The DCIT, Gandhinagar Circle, Gandhinagar V. Sardar Sarovar Narmada Nigam Ltd., Gandhinagar

ITA 717/AHD/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9702 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 20-12-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 10-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIBHA BHALL
• Assessee Lawyers: MRS ARTI N SHAH
• Keywords: Business income; Depreciation; Earning of tax free income
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA. NOS: 717 & 911/AHD/2014 (ASSESSMENT YEAR: 2009-10) DY. COMMISSIONER OF INCOME-TAX, GANDHINAGAR CIRCLE, GANDHINAGAR SARDAR SAROVAR NARMADA NIGAM LTD. 7 TH FLOOR BLOCK NO. 12, NEW SACHIVALAYA COMPLEX, GANDHINAGAR- 382010 V/S V/S SARDAR SAROVAR NARMADA NIGAM LTD. 7 TH FLOOR BLOCK NO. 12, NEW SACHIVALAYA COMPLEX, GANDHINAGAR- 382010 JT. COMMISSIONER OF INCOME-TAX, GANDHINAGAR RANGE, GANDHINAGAR (APPELLANT) (RESPONDENT) PAN: AACCS6704L APPELLANT BY : MS. VIBHA BHALL, CIT/DR RESPONDENT BY : MRS. ARTI N. SHAH ( )/ ORDER DATE OF HEARING : 20 -12-201 6 DATE OF PRONOUNCEMENT : 21-12-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: ITA NO. 717 & 911/AHD/2014 . A.Y. 2009-1 0 2 1. ITA NOS. 717/AHD/2014 & 911/AHD/2014 ARE CROSS APPE ALS BY THE REVENUE AND THE ASSESSEE PREFERRED AGAINST THE VERY SAME OR DER OF THE LD. CIT(A), GANDHINAGAR, AHMEDABAD DATED 02.11.2013 PERTAINING TO A.Y. 2009-10. 2. THE SUBSTANTIVE GRIEVANCE OF THE REVENUE READS AS U NDER:- 1. THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND FACTS IN HOLDING THAT BUSINESS OF IRRIGATION HAS COMMENCED WITHOUT CONSIDERING THAT M AIN CANAL WAS NOT USED FOR THE PURPOSE OF BUSINESS OF IRRIGATION DURING THE YE AR. 2. THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND FACTS IN DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF DEPRECIATION OF RS. 1077900 00/-. 3. THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND FACTS IN NOT APPLYING THE COST SHARING FORMULA FOR DETERMINING THE COST OF ASSETS OWNED BY THE ASSESSEE FOR THE PURPOSE OF DEPRECIATION. 4. THE LEARNED CIT(APPEALS) HAS ERRED IN LA W AND FACTS IN TREATING RS.109744244/- AS BUSINESS INCOME INSTEAD OF INCOME FROM OTHER SOURCES. 3. THE SUBSTANTIVE GRIEVANCE OF THE ASSESSEE READS AS UNDER:- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), G ANDHINAGAR HAS ERRED IN LAW AND ON FACTS OF THE CASE BY HOLDING THAT INTERE ST ON DEPOSIT AMOUNTING TO RS.13,88,71,332/- IS RIGHTLY TAXED BY ASSESSING OFF ICER UNDER THE HEAD OF 'INCOME FROM OTHER SOURCES'. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), G ANDHINAGAR HAS ERRED IN LAW AND ON FACTS OF THE CASE BY HOLDING THAT THE AS SESSING OFFICER HAS RIGHTLY DISALLOWED RS.1,62,750/- U/S.L4A OF I.T. ACT, 1961. 4. BOTH THESE APPEALS WERE HEARD TOGETHER AND ARE DISP OSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO. 717 & 911/AHD/2014 . A.Y. 2009-1 0 3 5. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASSESSE E STATED THAT ALL THE ISSUES IN THE IMPUGNED APPEALS HAVE BEEN DECIDED EITHER BY THE HONBLE JURISDICTIONAL HIGH COURT OR THE TRIBUNAL IN ASSESS EES OWN CASE IN EARLIER ASSESSMENT YEARS. THE LD. COUNSEL FURNISHED ALL THE RELEVANT DECISIONS OF THE HONBLE JURISDICTIONAL HIGH COURT/TRIBUNAL FOR THE RELEVANT ASSESSMENT YEARS. THE LD. D.R. FAIRLY CONCEDED TO THIS. 6. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORD ERS OF THE AUTHORITIES BELOW. WE HAVE ALSO CAREFULLY GONE THROUGH THE DECI SIONS OF THE HONBLE JURISDICTIONAL HIGH COURT AND THE TRIBUNAL SO FAR A S THE ISSUES UNDER THE IMPUGNED APPEALS ARE CONCERNED. 7. THE 1 ST GRIEVANCE OF THE REVENUE RELATES TO THE COMMENCEME NT OF THE BUSINESS OF IRRIGATION. 8. AN IDENTICAL ISSUE WAS CONSIDERED BY THE HONBLE JU RISDICTIONAL HIGH COURT IN TAX APPEAL NO. 449, 449, 479 AND 488 OF 2004, TH E HONBLE HIGH COURT AT PARA 10 OBSERVED AS UNDER:- 10. WHAT IS TO BE REGARDED IS AS TO WHETHER THE BU SINESS OF THE ASSESSEE HAS BEEN SET UP OR NOT SO THAT THE ASSESSEE COULD AVAIL BENEFITS UNDER THE ACT. BROADLY SPEAKING, THE ACTIVITY OF THE ASSESSEE COULD BE DIV IDED INTO THREE CATEGORIES- (I) CONSTRUCTION OF DAM AND RELATED WORKS (II) HYDRO-PO WER PLANT AND (III) NARMADA MAIN CANAL. CONSIDERING THE DIFFERENT CATEGORIES OF WORK, IT CAN NOT BE SAID THAT SUCH OBJECTS COULD BE ACHIEVED WITHOUT CONTEMPLATIN G DIFFERENT STAGES OF COMPLETION . ITA NO. 717 & 911/AHD/2014 . A.Y. 2009-1 0 4 11. IT WOULD BE WRONG TO UPHOLD THE CONTENTION OF R EVENUE THAT ONLY ON COMPLETION OF WORK OF ENTIRE CANAL, THE ASSESSEES BUSINESS CAN BE SAID TO HAVE BEEN SET UP. IN A PROJECT LIKE THE SARDAR SAROVAR , THERE ARE BOUND TO BE DIFFERENT STAGES WHERE DIFFERENT ACTIVITIES TAKE PLACE AND TH OSE ACTIVITIES BEING INTEGRAL PART OF BUSINESS AND WHEN THEY ARE SET UP PHASE WIS E, THE ASSESSEE CANNOT BE DEPRIVED OF THE BENEFITS OF FISCAL LEGISLATION IN D ISREGARD OF THE WELL SETTLED PRINCIPLES ON THE ISSUE. IN VIEW OF THE ABOVE, WE A NSWER BOTH QUESTIONS NO. 1 AS ALSO QUESTION NO. 2 IN FAVOUR OF THE ASSESSEE AND A GAINST THE REVENUE. 9. RESPECTFULLY FOLLOWING THE FINDINGS OF THE HONBLE JURISDICTIONAL HIGH COURT (SUPRA), GROUND NO. 1 IS DISMISSED. 10. GROUND NO. 2 RELATES TO THE DELETION OF THE ADDITIO N MADE BY THE A.O. ON ACCOUNT OF DEPRECIATION. 11. AN IDENTICAL ISSUE WAS CONSIDERED BY THE CO-ORDINAT E BENCH IN ASSESSEES OWN CASE IN ITA NO. 944/AHD/2011 FOR A.Y. 2007-08 A ND IN ITA NO. 420 & C.O. 80/AHD/2012 FOR A.Y. 2008-09. THE TRIBUNAL IN ITA NO. 420/AHD/2012 VIDE ORDER DATED 29.04.2016 HAD CONSIDERED THE FOLL OWING ISSUES:- 5. NEXT SUBSTANTIVE GROUND RAISED AT THE REVENUES BEHEST SEEKS TO RESTORE DEPRECIATION DISALLOWANCE/ADDITION OF RS. 1128,73,6 7,751/- CLAIMED AS PER COST SHARING FORMULA AMONGST DIFFERENT STATES INVOLVED I N THE SARDAR SAROVAR PROJECT. LD. AUTHORIZED REPRESENTATIVE FILES BEFORE US A COPY OF CO-ORDINATE BENCH ORDER AS INDICATED HEREINABOVE REJECTING SIMILAR GROUND H OLDING AS UNDER:- 10. GROUND NO.3 IS WITH RESPECT TO NON APPLICATION OF COST SHARING FORMULA FOR DETERMINATION OF THE COST OF ASSET FOR THE PURPOSE OF DEPRECIATION. 11. BEFORE US, LEARNED AR SUBMITTED THAT ON IDENTIC AL FACTS FOR A.Y.2005-06, THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE. SINCE THE FACTS OF THE CASE IN THE YEAR ITA NO. 717 & 911/AHD/2014 . A.Y. 2009-1 0 5 UNDER APPEAL ARE IDENTICAL TO THAT OF EARLIER YEARS , THE GROUND OF THE REVENUE NEEDS TO BE DISMISSED. HE HAS POINTED TO THE RELEVA NT PARAGRAPHS OF TRIBUNAL'S ORDER FOR A.Y.2005-06 AND 2006-07. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON THE ORDER OF AO. 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO THE NO N APPLICATION OF COST SHARING FORMULA FOR THE PURPOSE OF DEPRECIATION. WE FIND TH AT SIMILAR GROUND WAS TAKEN BEFORE THE HON'BLE TRIBUNAL BY THE REVENUE IN A.YS. 2005-06 AND 2006-07 AND THE SAME WAS DECIDED IN FAVOUR OF THE ASSESSEE BY HOLDI NG AS UNDER: '16. 3 RD GROUND IS WITH RESPECT TO NON APPLICATION OF COST SHARING FORMULA FOR THE PURPOSE OF DEPRECIATION: 17. THIS GROUND IS IDENTICAL TO THAT OF GROUND NOS. 2 & 3 OF 1TA NO 838/AHD/2010. 18. AO NOTED THAT 'SARDAR SAROVAR NARMADA PROJECT' WA S IN THE NATURE OF JOINT VENTURE OF GOVERNMENTS OF GUJARAT, MAHARASHTRA, M.P . AND RAJASTHAN AND THE COST OF PROJECT HAS ALREADY BEEN DETERMINED BY TRIB UNAL. SINCE THE ASSESSEE WAS AN INSTITUTION OF GUJARAT GOVERNMENT, ASSESSING OFF ICER WAS OF THE VIEW ITS SHARE CANNOT BE MORE THAN THE SHARE OF GUJARAT GOVERNMENT IN THE PROJECT AND THEREFORE THE DEPRECIATION U/S 32 WAS ONLY ALLOWABL E TO THE EXTENT OF ITS SHARE. HE ALSO NOTED THAT ASSESSEE HAS INCLUDED THE SHARE OF COST IN 'LNDIRA SAGAR DAM' BUILT BY MP GOVERNMENT TO WHICH ACCORDING TO AO, TH E ASSESSEE WAS NOT ELIGIBLE FOR DEPRECIATION ON THE ENTIRE COST. HE ACCORDINGLY RE-WORKED THE DEPRECIATION. AGGRIEVED BY THE ORDER OF AO,' ASSESSEE CARRIED THE MATTER BEFORE C1T(A). CIT(A) DECIDED THE ISSUE IN FAVOUR OF ASSESSEE BY HOLDING AS UNDER: 3.3 THE MATTER HAS BEEN GIVEN DUE CONSIDERATION. NO DOUBT THE PROJECT IN QUESTION IS THE PRODUCT OF ADMINISTRATIVE-POLITICO DECISION OF GOVERNMENTS OF GUJARAT, MAHARASHTRA, MADHYA PRADESH AND RAJASTH AN. IT IS ALSO PART OF THE SAME DECISION THAT IT SHALL BE IMPLEMENTED B Y GOVERNMENT OF GUJARAT IN ORDER TO IMPLEMENT THE SAME, THE GOVERNM ENT OF GUJARAT DECIDED TO SETUP SARDAR SAROVAR NARMADA NIGAM