TATA Power Solar Systems Limited, Bangalore V. The Deputy Commissioner of Income Tax, Circle - 7(1) (1) , Bangalore

MA 78/BANG/2022

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 2693 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 6 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 25-09-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 22-09-2022
• Assessment Year: 2011-2012
• Appeal Filed On: 19-07-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Capital receipt
• Section: 234B; 251; 153

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH : BANGALORE BEFORE SHRI. CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER M.P. No. 78/Bang/2022 (in IT(TP)A No. 699/Bang/2016) Assessment Year : 2011-12 M/s. Tata Power Solar Systems Ltd., 78, Electronic City, Hosur Road, Bangalore – 560 100. PAN: AAACT4660J Vs. The Deputy Commissioner of Income Tax, Circle – 7(1)(1), Bangalore. APPELLANT RESPONDENT Assessee by : Shri Aliasgar Rampurawala, CA Revenue by : Shri K.R. Narayan, Addl. CIT- DR Date of Hearing : 23-09-2022 Date of Pronouncement : 26-09-2022 ORDER PER BEENA PILLAI, JUDICIAL MEMBER Present miscellaneous petition has been filed by assessee in the order dated 30/03/2022 passed by this Tribunal. The Ld.AR submitted that following typographic mistakes has crept in para 14 of the impugned order at page 9. 2. He submitted that the date mentioned in said para 6 of para 14 should be 28.01.2015 as against 28/01/2014 recorded therein. We have verified the records and note that the date deserves to be corrected as submitted by the Ld.AR. Accordingly the sub para 6 in para 14 shall be read as under: Page 2 of 7 M.P. No. 78/Bang/2022 (in IT(TP)A No. 699/Bang/2016) “14. ...............6. Date by which order u/s. 92CA)3) was to be passed – on or before 28/01/2015.” 3. The next issue raised by the Ld.AR is in respect of the additional ground nos. 17-18 raised by assessee which has not been adjudicated. 4. In these grounds, we note that assessee is challenging the validity of the order passed u/s. 92CA(3A) r.w.s. 153 of the Act without jurisdiction. 5. Additional ground no. 18 is raised is also on the similar line. We have already considered the legal issue of challenging the validity of the transfer pricing order dated 30/01/2015 and has quashed the entire transfer pricing adjustment proposed in para 19 of the said order. In the light of the above, we do not find it necessary to adjudicate additional ground nos. 17 and 18. Accordingly, this plea of assessee does not amount to be a mistake apparent on record and hence is rejected. 6. The next issue raised by the Ld.AR is in respect of non-disposal of corporate tax issue raised by assessee in ground nos. 10-15. We note that admittedly these grounds have been missed out to be adjudicated that amounts to mistake apparent on record. Accordingly, we adjudicate these grounds as under: 7. These following paras shall be read in continuation to para 19 in the following manner. “20. The Ld.AR submitted that the assessee has taken External Commercial Borrowings only to acquire capital assets. The purpose of the loan was to acquire capital assets only. However, as the utilisation of ECB funds for acquisition of capital goods / assets was on progressive basis, the assessee parked the temporary funds in fixed Page 3 of 7 M.P. No. 78/Bang/2022 (in IT(TP)A No. 699/Bang/2016) deposit and earned interest of Rs.3,24,96,741/-. Accordingly, the interest so earned on temporary parking of funds is inextricably linked to the expansion project of the assessee and hence, the same were reduced from Capital Work in Progress of the project in line with Accounting Standard 16 on Borrowing Cost. He submitted that the Ld.AO after relying on Tuticorin Alkali Chemicals and Fertilizers Ltd vs. Commissioner of Income tax [1997] 227 ITR 172 (SC) taxed the interest as “Income from Other Sources”. 21. The Ld.AR relied on the Hon’ble Bangalore Tribunal’s order in assessee’s own case for A.Y. 2010-11, wherein it has been held that the income earned on fixed deposit is inextricably linked to the expansion project of the assessee and shall be capitalised and go on to reduce the CWIP and will not be taxable as Income from Other Sources under the Act for the year under consideration and made all necessary submissions but Hon’ble ITAT inadvertently missed to adjudicate the same. 22. Without prejudice to the above, the assessee has also submitted that if the above interest income is taxed as “Income from Other Sources” then the CWIP be accordingly increased, and the Ld.AO be directed to grant depreciation on such increased CWIP amount.” The Ld.DR relied on the orders passed by authorities below. Page 4 of 7 M.P. No. 78/Bang/2022 (in IT(TP)A No. 699/Bang/2016) We have perused the submissions advanced by both sides in the light of records placed before us. 23. We note that identical issue was considered by Coordinate Bench of this Tribunal in assessee’s own case for immediately preceding A.Y. 2010-11 in IT(TP)A No. 752/Mum/2015 by order dated 30/04/2019 observed as under: “20. We have given a careful consideration to the rival submissions. The facts of the assessee's case are identical to the facts of the case in NTPC Sail Power Co. P. Ltd. u. CIT (supra). In the aforesaid case, the facts were that the assessee, which was in the business of running power plant by way of expansion proposed to set up a new unit. It raised term loan for setting up new plant. Separate books of account were maintained for the same. The assessee had worked out the amount of interest payable or paid relating to the borrowings utilized for expansion purposes. It also worked out the earning of interest on temporary deposits of surplus fund and interest on margin/advances made for the purposes of expansion. The assessee adjusted the said interest towards the incidental expenses during construction by adopting matching principle. However, the Assessing Officer treated the said interest as `income from other sources' which was affirmed by the Tribunal. On further appeal by the Assessee to the Hon'ble Delhi High Court on the above facts, the question before the Hon'ble Delhi High Court was, whether interest earned on fixed deposits pending utilisation for capital expenditure on setting up of a project was a capital receipt, which is to be set off against pre-operative expenses? The further question was whether the interest earned on fixed deposits can be said to be related to setting up of a plant? The Hon'ble Delhi High Court held as follows: "9. This Court, in Indian Oil Panipat Power Consortium Ltd. v. ITO /2009] 315 ITR 255/ 181 Taxman 249 (Delhi) held that where interest on money received as share capital is temporarily placed in fixed deposit awaiting acquisition of land, a claim that such interest is a capital receipt entitled to be set off against pre- operative expenses, is admissible, as the funds received by the assessee company by the joint venture partners are "inextricably linked" with the setting up of the plant and such interest earned cannot be treated as income Page 5 of 7 M.P. No. 78/Bang/2022 (in IT(TP)A No. 699/Bang/2016) from other sources. The reasoning in Indian Oil is in line with Bokaro Steel Ltd. Similarly, the Supreme Court in CIT v. Karnataka Power Corpn. [2001] 247 ITR 268/[2000] 112 Taxman 629 (SC) and Bongaigaon v Ref nary & Petrochemicals Co. Ltd. v. CIT [2001] 251 ITR 329/ .119 Taxman 488 (SC) held that such receipts are not income. 10. It is no doubt correct that the proviso to section 36(1)(iii) of the Income Tax Act enacts that any amount of the interest paid towards ("in respect of) capital borrowed for acquisition of an asset or for extension of existing business regardless of its capitalization in the books or otherwise, 'for any period beginning from the date on which the capital was borrowed for acquisition of the asset till the date on which such asset was first put to use" would not qualify as deduction. However, in all these cases, when the interest was received by the assessee towards interest paid for fixed deposits when the borrowed funds could not be immediately put to use for the purpose for which they were taken, this Court, and indeed the Supreme Court held that if the receipt is "inextricably linked" to the setting up of the project, it would be capital receipt not liable to tax but ultimately be used to reduce the cost of the project. By the same logic, in this case too, the funds invested by the assessee company and the interest earned were inextricably linked with the setting up of the power plant. It may be added that the Tribunal has not found that the deposits made as margin monies were not limited to the construction activity connected to the expansion of the business by way of setting up of a new power generation plant. 11. As a result of the above discussion, it is held that the Tribunal and the lower authorities fell into error in holding that the interest earned on fixed deposit of amounts borrowed, which is the subject matter of the present appeal, would have to be treated as revenue receipt. The answer is given in favour of the assessee; the appeal is consequently allowed". 21. It can be seen from the aforesaid decision of the Hon'ble Delhi High Court that the Hon'ble Court has placed reliance on the decision of Hon'ble Supreme Court in the case of Bokaro Steel Ltd., 236 ITR 315 (SC) wherein the theory of inextricable link between the interest earned and setting up of a project if found to exist, interest income should not be treated as income from other sources, but should go to reduce capital cost of the project. As we have already seen, in the present case there exists such an inextricable link between the setting up of a project and Page 6 of 7 M.P. No. 78/Bang/2022 (in IT(TP)A No. 699/Bang/2016) borrowing of money and utilisation of funds not required by way of investments in fixed deposits and earning of interest income thereon. Therefore, the interest income in question was rightly capitalized by the assessee and the same went to reduce the cost of capital work-in-progress. The interest income therefore should not be assessed as income from other sources. In view of the above conclusion, the alternative claim made by the assessee for allowing depreciation does not require consideration.” Accordingly, this ground raised by assessee stands allowed as indicated hereinabove. 24. Ground nos. 13-15 is in respect of directions to consider the amount reflecting in Form 26AS, granting credit to the dividend distribution tax paid and levy of interest u/s. 234B & C. 25. We note that credit has to be granted to the amount reflecting in Form 26AS vis-à-vis the books of accounts based on a reconciliation has to be considered in accordance with law by the Ld.AO. 26. The Ld.AO also directed to grant credit on the dividend distribution tax paid by the assessee in accordance with law after due verification. 27. The levy of interest u/s. 234B & C are consequential in nature and therefore do not require adjudication. Accordingly, these grounds raised by assessee stands allowed as indicated hereinabove.” In the result, the M.P. filed by the assessee stands allowed. Order pronounced in open court on 26 th September, 2022. Sd/- Sd/- (CHANDRA POOJARI) (BEENA PILLAI) Accountant Member Judicial Member Bangalore, Dated, the 26 th September, 2022. /MS / Page 7 of 7 M.P. No. 78/Bang/2022 (in IT(TP)A No. 699/Bang/2016) Copy to: 1. Appellant 4. CIT(A) 2. Respondent 5. DR, ITAT, Bangalore 3. CIT 6. Guard file By order Assistant Registrar, ITAT, Bangalore