H.P.power Corporation Ltd, V. Income Tax Officer, Shimla

ITA 860/CHANDI/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5344 (ITAT-CHANDIGARH)
• Duration Of Justice: 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-01-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 24-05-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: GULSHAN RAI
• Keywords: Capital expenditure

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER & MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NOS. 940 & 941/CHD/2017 ASSESSMENT YEARS: 2012-13 & 2013-14 THE DCIT, VS. M/S HP POWER CORPORATION LTD., CIRCLE, SHIMLA HIMFED BHAWAN, TUTI KANDI, SHIMLA PAN NO. AABCH8615G & ITA NOS. 859 & 860/CHD/2017 ASSESSMENT YEARS: 2012-13 & 2013-14 M/S HP POWER CORPORATION LTD., VS. THE ITO, WARD-1, HIMFED BUILDING, BCS, SHIMLA NEW SHIMLA, SHIMLA-171009 PAN NO. AABCH8615G (APPELLANT) (RESPONDENT) APPELLANT BY : SH. GULSHAN RAI RESPONDENT BY : SH. VISHAL MOHAN DATE OF HEARING : 04.10.2017 DATE OF PRONOUNCEMENT: 01.2018 ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE ABOVE CAPTIONED CROSS APPEALS HAVE PREFERRED BY THE REVENUE AND ASSESSEE AGAINST THE SEPARATE ORDERS DATED 17.0 3.2017 OF THE 2 COMMISSIONER OF INCOME TAX (APPEALS)-2, [HEREINAFTE R REFERRED TO AS CIT(A)] SHIMLA. 2. SINCE THE COMMON ISSUES ARE INVOLVED IN THESE AP PEALS, THE SAME HAVE BEEN HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. FIRST, WE WILL TAKE THE APPEAL OF THE REVENUE FOR T HE ASSESSMENT YEAR 2012- 13. ASSESSMENT YEAR 2012-13 REVENUES APPEAL : 3. IN THIS APPEAL, THE REVENUE HAS AGITATED THE ACT ION OF THE CIT(A) IN REDUCING AN AMOUNT OF RS. 4,44,45,305/- OUT OF THE INTEREST INCOME OF RS. 28,33,69,310/-. THE ASSESSING OFFICER TAXED THE SAM E AS INCOME FROM OTHER SOURCES AS AGAINST THE CLAIM OF THE ASSESSEE THAT THE FUNDS WERE PARKED FOR SHORT DURATION INCOME FROM WHICH WOULD G O ON TO REDUCE THE CAPITAL EXPENDITURE RELATING TO THE PROJECT OF THE ASSESSEE. IN APPEAL BEFORE THE LD. CIT(A), THE ASSESSEE SUBMITTED THAT IN THE EARLIER ASSESSMENT YEARS, THE ASSESSEE HAD RECEIVED INTEREST FREE EQUITY FUND S FROM DELHI JAL BOARD AND THE INTEREST INCOME RECEIVED FROM THE INVESTMEN T OF THOSE FUNDS WAS HELD TO BE TAXABLE AS INCOME FROM OTHER SOURCES. HOWEVER, IN ASSESSMENT YEAR 2010-11, THE ASSESSEE HAS DEMONSTRATED BEFORE THE TRIBUNAL THAT DURING THE SAID YEAR THE ASSESSEE HAD ALSO BORROWED CERTAIN FUNDS FROM PFC AND ADB ETC. AND SINCE THERE WAS A DELAY IN PROJECT , THESE FUNDS WERE PARKED AS TEMPORARY INVESTMENTS IN FDRS AND THAT TH E INTEREST ON THESE INVESTMENTS SHOULD NOT BE SUBJECTED TO TAX. THAT T HEREAFTER CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND RELYING UPO N THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF BE AS VALLEY POWER CORPORATION LTD V ACIT IN ITA NO. 857/CHD/2012, TH E TRIBUNAL HELD THAT 3 THE INTEREST EARNED BY THE ASSESSEE ON THE BORROWED FUNDS WHICH WERE RELATED TO THE PROJECT SHOULD NOT BE SUBJECTED TO T AX AND ONLY INTEREST OF BALANCE SURPLUS FUNDS SHOULD BE SUBJECTED TO TAX. T HE LD. CIT(A) CONSIDERING THE ABOVE SUBMISSIONS AND WHILE RELYING UPON THE DECISION OF THE TRIBUNAL OBSERVED THAT FOR THE YEAR UNDER CONSI DERATION THE INTEREST INCOME OF RS. 28,33,69,310/- BE REDUCED BY RS. 4,40 ,45,305/- AFTER VERIFICATION BY THE ASSESSING OFFICER THAT THE SAID INTEREST HAS BEEN EARED ON FDRS EMANATING OUT OF THE LOAN ACCOUNTS WHEREIN THE CREDIT IS ONLY ON ACCOUNT OF THE LOAN ADVANCED TO THE ASSESSEE SPECIF ICALLY FOR CARRYING OUT THE PROJECT. THE LD. CIT(A) WHILE DIRECTING SO, F OLLOWED THE DECISION OF THE TRIBUNAL IN THE OWN CASE OF THE ASSESSEE IN EA RLIER ASSESSMENT YEAR 2010-11. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) ON THIS ACCOUNT. THE INCOME SO EARNED ON THE TEMPORARY PARK ED FUNDS WOULD REDUCE THE INTEREST INCURRED ON THE PRE-OPERATIVE B ORROWED FUNDS. THIS APPEAL OF THE REVENUE IS, THEREFORE, TREATED AS DIS MISSED. ASSESSMENT YEAR 2013-14 REVENUES APPEAL 6. IN THIS APPEAL THE REVENUE HAS AGITATED THE ACTI ON OF THE CIT(A) IN REDUCING THE AMOUNT OF RS. 5,72,80,540/- OUT OF THE TAXABLE INTEREST INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES. THE REV ENUE HAS FURTHER AGITATED THE ACTION OF THE CIT(A) IN HOLDING THAT T HE MISC. INCOME OF RS. 1,15,61,000/- EARNED BY THE ASSESSEE IS NOT A REVEN UE RECEIPT LIABLE FOR TAXATION. 7. SO FAR AS THE FIRST ISSUE RELATING TO THE REDUCT ION OF INTEREST INCOME ON THE BORROWED FUNDS TEMPORARILY PARKED TILL THE O PERATION OF THE PROJECT IS CONCERNED, THE SAME IS SQUARELY COVERED BY THE D ECISION OF THE TRIBUNAL 4 IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010 -11 IN ITA NO. 842/CHD/2014 ORDER DATED 6.5.2015 AND IN VIEW OF AB OVE FINDINGS GIVEN ABOVE, THIS ISSUE IS ACCORDINGLY DECIDED AGAINST TH E REVENUE. 8. SO FAR AS THE SECOND ISSUE RELATING TO THE TAXAT ION OF MISC. INCOME IS CONCERNED, THE LD. CIT(A) FOLLOWING THE SAME RATIO AND WHILE RELYING UPON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. BOKAR O STEEL LTD., 263 ITR 315 (SC) HELD THAT THE RECEIPTS OF ANY AMOUNT WHICH ARE INEXTRICABLY LINKED WITH THE PROCESS OF SETTING UP OF PLANT AND MACHINERY, WILL GO TO REDUCE THE COST OF THE ASSETS . THE LD. CIT(A) OBSERVED THAT THE MISC. INCOME EARNED BY THE ASSESS EE WERE LINKED TO THE INVESTMENT MADE IN THE COURSE OF SETTING UP OF THE PROJECT AND, HENCE, WERE REQUIRED TO BE REDUCED FROM THE PRE-OPERATIVE EXPEN DITURE. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A) ON THIS IS SUE ALSO. 9. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A RE DISMISSED. 10. NOW COMING TO THE APPEALS OF THE ASSESSEE IN ITA NOS. 859 & 860/CHD/2017 RELATING TO ASSESSMENT YEARS 2012-13 & 2013-14 RESPECTIVELY. 11. THE ASSESSEE IN ITS APPEALS FOR BOTH THE ASSESS MENT YEARS HAS AGITATED THE ACTION OF THE CIT(A) IN TAXING THE REM AINING INCOME ON INVESTMENT IN FDRS WHICH WERE MADE OUT OF THE OWN / INTEREST FREE FUNDS BY THE ASSESSEE. 12. IN VIEW OF OUR FINDINGS MADE ABOVE, THE ISSUE R AISED IS SQUARELY COVERED AGAINST THE ASSESSEE BY THE ORDER OF THE TR IBUNAL IN THE CASE OF ASSESSEE IN ITA NO. 842/CHD/2014 ORDER DATED 6.5.20 15 FOR ASSESSMENT 5 YEAR 2010-11. HENCE, THERE IS NO MERIT IN THE APPE ALS OF THE ASSESSEE AND THE SAME ARE ALSO DISMISSED. 13. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE AS WELL AS OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 02.01.2018 SD/- SD/- (ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 02.01.2018 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR