APPEAL IS PARTLY ALL OWED FOR STATISTICAL PURPOSES. 25. TO SUM UP, APPEAL OF THE ASSESSEE AS WELL AS APPEAL OF THE REVENUE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES . ITA NO.299/HYD/08 & ANR. M/S. G.V.K. INDUSTRIES LTD. , SECUNDERABAD. 16 ORDER PRONOUNCED IN THE COURT ON 11TH MAY, 2012 SD/- SD/- (SAKTIJIT DEY) (D.KARUNAKARA RAO) JUDICIAL MEMBER. ACCOUNTANT MEMBER. DT/- 11TH MAY, 2012 COPY FORWARDED TO: 1. M/S. G.V.K. INDUSTRIES LTD. , 1546 - 159 PAIGAH HOUSE, S.P.RAOD, SECUNDERABAD. 2. DY./ASST. COMMISSIONER OF INCOME- TAX CIRCLE 2(2), HYDERABAD 3. 4. COMMISSIONER OF INCOME - TAX(APPEALS) - III, HYDERABAD COMMISSIONER OF INCOME-TAX II, HYDERABAD 5 . THE DEPARTMENTAL REPRESENTATIVE, ITAT HYDERABAD B.V.S.