DCIT 8(3), MUMBAI V. SUN N SAND HOTELS P.LTD, MUMBAI

ITA 5645/MUM/2012

• Counselvise Citation: 564519914 RSA 2012
• Duration Of Justice: 1 year(s) 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 19-05-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 07-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GIRIJA DAYAL
• Assessee Lawyers: ARUN G VERMA
• Keywords: Business income
• Section: 28; 143(3); 80IB

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI , , BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIAL MEM BER . / ITA NO. 5645 / MUM./201 2 ( / ASSESSMENT YEAR : 20 09 10 ) ASSTT. COMMISSIONER OF INCOME TAX RANGE 8 (3), AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 020 .. / APPELLANT V/S SUN N SAND HOT ELS PVT. LTD. 39, JUHU BEACH, JUHU MUMBAI 400 049 .... / RESPONDENT ./ PERMANENT ACCOUNT NUMBER AAACS5521P / REVENUE BY : MR. GIRIJA DAYAL / ASSESSEE BY : MR. ARUN G. VERMA / DATE OF HEARING 19.05.2014 / DATE OF ORDE R 19.05.2014 / ORDER , / PER AMIT SHUKLA , J.M. THE AFORESAID APPEAL HA S BEEN PREFERRED BY THE REVENUE CHALLENGING THE IMPUGNED ORD ER DATED 13 TH JUNE 2012 , PASSED BY T HE LEARNED COMMISSIONER (APPEALS) X VII I, MUMBAI, FOR THE QUANTUM OF ASSESSMENT PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 SUN N SAND HOTELS PVT. LTD. 2 (FOR SHORT 'THE ACT' ) FOR THE ASSESSMENT YEAR 20 09 10 , ON THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO TREAT AND TAX THE INTEREST OF ` 10,41,315 ON DELAYED PAYMENT OF SALE PROCEEDS OF POWER GENERATED FROM WINDMILLS, AS BUSINESS INCO ME, WITHOUT APPRECIATING THE FACT THAT THE INTEREST RECEIVED CANNOT BE REGARDED AS BEING DERIVED FROM THE INDUSTRIAL UNDERTAKING AND HENCE NOT ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THE RATIO OF THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF LIBERTY INDIA LTD. V/S CIT, [317 ITR 218) WHEREIN IT IS HELD THAT CERTAIN INCOME MAY CONSTITUTE PROFIT FROM BUSINESS UNDER SECTION 28 BUT IT CANN OT BE CONSTRUED AS PROFITS DERIVED FROM THE ELIGIBLE INDUSTRIAL UNDERTAKING FOR THE PURPOSE OF DEDUCTION U/S 80IA. 2 . THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 80IA FOR ` 1,74,63,434, IN RESPECT OF ITS POWER GENERATION PROJECT NO.1 AT SATARA AND SUPA , MAHARASHTRA AND ANOTHER SUM OF ` 4,02,65,561 IN RESPECT OF ITS POWER GENERATION UNIT AT SODA MADA, RAJASTHAN. ON A PERUSAL OF THE PROFIT & LOSS ACCOUNT, THE ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE HAS CREDITED A SUM OF ` 10,41,315, ON ACCOUNT OF IN TEREST INCOME IN RESPECT OF WHICH IT HAS CLAIMED DEDUCTION UNDER SECTION 80IA, AS PER THE AUDIT REPORT IN FORM 10CCB. THE ASSESSING OFFICER HELD THAT THE INTEREST INCOME CANNOT BE SAID TO HAVE DERIVED FROM THE BUSINESS ACTIVITY OF THE ASSESSEE INDUSTRIAL UNIT UNDERTAKING ENGAGED IN POWER GENERATION AND, HENCE, THE SAME CANNOT BE HELD TO BE A PART OF THE ELIGIBLE PROFITS OF THE ASSESSEE UNDERTAKING FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80IA. ACCORDINGLY, HE EXCLUDED THE SUM OF ` 10,41,315, FROM THE AM OUNT OF DEDUCTION CLAIMED UNDER SECTION 80IA BY TREATING IT TO BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES . SUN N SAND HOTELS PVT. LTD. 3 3 . BEFORE THE LEARNED COMMISSIONER (APPEALS) , IT WAS SUBMITTED THAT THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF THE JURISDICTIONAL HIGH COURT IN CIT V/S VIDYUT CORPORATION, [2010] 324 ITR 221 (BOM.), WHEREIN THE HIGH COURT HAS ALSO TAKEN NOTE OF THE DECISION OF HON'BLE SUPREME COURT IN LIBERTY INDIA V/S CIT, [2009] 317 ITR 218 ( SC ). THE INTEREST WAS IN THE NATURE OF DELAYED PAYMENT OF SALE PROCEEDS OF POWER GENERATED AND SOLD. THEREFORE, THE DECISION OF THE JURISDICTIONAL HIGH COURT IS CLEARLY APPLICABLE. THE LEARNED COMMISSIONER (APPEALS) AGREED WITH THE CONTENTION OF THE ASSESSEE THAT THE ISSUE INVOLVED IS DIRECTLY COVERED BY THE DECISION OF THE JURISDICTIONAL HIGH COURT IN FAVOUR OF THE ASSESSEE AND DIRECTED THE ASSESSING OFFICER TO TREAT THE SUM OF ` 10,41,315, AS BUSINESS INCOME ALLOWABLE FOR DEDUCTION UNDER SECTION 80IB. 4 . BEFORE US, THE LEARNED COUNSEL, AT THE OUTSET, SUBMITTED THAT TH E NATURE OF INTEREST WAS ON ACCOUNT OF DELAYED PAYMENT OF SALE PROCEEDS OF POWER GENERATED FROM WINDMILLS. IT IS DIRECTLY RELATED TO THE BUSINESS OF THE UNDERTAKING AND ON SIMILAR FACTS, THE JURISDICTIONAL HIGH COURT IN VIDYUT CORPORATION (SUPRA), HAS HELD THAT SUCH AN INTEREST PARTAKES THE NATURE AND CHARACTER OF SALE PROCEEDS AND IS ALSO ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB. 5 . LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY RELIED UPON THE FINDINGS OF THE ASSESSING OFFICER. 6 . AFTER CAREFULLY CONSIDERING T HE RIVAL SUBMISSIONS AND ALSO THE FACTS AND MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF GENERATION OF POWER FROM WINDMILL AND SALE THEREOF. THE ASSESSEE HAS SOLD ITS POWER GENERATED FROM ITS WINDMILL TO MAHARASHTRA SUN N SAND HOTELS PVT. LTD. 4 STATE ELE CTRICITY DISTRIBUTION CO. LTD. THE SAID COMPANY DID NOT PAY FULL CONSIDERATION TO THE ASSESSEE FROM THE PERIOD FROM JANUARY 2002 TO APRIL 2003. THEREAFTER, IN TERMS OF APPELLATE TRIBUNAL FOR ELECTRICITY, NEW DELHI, VIDE ORDER DATED 5 TH FEBRUARY 2008, THE S AID COMPANY AGREED TO PAY THE INTEREST ON THE ARREARS FOR THE ABOVE PERIOD. THE SAID INTEREST WAS QUANTIFIED ON ACCOUNT OF DELAYED PAYMENT OF ` 10,41,315 WHICH WAS RECEIVED ON 30 TH AUGUST 2008. IN THE CASE BEFORE THE BOMBAY HIGH COURT IN VIDYUT CORP. (SUPR A), THE ASSESSEE WAS AN INDUSTRIAL UNDERTAKING ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB. IT HAS RECEIVED INTEREST ON DELAYED PAYMENT O N SALE PRICE OF ITS PRODUCT HAD CLAIM DEDUCTION UNDER SECTION 80IB ON SUCH INTEREST. IN THAT CASE ALSO, THE DEPARTMENT HA S HELD THAT INTEREST RECEIVED COULD NOT BE RE G ARDED AS BEING DERIVED FROM THE INDUSTRIAL UNDERTAKING FOR THE PURPOSE OF SECTION UNDER SECTION 80IB. THE JURISDICTIONAL HIGH COURT, AFTER REFERRING TO THE DECISION OF THE HON'BLE SUPREME COURT IN LIBERTY IND IA (SUPRA), HELD AS UNDER: HELD, THAT WHAT WAS RECEIVED BY THE ASSESSEE FROM THE PURCHASER WAS A COMPONENT OF INTEREST TOWARDS DELAYED PAYMENT OF THE PRICE OF THE GOODS SOLD, SUPPLIED AND DELIVERED BY THE ASSESSEE. THERE COULD BE NO DISPUTE ABOUT THE PO SITION THAT THE PRICE REALIZED BY THE ASSESSEE FROM THE SALE OF GOODS MANUFACTURED BY THE PRICE REALIZED BY THE ASSESSEE FROM THE SALE OF GOODS MANUFACTURED BY THE INDUSTRIAL UNDERTAKING CONSTITUTED A COMPONENT OF THE PROFITS AND GAINS DERIVED FROM THE ELI GIBLE BUSINESS. THE PURCHASER, ON ACCOUNT OF THE DELAY IN PAYMENT OF THE SALE PRICE ALSO PAID INTEREST TO THE ASSESSEE. THIS FORMED A COMPONENT OF THE SALE PRICE ALSO PAID INTEREST TO THE ASSESSEE. THIS FORMED A COMPONENT OF THE SALE PRICE AND WAS PAID TOW ARDS THE LAG WHICH HAD OCCURRED IN THE PAYMENT OF THE PRICE OF THE GOODS SOLD BY THE ASSESSEE. ON THESE FACTS, THEREFORE, THE PAYMENT OF INTEREST ON ACCOUNT OF THE DELAY IN PAYMENT OF THE SALE PRICE OF THE GOODS SUPPLIED BY THE UNDERTAKING PARTOOK OF THE S AME NATURE AND CHARACTER AS THE SALE CONSIDERATION. SUN N SAND HOTELS PVT. LTD. 5 7 . THUS, THE RATIO DECIDENDI DECIDED BY THE JURISDICTIONAL HIGH COURT ON SIMILAR SET OF FACTS, IS ALSO SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CASE AND RESPECTFULLY FOLLOWING THE SAID DECISION OF T HE HIGH COURT, WE HOLD THAT THE DIRECTION GIVEN BY THE LEARNED COMMISSIONER (APPEALS) IS LEGALLY AND FACTUALLY CORRECT AND THE SAME IS UPHELD. THUS, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 8 . 8 . IN THE RESU LT, REVENUE S APPEAL IS DISMISSED. 19 TH MAY 2014 ORDER PRONOUNCED IN THE OPEN COURT O N 19 TH MAY 2014 SD/ - SANJAY ARORA ACCOUNTANT MEMBER SD/ - AMIT SHUKLA JUDICIAL MEMBER MUMBAI, DATED : 19 TH MAY 2014 / COPY OF THE ORDER FORWARDED TO : ( 1 ) / THE ASSESSEE ; ( 2 ) / THE REVENUE; ( 3 ) ( ) / THE CIT(A ) ; ( 4 ) / THE CIT, MUMBAI CITY CON CERNED ; ( 5 ) , , / THE DR, ITAT, MUMBAI ; ( 6 ) / GUARD FILE . / TRUE COPY / BY ORDER . / PRADEEP J. CHOWDHURY / SR. PRIVATE SECRETARY / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI