THE DY CIT 5(1), v. M/S. ESSAR POWER LTD,

ITA 3711/MUM/2008 | 2004-2005
Pronouncement Date: 12-07-2013 | Result: Partly Allowed

Appeal Details

RSA Number 371119914 RSA 2008
Assessee PAN AAACE0895J
Bench Mumbai
Appeal Number ITA 3711/MUM/2008
Duration Of Justice 5 year(s) 1 month(s) 15 day(s)
Appellant THE DY CIT 5(1),
Respondent M/S. ESSAR POWER LTD,
Appeal Type Income Tax Appeal
Pronouncement Date 12-07-2013
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted I
Tribunal Order Date 12-07-2013
Date Of Final Hearing 09-07-2013
Next Hearing Date 09-07-2013
Assessment Year 2004-2005
Appeal Filed On 27-05-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH MUMBAI BEFORE SHRI P.M. JAGTAP AM AND SHRI SANJAY GARG J M ./ I.T.A. NO. 3555/MUM/2008 ( / / / / ASSESSMENT YEAR : 2004-05) M/S. ESSAR POWER LTD. ESSAR HOUSE 11 KESHAVRAO KHADY MARG MAHALAXMI MUMBAI / VS. ACIT CENTRAL CIRCLE-5(1) AAYAKAR BHAVAN MUMBAI-400020 ! '# ./ PAN : AAACE0895J ( !$ / // / APPELLANT ) .. ( %&!$ / RESPONDENT ) ./ I.T.A. NO. 3711/MUM/2008 ( / / / / ASSESSMENT YEAR : 2004-05) ACIT CENTRAL CIRCLE-5(1) AAYAKAR BHAVAN MUMBAI-400020 / VS. M/S. ESSAR POWER LTD. ESSAR HOUSE 11 KESHAVRAO KHADY MARG MAHALAXMI MUMBAI ! '# ./ PAN : AAACE0895J ( !$ / // / APPELLANT ) .. ( %&!$ / RESPONDENT ) ./ I.T.A. NO. 2492 & 2493/MUM/2009 ( / / / / ASSESSMENT YEAR : 2005-06 & 2006-07) M/S. ESSAR POWER LTD. ESSAR HOUSE 11 KESHAVRAO KHADY MARG MAHALAXMI MUMBAI / VS. ACIT CENTRAL CIRCLE-5(1) AAYAKAR BHAVAN MUMBAI-400020 ! '# ./ PAN : AAACE0895J ( !$ / // / APPELLANT ) .. ( %&!$ / RESPONDENT ) ./ I.T.A. NO. 2535 & 2763/MUM/2009 ( / / / / ASSESSMENT YEAR : 2005-06 & 2006-07) ACIT CENTRAL CIRCLE-5(1) AAYAKAR BHAVAN MUMBAI-400020 / VS. M/S. ESSAR POWER LTD. ESSAR HOUSE 11 KESHAVRAO KHADY MARG MAHALAXMI MUMBAI ! '# ./ PAN : AAACE0895J ( !$ / // / APPELLANT ) .. ( %&!$ / RESPONDENT ) 2 ITA NO.3555 3711 /MUM/08 & 2492 2493 2535&2763/M/2009 MS.ESSAR.POWER LTD.. !$ ' ( ' / APPELLANT BY : SHRI VIJAY MEHTA %&!$ ' ( ' / RESPONDENT BY : SHRI P.K.SHUKLA ' )# / // / DATE OF HEARING : 09-07-2013 *+ ' )# / DATE OF PRONOUNCEMENT : 12 -07-2013 '- / O R D E R PER BENCH : THESE SIX APPEALS THREE FILED BY THE ASSESSEE AND THREE FILED BY THE REVENUE ARE CROSS APPEALS FOR A.Y.2004-05 2005-06 AND 2006-07 AND SINCE COMMON ISSUES ARE THEREIN THE S AME HAVE BEEN HEARD TOGETHER AND ARE BEING DISPOSED BY THIS SINGLE CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST WE SHALL TAKE UP THE CROSS APPEALS FOR A.Y . 2004-06 BEING ITA NO.3555/MUM/2008 (ASSESSEES APPEAL) AND ITA NO.3711/MUM/2008(REVENUES APPEAL) WHICH ARE DIRECT ED AGAINST THE ORDER OF THE LD. CIT(A)-5 MUMBAI DATED 28.03. 2008. 3. THE ISSUE RAISED IN THE GROUND NO. 1 RELATES TO THE ADDITION OF RS.5 LAKHS MADE BY THE AO AND CONFIRMED BY THE L D. CIT(A) ON ACCOUNT OF DISALLOWANCE OF EDUCATION EXPENSES. 4. ASSESSEE IN THE PRESENT CASE IS A COMPANY WHICH IS ENGAGED IN THE BUSINESS OF GENERATION AND SALE OF ELECTRICI TY. THE RETURN OF INCOME FOR YEAR UNDER CONSIDERATION WAS FILED BY IT ON 30.10.2004 DECLARING LOSS OF RS.24 28 04 993 AND BOOK PROFIT U /S 115JB AT RS.59 56 01 809/-. IN THE PROFIT & LOSS ACCOUNT FI LED ALONGWITH THE SAID RETURN A SUM OF RS.10 31 901/- WAS DEBITE D BY THE ASSESSEE ON ACCOUNT OF DONATION AND CHARITY. FROM THE PERUSAL OF THE DETAILS OF THE SAID AMOUNT IT WAS NOTICED BY T HE AO THAT THE EXPENSES CLAIMED BY THE ASSESSEE ON DONATION AND CH ARITY 3 ITA NO.3555 3711 /MUM/08 & 2492 2493 2535&2763/M/2009 MS.ESSAR.POWER LTD.. INCLUDED CONTRIBUTION OF RS. 5 00 000/- PAID TO A S CHOOL. ACCORDING TO THE AO THE EXPENDITURE ON PAYMENT OF CONTRIBUTION TO SCHOOL WAS NOT INCURRED WHOLLY AND EXCLUSIVELY F OR THE PURPOSE OF BUSINESS. THE SAME THEREFORE WAS DISALLOWED BY H IM. ON APPEAL THE LD. CIT(A) CONFIRMED THE SAID DISALLOW ANCE HOLDING THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO ES TABLISH ANY NEXUS OF THE SAID EXPENDITURE WITH ITS BUSINESS. 5. WE HAVE HEARD THE ARGUMENTS OF BOTH SIDES AND AL SO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED TH AT THE EXPENDITURE IN QUESTION ON PAYMENT OF CONTRIBUTION TO THE SCHOO L CLAIMED BY THE ASSESSEE WAS DISALLOWED BY THE AO AS WELL AS TH E LD. CIT(A) ON THE GROUND THAT THE ASSESSEE COULD NOT ESTABLISH AN Y NEXUS OF THE SAID EXPENDITURE WITH ITS BUSINESS SO AS TO SAY THA T THE SAID EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ASSESSEES BUSINESS. EVEN BEFORE US THE LD. COUNSE L FOR THE ASSESSEE HAS NOT BEEN ABLE TO OFFER ANY SATISFACTOR Y EXPLANATION TO SHOW ANY SUCH NEXUS AND THIS BEING SO WE FIND NO JU STIFIABLE REASON TO INTERFERE WITH THE IMPUGNED ORDER OF THE LD. CIT(A) CONFIRMING THE DISALLOWANCE MADE BY THE AO ON ACCOU NT OF PAYMENT OF CONTRIBUTION MADE TO THE SCHOOL HOLDING THAT IT WAS NOT THE EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ASSESSEES BUSINESS. THE SAME IS THEREFORE UPHELD ON THIS ISSUE AND GROUND NO. 1 OF ASSESSEES APPEAL IS DISMISSED. 6. THE ISSUE RAISED IN GROUND NO. 2 OF THE ASSESSEE S APPEAL RELATES TO THE ADDITION OF RS.4.96 CRORE MADE BY TH E AO AND CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF INCOME-TA X RECOVERABLE FROM GEB/ESSAR STEEL LTD. 7. AT THE TIME OF HEARING BEFORE US THE LD. REPRE SENTATIVES OF BOTH SIDES HAVE AGREED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE BY THE DECI SION OF TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y.2003-04 RENDERED VID E ITS ORDER 4 ITA NO.3555 3711 /MUM/08 & 2492 2493 2535&2763/M/2009 MS.ESSAR.POWER LTD.. 09.11.2012 PASSED IN ITA NO.5318/MUM/2007. COPY O F THE SAID ORDER IS PLACED ON RECORD AND A PERUSAL OF THE SAME SHOWS THAT A SIMILAR ISSUE HAS BEEN CONSIDERED BY THE TRIBUNAL A ND AFTER DISCUSSING ALL THE RELEVANT FACTS OF THE CASE SUBM ISSIONS MADE BY BOTH THE SIDES AND CASE LAWS CITED IN SUPPORT THE TRIBUNAL DECIDED THE SAME AGAINST THE ASSESSEE VIDE PARAGRAPH NO. 41 OF ITS ORDER WHICH READS AS UNDER: UNDER THE ACT THE DEFINITION OF INCOME IN CLAUSE (24) OF SECTION 2 IS AN INCLUSIVE DEFINITION. ANYTHING WHIC H CAN PROPERLY BE DESCRIBED AS INCOME IS TAXABLE UNLESS OF COURSE IT IS EXEMPTED UNDER ONE OR THE OTHER PROVI SIONS OF THE ACT. IT IS FROM THE SAID ANGLE WE ARE OF THE OPINION THAT THE AMOUNT PAID BY THE POWER PURCHASERS BY WAY OF TAX ON THE AMOUNT OF TARIFF CHARGES RECEIVED BY THE ASSESSEE CAN BE TREATED AS THE INCOME OF THE ASSESS EE. IT CANNOT BE OVERLOOKED THAT THE SAID AMOUNT IS NOT HING BUT A TAX UPON THE PAYMENTS RECEIVED BY THE ASSESSE E. BY VIRTUE OF THE OBLIGATION UNDERTAKEN BY THE POWER PURCHASERS TO REIMBURSE THE TAX TO THE ASSESSEE DOE S NOT MEAN THAT IT IS NOT THE INCOME IN THE HANDS OF THE ASSESSEE. UNDER THESE CIRCUMSTANCES AND KEEPING IN VIEW THE RATIO OF THE DECISIONS REFERRED IN PARA 25 TO 29 OF THIS ORDER WE HOLD THAT THE PAYMENT OF TAX RECE IVED BY THE ASSESSEE IS A PART OF TARIFF CHARGES AS PER AGREEMENTS (SUPRA) AND HENCE IT IS AN INCOME IN T HE HANDS OF THE ASSESSEE AND THEREFORE THE SAID AMOU NT WITHOUT ALLOWING ANY DEDUCTION IS LIABLE TO BE INCL UDED IN THE INCOME OF THE ASSESSEE. ACCORDINGLY THE LD. CIT(A) WAS FULLY JUSTIFIED IN UPHOLDING THE ORDER O F THE A.O. IN TREATING THE SAME AS INCOME. THE GROUND TAK EN BY THE ASSESSEE IS THEREFORE REJECTED. 5 ITA NO.3555 3711 /MUM/08 & 2492 2493 2535&2763/M/2009 MS.ESSAR.POWER LTD.. 8. AS THE ISSUE INVOLVED IN THE YEAR UNDER CONSIDER ATION AS WELL AS ALL THE MATERIAL OF FACTS RELEVANT THERETO ARE SIMILAR TO THAT A.Y. 2003-04 WE RESPECTFULLY FOLLOW THE DECISION OF COORDINATE BENC H OF THIS TRIBUNAL RENDERED IN A.Y. 2003-04 AND UPHOLD THE IMPUGNED OR DER OF THE LD. CIT(A) CONFIRMING THE ADDITION MADE BY THE AO ON AC COUNT OF THE INCOME- TAX RECOVERABLE FROM GEB/ESSAR STEEL LTD. WHILE COM PUTING THE INCOME OF THE ASSESSEE UNDER THE NORMAL PROVISIONS OF THE ACT. GROUND NO. 2 OF THE ASSESSEES APPEAL IS ACCORDINGLY DISMISSED. 9. THE ISSUE RAISED IN GROUND NO. 3 OF THE ASSESSEE APPEAL AS WELL AS IN GROUND NO. 3 OF THE REVENUES APPEAL RELATES TO THE DISALLOWANCE OF EXPENSES U/S.14A. 10. IN THE COMPUTATION OF INCOME THE ASSESSEE HAD SHOWN INCOME FROM DIVIDEND OF RS.12 68 179/- UNDER THE HEAD INC OME FROM OTHER SOURCES. DURING THE COURSE OF ASSESSMENT PROCEEDIN GS THE ASSESSEE HOWEVER CLAIMED SUCH DIVIDEND INCOME RECEIVED FROM MUTUAL FUND AS EXEMPT U/S.10. THE AO ALLOWED THIS CLAIM OF THE AS SESSEE. HE HOWEVER PROCEEDED TO MAKE THE DISALLOWANCE U/S 14A ON ACCOU NT OF EXPENSES INCURRED BY THE ASSESSEE IN THE RELATION TO EXEMPT DIVIDEND INCOME. IN THIS REGARD HE FOUND THAT INVESTMENT IN MUTUAL FUN D WAS MADE BY THE ASSESSEE OUT OR THE INTEREST BEARING BORROWED FUNDS . HE ALSO FOUND THAT THE AVERAGE COST OF BORROWINGS TO THE ASSESSEE WAS 8.03% PER ANNUM. ACCORDINGLY APPLYING THE SAID RATE HE WORKED OUT THE INTEREST ATTRIBUTABLE TO THE INVESTMENT MADE IN MUTUAL FUNDS AT RS.18 35 586/- AND MADE A DISALLOWANCE U/S.14A TO THAT EXTENT. ON APPEAL THE LD. CIT(A) UPHELD THE ACTION OF THE AO IN MAKING DISALL OWANCE U/S. 14A. HE HOWEVER REMITTED THIS ISSUE BACK TO THE ASSESSING OFFICER WITH A DIRECTION TO RE-COMPUTE THE DISALLOWANCE U/S 14A BY FOLLOWING THE MODALITIES TO BE PRESCRIBED BY THE CBDT. 11. WE HAVE HEARD THE ARGUMENTS OF BOTH SIDES AND A LSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT TH E MODALITIES FOR COMPUTING THE DISALLOWANCE U/S 14A HAVE SINCE BEEN PRESCRIBED BY THE 6 ITA NO.3555 3711 /MUM/08 & 2492 2493 2535&2763/M/2009 MS.ESSAR.POWER LTD.. CBDT IN THE FORM OF RULE 8D OF INCOME-TAX RULES 196 2. HOWEVER AS HELD BY THE HONOURABLE BOMBAY HIGH COURT IN THE CASE OF GODREJ AGROVET LTD. VS. CIT IN 328 ITR 81 THE SAID RULE IS APPLICABLE PROSPECTIVELY ONLY FROM ASSESSMENT YEAR 2008-09. AS FURTHER HELD BY THE HON OURABLE BOMBAY HIGH COURT THE DISALLOWANCE TO BE MADE U/S 14A FOR THE YEARS PRIOR YEAR 2008-09 IS REQUIRED TO BE WORKED OUT BY THE AO ON S OME REASONABLE BASIS. AT THE TIME HEARING BEFORE US LD. REPRESEN TATIVES OF BOTH THE SIDES HAVE AGREED THAT THE BASIS ADOPTED BY THE AO TO COMPUTE THE DISALLOWANCE U/S 14A WAS QUITE REASONABLE. WE TH EREFORE SET-ASIDE THE IMPUGNED ORDER OF THE LD. CIT(A) ON THIS ISSUE AND RESTORE THAT OF THE ASSESSING OFFICER. GROUND NO. 3 OF THE REVENUES A PPEAL AS WELL AS THAT OF ASSESSEES APPEAL ARE ACCORDINGLY TREATED AS PARTLY ALLOWED. 12. IN GROUND NO. 1 OF THE ITS APPEAL FOR A.Y. 2004 -05 THE REVENUE IS CHALLENGED THE ACTION OF THE LD. CIT(A) IN TREATING THE INTEREST RECEIVED BY THE ASSESSEE ON LOANS AND ADVANCE GIVEN TO ITS EMPL OYEES AS INCOME FROM BUSINESS INSTEAD OF INCOME FROM OTHER SOURCES AS TR EATED BY THE AO. 13. AT THE TIME OF HEARING BEFORE US THE LD. REPRE SENTATIVE OF BOTH SIDES HAVE AGREED THAT THIS ISSUE IS SQUARELY COVER ED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL PASSED IN ASS ESSEE OWN CASE FOR THE EARLIER YEARS. IN ONE OF SUCH ORDERS DATED 11.08.2 008 PASSED IN ITA NO.6430/MUM/2003 FOR A.Y.2000-01 IT WAS HELD BY TH E TRIBUNAL THAT INTEREST RECEIVED BY THE ASSESSEE ON THE LOANS GIVE N TO THE EMPLOYEES WAS ASSESSABLE AS ITS BUSINESS INCOME. THE SAID ORDER HAS BEEN FOLLOWED BY THE TRIBUNAL TO DECIDE THE SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE IN A.Y. 2002-03 AND 2003-04 VIDE ITS ORDER DATED 01.08.2008 AND 09.11.2012 PASSED IN ITA NO. 631/MUM/2006 AND 5725/MUM/2007 RE SPECTIVELY. RESPECTFULLY FOLLOWING THE ORDERS OF THE TRIBUNAL I N ASSESSEES OWN CASE FOR THE EARLIER YEARS ON SIMILAR ISSUE WE UPHOLD T HE IMPUGNED ORDER OF THE LD. CIT(A) TREATING THE INTEREST RECEIVED BY TH E ASSESSEE ON LOANS AND ADVANCE GIVEN TO ITS EMPLOYEES AS ITS BUSINESS INCO ME. GROUND NO. 1 OF THE REVENUES APPEAL IS ACCORDINGLY DISMISSED. 7 ITA NO.3555 3711 /MUM/08 & 2492 2493 2535&2763/M/2009 MS.ESSAR.POWER LTD.. 14. IN THE GROUND NO.2 THE REVENUE HAS CHALLENGED THE ACTION OF THE LD. CIT(A) IN DELETING THE ADDITION OF RS.4.96 CROR ES MADE BY THE AO ON ACCOUNT OF INCOME-TAX RECOVERABLE BY THE ASSESSEE F ROM GEB/ESSAR STEEL LTD. WHILE COMPUTING THE BOOK PROFIT OF U/S. 115JB . 15. AS AGGRIED BY THE LD. REPRESENTATIVES OF BOTH S IDES A SIMILAR ISSUE INVOLVED IN THE ASSESSEES CASE FOR A.Y. 2003-04 HA S BEEN RESTORED BY THE TRIBUNAL TO THE FILE OF THE AO FOR DECIDING THE SAM E AFRESH FOR THE FOLLOWING REASONS GIVEN IN PARAGRAPH NO. 62 OF ITS ORDER DATED 09.11.2012 PASSED IN ITA NO. 5725/MUM/2007. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF TH E RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECOR D. THERE IS NO DISPUTE THAT UNDER CLAUSE (I) OF EXPLANATION 1 T O SECTION 115JB OF THE ACT THERE IS A RETROSPECTIVE AMENDMENT MADE BY FINANCE (2) ACT 2009 W.E.F. 1-4-2001 THEREFORE T HE BOOK PROFIT HAS TO BE RECOMPUTED IN ACCORDANCE WITH THE ABOVE CLAUSE (I) OF EXPLANATION 1 TO SECTION 115JB OF THE ACT. IN THIS VIEW OF THE MATTER AND KEEPING IN VIEW OF OUR FINDI NG RECORDED IN PARA 58 OF THIS ORDER WE ARE OF THE VIEW THAT I N THE INTEREST OF JUSTICE THE MATTER SHOULD GO BACK TO THE FILE OF THE A.O. AND ACCORDINGLY WE SET ASIDE THE ORDER PASSED BY THE RE VENUE AUTHORITIES ON THIS ACCOUNT AND SEND BACK THE MATTE R TO THE FILE OF THE A.O. TO DECIDE THE SAME AFRESH IN THE L IGHT OF OUR OBSERVATION HEREINABOVE AND ACCORDING TO LAW INCLUD ING THE DECISION OF HONBLE APEX COURT IN APOLLO TYRES LTD. (SUPRA) AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEA RD TO THE ASSESSEE. THE GROUND TAKEN BY THE REVENUE IS THERE FORE PARTLY ALLOWED FOR STATISTICAL PURPOSE. 16. AS THE ISSUE INVOLVED IN THE YEAR UNDER CONSIDE RATION AS WELL AS ALL THE MATERIAL FACTS RELEVANT THERETO ARE SIMILAR TO THAT AY 2003-04 WE RESPECTFULLY THE ORDER OF THE TRIBUNAL FOR A.Y.2003 -04 AND RESTORE THIS ISSUE TO THE FILE OF THE AO FOR DECIDING THE SAME A FRESH AS PER THE SAME 8 ITA NO.3555 3711 /MUM/08 & 2492 2493 2535&2763/M/2009 MS.ESSAR.POWER LTD.. DIRECTIONS AS GIVEN BY THE TRIBUNAL IN A.Y.2003-04. GROUND NO.2 OF THE REVENUES APPEAL IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSE. 17. NOW WE TAKE UP THE CROSS APPEALS FOR A.Y. 2005- 06 BEING ITA NO.2492/MUM/2009 (ASSESSEES APPEAL) AND ITA NO.253 5/MUM/2009 (REVENUES APPEAL) WHICH ARE DIRECTED AGAINST THE O RDER OF THE LD. CIT(A)5 MUMBAI DATED 13.02.2009. 18. AS REGARDS GROUND NO. 1 OF THE ASSESSEES APPEA L IT IS OBSERVED THAT THE ISSUE INVOLVED THEREIN RELATING TO ADDITIO N MADE TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF THE INCOME-TAX RECOVERABLE FROM GUVNL AND ESSAR STEEL LTD. WHILE COMPUTING THE INCO ME OF THE ASSESSEE UNDER THE NORMAL PROVISIONS OF THE ACT IS SIMILAR T O THE ONE INVOKED IN GROUND NO. 2 FOR 2004-05 WHICH HAS ALREADY BEEN DEC IDED BY US IN FORGOING PORTION OF THIS ORDER. FOLLOWING OUR CONC LUSION DRAWN IN A.Y. 2004-05 ON THIS ISSUE WE UPHOLD THE IMPUGNED ORDE R OF THE LD. CIT(A) CONFIRMING THE ADDITION MADE BY THE AO ON ACCOUNT O F INCOME-TAX RECOVERABLE FROM GUVNL AND ESSAR STEEL LTD. AND DIS MISS GROUND NO. 1 OF THE ASSESSEES APPEAL. 19. AS REGARDS GROUND NO.2 AND 3 OF THE ASSESSEES APPEAL FOR 2005- 06 IT IS OBSERVED THAT THE ISSUE INVOLVED THEREIN RELATING TO THE DISALLOWANCE OF EXPENSES MADE U/S 14A IS SIMILAR TO THE ONE INVOLVED IN GROUND NO. 3 OF THE ASSESSEES APPEAL FOR A.Y.2004- 05 WHICH IS ALREADY DECIDED BY US IN THE FORGOING PORTION OF THIS ORDER . FOLLOWING CONCLUSION DRAWN BY US FOR A.Y. 2004-05 ON THE SIMILAR ISSUE WE SET-ASIDE THE IMPUGNED ORDER OF THE LD. CIT(A) ON THIS ISSUE AND CONFIRMED THE DISALLOWANCE U/S 14A TO THE EXTENT OF RS.10 53 357/ - AS MADE BY THE AO. GROUND NO. 2 & 3 OF THE ASSESSEES APPEAL ARE ACCORDINGLY TREATED AS PARTLY ALLOWED. 20. AS REGARDS GROUND NO. 1 OF THE REVENUES APPEAL FOR A.Y. 2005-06 IT IS OBSERVED THAT THE ISSUE INVOLVED THEREIN RELA TING TO DETERMINATION OF HEAD OF INCOME UNDER WHICH INTEREST INCOME ON MARGI N MONEY DEPOSITS AND EMPLOYEES LOANS IS CHARGEABLE TO TAX IS SIMILAR TO THE ONE INVOLVED IN 9 ITA NO.3555 3711 /MUM/08 & 2492 2493 2535&2763/M/2009 MS.ESSAR.POWER LTD.. GROUND NO. 1 OF THE REVENUES APPEAL FOR A.Y. 2004- 05 WHICH HAS BEEN DECIDED BY US IN THE FORGOING PORTION OF THIS ORDER . FOLLOWING OUR CONCLUSION DRAWN IN A.Y. 2004-05 ON THE SIMILAR ISS UE WE UPHOLD THE ORDER OF THE LD. CIT(A) TREATING THE INTEREST RECEI VED BY THE ASSESSEE ON MARGIN MONEY DEPOSITS AND EMPLOYEES LOANS AS ITS BU SINESS INCOME AND DISMISS GROUND NO. 1. 21. AS REGARDS GROUND NO. 2 OF THE REVENUES APPEAL FOR A.Y. 2005-06 IT IS OBSERVED THAT THE ISSUE INVOLVED THEREIN RELATIN G TO ADDITION OF RS.8.76 CRORE ON ACCOUNT OF INCOME-TAX RECOVERABLE FROM GUV NL AND ESSAR STEEL LTD. WHILE COMPUTING THE BOOKS PROFIT U/S 115JB IS SIMILAR TO BE ONE INVOLVED IN GROUND NO. 2 OF THE REVENUES APPEAL FO R A.Y. 2004-05 WHICH HAS ALREADY BEEN DECIDED BY US IN FORGOING PORTION OF THIS ORDER. FOLLOWING OUR CONCLUSION DRAWN IN A.Y 2004-05 ON SI MILAR ISSUE WE RESTORE THIS ISSUE TO THE FILE OF THE AO FOR DECIDI NG THE SAME AFRESH AS PER THE SAME DIRECTIONS AS GIVEN BY THE TRIBUNAL IN ITS ORDER FOR AY. 2003- 04(SUPRA). GROUND NO. 2 OF THE REVENUES APPEAL FO R A.Y. 2005-06 IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURP OSE. 22. NOW WE TAKE UP THE CROSS APPEALS FOR A.Y. 2006- 07 BEING ITA NO.2493/MUM/2009 (ASSESSEES APPEAL) AND ITA NO.276 3/MUM/2009 (REVENUES APPEAL) WHICH ARE DIRECTED AGAINST THE O RDER OF THE LD. CIT(A)5 MUMBAI DATED 13.02.2009. 23. AS REGARDS GROUND NO. 1 OF THE ASSESSEES APPEA L IT IS OBSERVED THAT THE ISSUE INVOLVED THEREIN RELATING TO ADDITION MAD E TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF THE INCOME-TAX RECOVERAB LE FROM GUVNL AND ESSAR STEEL LTD. WHILE COMPUTING THE INCOME OF THE ASSESSEE UNDER THE NORMAL PROVISIONS OF THE ACT IS SIMILAR TO THE ONE INVOKED IN GROUND NO. 2 FOR 2004-05 WHICH HAS ALREADY BEEN DECIDED BY US IN FORGOING PORTION OF THIS ORDER. FOLLOWING OUR CONCLUSION DRAWN IN A. Y. 2004-05 ON THIS ISSUE WE UPHOLD THE IMPUGNED ORDER OF THE LD. CIT (A) CONFIRMING THE ADDITION MADE BY THE AO ON ACCOUNT OF INCOME-TAX RE COVERABLE FROM 10 ITA NO.3555 3711 /MUM/08 & 2492 2493 2535&2763/M/2009 MS.ESSAR.POWER LTD.. GUVNL AND ESSAR STEEL LTD. AND DISMISSED THE GROUND NO. 1 OF THE ASSESSEES APPEAL. 24. AS REGARDS GROUND NO.2 AND 3 OF THE ASSESSEES APPEAL FOR 2006- 07 IT IS OBSERVED THAT THE ISSUE INVOLVED THEREIN RELATING TO THE DISALLOWANCE OF EXPENSES MADE U/S 14A IS SIMILAR TO THE ONE INVOLVED IN GROUND NO. 3 OF THE ASSESSEES APPEAL FOR A.Y.2004- 05 WHICH IS ALREADY DECIDED BY US IN THE FORGOING PORTION OF THIS ORDER . FOLLOWING CONCLUSION DRAWN BY US FOR A.Y. 2004-05 ON THE SIMILAR ISSUE WE SET-ASIDE THE IMPUGNED ORDER OF THE LD. CIT(A) ON THIS ISSUE AND CONFIRM THE DISALLOWANCE U/S 14A TO THE EXTENT OF RS.50 73 008/ - AS MADE BY THE AO. GROUND NO. 2 & 3 OF THE ASSESSEES APPEAL ARE ACCORDINGLY TREATED AS PARTLY ALLOWED. 25. AS REGARDS GROUND NO. 1 OF THE REVENUES APPEAL FOR A.Y. 2006-07 IT IS OBSERVED THAT THE ISSUE INVOLVED THEREIN RELA TING TO DETERMINATION OF HEAD OF INCOME UNDER WHICH INTEREST INCOME ON MARGI N MONEY DEPOSITS AND EMPLOYEES LOANS IS CHARGEABLE TO TAX IS SIMILAR TO THE ONE INVOLVED IN GROUND NO. 1 OF THE REVENUES APPEAL FOR A.Y. 2004- 05 WHICH HAS BEEN DECIDED BY US IN THE FORGOING PORTION OF THIS ORDER . FOLLOWING OUR CONCLUSION DRAWN IN A.Y. 2004-05 ON THE SIMILAR ISS UE WE UPHOLD THE ORDER OF THE LD. CIT(A) TREATING THE INTEREST RECEI VED BY THE ASSESSEE ON MARGIN MONEY DEPOSITS AND EMPLOYEES LOANS AS ITS BU SINESS INCOME AND DISMISS GROUND NO. 1. 26. AS REGARDS GROUND NO. 2 OF THE REVENUES APPEAL FOR A.Y. 2006-07 IT IS OBSERVED THAT THE ISSUE INVOLVED THEREIN RELATIN G TO ADDITION OF RS.4 22 50 000/- ON ACCOUNT OF INCOME-TAX RECOVERAB LE FROM GUVNL AND ESSAR STEEL LTD. WHILE COMPUTING THE BOOKS PROFIT U /S 115JB IS SIMILAR TO BE ONE INVOLVED IN GROUND NO. 2 OF THE REVENUES AP PEAL FOR A.Y. 2004-05 WHICH HAS ALREADY BEEN DECIDED BY US IN FORGOING PO RTION OF THIS ORDER. FOLLOWING OUR CONCLUSION DRAWN IN A.Y 2004-05 ON SI MILAR ISSUE WE RESTORE THIS ISSUE TO THE FILE OF THE AO FOR DECIDI NG THE SAME AFRESH AS PER THE SAME DIRECTIONS AS GIVEN BY THE TRIBUNAL IN ITS ORDER FOR AY. 2003- 11 ITA NO.3555 3711 /MUM/08 & 2492 2493 2535&2763/M/2009 MS.ESSAR.POWER LTD.. 04(SUPRA). GROUND NO. 2 OF THE REVENUES APPEAL FO R A.Y. 2006-07 IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURP OSE. 27. IN THE RESULT ALL SIX APPEALS ARE PARTLY ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH JULY 2013 '- ' *+ #' / 0 12 TH JULY .2013 + ' 1 SD/- SD/- ( SANJAY GARG ) (P.M. JAGTA P ) JUDICIAL MEMBER '# / ACCOUNTANT MEMBER MUMBAI ; / DATED 12.07.2013 ../ S.S.K PS '- ' %)23 4'3) '- ' %)23 4'3) '- ' %)23 4'3) '- ' %)23 4'3)/ COPY OF THE ORDER FORWARDED TO : 1. !$ / THE APPELLANT 2. %&!$ / THE RESPONDENT. 3. 5 () / THE CIT (A) - MUMBAI 4. 5 /CIT MUMBAI 5. 381 %) / DR ITAT MUMBAI BENCH 6. 1: ; / GUARD FILE. '- '- '- '- / BY ORDER &3) %) //TRUE COPY// < < < = > = > = > ( DY./ASSTT. REGISTRAR) / ITAT MUMBAI