LTD. AS A PUBLIC LIMITED COMPANY. IF SHOULD BE NOTED THAT ENTIRE SHARE CAPIT AL OF THE NIGAM WAS SUBSCRIBED TO BY THE GOVERNMENT OF GUJARAT AND THE NIGAM WAS TO EXECUTE THE ENTIRE PROJECT. SO THERE ARE TWO SEPARA TE AREA OF OPERATION, ONE AMONG THE PARTICIPATING STATES FOR TAKING UP SU CH A PROJECT AND FOR ITA NO. 717 & 911/AHD/2014 . A.Y. 2009-1 0 6 COST SHARING AMONGST THEM AND THE OTHER FOR A LEGAL LY INDEPENDENT COMPANY TO IMPLEMENT THE PROJECT. TO THE COMPANY TH E COST OF THE ASSETS REMAINS THE SAME, NOTWITHSTANDING ANY ARRANGEMENT A MONG THE PARTICIPANT STATES BECAUSE THE COST OF THE ASSETS I S BEING MET BY THE FUNDS OF THE COMPANY EQUITY PROVIDED BY GOVERNMENT OF GUJ ARAT AND BORROWED FUNDS AS IN ANY COMMERCIAL VENTURE. IF ANY FUNDS AR E TRANSFERRED FROM ONE OF THE STATES TO THE GOVERNMENT OF GUJARAT, THE SAM E SHALL NEITHER BE REFLECTED IN THE BOOKS OF THE APPELLANT NOR SHALL E FFECT THE COST OF ASSETS IN THE HANDS OF THE APPELLANT. THE ASSESSING OFFICER'S ASSERTION THAT APPELLANT'S SHARE IN PROJECT CANNOT EXCEED THE SHAR E OF GOVERNMENT OF GUJARAT OVERLOOKS THE DISTINCTION OF FINANCIAL RELA TIONSHIP BETWEEN STATES VIS-A-VIS MANNER OF IMPLEMENTING A PROJECT THROUGH A CARRIER, IN THIS CASE A COMPANY. THEREFORE, I DO NOT AGREE WITH THE ASSES SING OFFICER'S ACTION OF HOLDING THAT COST OF ASSETS IN THE HANDS OF THE APPELLANT HAS TO BE RESTRICTED AS PER COST-SHARING FORMULA DETERMINED B Y THE TRIBUNAL. 3.3.1 AS FAR AS THE ISSUE OF 'INDIRA SAGAR DAM' IS CO NCERNED, OBVIOUSLY THE ACCOUNTING TREATMENT GIVEN BY THE APPELLANT IS INCO RRECT ON THE BASIS OF APPELLANT'S OWN LOGIC. HENCE WHILE GIVING APPEALS E FFECT, THE ASSESSING OFFICER IS DIRECTED NOT TO TREAT WHOSE ASSETS AS BE LONGING TO THE APPELLANT, WITH ITS DUE FOLLOW UP CONSEQUENCES LIKE WITHDRAWAL OF DEPRECIATION. 19. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NO W IN APPEAL BEFORE US. BEFORE US, ID. D.R. RELIED ON THE ORDER OF AO. ON THE OTHE R HAND ID. A.R. REITERATED THE SUBMISSIONS MADE BEFORE CIT(A) AND SUPPORTED HIS OR DER. 20. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. CIT(A) WHILE GRANTING THE RELIEF TO ASSESSEE HAS NOTED THA T THE ASSESSES IS A SEPARATE COMPANY FOR IMPLEMENTATION OF THE PROJECT AND ITS S HARE CAPITAL WAS SUBSCRIBED BY GOVT. OF GUJARAT. HE HAS FURTHER NOTED THAT THE COSTS ARE MET BY THE ASSESSEE WHICH IS INDEPENDENT OF THE ARRANGEMENT AMONG THE P ARTICIPATING STATES AND THE TRANSFER OF FUNDS BETWEEN ONE OF THE STATES TO GUJA RAT IS NOT REFLECTED IN THE BOOKS OF THE ASSESSEE AND DOES NOT EFFECT THE COST OF ASSETS. BEFORE US, REVENUE COULD NOT PRODUCE ANY MATERIAL' TO CONTROVERT THE F INDINGS OF CIT(A). WE THUS FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A) AND THUS DISMISS THIS GROUND OF REVENUE FOR A.Y. 05-06 & 06-07.' ITA NO. 717 & 911/AHD/2014 . A.Y. 2009-1 0 7 12.1 SINCE THE FACTS OF THE YEAR UNDER APPEAL ARE I DENTICAL TO THAT OF EARLIER YEARS AND AS THE REVENUE HAS NOT BROUGHT ANY CONTRARY BIN DING DECISION IN ITS SUPPORT, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LE ARNED CIT(A) AND THUS DISMISS THIS GROUND OF THE REVENUE. NO DISTINCTION IS BEING POINTED OUT BY THE LD. DEPA RTMENTAL REPRESENTATIVE. WE ACCORDINGLY AFFIRM THE LOWER APPELLATE FINDINGS UND ER CHALLENGE. 12. AS NO DISTINGUISHING DECISION HAS BEEN BROUGHT TO O UR NOTICE BY THE REVENUE, WE DECLINE TO INTERFERE. GROUND NO. 2 IS A CCORDINGLY DISMISSED. 13. GROUND NO. 3 RELATES TO NON APPLICATION OF THE COST SHARING FORMULA FOR DETERMINING THE COST OF ASSETS OWNED BY THE ASSESSE E FOR THE PURPOSE OF DEPRECIATION. 14. AN IDENTICAL ISSUE WAS CONSIDERED BY THE CO-ORDINAT E BENCH IN ITA NO. 944/AHD/2011 FOR A.Y. 2007-08 QUA GROUND NO. 3 OF T HAT APPEAL AND THE SAME READS AS UNDER:- 10. GROUND NO.3 IS WITH RESPECT TO NON APPLICATION OF COST SHARING FORMULA FOR DETERMINATION OF THE COST OF ASSET FOR THE PURPOSE OF DEPRECIATION. 11. BEFORE US, LEARNED AR SUBMITTED THAT ON IDENTIC AL FACTS FOR A.Y.2005-06, THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE. SINCE THE FACTS OF THE CASE IN THE YEAR UNDER APPEAL ARE IDENTICAL TO THAT OF EARLIER YEARS , THE GROUND OF THE REVENUE NEEDS TO BE DISMISSED. HE HAS POINTED TO THE RELEVA NT PARAGRAPHS OF TRIBUNAL'S ORDER FOR A.Y.2005-06 AND 2006 AND 2006-07 07. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON THE ORDER OF AO. 12.WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO THE NO N APPLICATION OF COST SHARING ITA NO. 717 & 911/AHD/2014 . A.Y. 2009-1 0 8 FORMULA FOR THE PURPOSE OF DEPRECIATION. WE FIND TH AT SIMILAR GROUND WAS TAKEN BEFORE THE HONBLE TRIBUNAL BY THE REVENUE IN A.Y. 2005-06 AND 2006-07 AND THE SAME WAS DECIDED IN FAVOUR OF THE ASSESSEE BY HOLDI NG AS UNDER: '16. 3RD GROUND IS WITH RESPECT TO NON APPLICATION O F COST SHARING FORMULA FOR THE PURPOSE OF DEPRECIATION: 17. THIS GROUND IS IDENTICAL TO THAT OF GROUND NOS. 2 & 3 OF ITA NO 838/AHD/2010. 18. AO NOTED THAT 'SARDAR SAROVAR NARMADA PROJECT' WA S IN THE NATURE OF JOINT VENTURE OF GOVERNMENTS OF GUJARAT, MAHARASHTR A, M.P. AND RAJASTHAN AND THE COST OF PROJECT HAS ALREADY BEEN DETERMINED BY TRIBUNAL. SINCE THE ASSESSEE WAS AN INSTITUTION OF GUJARAT GOVERNMENT, ASSESSING OFFICER WAS OF THE VIEW ITS SHARE CANNOT BE MORE THAN THE SHARE OF GUJARAT GOVERNMENT IN THE PROJECT AND THEREFORE THE DEPRECIATION U/S 32 WAS ONLY ALLOWABLE TO THE EXTENT OF ITS SHARE. H E ALSO NOTED THAT ASSESSEE HAS INCLUDED THE SHARE OF COST IN 'INDIRA S AGAR DAM' BUILT BY MP GOVERNMENT TO WHICH ACCORDING TO AO, THE ASSESSEE W AS NOT ELIGIBLE FOR DEPRECIATION ON THE ENTIRE COST. HE ACCORDINGLY RE- WORKED THE DEPRECIATION. AGGRIEVED BY THE ORDER OF AO,' ASSESSE E CARRIED THE MATTER BEFORE CIT(A). CIT(A) DECIDED THE ISSUE IN FAVOUR O F ASSESSEE BY HOLDING AS UNDER: 3.3 THE MATTER HAS BEEN GIVEN DUE CONSIDERATION. NO DOUBT THE PROJECT IN QUESTION IS THE PRODUCT OF ADMINISTRATIVE-POLITICO DECISION OF GOVERNMENTS OF GUJARAT, MAHARASHTRA, MADHYA PRADESH AND RAJASTH AN. IT IS ALSO PART OF THE SAME DECISION THAT IT SHALL BE IMPLEMENTED B Y GOVERNMENT OF GUJARAT IN ORDER TO IMPLEMENT THE SAME, THE GOVERNM ENT OF GUJARAT DECIDED TO SETUP SARDAR SAROVAR NARMADA NIGAM LTD. AS A PUBLIC LIMITED ITA NO. 717 & 911/AHD/2014 . A.Y. 2009-1 0 9 COMPANY. IT SHOULD BE NOTED THAT ENTIRE SHARE CAPIT AL OF THE NIGAM WAS SUBSCRIBED TO BY THE GOVERNMENT OF GUJARAT AND THE NIGAM WAS TO EXECUTE THE ENTIRE PROJECT. SO THERE ARE TWO SEPARA TE AREA OF OPERATION, ONE AMONG THE PARTICIPATING STATES FOR TAKING UP SU CH A PROJECT AND FOR COST SHARING AMONGST THEM AND THE OTHER FOR A LEGAL LY INDEPENDENT COMPANY TO IMPLEMENT THE PROJECT. TO THE COMPANY TH E COST OF THE ASSETS REMAINS THE SAME, NOTWITHSTANDING ANY ARRANGEMENT A MONG THE PARTICIPANT STATES BECAUSE THE COST OF THE ASSETS I S BEING MET BY THE FUNDS OF THE COMPANY EQUITY PROVIDED BY GOVERNMENT OF GUJ ARAT AND BORROWED FUNDS AS IN ANY COMMERCIAL VENTURE. IF ANY FUNDS AR E TRANSFERRED FROM ONE OF THE STATES TO THE GOVERNMENT OF GUJARAT, THE SAM E SHALL NEITHER BE REFLECTED IN THE BOOKS OF THE APPELLANT NOR SHALL E FFECT THE COST OF ASSETS IN THE HANDS OF THE APPELLANT. THE ASSESSING OFFICER'S ASSERTION THAT APPELLANT'S SHARE IN PROJECT CANNOT EXCEED THE SHAR E OF GOVERNMENT OF GUJARAT OVERLOOKS THE DISTINCTION OF FINANCIAL RELA TIONSHIP BETWEEN STATES VIS-A-VIS MANNER OF IMPLEMENTING A PROJECT THROUGH A CARRIER, IN THIS CASE A COMPANY. THEREFORE, I DO NOT AGREE WITH THE ASSES SING OFFICER'S ACTION OF HOLDING THAT COST OF ASSETS IN THE HANDS OF THE APPELLANT HAS TO BE RESTRICTED AS PER COST-SHARING FORMULA DETERMINED B Y THE TRIBUNAL. 3.3.1 AS FAR AS THE ISSUE OF 'INDIRA SAGAR DAM' IS CO NCERNED, OBVIOUSLY THE ACCOUNTING TREATMENT GIVEN BY THE APPELLANT IS INCO RRECT ON THE BASIS OF APPELLANT'S OWN LOGIC. HENCE WHILE GIVING APPEAL EF FECT, THE ASSESSING OFFICER IS DIRECTED NOT TO TREAT WHOSE ASSETS AS BE LONGING TO THE APPELLANT, WITH ITS DUE FOLLOW UP CONSEQUENCES LIKE WITHDRAWAL OF DEPRECIATION. 19. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NO W IN APPEAL BEFORE US. BEFORE US, LD. D.R. RELIED ON THE ORDER OF AO. ON T HE OTHER HAND LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE CIT(A) AND S UPPORTED HIS ORDER. ITA NO. 717 & 911/AHD/2014 . A.Y. 2009-1 0 10 20. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. CIT(A) WHILE GRANTING THE RELIEF TO ASSESSEE HAS NO TED THAT THE ASSESSES IS A SEPARATE COMPANY FOR IMPLEMENTATION OF THE PROJEC T AND ITS SHARE CAPITAL WAS SUBSCRIBED BY GOVT. OF GUJARAT. HE HAS FURTHER NOTED THAT THE COSTS ARE MET BY THE ASSESSEE WHICH IS INDEPENDENT OF THE ARRANGEMENT AMONG THE PARTICIPATING STATES AND THE TRANSFER OF BETWEEN ONE OF THE STATES TO GUJARAT. HE HAS FURTHER NOTED THAT THE CO STS ARE MET BY THE ASSESSEE WHICH IS INDEPENDENT OF THE ARRANGEMENT AM ONG THE PARTICIPATING STATES AND THE TRANSFER OF FUNDS BETW EEN ONE OF THE STATES TO GUJARAT IS NOT REFLECTED IN THE BOOKS OF THE ASSESS EE AND DOES NOT EFFECT THE COST OF ASSETS. BEFORE US, REVENUE COULD NOT PR ODUCE ANY MATERIAL TO CONTROVERT THE FINDINGS OF CIT(A). WE THUS FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A) AND THUS DISMISS THIS GROUND OF REVENUE FOR A.Y. 05-06 & 06-07. 12.1 SINCE THE FACTS OF THE YEAR UNDER APPEAL ARE I DENTICAL TO THAT OF EARLIER YEARS AND AS THE REVENUE HAS NOT BROUGHT ANY CONTRARY BIN DING DECISION IN ITS SUPPORT, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LE ARNED CIT(A) AND THUS DISMISS THIS GROUND OF THE REVENUE. 15. SINCE THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE CO-ORDINATE BENCH, THEREFORE, RESPEC TFULLY FOLLOWING THE SAME, WE DECLINE TO INTERFERE. GROUND NO. 3 IS ACC ORDINGLY DISMISSED. 16. GROUND NO. 4 RELATES TO THE TREATMENT OF RS. 1,97,4 4,244/- AS BUSINESS INCOME INSTEAD OF INCOME FROM OTHER SOURCES. ITA NO. 717 & 911/AHD/2014 . A.Y. 2009-1 0 11 17. AN IDENTICAL ISSUE WAS CONSIDERED BY THE TRIBUNAL I N ASSESSEES OWN CASE IN ITA NO. 420/AHD/2012 & C.O. 80/AHD/2012 FOR A.Y. 20 08-09 AT PARA 7 & 8 OF ITS ORDER AND THE SAME READS AS UNDER:- 7. THE REVENUES FOURTH AND LAST SUBSTANTIVE GROUND SEEKS TO TREAT ASSESSEES INCOME OF RS. 4,99,15,047/- COMPRISING O F RENT OF RESIDENTIAL BUILDING OF RS. 67,67,288/-, MISCELLANEOUS RECEIPT OF RS. 4, 12,18,702/-, PRIOR PERIOD ADJUSTMENT OF RS. 19,28,992/- AND INTEREST ON LOAN TO STAFF OF RS. 65; RESPECTIVELY AS OTHER INCOME FROM SOURCES AS AGAINST THE CIT(A) S ORDER TAKING THE SAME THE BUSINESS INCOME. THE ASSESSEE INVITES OUR ATTENTIO N TO THE TRIBUNALS ORDER IN ITS OWN IN ASSESSMENT YEAR 2006-07 DECIDED ON 28-02-201 4 THAT THE SAME COVERS BY THE FINDINGS THEREIN. LD. DEPARTMENTAL REPRESENTAT IVE STATES THAT THE FOUR HEADS OF INCOME HEREINABOVE ARE NOT COVERED FROM THE SAID ORDER. THE ASSESSEE AT THIS STAGE TAKES US TO PAGE 74 OF THE PAPER BOOK TO STAT E THAT ALL THE FOUR ITEMS ARE SQUARELY COVERED. WE HAVE ALSO VERIFIED THIS ASPEC T TO FIND THAT THESE FOUR HEADS HAVE ALREADY BEEN HELD TO BE INCOME FROM BUSINESS. THERE IS NO OTHER DISTINCTION POINTED OUT. WE REJECT THIS FOURTH GROUND AS WELL. REVENUES APPEAL ITA 420/AHD/2012 IS DISMISSED. 8. WE COME TO ASSESSEES CROSS OBJECTION NOW. ITS FIRST SUBSTANTIVE GROUND PLEADS THAT BOTH THE LOWER AUTHORITIES HAVE ERRED I N HOLDING RECEIPTS OF RS. 18,48,34,122/- ARISING FROM INTEREST ON DEPOSITS AN D SINKING FUND INVESTMENTS CLAIMED TO BE BUSINESS INCOME AS INCOME FROM OTHER SOURCES. LD. AUTHORIZED REPRESENTATIVE IS FAIR ENOUGH TO CONCEDE THAT THE V ERY ISSUE STANDS ADJUDICATED AGAINST THE ASSESSEE BY THE TRIBUNAL IN ASSESSMENT YEAR 2006-07. WE APPRECIATE THIS FAIR STAND AND REJECT THIS FIRST SUBSTANTIVE G ROUND PLEADED IN THE INSTANT CROSS OBJECTION. ITA NO. 717 & 911/AHD/2014 . A.Y. 2009-1 0 12 18. RESPECTFULLY FOLLOWING THE AFORE-STATED FINDINGS OF THE CO-ORDINATE BENCH, GROUND NO. 4 OF REVENUES APPEAL IS DISMISSED AND G ROUND NO. 1 OF ASSESSEES APPEAL IS ALSO DISMISSED. 19. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS D ISMISSED. 20. COMING TO THE ONLY REMAINING GROUND IN ASSESSEES A PPEAL WHICH RELATES TO THE DISALLOWANCE OF RS. 1,62,750/-, WE FIND THAT A SIMILAR DISALLOWANCE WAS ALSO MADE IN A.Y. 2008-09 IN WHICH YEAR THE MATTER TRAVELLED UP TO THE TRIBUNAL AND THE TRIBUNAL IN ITA N0. 420/AHD/2012 & C.O. 80/AHD/2012 FOR A.Y. 2008-09 HAD CONSIDERED A SIMILAR ISSUE AT PARA 9 OF ITS ORDER AND THE SAME READS AS UNDER:- 9. THE ASSESSEES SECOND SUBSTANTIVE GROUND CHALLEN GES ADMINISTRATIVE EXPENDITURE DISALLOWANCE @ 0.5% OF AVERAGE VALUE OF INVESTMENTS RELATED TO ITS EXEMPT INCOME ARISING FROM US 64 BONDS. BOTH THE L OWER AUTHORITIES ARE UNANIMOUS IN INVOKING RULE 8D(2)(III) OF THE INCOME TAX RULES R.W.S 14A(2) IN INVOKING THE IMPUGNED DISALLOWANCE. WE FIND THAT N EITHER THE ASSESSING OFFICER NOR THE CIT(A) REJECT ASSESSEES SPECIFIC CONTENTIO N OF NOT HAVING INCURRED ANY EXPENDITURE IN EARNING EXEMPT INCOME. THE ASSESSEE QUOTES CASE LAW OF (2015) 376 ITR 553 (GUJ) PCIT VS. INDIA GILETINE CHEMICAL LTD. HOLDING THAT SUCH A SATISFACTION IS A PRE-CONDITION BEFORE INVOKING DI SALLOWANCE UNDER RULE 8D FROM ASSESSMENT YEAR 2008-09. WE PLACE RELIANCE UPON TH E SAME TO DELETE THE IMPUGNED DISALLOWANCE OF ADMINISTRATIVE EXPENDITURE AMOUNTING TO RS. 3,03000/-. LD. AUTHORIZED REPRESENTATIVES ARGUMEN TS STRONGLY SUPPORTS THE IMPUGNED DISALLOWANCE ARE ACCORDINGLY REJECTED. TH IS SECOND GROUND IN ASSESSEES CROSS OBJECTION IS TREATED ALLOWED. ITA NO. 717 & 911/AHD/2014 . A.Y. 2009-1 0 13 21. AS NO DISTINGUISHING DECISION HAS BEEN BROUGHT TO O UR NOTICE BY THE REVENUE, RESPECTFULLY FOLLOWING THE FINDINGS OF THE CO-ORDINATE BENCH, WE DIRECT THE A.O. TO DELETE THE ADDITION OF RS. 1,62, 750/-. 22. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 21- 12- 2 016 SD/- SD/- (MAHAVIR PRASAD) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY ACCOUNTANT MEMBER AHMEDABAD: DATED 21 /12/2016 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD