ITO, WARD- 13(1), New Delhi V. Nabinagar Power Generating Co. Pvt. Ltd, New Delhi

ITA 5290/DEL/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7389 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2014-2015
• Appeal Filed On: 16-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AGAINST DATED PASSED
• Keywords: Capital receipt; Capital expenditure
• Section: 142(1); 143(1); 56

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E, NEW DELHI BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 5290/DEL/2017 ASSESSMENT YEAR: 2014-15 ITO, WARD 13(1), NEW DELHI ROOM NO. 225-D, C.R. BUILDING, I.P. ESTATE, NEW DELHI 2 VS. NABINAGAR POWER GENERATING CO. PVT. LTD. CORE-7, SCOPE COMPLEX, INSTITUTIONAL AREA, LODHI ROAD, NEW DELHI -3 (PAN: AACCN9448C) (APPELLANT) (RESPONDENT) ORDER PER H.S. SIDHU, JM THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER DATED 5.6.2017 PASSED BY THE LD. CIT(A)-6, NEW DELHI RELA TING TO ASSESSMENT YEAR 2014-15 ON THE FOLLOWING GROUNDS:- I. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) IS LEGALLY JUSTIFIED IN DELETI NG THE ADDITION OF RS. 58,11,065/- AND RS. 20,06,174/- ON ACCOUNT OF INTEREST RECEIVED FROM BANK AND ON ADVANCES TO CONTRACTORS RESPECTIVELY DURING THE YEA R BY NOT APPRECIATING THE FACT THAT PROVISIONS LAID D OWN DEPARTMENT BY MS. RINKU SINGH, SR. DR ASSESSEE BY SH. AJAY KUMAR AGARWAL, CA 2 IN SECTION 5 OF THE INCOME TAX ACT, (THE ACT) WHERE IN IT HAS BEEN CLEARLY MENTIONED THAT THE TOTAL INCOME OF A PERSON INCLUDES ALL THE INCOME EARNED / RECEIV ED OR DEEMED TO BE EARNED / RECEIVED BY THE PERSON IN THE PREVIOUS YEAR? II. WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS LEGALLY JUSTIFIED IN DELETI NG THE ADDITION OF RS. 2,44,466/- ON ACCOUNT OF MISCELLANEOUS INCOME BY SALE OF SCRAP EVEN WHEN THE RECEIPT WAS SQUARELY COVERED UNDER PROVISION TO SECTION 5 OF THE ACT R.W.S. 56(1) & (2) OF THE ACT WHICH SAYS THAT THE TOTAL INCOME INCLUDES ALL THE INCOME EARNED / RECEIVED OR DEEMED TO BE EARNED / RECEIVED BY THE PERSONS IN THE PREVIOUS YEAR? III. WHETHER ON FACTS AND IN CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) IS LEGALLY JUSTIFIED IN DELETING THE ADDITION OF RS. 58,11,065/- AND RS. 20,06,174/- ON ACCOUNT OF INTEREST RECEIVED FROM BANK AND ON ADVANCES TO CONTRACTORS RESPECTIVELY BY IGNORING TH E FINDINGS OF THE AO RECORDED IN THE ASSESSMENT ORDER THAT THE ASSESSEE INVESTED SURPLUS FUNDS WHICH WERE NOT IMMEDIATELY REQUIRED BY IT IN FDRS AND EARNED INTEREST ON IT WHICH CLEARLY FALLS IN THE DEFINITIO N OF 3 INCOME FROM OTHER SOURCES AS PER SUB SECTION (1) AND (2) TO SECTION 56 OF THE ACT? IV. WHETHER ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS LEGALLY JUSTIFIED IN ALLOWING REL IEF TO THE ASSESSEE ON THE BASIS OF ITS EARLIER YEARS DEC ISION IN THE ASSESSEES OWN CASE DESPITE THE FACT THAT PRINCIPLE OF RESJUDICATA IS NOT APPLICABLE TO INCOM E TAX PROCEEDINGS AS EACH ASSESSMENT YEAR IS A SEPARATE YEAR? V. THAT THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTE R OR FORGO ANY GROUND(S) OF APPEAL EITHER BEFORE OR A T THE TIME OF HEARING OF THE APPEAL. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE F ILED ITS E-RETURN ON 30.9.2013 DECLARING NIL INCOME WITH LOSS OF RS. (-) RS. 1500/-. THE RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE I NCOME TAX ACT, 1961 ON 12.6.2015. THE CASE WAS SELECTED FOR SCRUTINY UN DER COMPULSORY MANUAL CATEGORY. ACCORDINGLY NOTICE UNDER SECTION 143(2) OF THE I.T. ACT, 1961 DATED 14.9.2015 WAS ISSUED AND SERVED UPO N THE ASSESSEE COMPANY. THEREAFTER, NOTICES U/S. 142(1) ALONGWIT H WITH QUESTIONNAIRE WAS ISSUED AND DULY SERVED UPON THE ASSESSEE COMPAN Y. IN RESPONSE TO THE SAME, ASSESSEE ATTENDED THE PROCEEDINGS FROM TI ME TO TIME AND FILED THE REQUISITE DETAILS. THE ASSESSEE IS A JOINT V ENTURE COMPANY INCORPORATED ON 9.9.2008. THE JOINT VENTURE COMPAN Y OF THE COMPANY ARE NTPC LIMITED AND BIHAR STATE ELECTRICITY BOARD. THE JOINT VENTURE WAS 4 INCORPORATED WITH THE MAIN OBJECTIVE OF CONSTRUCTIO N OF POWER PLANT OF THE CAPACITY TO PRODUCE 3,960 MW (660 MW*6 UNITS) OF EL ECTRICITY AT SHIVANPUR, DIST. AURANGABAD, BIHAR. ON PERUSAL OF T HE NOTE NO. 14 OTHER INCOME OF THE STATEMENT OF PROFIT AND LOSS ACCOUNT, IT WAS OBSERVED THAT THE ASSESSEE COMPANY HAS SHOWN RECEIP T OF RS. 20,06,174/- ON ACCOUNT OF INTEREST FROM CONTRACTORS , RS. 58,11,065/- ON ACCOUNT OF INTEREST INCOME FROM INDIAN BANKS, AND R S. 2,44,466/- ON ACCOUNT OF MISC. INCOME. THE ASSESSEE HAS REDUCED THE ENTIRE RECEIPTS ON ACCOUNT OF INTEREST FROM THE TOTAL EXPENDITURE D URING CONSTRUCTION PERIOD UNDER NOTE NO. 18 OF THE STATEMENT OF PROFIT AND LOSS ACCOUNT AND THE NET AMOUNT HAS BEEN TRANSFERRED TO THE CAPITAL WORK-IN-PROGRESS VIDE NOTE NO. 9 OF THE BALANCE SHEET. THE AO VIDE HIS QU ERY NOTE DATED 15.1.2016 HAS CALLED UPON TO FURNISH THE COMPLETE D ETAILS OF OTHER INCOME AS SHOWN IN THE STATEMENT OF THE PROFIT AND LOSS AC COUNT AND THE ASSESSEE WAS ALSO ASKED TO SHOW CAUSE AS TO WHY THE INTEREST RECEIVED FROM CONTRACTORS AND INTEREST RECEIVED FROM BANKS, MISCELLANEOUS INCOME AND NET GAIN IN FOREIGN CURRENCY TRANSACTION SHOULD BE NOT ADDED IN THE TOTAL INCOME OF THE ASSESSEE AS INCOME UNDER THE HE AD OTHER SOURCES. THE ASSESSEE COMPANY SUBMITTED ITS REPLY VIDE DATE D 29.8.2016 AND THE CONTENTION OF THE ASSESSEE COMPANY, THAT INTEREST I S IN RESPECT OF INTEREST ON FDRS AND INCOME ON ADVANCES GIVEN TO CONTRACTORS EARNED IN A PERIOD WHICH IS PRIOR TO COMMENCEMENT OF BUSINESS AND THER EFORE BE TREATED AS CAPITAL RECEIPT AND REDUCED FROM THE TOTAL CAPITAL EXPENDITURE WAS NOT CORRECT. THEREAFTER, THE AO OBSERVED THAT ASSESSE E COMPANY HAS 5 INVESTED THE SURPLUS FUNDS, WHICH WERE NOT IMMEDIAT ELY REQUIRED BY IT, IN FDRS AND ALSO HAS GIVEN ADVANCES TO THE CONTRACTORS . THE DEPOSITS AND THE ADVANCES GIVEN BY THE COMPANY WERE NOT IN THE R EGULAR COURSE OF BUSINESS, NOR WAS IT THE BUSINESS OF THE COMPANY TO MAKE DEPOSITS AND ADVANCES AND EARN INTEREST. THE INTEREST INCOME CA NNOT BE SAID TO BE ATTRIBUTABLE TO THE ACTIVITIES OF THE COMPANY. TH E INTEREST HAD ACCRUED ON THE FUNDS, WHICH WERE NOT IMMEDIATELY REQUIRED B Y THE ASSESSEE COMPANY FOR ITS BUSINESS PURPOSES AND WHICH WERE I NVESTED IN FDRS AND ON THE ADVANCES GIVEN TO CONTRACTORS. THE INTEREST EARNED ON FDRS AND ADVANCES WERE NOT EARNED OUT OF BUSINESS REGULARLY CARRIED OUT BY THE ASSESSEE COMPANY. THEREFORE, THE AO TREATED THE INTEREST INCOME OF RS. 20,06,174/- ON ACCOUNT OF INTEREST FROM CONTRAC TORS RS. 58,11,065/- ON ACCOUNT OF INTEREST INCOME FROM INDIAN BANKS AND RS. 2,44,466/- ON ACCOUNT OF MISC. INCOME AS THE INCOME UNDER THE HEA D INCOME FROM OTHER SOURCES. ACCORDINGLY, THE AO ASSESSED THE INCOME O F THE ASSESSEE AT RS. 80,61,705/- U/S.143(3) OF THE ACT DATED 31.8 .2016. AGAINST THE ASSESSMENT ORDER, ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE HIS IMPUGNED ORDER DATED 05.6.2017 HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. AGGRIEVED WITH THE IMPUGNED ORDER, REVENU E IS IN APPEAL BEFORE THE TRIBUNAL. 3. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER OF THE ASSESSING OFFICER. 4. LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE OR DER OF THE LD. CIT(A) AND STATED THAT THE ISSUE IS SQUARELY COVERED BY TH E DECISION DATED 6 13.9.2017 OF THE ITAT, E BENCH, NEW DELHI IN ASSE SSEES OWN CASE PASSED IN ITA NO. 4560-4561/DEL/2014 (AYRS.) 2011-1 2 & 2012-13. HE ALSO STATED THAT THE ABOVE DECISION OF THE ITAT HAS BEEN UPHELD BY THE HONBLE DELHI HIGH COURT IN ITA NO.553/2018, CM APP L. 19070/2018 AND ITA NO. 555/2018, CM APPL. 19072/2018 VIDE ORDER DA TED 9.5.2018 IN ASSESSEES OWN CASE. IN THIS BEHALF, HE FILED THE C OPIES OF THE AFORESAID DECISIONS BEFORE US. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS ESPECIALLY THE IMPUGNED ORDER. WE FIND THAT LD. CIT(A) HAS EL ABORATELY DISCUSSED THE ISSUES IN DISPUTE VIDE PARA NO. 3.1.3 AT PAGE N O. 10 & 11 OF THE IMPUGNED ORDER. FOR THE SAKE OF CLARITY, WE ARE REP RODUCING THE RELEVANT FINDING OF THE LD. CIT(A) AS UNDER:- 3.3.1 THE FACTS OF THE CASE AND THE SUBMISSIONS OF THE AR HAVE BEEN CAREFULLY CONSIDERED. IT IS OBSERVED THAT THE GROUND OF APPEAL RELATES TO THE RECEIPT OF RS. 20,06,174/- ON ACCOUNT OF INTEREST FROM CONTRACTORS ADVANCES, RS. 58,11,065/- ON ACCOUNT OF INTEREST INCOME FROM BANKS AND RS. 2,44,466/- ON ACCOUNT OF MISC. INCOME FROM SALE OF SCRAP ETC. IT IS SUBMITTED THAT THE COMPANY IS A PRIVATE LIMITED COMPANY WHICH WAS INCORPORATED ON 9.9.2008 AS A JOINT VENTURE COMPANY 7 BETWEEN NTPC LTD. AND BIHAR STATE ELECTRICITY BOARD, WITH AN EQUAL PERCENTAGE OF SHAREHOLDINGS WITH THE MAIN OBJECTIVE OF CONSTRUCTION OF POWER PLANT(S) FOR GENERATING ELECTRICITY. THE JOINT VENTURE WAS INCORPORATED WITH AN AUTHORIZED CAPITAL OF RS. 2000 CRORE. IT HAD STARTED IN THE FINANCIAL YEAR 2009-10, THE PRELIMINARY WORK LIKE SURVEY AND INVESTIGATIONS ETC I.E. BEFORE UNDERTAKING THE CONSTRUCTION OF THE POWER GENERATING PLANT OF THE CAPACITY TO PRODUCE 3960 MW (660 MWX6 UNITS) OF ELECTRICITY AT SHIVANPUR, DISTT- AURANGABAD, BIHAR. THE TOTAL ESTIMATED COST OF THE PROJECT IS RS. 12,600 CRORE. THE MAIN WORK OF CONSTRUCTION OF THE SAID POWER PLANT WAS STARTED IN THE YEAR 2011-12, WHICH IS NOW EXPECTED TO BE COMPLETED IN THE FINANCIAL YEAR 2018-19 (STAGE-1). THE FUNDS FOR THE ENTIRE POWER PLANT HAD BEEN PLANNED TO BE FINANCED BY WAY OF 30% AS EQUITY CONTRIBUTIONS FROM THE SHAREHOLDERS AND THE BALANCE 70% BY RAISING DEBT FUNDS. 8 I FIND THAT GOING BY THE FACTS AND THE NATURE OF RECEIPTS, THE JUDGMENT IN THE CASE OF FACOR POWER LIMITED AND INDIAN OIL PANIPAT POWER CONSORTIUM (BOTH HON'BLE HIGH COURT OF DELHI), SQUARELY APPLIES TO PRESENT CASE. IN THE CASE OF FACOR POWER LIMITED, HON'BLE DELHI HIGH COURT HELD THAT 'WHERE ASSESSEE ENGAGED IN GENERATING ELECTRIC POWER, KEPT MARGIN MONEY IN FORM OF FIXED DEPOSITS FOR PROCUREMENT OF VARIOUS CAPITAL GOODS FOR SETTING UP OF POWER PROJECT, INTEREST EARNED ON SAID DEPOSITS WOULD BE IN NATURE OF CAPITAL RECEIPT NOT LIABLE TO TAX'. IN THE CASE OF INDIAN OIL PANIPAT POWER CONSORTIUM, HON'BLE HIGH COURT OF DELHI RELIED ON THE HON'BLE SUPREME COURT JUDGMENT IN CIT VS. BOKARO STEEL LIMITED THAT IF INCOME IS EARNED, WHETHER BY WAY OF INTEREST OR IN ANY OTHER MANNER ON FUNDS WHICH ARE OTHERWISE 'INEXTRICABLY LINKED' TO THE SETTING UP OF PLANT, SUCH INCOME IS REQUIRED TO BE CAPITALIZED TO BE SET OFF AGAINST PRE- OPERATIVE EXPENSES. THE HON'BLE DELHI HIGH 9 COURT HAD ALSO DISTINGUISHED THE FACTS BEFORE THEM FROM THOSE WHICH WERE BEFORE THE APEX COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS AND FETILIZERS LTD. VS CIT. THE AO FAILED TO ESTABLISH THAT THESE WERE SURPLUS FUNDS PARKED IN THE BANK TO EARN INTEREST. GOING BY THE FACTS OF THE CASE AND VARIOUS DECISIONS CITED ABOVE, THE INTEREST RECEIPTS ARE TREATED AS CAPITAL IN NATURE AND THE ADDITIONS DESERVE TO BE DELETED. BESIDES, IT IS OBSERVED THAT THE SIMILAR ADDITION OF INTEREST INCOME FROM BANK, INTEREST ON CONTRACTOR'S ADVANCES AND MISC. INCOME ON ACCOUNT OF SALE OF SCRAP ETC. IN A.Y. 2011-12, A.Y. 2012-13 AND A.Y. 2013- 14 WAS ALSO DELETED BY CSLT(A) IN THE APPELLANT'S OWN CASE. THEREFORE, THE ADDITION OF RS. 80,61,705/- IS HEREBY DELETED. THESE GROUNDS OF APPEAL ARE THEREFORE ALLOWED. 5.1 AFTER PERUSING THE AFORESAID FINDING AND AFTER GOING THROUGH THE DECISION DATED 13.9.2017 OF THE ITAT, E BENCH, N EW DELHI IN ASSESSEES OWN CASE PASSED IN ITA NO. 4560-4561/DEL/2014 (AYRS .) 2011-12 & 10 2012-13, WHICH HAS ALSO BEEN UPHELD BY THE HONBLE DELHI HIGH COURT IN ITA NO.553/2018, CM APPL. 19070/2018 AND ITA NO. 55 5/2018, CM APPL. 19072/2018 VIDE ORDER DATED 9.5.2018, WE ARE OF TH E CONSIDERED VIEW THAT THERE IS NO ILLEGALITY OR INFIRMITY IN THE FIN DING OF THE LD. CIT(A) ON THE ISSUES IN DISPUTE, HENCE, THEREFORE, WE UPHOLD THE ACTION OF THE LD. CIT(A) ON THE ISSUES IN DISPUTE AND REJECT THE GROU NDS RAISED BY THE REVENUE. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS D ISMISSED. ORDER PRONOUNCED ON 09-01-2019. SD/- SD/- [PRASHANT MAHARISHI] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE:09/01/2019 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4.CIT (A) 5. D R, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES