U.P Power Corporation Ltd., Lucknow V. Dy. Commissioner of Income Tax, Lucknow

MA 82/LKW/2015

• Counselvise Citation: [2015] 124 COUNSELVISE.COM (IT) 3487 (ITAT-LUCKNOW)
• Duration Of Justice: 1 month(s) 18 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 10-09-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 22-07-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: R C JAIN
• Keywords: Wholly owned subsidiary
• Section: 14A

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER M.A. NO.82/LKW/2015 (ARISING OUT OF I.T.A.NO.97/LKW/2013) ASSESSMENT YEAR:2009 - 10 U.P. POWER CORPORATION LTD., 14, ASHOK MARG, LUCKNOW. PAN:AAACU5088M VS. DCIT, RANGE - 6, LUCKNOW. (APPLICANT) (RESPONDENT) APPLICANT BY SHRI R. C. JAIN, C. A. RESPONDENT BY SHRI AMIT NIGAM, D. R. DATE OF HEARING 28/08/2015 DATE OF PRONOUNCEMENT 1 0 /09/2015 O R D E R PER A. K. GARODIA, A.M. THIS MISC. APPLICATION IS FILED BY THE ASSESSEE POINTING OUT CERTAIN MISTAKES IN THE TRIBUNAL ORDER DATED 16/06/2015 IN I.T.A. NO.96 & 97/LKW/2013 FOR THE ASSESSMENT YEAR 2008 - 09 AND 2009 - 10. 2. THE CONTENTS OF THE MISC. APPLICATION ARE RUNNING INTO THREE PAGES, WHICH ARE REPRODUCED BELOW FOR THE SAKE OF READY REFERENCE: - 1. THE SUBJECT APPEAL WAS DECIDED BY THE HON'BLE BENCH VIDE ORDER DATED 16 - 06 - 2015 (SERVED ON THE ASSESSEE ON 20 / 06 / 2015). COPY OF ORDER ENCLOSED. 2. WE BEG TO SUBMIT BEFORE THE HON'BLE BENCH THAT CERTAIN SPECIFIC GROUNDS TAKEN BY US HAVE NOT BEEN DECIDED BY THE HON'BLE BENCH. 3. THE ASSESSEE HAS TAKEN A SPECIFIC GROUND THAT THE SHARE APPLICATION MONEY OUGHT TO HAVE BEEN EXC LUDED FOR CALCULATING AVERAGE VALUE OF INVESTMENT FOR APPLYING RULE [ 2 ] 8D. FOR READY REFERENCE THE GROUND IS REPRODUCED HEREINBELOW. GROUND NO. 2.1.2 'BECAUSE, WITHOUT PREJUDICE TO ABOVE, THE LEARNED ASSESSING OFFICER OUGHT NOT TO HAVE INCLUDED SHARE APPLICA TION MONEY PENDING FOR ALLOTMENT FOR CALCULATION OF AVERAGE VALUE OF INVESTMENT FOR APPLYING RULE 8D OF THE INCOME TAX RULES, 1962'. THE ORDER OF ITAT, CHENNAI BENCH D IN MSA SECURITIES PRIVATE LIMITED REPORTED IN 58 SOT 44 (CHENNAI) (URO) AND PLACED ON PAGE 239 OF THE PAPER BOOK AND THE ORDER OF ITAT MUMBAI BENCHES D REPORTED IN (2013) 56 SOT 61 (MUMBAI) (URO) AND PLACED ON PAGE 242 OF THE PAPER BOOK RAINY INVESTMENTS PRIVATE LIMITED WERE MENTIONED IN SUPPORT OF THIS CONTENTION. THESE TRIBUNAL ORDERS WERE SPECIFICALLY BROUGHT TO THE NOTICE OF THE HON'BLE BENCH AND THIS FACT WAS RECORDED ALSO IN PARA 10 AND 11 OF THE APPELLATE ORDER PASS ED BY THE HON'BLE BENCH. THE HON'BLE BENCH HAS RECORDED A FINDING IN THESE PARA 10 THAT 'SINCE, IN THE PRESENT CASE, THE INVESTMENTS IS IN SHARES AND NOT SHARE APPLICATION MONEY, THIS TRIBUNAL ORDER ALSO DOES NOT RENDER ANY HELP TO THE ASSESSEE IN THE PRES ENT CASE'. THIS FINDING OF THE HON'BLE BENCH IS ERRONEOUS AS THERE IS CONSIDERABLE AMOUNT OF SHARE APPLICATION MONEY AS WOULD BE EVIDENT FROM SCHEDULE 6 OF INVESTMENTS PLACED ON PAGE 27 OF A SEPARATE PAPER BOOK FILED ON 10 - 03 - 2015. AS SUCH THE HON'BLE BEN CH HAS NOT DECIDED THIS GROUND NO. 2.1.2. 4. FURTHER, THE FOLLOWING GROUND NO. 2.1.3 HAS ALSO NOT BEEN DECIDED BY THE HON'BLE BENCH. GROUND NO. 2.1.3 'BECAUSE, WITHOUT PREJUDICE, THE 1ST APPELLATE AUTHORITY OUGHT TO HAVE HELD THAT THE ASSESSING OFFICER E RRED IN TREATING FINANCE CHARGES OF RS. 89,65,230/ - AND BANK CHARGES OF RS. 32,27,69,644/ - AS INTEREST FOR APPLYING RULE 8D(II) OF THE INCOME TAX RULES, 1962; AND OUGHT TO HAVE EXCLUDED INTEREST CAPITALISED OF RS.18,21,65, 000 / - OUT OF INTEREST EXPENSE FOR CALCULATION UNDER RULE 8D(II ) '. 5. IN PARA 9 OF THE APPELLATE ORDER, YOUR HONOUR HAVE RECORDED THE FINDING THAT [ 3 ] 'THE SECOND TRIBUNAL ORDER IS TRIBUNAL ORDER IN THE CASE OF EIH ASSOCIATED HOTELS LIMITED VS. DC IT ' (SUPRA). IN THIS CASE, THE INVESTMENTS WERE MADE IN WHOLLY OWNED SUBSIDIARY COMPANY AND UNDER THIS FACT, IT WAS HELD BY THE TRIBUNAL THAT INVESTMENT MADE IN WHOLLY OWNED SUBSIDIARY COMPANY IS NOT TO BE RECKONED FOR DISALLOWANCE U/S 14A. IN THE PRESENT CASE, THE INVESTMENT IS NOT MADE IN WHOLLY OWNED SUBSIDIARY COMPANY AND THEREFORE THE TRIBUNAL ORDER ALSO DOES NOT RENDER ANY HELP TO THE ASSESSEE IN THE PRESENT CASE.' IT IS MOST RESPECTFULLY SUBMITTED THAT THIS FINDING OF THE HON'BLE BENCH IS ERRONEOUS AS KESCO, DISCOMS AND UPPTCL LISTED AT (A) TO (F) IN SCHEDULE 6 PLACED ON PAGE 27 OF THE PAPER BOOK ARE WHOLLY OWNED SUBSIDIARIES OF THE ASSESSEE AND HENCE THE TRIBUNAL ORDER IN THE CASE OF EIH ASSOCIATED HOTELS LTD. VS. DCIT IS APPLICABLE IN THE CASE OF THE ASSESSEE. 6. IN PARA 7 OF THE APPELLATE ORDER, THE FOLLOWING FINDING HAS BEEN RECORDED BY THE HON'BLE BENCH 'NOW FOR APPLYING SUB - RULE (2), APPORTIONMENT OF INTEREST EXPENDITURE IS TO BE MADE IN RESPECT OF THAT INTEREST EXPENDITURE, WHICH IS NOT DIRECTLY ATTRIBUTABLE TO ANY PARTICULAR INCOME O R RECEIPT. IN THE PRESENT CASE, A CLAIM IS MADE THAT INTEREST EXPENDITURE IS INCURRED FOR TAXABLE BUSINESS BUT NO EVIDENCE IS BROUGHT ON RECORD TO ESTABLISH THIS CONTENTION AND IN THE ABSENCE OF EVIDENCE IT CANNOT BE ACCEPTED.' WE BEG TO SUBMIT THAT THE A TTENTION OF THE HON'BLE BENCH WAS SPECIFICALLY DRAWN TO THE FACT THAT ALL INVESTMENTS ARE MADE OUT OF FUNDS RECEIVED FROM THE GOVERNMENT OF U.P. TOWARDS EQUITY SHARE CAPITAL OF THE ASSESSEE COMPANY AND ATTENTION WAS DRAWN TO NOTE 5 (D) (I) OF SCHEDULE NO. 23 PLACED ON PAGE 44 OF THE PAPER BOOK FILED ON 10 - 03 - 2015 AND IS REPRODUCED HEREINBELOW FOR READY REFERENCE. 5 (D) (I)'EQUITY RECEIVED FROM GOUP FOR DISTRIBUTION WORKS IS INVESTED IN EACH DISCOM BASED ON PHYSICAL/ FINANCIAL TARGETS FIXED AND IS SHOWN AS INVESTMENT IN RESPECTIVE DISCOMS.' IT IS MOST RESPECTFULLY SUBMITTED THAT THIS PLEA OF THE ASSESSEE HAS NOT BEEN CONSIDERED BY THE HON'BLE BENCH [ 4 ] AND HENCE THE FINDING OF THE HONBLE BENCH IS WITHOUT CONSIDERING THIS IMPORTANT FACT. 7. THE ASSESSEE HAD DE MONSTRATED DURING HEARING THAT NO INCOME WAS EARNED ON THE INVESTMENTS MADE IN DISCOMS BY REFERRING TO RELEVANT SCHEDULES OF FINANCIAL STATEMENTS PLACED ON 17 - 48 OF THE PAPER BOOK FILED ON 10 - 03 - 2015 BUT THIS IMPORTANT FACT HAS ALSO NOT BEEN RECORDED BY TH E HON'BLE BENCH. 8. WE ARE FILING THIS MISCELLANEOUS APPLICATION (MA) IN THE HOPE THAT YOUR HONORS WOULD BE KIND ENOUGH TO GIVE A HEARING IN THE MATTER AND DECIDE THE ISSUES ACCORDINGLY. 3. IN COURSE OF HEARING OF THE MISC. APPLICATION, LEARNED A.R. OF THE ASSESSEE SUBMITTED THAT ALL THE CONTENTIONS ARE RAISED IN THE MISC. APPLICATION AND THE SAME SHOULD BE DECIDED AFTER CONSIDERING THE CONTENTIONS RAISED IN THE MISC. APPLICATION. 4. AS AGAINST THIS, LEARNED D.R. OF THE REVENUE SUBMITTED THAT THERE IS N O APPARENT MISTAKE IN THE IMPUGNED TRIBUNAL ORDER AND THEREFORE, THERE IS NO MERIT IN THE MISC. APPLICATION. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. FROM THE CONTENTS OF THE MISC. APPLICATION, REPRODUCED ABOVE, WE FIND THAT THIS IS THE FIRST CONTENT ION OF THE ASSESSEE THAT RELIANCE WAS PLACED ON THE FOLLOWING TWO TRIBUNAL ORDERS BUT THE TRIBUNAL HAS NOT CONSIDERED THESE TRIBUNAL ORDERS IN THE IMPUGNED TRIBUNAL ORDER. THOSE TRIBUNAL ORDERS CITED BY THE ASSESSEE ARE THE TRIBUNAL ORDER RENDERED IN THE CASE OF MSA SECURITIES PRIVATE LIMITED REPORTED IN 58 SOT 44 (CHENNAI) (URO) AND PLACED ON PAGE 239 OF THE PAPER BOOK AND IN THE CASE OF RAINY INVESTMENTS PVT. LTD. VS. ACIT REPORTED IN 56 SOT 61 AND COPY AVAILABLE ON PAGE 242 OF THE PAPER BOOK. IN THE MI SC. APPLICATION, THIS IS ALSO STATED BY THE ASSESSEE THAT THE IMPUGNED TRIBUNAL ORDER IS ON THE BASIS THAT IN THE PRESENT CASE, THE INVESTMENT IS IN SHARES AND NOT SHARE APPL ICATION MONEY AND THEREFORE, THESE TRIBUNAL ORDER S DO NOT RENDER ANY HELP TO THE ASSESSEE IN THE PRESENT CASE. THIS GOES TO SHOW THAT THE ALLEGED [ 5 ] MISTAKE IS NOT THAT THE TRIBUNAL HAS NOT CONSIDERED THESE JUDGMENTS BUT THE ALLEGED MISTAKE IS THAT THE TRIBUNAL IS WRONG IN SAYING THAT THE INVESTMENT IN THE PRESENT CASE IS IN SHARES AND NOT IN SHARE APPLICATION MONEY. IN THIS REGARD, OUR ATTENTION HAS BEEN DRAWN TO PAGE NO. 27 OF THE PAPER BOOK. AS PER PAGE NO. 27 OF THE PAPER BOOK, WE FIND THAT THERE IS SUBSTANTIAL AMOUNT LYING INTO INVESTMENTS AS SHARE AP PLICATION MONEY PENDING FOR ALLOTMENT BEING RS.11799.25 LAC IN KESCO, RS.181344.89 LAC IN DAKSHINANCHAL VVNL, RS.248905.54 LAC IN MADHYANCHAL VVNL, RS.136564.18 LAC IN PASCHIMANCHAL VVNL AND RS.249918.61 LAC IN POORVANCHAL VVNL. THIS FACT HAS ESCAPED THE ATTENTION OF THE TRIBUNAL IN THE IMPUGNED ORDER AND THEREFORE, WE FEEL THAT THE TRIBUNAL ORDER ON THIS ISSUE REGARDING GROUND NO. 2.1.2 SHOULD BE RECALLED AND SHOULD BE DECIDED AFRESH AFTER CONSIDERING THIS IMPORTANT FACT, WHICH HAS MISSED THE ATTENTION OF THE TRIBUNAL IN THE IMPUGNED TRIBUNAL ORDER. ACCORDINGLY, WE RECALL THIS TRIBUNAL ORDER FOR THIS LIMITED PURPOSE OF DECIDING GROUND NO. 2.1.2 AFRESH AFTER HEARING BOTH THE SIDES. THE REGISTRY IS DIRECTED TO FIX THIS APPEAL FOR HEARING FOR THIS LIMITED P URPOSE IN NORMAL COURSE. 6. THE SECOND CONTENTION RAISED IS THAT GROUND NO. 2.1.3 HAS NOT BEEN DECIDED BY THE TRIBUNAL. AFTER SAYING SO IN PARA 4 THAT THIS GROUND WAS NOT DECIDED, IT IS STATED IN PARA NO. 5 TO 7 OF THE MISC. APPLICATION THAT THE MISTAKE IS THAT THE ATTENTION OF THE TRIBUNAL WAS DRAWN TO THIS FACT THAT ALL THE INVESTMENTS ARE MADE OUT OF FUND RECEIVED FROM THE GOVERNMENT OF UP TOWARDS EQUITY SHARE CAPITAL OF THE ASSESSEE COMPANY AND ATT ENTION WAS DRAWN TO NOTE NO. 5(D)(I) OF SCHEDULE - 23 AVAILABLE ON PAGE NO. 44 OF THE PAPER BOOK FILED ON 10/03/2015 AND THE SAID PARA 5(D)(I) HAS BEEN REPRODUCED IN THE MISC. APPLICATION, WHICH HAS ALREADY BEEN REPRODUCED ABOVE. FROM THIS PARA , IT IS SEEN THAT WHAT IS STATED IN THIS PARA IS THAT EQUITY RECEIVED FROM GOVERNMENT OF UP FOR DISTRIBUTION WORK IS INVESTED IN EACH DISCOM BASED ON PHYSICAL/FINANCIAL TARGETS FIXED AND IS S HO W N AS INVESTMENT IN RESPECTIVE DISCOMS . FROM THIS PARA , THIS CANNOT BE INFE RRED [ 6 ] THAT THE ENTIRE INVESTMENT IS OUT OF EQUITY FUND PROVIDED BY THE GOVERNMENT OF UP. THIS IS DIFFERENT THAT THE ENTIRE EQUITY FUND RECEIVED FROM GOVERNMENT OF UP IS INVESTED IN DISCOM AND THIS IS ENTIRELY A DIFFERENT PROPOSITION THAT SUCH ENTIRE INVES TMENT IS FINANCED BY EQUITY RECEIVED FROM GOVERNMENT OF UP BECAUSE IF THE INVESTMENT IS MORE THAN THE EQUITY RECEIVED FROM THE GOVERNMENT OF UP THEN EVEN IF THE ENTIRE AMOUNT RECEIVED FROM UP IS INVESTED IN DISCOM, THE REMAINING INVESTMENT IN DISCOM WILL BE OUT OF OTHER FUNDS, WHICH MAY INCLUDE BORROWED FUNDS ALSO AND THEREFORE, ON THIS ASPECT, WE DO NOT FIND ANY APPARENT MISTAKE IN THE IMPUGNED TRIBUNAL ORDER. 7. ONE MORE CONTENTION IS RAISED IN PARA 7 OF THE MISC. APPLICATION THAT THE ASSESSEE HAD DEMONSTRATED DURING HEARING THAT NO INCOME WAS EARNED ON THE INVESTMENTS MADE IN DISCOMS . ON THIS ASPECT, WE ARE OF THE CONSIDERED OPINION THAT THIS FACTOR IS NOT RELEVANT FOR DETERMINING THE DISALLOWANCE U/S 14A AS TO WHETHER ANY TAX FREE INCOME WAS RECE IVED IN THE PRESENT YEAR OR NOT IN VIEW OF THE JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF RAJENDRA PRASAD MOODY REPORTED IN 115 ITR 519 (SC). HENCE, ON THIS ASPECT ALSO, WE DO NOT FIND ANY APPARENT MISTAKE IN THE IMPUGNED TRIBUNAL ORDER. 8. IN THE RESULT, THE MISC. APPLICATION OF THE ASSESSEE IS PARTLY ALLOWED IN THE TERMS INDICATED ABOVE. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 1 0 /09/2015 *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. DR, ITAT, LUCKNOW ASSTT. REGISTRAR