M/s Samalpatti Power Company Private Limited, CHENNAI V. Addl. CIT, CHENNAI

ITA 894/CHNY/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5036 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 03-06-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: TAPAS KUMAR DUTTA
• Assessee Lawyers: DR ANITA SUMANTH
• Keywords: Capital asset; Retrospective amendment
• Section: 2(14); 234B; 115JB; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH C : CHENNAI [BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI ABRAHAM P GEORGE, ACCOUNTANT MEMBER] I.T.A NO. 894/MDS/2009 ASSESSMENT YEAR : 2005-06 M/S SAMALPATTI POWER COMPANY PVT. LTD FIRST FLOOR, SREYAS VIRAT 14, THIRD CROSS ROAD RAJA ANNAMALAIPURAM CHENNAI 600 028 VS THE ADDL. CIT COMPANY RANGE VI(1) CHENNAI [PAN - AADCS1893D] (APPELLANT) (RESPONDENT) I.T.A NO. 1657/MDS/2009 ASSESSMENT YEAR : 2005-06 THE ADDL. CIT COMPANY RANGE VI(1) CHENNAI VS M/S SAMALPATTI POWER COMPANY PVT. LTD CHENNAI 600 028 (APPELLANT) (RESPONDENT) ASSESSEE BY : DR.ANITA SUMANTH DEPARTMENT BY : SHRI TAPAS KUMAR DUTTA O R D E R PER HARI OM MARATHA, JUDICIAL MEMBER: THESE CROSS APPEALS, PERTAINING TO ASSESSMENT Y EAR 2005-06, ARE FILED AGAINST THE ORDER OF THE LD. CIT(A), DATE D 30.3.2009. FOR THE ITA 8 94&1657/09 :- 2 -: SAKE OF CONVENIENCE AND BREVITY, WE PROCEED TO DECI DE THEM BY A COMMON ORDER. I.T.A.NO. 894/MDS/2009 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE COMPANY WAS INCORPORATED IN INDIA IN THE MONTH OF D ECEMBER 1995 UNDER THE COMPANIES ACT, 1956. IT IS ENGAGED IN TH E BUSINESS OF GENERATION AND SALE OF POWER TO TAMIL NADU ELECTRIC ITY BOARD (TNEB). THE COMPANY HAS CONSTRUCTED A DIESEL POWER PLANT FO R GENERATING POWER IN PURSUANCE TO 15 YEAR CONTRACT WITH TNEB FO R SUPPLY OF POWER UNDER A POWER PURCHASE AGREEMENT [PPA] ENTERED INTO WITH TNEB ON 22.5.1998. THIS PLANT WAS COMPLETED AND STARTED IT S COMMERCIAL PRODUCTION ON 1.3.2001. IN RESPECT OF THE YEAR UN DER APPEAL, THE ASSESSEE-COMPANY HAD RETURNED NIL INCOME UNDER TH E PROVISIONS OF THE INCOME-TAX ACT, 1961 OTHER THAN U/S 115JB UNDE R WHICH THE RETURNED INCOME IS ` 13,28,92,013/-. THE RETURN OF INCOME WAS FILED ON 28.10.2005. THE ASSESSMENT WAS COMPLETED U/S 1 43(3) ON 31.12.2007. IN THE ASSESSMENT ORDER, WHILE COMPUTI NG THE BOOK PROFITS CHARGEABLE TO TAX, THE ASSESSING OFFICER HA D ADDED TO THE BOOK PROFITS REBATE AND OTHER PROVISIONS AMOUNTING TO ` 15,59,85,460/- ON THE GROUND THAT SUCH PROVISIONS REPRESENTED UNASCER TAINED LIABILITIES. WHILE COMPUTING THE TAX PAYABLE AS PER THE NORMAL PROVISIONS OF THE ITA 8 94&1657/09 :- 3 -: ACT, LONG TERM CAPITAL LOSS OF ` 31,52,033/- WAS DISALLOWED ON THE GROUND THAT SUCH LOSS WAS WITH REFERENCE TO SALE OF AN AGRICULTURAL LAND WHICH WOULD NOT COME WITHIN THE CATEGORY OF A CAPIT AL ASSET AS UNDERSTOOD BY THE PROVISIONS OF SECTION 2(14) OF TH E ACT. IN THE COMPUTATION AS PER THE NORMAL PROVISIONS OF THE ACT , START UP FUEL COST OF ` 8,30,68,193/- FOR WHICH INVOICES HAD BEEN RAISED B Y THE ASSESSEE- COMPANY ON TNEB HAD NOT BEEN RECOGNIZED AS AN INCOM E BY THE ASSESSEE-COMPANY IN ITS BOOKS, WAS ADDED TO THE RET URNED INCOME AND WAS SUBJECTED TO TAX. DEPOSITS OF ` 1,41,67,200/- MADE BY CONVANTA SAMALPATTI OPERATING PRIVATE LTD., A RELATED CONCER N, TOWARDS MAJOR MAINTENANCE RESERVE ACCOUNT, DEPOSITED WITH THE BA NK AND REFLECTED IN THE ASSESSEES BOOKS, WAS ALSO BROUGHT TO TAX BY THE ASSESSING OFFICER. BEING AGGRIEVED, THE ASSESSEE FILED APPEA L BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS DELETED THE ADDITION MA DE BY THE ASSESSING OFFICER IN ARRIVING AT THE BOOK PROFITS COMPUTED U/S 115JB OF THE ACT BY PLACING RELIANCE ON THE DECISION OF HON' BLE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE FOR ASSESSMENT Y EARS 2003-04 AND 2004-05. THE HON'BLE HIGH COURT HAS FOLLOWED THE DECISION OF HON'BLE SUPREME COURT RENDERED IN THE CASE OF CIT VS HCL CO MNET SYSTEMS AND SERVICES LTD,(305 ITR 409) WHILE DECIDING THE A SSESSEES APPEALS FOR THOSE YEARS. NOW, BOTH THE PARTIES ARE AGGRIEV ED. THE DEPARTMENT HAS PREFERRED APPEAL AGAINST THE ORDER O F THE LD. CIT(A), ITA 8 94&1657/09 :- 4 -: TAKING A GROUND WITH REGARD TO THE DELETION OF PROV ISION FOR THE COMPUTATION OF BOOK PROFITS IN VIEW OF THE AMENDMEN T MADE IN SECTION 115JB WITH RETROSPECTIVE EFFECT BY FINANCE ACT, 200 9 TO INCLUDE CLAUSE (I) TO EXPLANATION 1 OF SUB-SECTION 2 TO BRING THE AMOUNT OR AMOUNTS SET ASIDE AS PROVISIONS FOR THE DIMINUTION IN THE V ALUE OF ANY ASSET WITHIN THE AMBIT OF ADJUSTMENT FOR COMPUTATION OF T HE BOOK PROFIT. THE ASSESSEE HAS CHALLENGED THE ACTION OF THE ASSE SSING OFFICER IN NOT GRANTING THE DEDUCTIONS WITH REGARD TO NORMAL COMPU TATION OF INCOME IN ITS ORIGINAL GROUNDS OF APPEAL, WHICH READ AS UN DER: ADDITION OF PROVISION FOR REBATE AND OTHER RECEIVA BLES ( ` 15,59,85,460) FOR COMPUTATION OF INCOME UNDER SECTIONS OTHER THAN SECTION 115 JB OF THE INCOME-TA X ACT, 1961(' ACT') 1. THE LEARNED AO ERRED IN NOT DETERMINING THE COR RECT INCOME UNDER SECTIONS OTHER THAN SECTION 115JB ('NORMAL PR OVISIONS') OF THE ACT IRRESPECTIVE OF THE INCOME OFFERED BY TH E APPELLANT. 2. THAT, ON THE FACTS AND CIRCUMSTANCES OF THE CAS E, THE AO HAS, ERRED IN NOT ALLOWING THE PROVISION FOR REBATE AND OTHER RECEIVABLES FOR THE PURPOSE OF COMPUTATION OF INCOM E UNDER NORMAL PROVISIONS OF THE ACT. 3. THE LEARNED AO OUGHT TO HAVE APPRECIATED THAT T HE REBATE IS MORE IN THE NATURE OF A DISCOUNT. 4. THE LEARNED AO OUGHT TO HAVE FOLLOWED THE CBDT CIRCULAR NO. 14 (XL-35) DATED APRIL 11, 1955 WHICH STATES TH AT THE OFFICERS OF THE DEPARTMENT MUST NOT TAKE ADVANTAGE OF THE MISTAKES COMMITTED BY THE ASSESSEE. 5. THAT, ON FACTS AND CIRCUMSTANCES OF THE CASE, T HE LEARNED AO HAS, ERRED IN CONFIRMING THE ADDITIONS FOR PROVI SION FOR AUXILIARY CONSUMPTION AND DIVIDEND DISTRIBUTION TAX FOR THE PURPOSE OF COMPUTATION OF INCOME UNDER NORMAL PROVI SIONS OF THE ACT. 6. THAT, THE LEARNED CIT(A) OUGHT TO HAVE EXERCISE D THE POWERS COTERMINOUS TO THAT OF THE AO IN DETERMINING THE ALLOWABILITY OF THE SAID PROVISIONS FOR REBATE, AUX ILIARY ITA 8 94&1657/09 :- 5 -: CONSUMPTION AND DIVIDEND DISTRIBUTION TAX FOR THE C OMPUTATION OF THE INCOME UNDER NORMAL PROVISIONS OF THE ACT. 7. THE APPELLANT CRAVES LEAVE TO ADD, SUPPLEMENT, AMEND, DELETE OR OTHERWISE MODIFY ANY OF THE GROUNDS STATE D HEREINBEFORE AT THE TIME OF HEARING. 3. APART FROM THE ABOVE, AN ADDITIONAL GROUND HAS BEEN RAISED BY THE ASSESSEE PRAYING THAT INTEREST U/S 234B CANNOT BE LEVIED ON THE ADDITIONAL TAX, IF ANY, DUE TO RETROSPECTIVE AMENDM ENT MADE IN SECTION 115JB. THE PETITION FOR ADMITTANCE OF ADDITIONAL GROUND STATES THAT IT IS PURELY A LEGAL ONE AND DOES NOT REQUIRE FURTHER INVESTIGATION OF FACTS. ALTHOUGH THE LD.DR HAS OBJECTED TO THE ADMIT TANCE OF THIS ADDITIONAL GROUND, BUT HE COULD NOT DISPUTE THAT IT DOES NOT REQUIRE FURTHER INVESTIGATION. WE HAVE FOUND THAT FACTS NEC ESSARY FOR THE ADJUDICATION OF THIS ADDITIONAL GROUND ARE ALREADY AVAILABLE ON RECORD. IN VIEW OF THE RATIO DECIDENDI OF THE DECISIONS OF HON'BLE SUPREME COURT RENDERED IN THE CASES OF JUTE CORPORATION (18 7 ITR 688) AND OF M/S NATIONAL THERMAL POWER CORPORATION (229 ITR 383), WE ADMIT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FIRST ISSUE RAIS ED IN THIS APPEAL RELATES TO PROVISION FOR REBATE WHICH ACCORDING TO THE ASSESSEE IS IN THE NATURE OF DISCOUNT AND IS A PROVISION FOR AUXILIAR Y CONSUMPTION AND DIVIDEND DISTRIBUTION TAX FOR THE ACTUAL AMOUNT AND NOT ON ADHOC BASIS. ITA 8 94&1657/09 :- 6 -: THE CASE OF THE ASSESSEE IS THAT INCOME HAS NOT ACC RUED TO THE COMPANY SINCE THE TNEB HAS NEVER ACKNOWLEDGED THE C LAIMS OF THE COMPANY. IT WAS ARGUED BY THE LD.AR THAT THE INCOM E UNDER NORMAL PROVISIONS HAVE BEEN NOT CORRECTLY COMPUTED IRRESPE CTIVE OF THE FACT THAT THE INCOMES WERE OFFERED. THE GRIEVANCE OF TH E LD.AR IS THAT THE ASSESSING OFFICER SHOULD HAVE ALLOWED THE PROVISION FOR REBATE AND OTHER RECEIVABLES FOR THE PURPOSE OF NORMAL COMPUTA TION BECAUSE THE REBATE IS IN THE NATURE OF A DISCOUNT AND THE PROVI SION FOR REBATE, AUXILIARY CONSUMPTION AND DIVIDEND DISTRIBUTION TAX FOR THE PURPOSE OF TAX HAVE TO BE CONSIDERED FOR NORMAL COMPUTATION OF INCOME. IN THIS REGARD, RELIANCE WAS PLACED ON THE CBDT CIRCULAR NO .14(XL-35) DATED 11.4.1955 WHICH STATES THAT THE OFFICERS OF THE DEP ARTMENT MUST NOT TAKE ADVANTAGE OF THE MISTAKES COMMITTED BY THE ASS ESSEE. IN THE SAME MANNER, IT WAS ARGUED THAT THE LD. CIT(A) OUGH T TO HAVE EXERCISED HIS POWERS WHICH ARE CO-TERMINUS WITH THA T OF THE ASSESSING OFFICER IN DETERMINING THE ALLOWABILITY OF THE PROV ISIONS FOR REBATE, AUXILIARY CONSUMPTION AND DIVIDEND DISTRIBUTION TAX FOR THE COMPUTATION OF INCOME UNDER NORMAL PROVISIONS OF THE ACT. ON T HE OTHER HAND, THE LD.DR HAS SUPPORTED THE ORDER OF THE LD. CIT(A). T HE PERUSAL OF ENTIRE RECORDS REVEALS THAT THE PROVISION FOR REBATE IS IN THE NATURE OF DISCOUNT. IN THIS REGARD, EXTRACTS OF THE PPA ON R EBATE PLACED AT PAGES 17 TO 20 OF THE PAPER BOOK CAN BE REFERRED TO. THE PROVISION FOR ITA 8 94&1657/09 :- 7 -: AUXILIARY CONSUMPTION AND DIVIDEND DISTRIBUTION TAX HAS BEEN CREDITED ON ACTUAL BASIS AND NOT ON ADHOC BASIS. THE INCOME HAS NOT ACCRUED TO THE COMPANY SINCE TNEB HAS NEVER ACKNOWLEDGED TH E CLAIMS OF THE COMPANY. THE PORTIONS OF EXTRACTS OF PPA IN RELATI ON TO AUXILIARY CONSUMPTION PLACED AT PAGES 21 TO 27 OF THE PAPER B OOK AND IN RELATION TO DIVIDEND DISTRIBUTION TAX AS CONTAINED AT PAGES 28 TO 30 OF THE PAPER BOOK, ARE RELEVANT. THE LD.AR HAS RELIED ON THE DECISIONS OF HON'BLE SUPREME COURT RENDERED IN THE CASE OF ROTOR K CONTROL INDIA(P) LTD VS CIT (314 ITR 62) AND IN THE CASE OF BHARAT E ARTH MOVERS VS CIT, (245 ITR 428) AND THAT OF HON'BLE KERALA HIGH COUR T RENDERED IN THE CASE OF INDIAN TRANSFORMERS LTD (270 ITR 259). TH E RELEVANT HELD PORTION OF THESE CASES ARE AS UNDER: ROTORK CONTROL INDIA(P) LTD VS CIT (314 ITR 62) HELD, REVERSING .THE DECISION OF THE HIGH COURT, TH AT THE VALVE ACTUATORS, MANUFACTURED BY THE ASSESSEE, WERE SOPHISTICATED GOODS AND STATISTICAL DATA INDICATED THAT EVERY YEAR SOME OF THESE WERE FOUND DEFECTIVE ; THA T VALVE ACTUATOR BEING A SOPHISTICATED ITEM NO CUSTOM ER WAS PREPARED TO BUY A VALVE ACTUATOR WITHOUT A WARR ANTY. THEREFORE, THE WARRANTY BECAME AN INTEGRAL PART OF THE SALE PRICE; IN OTHER WORDS, THE WARRANTY STOOD ATTA CHED TO THE SALE PRICE OF THE PRODUCT. IN THIS CASE THE WAR RANTY PROVISIONS HAD TO BE RECOGNIZED BECAUSE THE ASSESSE E HAD A PRESENT OBLIGATION AS A RESULT OF PAST EVENTS RESULT- ING IN AN OUTFLOW OF RESOURCES AND A RELIABLE ESTIM ATE COULD BE MADE OF THE AMOUNT OF THE OBLIGATION. THER EFORE, THE ASSESSEE HAD INCURRED A LIABILITY DURING THE ASSESSMENT YEAR WHICH WAS ENTITLED TO DEDUCTION UND ER SECTION 37 OF THE INCOME-TAX ACT, 1961. ITA 8 94&1657/09 :- 8 -: THE PRESENT VALUE OF A CONTINGENT LIABILITY, LIKE T HE WARRANTY EXPENSE, IF PROPERLY ASCERTAINED AND DISCOUNTED ON ACCRUAL BASIS CAN BE AN ITEM OF DEDUC TION UNDER SECTION 37. THE PRINCIPLE OF ESTIMATION OF TH E CONTINGENT LIABILITY IS NOT THE NORMAL RULE. IT WOU LD DEPEND ON THE NATURE OF THE BUSINESS, THE NATURE OF SALES, THE NATURE OF THE PRODUCT MANUFACTURED AND S OLD AND THE SCIENTIFIC METHOD OF ACCOUNTING ADOPTED BY THE ASSESSEE. IT WOULD ALSO DEPEND UPON THE HISTORICAL' TREND AND UPON THE NUMBER OF ARTICLES PRODUCED. A PROVISION IS A LIABILITY WHICH CAN BE MEASURED ON LY BY USING A SUBSTANTIAL DEGREE OF ESTIMATION. A PROV ISION IS RECOGNIZED WHEN: (A) AN ENTERPRISE HAS A PRESENT OBLIGATION AS A RESULT OF A PAST EVENT; (B) IT IS P ROBABLE THAT AN OUTFLOW OF RESOURCES WILL BE REQUIRED TO SE TTLE THE OBLIGATION, AND (C) A RELIABLE ESTIMATE CAN BE MADE OF THE AMOUNT OF THE OBLIGATION. IF THESE CONDITIONS A RE NOT MET, NO PROVISION CAN BE RECOGNIZED. THE PRINCIPLE IS THAT IF THE HISTORICAL TREND INDIC ATES THAT A LARGE NUMBER OF SOPHISTICATED GOODS WERE BEING MANUFACTURED IN THE PAST AND THE FACTS SHOW THAT DEFECTS EXISTED IN SOME OF THE ITEMS MANUFACTURED A ND SOLD, THEN PROVISION MADE FOR WARRANTY IN RESPECT O F SUCH SOPHISTICATED GOODS WOULD BE ENTITLED TO DEDUC TION FROM THE GROSS RECEIPTS UNDER SECTION 37. BHARAT EARTH MOVERS VS CIT (245 ITR 428) HELD, REVERSING THE DECISION OF THE HIGH COURT, TH AT THE PROVISION MADE BY THE ASSESSEE-COMPANY FOR MEETING THE LIABILITY INCURRED BY IT UNDER TILE LEAVE ENCASHMEN T SCHEME PROPORTIONATE WITH THE ENTITLEMENT EARNED BY THE EM PLOYEES OF THE COMPANY, INCLUSIVE OF THE OFFICERS AND THE STAFF; SUBJECT TO THE CEILING ON ACCUMULATION AS APPLICABLE ON THE RE LEVANT DATE, WAS ENTITLED TO DED1LCTION OUT OF THE GROSS RECEIPT S OF THE ACCOUNTING YEAR DURING WHICH TILE PROVISION IS MADE FOR THE LIABILITY. THE LIABILITY WAS NOT A CONTINGENT LIABI LITY. ITA 8 94&1657/09 :- 9 -: INDIAN TRANSFORMERS LTD (270 ITR 259) HELD, DISMISSING THE APPEAL, THAT THE TWO INSTANCES OF DEFECTS CAME TO THE NOTICE OF THE ASSESSEE OF WHICH ONE WAS WITH RESPECT TO TEN NUMBERS OF TRANSFORMERS SOL D TO BHEL AND AS PER THE COMPLAINT ALL THE TRANSFORMERS FAILED WITHIN ONE YEAR OF SUCH PURCHASE. THIS GAV E A CLEAR PICTURE THAT A MAJOR PORTION OF THE TRANSFORM ERS SOLD WERE DEFECTIVE AND THEREFORE A REASONABLE PRO- VISION HAD TO BE MADE. THE ASSESSEE HAD MADE A PROVISION OF RS.3,50,000 BUT THE ACTUAL EXPENSES INCURRED FOR THAT YEAR WAS RS. 7,98,958. THESE CIRC UM- STANCES CLEARLY SHOWED THAT THE PROVISION WAS MADE ON A REASONABLE BASIS. THE TRIBUNAL HAD RIGHTLY HELD T HAT THE PROVISION MADE FOR THE THREE YEARS WAS BASED ON AN ASCERTAINED LIABILITY AND THAT IT COULD NOT BE TREA TED AS A CONTINGENT LIABILITY. 5. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE AND THE LEGAL POSITION ON THE ISSUE, WE RESTORE THIS I SSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO DECIDE THE SA ME AFRESH IN THE LIGHT OF OUR OBSERVATIONS MADE HEREINABOVE, AFTER HEARING THE ASSESSEE. THE GROUNDS RAISED ORIGINALLY ARE ALLOWED FOR STATI STICAL PURPOSES. 6. THE ADDITIONAL GROUND IS WITH REGARD TO CHARGING OF INTEREST U/S 234B. ACCORDING TO THE LD.AR, IT CANNOT BE LEVIED ON THE TAX BY VIRTUE OF RETROSPECTIVE AMENDMENT TO SECTION 115JB OF THE ACT AS THE COMPANY HAD REMITTED THE TAX BY TAKING INTO CONSIDE RATION THE LAW PREVALENT AT THAT POINT OF TIME. TO SUPPORT HER CO NTENTION, THE LD.AR HAS RELIED ON THE FOLLOWING CASE LAWS: CIT VS SEDCO FOREX INTERNATIONAL DRILLING CO. LTD, 264 ITR 320 (UTTARANCHAL HIGH COURT) CIT VS REVATHI EQUIPMENT LTD, 298 ITR 67(MAD) ITA 8 94&1657/09 :- 10 - : 7. THE LD.DR HAS RELIED ON THE DECISION OF HON'BLE SUP REME COURT RENDERED IN THE CASE OF JT. CIT VS ROLTA INDIA LTD, 330 ITR 470. 8. IN OUR VIEW, THE DECISION CITED BY THE DEPARTMENT IS NOT DIRECTLY ON THE ISSUE. THEREFORE, WE FIND FORCE IN THE ADDI TIONAL GROUND BECAUSE THE ASSESSEE HAD PAID TAX AS PER THE EXISTI NG LAW AND NOBODY CAN KNOW AS TO WHAT IS GOING TO HAPPEN IN FUTURE. HENCE, FOR NO DEFAULT OF THE ASSESSEE, SUCH INTEREST CANNOT BE CH ARGED. ACCORDINGLY, WE ALLOW THE ADDITIONAL GROUND RAISED BEFORE US. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED AND IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. I.T.A.NO. 1657/MDS/2009 10. IN THIS APPEAL OF THE DEPARTMENT, FOLLOWING GROUNDS HAVE BEEN RAISED: 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO LAW AND FACTS OF THE CASE. 2.1. THE LEARNED CIT(A) ERRED IN HOLDING THAT ITEM (C) OF EXPLANATION TO SEC.115JB IS NOT ATTRACTED TO ANY PR OVISION TO COVER DOUBTFUL RECEIVABLES, WHILE COMPUTING THE BOOK PROFITS CHARGEABLE TO TAX, PLACING RELIANCE ON THE HON'BLE APEX COURT DECISION IN THE CASE OF CIT V. HCL COMNE T SYSTEMS AND SERVICES LTD. (305 ITR 409). 2.2. HAVING REGARD TO THE AMENDMENT TO SEC.115JB BY INTRODUCTION OF CLAUSE (I) IN THE EXPLANATION 1 TO SEC.115JB BY THE FINANCE (NO.2) ACT, 2009 WITH RETROSPECTIVE EFFECT FROM THE A-Y 2001-02, THE DECI SION OF THE HON'BLE SUPREME COURT IS NO MORE GOOD LAW AND T HE AFORESAID AMENDMENT HOLDS THE FIELD NOW. 3.1. THE LEARNED CIT(A) ERRED IN HOLDING THAT AS TH E TAMIL NADU ELECTRICITY BOARD (TNEB) HAD REFUSED TO ACCEPT AS ITA 8 94&1657/09 :- 11 - : ITS LIABILITY, THE START UP FUEL COST INCURRED BY T HE ASSESSEE COMPANY, THE INCOME IN RESPECT OF SUCH START UP FUE L COST BASED ON THE INVOICES RAISED BY THE ASSESSEE COMPAN Y, CANNOT BE TREATED AS HAVING ACCRUED TO THE ASSESSEE COMPANY. 3.2. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT T HE ASSESSEE COMPANY RAISED INVOICES ON TNEB CONTAINING THE START UP FUEL COST OF ` 8,30,68,183/- AND IN RESPECT OF SUCH START UP FUEL COST, NO CREDIT NOTE HAS BEEN IS SUED BY THE ASSESSEE COMPANY IN FAVOUR OF TNEB. 4.1. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE R ECEIPT FROM COVANTA SAMALPATTI OPERATING PRIVATE LTD. (CSO PL), CLASSIFIED AS DEPOSIT, CANNOT BE CONSIDERED AS A RE VENUE RECEIPT IN THE HANDS OF THE ASSESSEE COMPANY. 4.2. THE LEARNED CIT(A) FAILED TO NOTE THAT TO THE EXTENT OF THE AMOUNT RECEIVED BACK BY THE ASSESSEE FROM CSOPL , THE ASSESSEE HAD NOT PAID FOR THE MAINTENANCE EXPENDITURE TO CSOPL AND HENCE, THE AMOUNT OF RECEI PT FROM CSOPL WILL PARTAKE THE CHARACTER OF INCOME ONL Y. 5.1. THE LEARNED CIT(A) ERRED IN HOLDING THAT LOSS ON SALE OF LAND, CLASSIFIED AS AGRICULTURAL LAND BY THE ASS ESSING OFFICER, WOULD CONSTITUTE A LONG TERM CAPITAL LOSS (LTCL) AND WOULD BE ELIGIBLE FOR CARRY FORWARD FOR SET OFF TO FUTURE YEARS. 5.2. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT T HE IMPUGNED LAND WAS CLASSIFIED AS AGRICULTURAL LAND I N THE LAND REVENUE RECORDS AND THAT THE LAND CONTAINED CO CONUT AND PALMYRAH TREES. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF TH E LEARNED CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FIRST ISSUE RAI SED VIDE GROUND NOS.2.1 AND 2.2 RELATES TO THE FINDING OF THE LD. CIT(A) IN HOLDING THAT ITEM (C) OF EXPLANATION TO SECTION 115JB IS NOT ATT RACTED TO ANY ITA 8 94&1657/09 :- 12 - : PROVISION TO COVER DOUBTFUL RECEIVABLES WHILE COMPU TING THE BOOK PROFITS CHARGEABLE TO TAX, PLACING RELIANCE ON THE HON'BLE APEX COURT DECISION RENDERED IN THE CASE OF CIT VS HCL COMNET SYSTEMS AND SERVICES LTD(305 ITR 409). IT WAS ARGUED THAT THIS AMENDMENT CAME INTO EFFECT BY FINANCE(NO.2) ACT, 2009 WITH RETROS PECTIVE EFFECT FROM THE ASSESSMENT YEAR 2001-02. THIS FACT WAS NOT DEN IED BY THE LD.DR AND ALSO CLEAR FROM THE STATUTE. THEREFORE, WE FIN D THAT THE ISSUE IS COVERED BY THE RETROSPECTIVE AMENDMENT TO SECTION 1 15JB [CLAUSE (I) EXPLANATION 1, SUB-SECTION (2) IN FAVOUR OF THE REV ENUE. HENCE, WE REVERSE THE FINDING OF THE LD. CIT(A) IN THIS REGAR D AND ALLOW THE GROUNDS RAISED BY THE REVENUE IN THIS RESPECT. 12. GROUND NO.3(3.1 & 3.2) RELATES TO CLAIM OF THE ASSE SSEE REGARDING START UP FUEL COSTS FROM TNEB, BUT HAS NO T RECOGNIZED THE SAME IN ITS ACCOUNTS SINCE TNEB HAS TAKEN A STAND T HAT START UP FUEL COST IS NOT PAYABLE. ACCORDING TO TNEB, IT HAS ISS UED INSTRUCTIONS ONLY TO REDUCE THE STATION LOAD BUT NOT SHUT DOWN. THE CASE OF THE REVENUE IS THAT SINCE TNEB HAS REFUSED TO ACCEPT TH E CLAIMS MADE BY THE COMPANY TOWARDS START UP FUEL, THE COMPANY HAS NOT RECOGNIZED THE REVENUE, ON THE BASIS OF THE REAL INCOME CONCEP T. IT WAS FURTHER ARGUED THAT TNEB HAS CONFIRMED THAT IT HAS NOT PAID ANY AMOUNT TO THE COMPANY TOWARDS THE CLAIM FOR START UP FUEL COS T FROM INCEPTION ITA 8 94&1657/09 :- 13 - : VIDE ITS LETTER DATED 17.4.2003. ON THE OTHER AND, THE LD.AR HAS RELIED ON THE APPELLATE FINDING AND THE SUM AND SUBSTANCE OF THIS IS THAT EVEN THOUGH THE ASSESSEE HAS BEEN FOLLOWING THE MERCANT ILE SYSTEM OF ACCOUNTING WHICH BRINGS INTO CREDIT WHAT IS DUE, IM MEDIATELY IT BECOMES DUE AND THEREFORE, BEFORE IT IS ACTUALLY RE CEIVED AND IT BRINGS INTO DEBIT, EXPENDITURE, THE AMOUNT FOR WHICH A LEG AL LIABILITY HAS BEEN INCURRED BEFORE IT IS ACTUALLY DISBURSED. HOWEVER, ON THE FACTS OF THE PRESENT, THE CLAIM WHICH HAS BEEN MADE TOWARDS STAR T UP FUEL COST HAS NOT BEEN ACCEPTED BY THE TNEB AND IN SUCH CIRCUMSTA NCES, THE DECISION OF HON'BLE APEX COURT IN THE CASE OF CIT V S CHAMANLAL MANGALDAS AND COMPANY(39 ITR 8) AND THE CASE OF GOD HARA ELECTRICITY COMPANY LTD VS CIT (225 ITR 746) AND THAT OF HON'BL E JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS PIONEER ENGINEERIN G SYNDICATE(234 ITR 503) ARE RELEVANT. THE GIST OF RATIO DECIDENDI OF THESE CASES IS THAT SINCE THE CLAIM MADE BY THE ASSESSEE AGAINST THE GO VERNMENT HAS NOT BEEN ACCEPTED BY THE LATTER, THERE WAS NO Q UESTION OF THE SAID AMOUNT HAVING ACCRUED TO THE ASSESSEE . AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE ARE ALSO OF THE OPINION THAT THE CO NCEPT OF ACCRUAL IS BASED ON THE ACQUISITION OF AN ENFORCEABLE RIGHT TO RECEIVE. IF SUCH RIGHT TO RECEIVE IS SUBJECT TO CERTAIN CONTINGENCIE S, THEN ACCRUAL CANNOT BE SAID TO HAVE TAKEN PLACE. IN SUCH CIRCUMSTANCES , THE PAYER MUST ALSO ACCEPT THE LIABILITY FAILING WHICH, AN ENFORCE ABLE RIGHT TO RECEIVE ITA 8 94&1657/09 :- 14 - : DOES NOT ARISE AS PER LAW. THUS, IF A RECEIPT IS U NCERTAIN AND IS SUBJECT TO THE OUTCOME OF THE EVENTS IN FUTURE, IT CANNOT B E TREATED AS HAVING ACCRUED DURING THE RELEVANT PERIOD. SINCE TNEB HAS REFUSED TO ACCEPT AS ITS LIABILITY THE START UP FUEL COST INCURRED BY THE ASSESSEE, THE INCOME IN RESPECT OF START UP FUEL COST BASED ON T HE INVOICES RAISE BY THE ASSESSEE-COMPANY CANNOT BE TREATED AS HAVING AC CRUED TO THE COMPANY EVEN IT HAS BEEN FOLLOWING MERCANTILE SYSTE M OF ACCOUNTING. ON A SPECIFIC QUERY RAISED BY THE BENCH IT HAS BEEN CONFIRMED THAT THE AMOUNT OF START UP FUEL COSTS HAS NOT BEEN RECOGNIZ ED BY THE ASSESSEE AS NOTED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE FINDING OF THE LD. CIT(A) IN ALLOWING THE APPEAL IN FAVOUR OF THE ASSESSEE. HENCE, WE DI SMISS GROUND NOS. 3.1 & 3.2 RAISED BY THE REVENUE. 13. THE NEXT ISSUE RAISED VIDE GROUND NOS. 4.1 AND 4.2 RELATES TO TREATMENT OF THE RECEIPT FROM COVANTA SAMALPATTI OP ERATING PVT LTD.(CSOPL), CLASSIFIED AS DEPOSIT, WHICH HAS BEEN HELD BY THE LD. CIT(A) TO BE NOT A REVENUE RECEIPT IN THE HANDS OF THE ASSESSEE- COMPANY. THE FACTS OF THIS ISSUE ARE THAT AS PER P PA BETWEEN THE ASSESSEE AND TNEB, OPERATION AND MAINTENANCE FEE AM OUNTING TO 4% OF THE CAPITAL COST WAS PAYABLE BY TNEB TO THE ASSE SSEE-COMPANY. ANOTHER COMPANY NAMED, CSOPL WAS INCORPORATED FOR T HE PURPOSE OF ITA 8 94&1657/09 :- 15 - : OPERATION AND MAINTENANCE OF THE POWER PLANT OF THE ASSESSEE . 4% OF THE CAPITAL COST RECEIVED BY THE ASSESSEE-COMPAN Y AS OPERATION AND MAINTENANCE FEES FROM TNEB WAS, IN TURN, GIVEN TO C SOPL AND WAS REFLECTED AS REVENUE RECEIPT BY THAT CONCERN. A C ONSORTIUM OF BANKS PROVIDED FINANCE FOR THE CAPITAL REQUIREMENTS OF TH E ASSESSEE AND THEREFORE, THEY HAD VESTED INTEREST IN ENSURING THA T ADEQUATE FUNDS WERE AVAILABLE WITH THE ASSESSEE-COMPANY AT THE TIM E OF UNDERTAKING MAJOR MAINTENANCE EXPENDITURE WHICH WAS REQUIRED P ERIODICALLY BECAUSE THE PPA WAS FOR A PERIOD OF 15 YEARS. AS S UCH, MAJOR MAINTENANCE EXPENDITURE(MME) WERE LIKELY TO HAPPEN IN THE LATER PART OF THE PROJECT PERIOD FOR WHICH MONIES WERE PAID EV ERY YEAR BY TNEB. TO ENSURE AVAILABILITY OF FUNDS TO CARRY OUT MAJOR MAINTENANCE THE LENDERS INSISTED THAT A SCIENTIFIC EVALUATION BE MA DE OF SUCH EXPENSES AND THAT SUCH AMOUNTS BE BUILT UP AS A DEPOSIT OVER A PERIOD OF TIME. THEREFORE, A TRUST AND RETENTION ACCOUNT AGREEMENT WAS ENTERED BETWEEN THE ASSESSEE-COMPANY AND THE CONSORTIUM OF LENDERS WHICH SPECIFIED THAT EQUAL ANNUAL INSTALMENTS OF ` 1,41,67,200/- SHOULD BE DEPOSITED IN A TRUST AND RETENTION ACCOUNT (TRA) OV ER WHICH THE LENDERS WOULD HAVE CONTROL AND SUCH DEPOSITS WOULD BE CLOSELY MONITORED AND SPENT ONLY FOR MEETING MAJOR MAINTENA NCE EXPENSES. THE OPERATION AND MAINTENANCE ACTIVITY HAD BEEN SUB -CONTRACTED BY THE ASSESSEE-COMPANY TO CSOPL AND MAJOR MAINTENANCE EXPENSES ITA 8 94&1657/09 :- 16 - : ALSO WERE TO BE MET OUT OF THE OPERATION AND MAINTE NANCE FEE PAID PERIODICALLY BY THE ASSESSEE-COMPANY TO CSOPL. SIN CE THE ASSESSEE- COMPANY HAD THIS OBLIGATION TO DEPOSIT AN ANNUAL I NSTALLMENT IN THE TRA, SIMILAR OBLIGATION WAS PLACED BY THE ASSESSEE- COMPANY ON CSOPL WHICH, IN TURN, WAS REQUIRED TO MAKE AN EQUIVALENT ANNUAL DEPOSIT WITH THE ASSESSE-COMPANY. THE ASSESSING OFFICER HAS NOT ED THAT OUT OF THE OPERATIONAL AND MAINTENANCE CHARGES PAID BY THE ASS ESSEE-COMPANY TO CSOPL, PART OF IT WAS COMING BACK TO IT IN THE F ORM OF DEPOSIT WHICH INDICATED THAT, TO THE EXTENT OF THE DEPOSIT RECEIV ED FROM CSOPL BY THE ASSESSEE-COMPANY, THERE IS NO ACTUAL EXPENDITURE BY WAY OF MAINTENANCE FEE. IN THE ORIGINAL RETURN OF INCOME F ILED BY CSOPL FOR ASSESSMENT YEARS 2003-04 AND 2004-05, IT HAD CLAIME D THE AMOUNT PLACED AS DEPOSIT WITH THE ASSESSEE-COMPANY AS AN E XPENDITURE. FROM THIS, THE ASSESSING OFFICER HAS CONCLUDED THAT EXPE NDITURE TO THE TUNE OF ` 1,41,67,200/- WOULD NOT BE ALLOWABLE AS IT REPRESE NTED ONLY A NOTIONAL PAYMENT FOR AN EXPENDITURE WHICH WAS NEVER INCURRED BY CSOPL AND WAS INSTEAD RECEIVED BACK BY THE ASSESSEE -COMPANY IN THE FORM OF DEPOSIT. 14. AFTER GOING THROUGH THE RECORDS, IT WAS FOUND THAT THE INITIALLY CSOPL HAD CLAIMED THE PAYMENT TO THE ASSESSEE-COMPA NY AS AN EXPENDITURE, BUT LATER ON HAD WITHDRAWN ITS CLAIM A ND HAD TREATED THE ITA 8 94&1657/09 :- 17 - : SAME AS DEPOSIT WITH THE ASSESSEE-COMPANY FOR THE P ERIOD RELEVANT TO ASSESSMENT YEAR 2005-06. SUCH RECLASSIFICATION BY CSOPL FROM EXPENDITURE TO A CREDIT TO THE MAJOR MAINTENANCE RE SERVE KEPT WITH THE ASSESSEE-COMPANY WAS ACCEPTED BY THE DEPARTMENT IN THE SCRUTINY ASSESSMENT ORDER OF CSOPL FOR ASSESSMENT YEAR 2003 -04. THE DEPOSIT MADE BY CSOPL WITH THE ASSESSEE-COMPANY HAD , FOR THE PERIOD UNDER CONSIDERATION BEEN DISCLOSED UNDER THE HEAD LOANS AND ADVANCES. THEREFORE, CSOPL HAS VESTED RIGHT OVER THE DEPOSIT PLACED BY IT WITH THE ASSESSEE-COMPANY. THE ASSESSEE-COMP ANY ALSO, AFTER MAKING THE DEPOSIT WITH THE BANK, DOES NOT HAVE ANY RIGHT OVER THE WITHDRAWAL OF THE AMOUNT PLACED IN TRA EXCEPT FOR T HE SPECIFIED PURPOSE OF MAJOR MAINTENANCE EXPENSES TO BE INCURRE D ON BEHALF OF CSOPL. THE QUESTION IS AS TO WHETHER THE RECEIPT O F DEPOSIT FROM CSOPL AND PLACEMENT OF AN EQUAL AMOUNT BY THE ASSES SEE-COMPANY WITH TRA FOR THE SPECIFIC PURPOSE OF MAJOR MAINTENA NCE EXPENSES WOULD AMOUNT TO A REVENUE RECEIPT FROM CSOPL IN THE ASSESSEES HANDS OR NOT. IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, THE ASSESSEE, AT BEST, BE CONSIDERED AS A CUSTODIAN OF THE RESERVE CREATED FOR MEETING MAJOR MAINTENANCE EXPENSES, AN OBLIGATI ON IT HAD TO UNDERTAKE UNDER THE DIRECTIONS OF THE LENDERS. CON SEQUENTLY, THE AMOUNTS AVAILABLE IN THE RESERVE COULD NOT BE UTILI ZED FOR ANY COMMERCIAL REQUIREMENTS OF THE COMPANY. MAJOR MAIN TENANCE WAS THE ITA 8 94&1657/09 :- 18 - : RESPONSIBILITY OF THE OPERATING COMPANY CSOPL AND THE ACCUMULATED DEPOSITS WERE TOWARDS DISCHARGING OF SUCH MAINTENAN CE OBLIGATION OF CSOPL. THUS, THIS RECEIPT CANNOT BE CONSIDERED AS A REVENUE RECEIPT IN THE HANDS OF THE ASSESSEE. 15. WE HAVE GONE THROUGH THE ENTIRE RECORDS INCLUDING T HE PLANT MANUFACTURERS MANUAL FOR PERIODIC MAINTENANCE; EXT RACT OF THE TRAA; EXTRACTS OF THE FINANCIAL STATEMENT OF THE COMPANY AND THE O&M CONTRACTOR; PAYMENT DETAILS OF MME DEPOSIT BACK TO THE O&M CONTRACTOR; AND LETTER FROM THE O&M CONTRACTOR ACKN OWLEDGING THE RECEIPT OF THE DEPOSIT IT HELD WITH THE COMPANY. U NDER THESE CIRCUMSTANCES, WE FIND NO FORCE IN THE REVENUES GR OUNDS HENCE, GROUND NOS. 4.1 AND 4.2 STAND DISMISSED. 16. THE LAST GROUND OF THIS APPEAL RELATES TO THE FINDI NG OF THE LD. CIT(A) IN HOLDING THAT LOSS ON SALE OF LAND, CLASS IFIED AS AGRICULTURAL LAND BY THE ASSESSING OFFICER WOULD CONSTITUTE A LO NG TERM CAPITAL LOSS (LTCL) AND WOULD BE ELIGIBLE FOR CARRY FORWARD FOR SET OFF TO FUTURE YEARS. ACCORDING TO THE LD.DR, THIS LAND HAS BEEN CLASSIFIED AS AGRICULTURAL LAND ON WHICH COCONUT AND PALMYRAH TRE ES HAVE BEEN GROWN, HENCE, IT WOULD NOT BE ELIGIBLE FOR CARRIED FORWARD FOR SET OFF OF TO FUTURE YEARS. THE LAND IN QUESTION WAS ACQUIRED BY THE COMPANY FOR THE PURPOSE OF SETTING-UP OF POWER PLANT. HOWEVER, IT COULD NOT BE ITA 8 94&1657/09 :- 19 - : USED FOR THE SAID PURPOSE DUE TO UNAVAILABILITY OF WATER FACILITIES, RAILWAY SIDING ETC. THE LAND WAS NEITHER ACQUIRED NOR GIVEN BY THE ASSESSEE FOR AGRICULTURAL PURPOSES. SO, ACCORDING TO THE ASSESSEE, THIS CANNOT BE TREATED AS AGRICULTURAL LAND. 17. WE HAVE GONE THROUGH THE ENTIRE RECORDS INCLUDING T HE LETTER DATED 14.3.1997 FROM TNEB, MEMORANDUM OF UNDERSTAND ING BETWEEN THE PROMOTER AND THE TNEB DATED 18.2.1995; AND SHAR EHOLDERS AGREEMENT DATED 26.2.1999. WE HAVE ALSO GONE THROU GH THE RELEVANT PROVISIONS AND PRECEDENTS ON THE ISSUE. SECTION 2( 14) EXCLUDES AGRICULTURAL LAND FROM THE PURVIEW OF CAPITAL ASSET . THE DEFINITION AVAILABLE FURTHER ELABORATES ON THE LOCATION OF SUC H LAND, BUT THE SUBJECT MATTER OF SUCH EXCLUSION REMAINS AGRICULTU RAL LAND. THIS ISSUE HAS BEEN DEALT BY THE HON'BLE APEX COURT IN THE CAS E OF CWT VS OFFICER-IN-CHARGE [COURT OF WARDS] (105 ITR 133). RELIANCE WAS ALSO PLACED ON THE DECISION OF HON'BLE MADRAS HIGH COURT RENDERED IN THE CASSE OF M.S. SRINIVASA NAICKER AND OTHERS VS ITO ( 292 ITR 481) IN WHICH IT HAS BEEN HELD AS UNDER: HELD, THAT IT WAS AN ADMITTED CASE THAT TILL THE D ATE OF SALE, AGRICULTURAL OPERATIONS WERE CARRIED ON BY THE ASSE SSEE. THE LAND WAS PUT TO USE ONLY FOR AGRICULTURAL PURPO SES AND NOT FOR ANYTHING ELSE. THE LANDS IN QUESTION WERE ALSO REGISTERED AS AGRICULTURAL LANDS AND ASSESSED TO LA ND ITA 8 94&1657/09 :- 20 - : REVENUE. THE FACT THAT THE PURCHASER HAD PUT IT TO USE FOR A TOTALLY DIFFERENT PURPOSE FROM THAT OF THE ASSESSEE OUGHT NOT TO HAVE WEIGHED WITH THE TAX AUTHORITY. CAPITA L GAIN TAX COULD NOT BE LEVIED. HELD ALSO, THAT THE TRIBUNAL HELD THAT ADDITION WAS MADE TOWARDS GROSS PROFITS, ON THE GROUND THAT THE PROFI T MARGIN ADOPTED BY THE ASSESSEE FOR A HIGH QUALITY OF KAPAS WAS MUCH LOWER IN POINT OF RETURN, COMPARED TO WHAT HAD BEEN RETURNED ON LESSER QUALITY OF KAPAS. IN THE ABSENC E OF ANY MATERIAL TO SUBSTANTIATE THE CLAIM OF THE ASSESSEE THAT THE ADDITION OF GROSS PROFIT WAS NOT SUPPORTED BY ANY E VIDENCE, THE ADDITION WAS JUSTIFIED. 18. IT IS TRUE THAT AT THE TIME OF PURCHASE OF THIS LAN D, THE CONCERNED LAND MAY HAVE BEEN AGRICULTURAL LAND AS IS INDICATE D BY THE PRESENCE OF SOME COCONUT AND PALMYRAH TREES. IT WAS CERTAINLY CLASSIFIED AS AGRICULTURAL LAND IN THE LAND REVENUE RECORDS. HOW EVER, THE ASSESSEE- COMPANY PURCHASED THIS LAND WITH NO INTENTION TO US E IT FOR CARRYING OUT ANY AGRICULTURAL OPERATIONS, BUT TO SET UP A PO WER PLANT. RIGHT FROM ITS ACQUISITION IN 1996 AND UPTO THE DATE OF I TS SALE, NO AGRICULTURAL OPERATIONS WERE CARRIED OUT ON THIS LA ND BY THE ASSESSEE OR BY ANY PERSON ON BEHALF OF THE ASSESSEE-COMPANY. CONSEQUENTLY, AS ON THE DATE OF SALE, THE CONCERNED LAND CANNOT B E TREATED AS AN AGRICULTURAL LAND. IT WAS DEFINITELY A BUSINESS AS SET HELD AS SUCH IN THE BOOKS OF THE ASSESSEE-COMPANY HENCE, LOSS ON SALE O F SUCH LAND WOULD ITA 8 94&1657/09 :- 21 - : CONSTITUTE A LONG TERM CAPITAL LOSS AND WOULD BE EL IGIBLE FOR CARRY FORWARD FOR SET OFF TO FUTURE YEARS. HENCE, THE GR OUNDS RAISED BY THE REVENUE CANNOT BE ALLOWED. 19. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS PAR TLY ALLOWED. 20. TO SUMMARIZE THE RESULT, THE APPEAL OF THE ASSESSEE STANDS PARTLY ALLOWED AND PARTLY ALLOWED FOR STATISTICAL P URPOSES AND THAT OF THE REVENUE STANDS PARTLY ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 24.5.2011. SD/- SD/- (ABRAHAM P GEORGE) ACCOUNTANT MEMBER ( HARI OM MARATHA ) JUDICIAL MEMBER DATED: 24 TH MAY, 2011 RD COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR