M/s H.P. Power Transmission Corporation Ltd., Shimla V. ITO, Shimla

ITA 530/CHANDI/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8921 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 09-05-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS.ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO. 530/CHD/2016 ASSESSMENT YEAR : 2012-13 M/S H.P. POWER TRANSMISSION CORP.LTD. VS THE I TO, BAROWALIA HOUSE, KHALINI, WARD 1, SHIMLA 2. SHIMLA. PAN: AACCH1548M (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TEJ MOHAN SINGH, PROXY COUNSEL FOR SHRI VISHAL MOHAN RESPONDENT BY : SHRI MANJIT SINGH DATE OF HEARING : 05.12.2016 DATE OF PRONOUNCEMENT : 07.12.2016 O R D E R PER BHAVNESH SAINI,JM THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINST ORDER OF LD. CIT(APPEALS) SHIMLA DATED 04.03.2016 F OR ASSESSMENT YEARS 2012-13 ON THE FOLLOWING GROUND : THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LD COMMISSIONER OF INCOME TAX ( APPEALS) IS NOT JUSTIF IED IN UPHOLDING THE ADDITION OF RS 9,46,51,086/- MADE TO THE TAXABLE INCOME OF THE ASSESSEE BY TREATING THE INTEREST ACC RUED ON FDR'S AS INCOME FROM OTHER SOURCES AND SUBJECTING THE SAM E FOR TAXATION . FACT OF THE MATTER IS THAT THE' ASSESSEE 'S BUSINESS WAS IN A PRE-OPERATIONAL STAGE AND THE INTEREST HAD BEE N RIGHTLY REDUCED FROM THE CAPITAL WORK IN PROGRESS. 2 2. BRIEF FACTS OF THE CASE ARE THAT RETURN DECLARIN G NIL INCOME WAS E-FILED BY THE ASSESSEE-CORPORATIO N ON 29/09/2012. THE CASE WAS SELECTED FOR SCRUTINY THRO UGH CASS. THE ASSESSEE COMPANY NAMELY, H.P. POWER TRANSMISSION CORPORATION LIMITED (HPPTCL), AN UNDERTAKING OF GOVERNMENT OF HIMACHAL PRADESH WAS ESTABLISHED ON 27 TH AUGUST, 2008 WITH A VIEW TO STRENGTHEN THE TRANSMISSION NETWORK IN HIMACHAL PRADESH AND TO FACILITATE EVACUATION OF POWER FROM UPCOMING GENERATING PLANTS. THE JOBS ENTRUSTED TO CORPORATION BY GOHP INTER-ALIA INCLUDED EXECUTION O F ALL NEW WORKS - BOTH TRANSMISSION LINES AND SUBSTATIONS OF 66KV AND ABOVE VOLTAGE RATINGS, FORMULATION, UPDATION, EXECUTION OF TRANSMISSION MASTER PLAN OF HP FOR STRENGTHENING OF TRANSMISSION NETWORK AND EVACUATION OF POWER. BESIDES, COORDINAT ING THE TRANSMISSION RELATED ISSUES WITH CTU, CEA/OP (GOI), HP GOVERNMENT AND HPSEBL. HPPTCL WAS ALSO RESPONSIBLE FOR PLANNING AND CO-ORDINATION OF TRANSMISSION RELATED ISSUES WITH IPPS, CPSUS, STATE PSUS, HPPCL AND OTHER STATE/CENTRAL GOVERNMENT AGENCIES. THE ASSESSEE COMPANY HAS NOT PREPARED PRO FIT AND LOSS ACCOUNT, AS THE COMPANY WAS YET TO START COMMERCIAL OPERATION. HOWEVER, THE STATEMENT SHOWIN G INCIDENTAL EXPENDITURE DURING CONSTRUCTION (PENDING ALLOTMENT) HAS BEEN PREPARED. THUS, IT IS AN UNDISP UTED FACT THAT BUSINESS OF THE ASSESSEE COMPANY IS YET I N PRE-OPERATIVE STAGE AND IT HAS NOT COMMENCED BUSINE SS 3 OPERATIONS. NOR IT HAS UNDERTAKEN ANY PRODUCTION IN THE RELEVANT ASSESSMENT YEAR. THE ASSESSEE COMPANY HAD EARNED INTEREST INCOME OF RS.9,46,51,086/- IN THE ASSESSMENT YEAR 20L2-13. THE INTEREST WAS EARNED ON SURPLUS FUNDS AVAILABLE WITH THE ASSESSEE COMPANY. THIS FACT WAS DULY NOTED BY THE STATUTORY AUDITORS OF THE ASSESSEE COMPANY IN THEIR AUDIT REPORT DATED 26.10.2012. THE STATUTORY AUDITORS COMMENTED ON THE ACCOUNTING POLICIES AS UNDER : 'TAX ON INCOME FOR THE CURRENT PERIOD IS DETERMINED ON THE BASIS OF VARIOUS JUDGMENTS OF HON'BLE COURTS THAT INCOME EARNED DURING CONSTRUCTION PERIOD IS NOT TAXABLE AND ACCORDINGLY NO CURRENT TAX LIABILITY IS DETERMINED.' 3. THE AUDITORS FURTHER IN PARA (E)(II) OF THEIR 'AUDITOR'S REPORTS ' HAS CATEGORICALLY MENTIONED A BOUT THE CHANGE OF ACCOUNTING POLICIES AND ACCOUNTING ASSUMPTION DURING THE PREVIOUS YEAR AND REPORTED AS UNDER : 'DURING THE YEAR ON THE BASIS OF VARIOUS JUDGMENTS OF HON'BLE COURTS THE CORPORATION HAS NOT MADE ANY INCOME TAX PROVISION WHICH IS IN CONTRAVENTION TO ACCOUNTING STANDARD AS-22 ' ACCOUNTING FOR TAXES ON INCOME' WHICH STATES THE INCOME-TAX PROVISIONS TO BE CALCULATED ON THE BASIS OF PREVAILING TAX LAWS. AS PER NOTE 22 DURING THE YEAR THE CORPORATION HAS NOT MADE ANY INCOME TAX PROVISIONS ON THE BASIS OF VARIOUS JUDGMENTS OF HON'BLE COURTS. HOWEVER, THE CORPORATION HAS DEPOSITED ADVANCE INCOME TAX OF RS.2,35,00,000/-.' 3(I) THUS DURING THE YEAR UNDER CONSID ERATION 4 ASSESSEE HAS CHANGE ACCOUNTING SYSTEM WHEREIN INTEREST EARNED ON FUNDS RECEIVED FROM GOVERNMENT H AS BEEN SET OFF AGAINST THE CAPITAL EXPENDITURE INCURR ED ON PROJECTS AS EARNINGS OF INTEREST BEING INCIDENTAL TO MAIN ACTIVITY OF COMPANY AND COMPANY INDISPUTABLY IS IN PREOPERATIVE STAGE I.E. COMPA NY HAS NOT COMMENCED HIS OPERATIONS. 3(II) THE ASSESSEE WAS CONFRONTED BY THE ASSESSING OFFICER WITH A SHOW CAUSE AS TO WHY THE INTEREST EA RNED BY IT ON SURPLUS AND BORROWED FUNDS SHOULD NOT BE BROUGHT TO TAX UNDER THE HEAD 'INCOME FROM OTHER SOURCES', IN VIEW OF THE RATIO OF JUDGMENT OF THE H ON'BLE SUPREME COURT IN TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. VS. CIT (1997) 227 ITR172 (SC). IN RESPONSE, THE ASSESSEE COMPANY HAS FILED REPLY VIDE THEIR COUNSEL'S LETTER DATED 27.01.2015. THE REPLY OF THE ASSESSEE WAS NOT FOUND SATISFACTORY AND AFTER ELABO RATE DISCUSSION AND RELYING ON JUDGMENT OF THE HON'BLE SUPREME COURT IN TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. VS. CIT (1997) 227 ITR 172 (SC) AP EX COURT, MADE IN THE ASSESSMENT ORDER, THE A.O. HELD THAT THE GROSS INTEREST EARNED BY ASSESSEE WAS ASSESSABL E UNDER THE HEAD INCOME FROM OTHER SOURCES. THEREFORE , IT WAS CONCLUDED THAT INTEREST OF RS.9,46,51,086/-WAS ASSESSABLE IN THE HANDS OF HPPTCL FOR ASSESSMENT YE AR 2012-13 AS INCOME FROM THE OTHER SOURCES. AGGRIEVED BY THE SAME, ASSESSEE FILED APPEAL. 5 4. THE ASSESSEE CHALLENGED THE ORDER OF THE ASSESSI NG OFFICER BEFORE LD. CIT(APPEALS) AND HIS SUBMISSIONS ARE REPRODUCED IN THE APPELLATE ORDER. THE LD. CIT(APP EALS) NOTED THAT THE IDENTICAL ISSUE HAVE BEEN DECIDED AG AINST THE ASSESSEE BY LD. CIT(APPEALS) FOR ASSESSMENT YEA R 2010-11 AND 2011-12 VIDE ORDER DATED 05.11.2014. T HE ORDER OF THE LD. CIT(APPEALS) DATED 05.11.2014 HAS BEEN CONFIRMED BY JURISDICTIONAL ITAT IN ITA NO. 68/CHD/2015 VIDE ORDER DATED 04.08.2015. THE APPEA L HAS BEEN DECIDED AGAINST THE ASSESSEE BY ITAT BY RELYING UPON ITS OWN ORDER IN ITA 488/2012 AND ITA 169/2013 FOR ASSESSMENT YEAR 2008-09 AND 2009-10. THE LD. CIT(APPEALS), THEREFORE, FOUND THAT ISSUE I S COVERED AGAINST THE ASSESSEE BY ORDER OF ITAT CHANDIGARH BENCH IN PRECEDING ASSESSMENT YEARS AS NOTED ABOVE AND ACCORDINGLY, APPEAL OF THE ASSESSEE WAS DISMISSED. 5. THE LD. COUNSEL FOR THE ASSESSEE, VERY FAIRLY CONCEDED THAT THE ISSUE IS COVERED AGAINST THE ASSE SSEE BY ORDER OF ITAT CHANDIGARH BENCH REFERRED TO ABOVE BY THE LD. CIT(APPEALS). HE HAS SUBMITTED THAT THE SA ME ORDER FOR ASSESSMENT YEAR 2008-09 AND 2009-10 IN IT A 488/2012 AND 169/2013 (SUPRA) HAVE BEEN FOLLOWED BY THE TRIBUNAL IN THE CASE OF SAME ASSESSEE IN ASSESS MENT YEAR 2010-11 IN ITA 799/2014 AND APPEAL OF THE ASSESSEE HAVE BEEN DISMISSED ON THE IDENTICAL GROUN D VIDE ORDER DATED JUNE,2015, COPY OF THE ORDER IS PL ACED 6 ON RECORD. 6. CONSIDERING THE ABOVE FACTS, WE ARE OF THE VIEW ISSUE IS COVERED AGAINST THE ASSESSEE BY VARIOUS OR DERS OF ITAT CHANDIGARH BENCH IN THE CASE OF THE ASSESSE E ITSELF. THE LATEST ORDER OF JUNE, 2015 HAVE BEEN P LACED ON RECORD (SUPRA) IN WHICH THE TRIBUNAL FOLLOWING E ARLIER ORDER IN THE CASE OF THE ASSESSEE, DECIDED THE ISSU E AGAINST THE ASSESSEE. NO ERROR HAVE BEEN POINTED O UT IN THE ORDER OF THE LD. CIT(APPEALS) IN FOLLOWING THE ORDER OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE. THE A PPEAL OF THE ASSESSEE HAS NO MERIT. SAME IS ACCORDINGLY, DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- ( ANNAPURNA GUPTA) (BHAVNESH SAINI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 7 TH DECEMBER,2016. POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT,DR ASSISTANT REGISTRAR, ITAT/CHD