M/s. NTPC Electric Supply Company Ltd., New Delhi v. DCIT, New Delhi

ITA 603/DEL/2017 | 2012-2013
Pronouncement Date: 15-11-2019 | Result: Allowed

Appeal Details

RSA Number 60320114 RSA 2017
Assessee PAN AABCN7520Q
Bench Delhi
Appeal Number ITA 603/DEL/2017
Duration Of Justice 2 year(s) 9 month(s) 13 day(s)
Appellant M/s. NTPC Electric Supply Company Ltd., New Delhi
Respondent DCIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 15-11-2019
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted E
Tribunal Order Date 15-11-2019
Assessment Year 2012-2013
Appeal Filed On 02-02-2017
Judgment Text
IN THE INCOME-TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE : SHRI BHAVNESH SAINI JUDICIAL MEMBER AND SHRI O.P. KANT ACCOUNTANT MEMBER ITA NO. 603/DEL/2017 ASSESSMENT YEAR: 2012-13 NTPC ELECTRIC SUPPLY COMPANY LTD. NTPC BHAWAN CORE-7 SCOPE COMPLEX LODHI ROAD NEW DELHI. PAN: AABCN7520Q (APPELLANT) VS. DCIT CIRCLE 18(2) NEW DELHI. (RESPONDENT) ITA NO. 777/DEL/2017 ASSESSMENT YEAR: 2012-13 DCIT CIRCLE 18(2) NEW DELHI. (APPELLANT) VS. NTPC ELECTRIC SUPPLY COMPANY LTD. NTPC BHAWAN CORE-7 SCOPE COMPLEX LODHI ROAD NEW DELHI. (RESPONDENT) A SSESSEE BY SH. VED JAIN ADVOCATE & SH. HIMANSHU AGGARWAL CA MS. UMANG LUTHRA CA RE VENUE BY SH. ATIQ AHMAD SR. DR ORDER PER O.P. KANT A.M. THESE CROSS APPEALS BY THE ASSESSEE AND THE REVENU E ARE DIRECTED AGAINST THE ORDER DATED 03.10.2016 PASSED BY THE LE ARNED COMMISSIONER OF DATE OF HEARING 17.09.2019 DATE OF PRONOUNCEMENT 15.11.2019 ITA NOS. 603 & 777/DEL/2017 2 INCOME-TAX (APPEALS)-33 NEW DELHI [IN SHORT THE LD . CIT(A)] FOR THE ASSESSMENT YEAR 2012-13. 2. THE GROUNDS RAISED IN APPEAL OF THE REVENUE ARE REPRODUCED AS UNDER : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) IS LEGALLY JUSTIFIED IN DELETING ADDITION OF INTEREST INCOME O F RS. 64 16 15 379/- BY IGNORING AN ADMITTED FACT THAT THE ASSESSEE HAD EAR NED INTEREST ON THE DEPOSITS IN ITS BANK ACCOUNT OUT OF FUNDS RECEIVED BY THE ASSESSEE TO BE USED AS ITS OWN AND THE CLAIM OF TRANSFER OF THE IN TEREST INCOME TO THE PAYER WAS IN CONTRAVENTION TO PROVISIONS OF SECTION 60 OF THE INCOME TAX ACT(THE ACT)? 2. WHETHER IN FACTS AND CIRCUMSTANCES OF THE CASE THE LD. C'IT(A) IS LEGALLY JUSTIFIED IN DELETING ADDITION OF INTEREST INCOME OF RS. 64 16 15 379/- BY IGNORING THE FACT THAT THE ASSESS EE HAD CLAIMED CREDIT OF TDS ON THE INTEREST INCOME BUT HAD NOT CREDITED THE CORRESPONDING INTEREST IN THE PROFIT & LOSS ACCOUNT IN CONTRAVENT ION TO PROVISIONS OF SECTION 199 OF THE ACT? 3. THAT THE APPELLANT CRAVES LEAVE TO ADD AMEND AL TER OR FORGO ANY GROUND/(S) OF APPEAL EITHER BEFORE OR AT THE TIME O F HEARING OF APPEAL. 3. THE GROUNDS OF ASSESSEES APPEAL ARE REPRODUCED AS UNDER : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE TH E ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A) ] IS BAD BOTH IN THE EYE OF LAW AND ON FACTS. 2(I). ON THE FACTS AND CIRCUMSTANCES OF THE CASE T HE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE AC TION OF THE A.O. IN DISALLOWING AN AMOUNT OFRS.5 99 893/- ON THE ACCOUN T OF COMMUNITY DEVELOPMENT & WELFARE EXPENSES. (II). THAT THE DISALLOWANCE HAS BEEN CONFIRMED DESPI TE THE EXPENSES HAVING BEEN INCURRED WHOLLY & EXCLUSIVELY FOR THE P URPOSE OF BUSINESS. ITA NOS. 603 & 777/DEL/2017 3 3. THE APPELLANT CRAVES LEAVE TO ADD AMEND OR ALTER ANY OF THE GROUNDS OF APPEAL. 4. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT T HE ASSESSEE COMPANY IS A WHOLLY OWNED SUBSIDIARY OF NTPC LTD. DURING THE YEA R UNDER CONSIDERATION THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF DISTRIBUTION AND SUPPLY OF ELECTRIC ENERGY ALONG WITH PROVIDING CONSULTANCY SUPERVISION & PROJECT MANAGEMENT AND INSPECTION SERVICES ETC. THE ASSESSE E FILED RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 27.09.2012 DEC LARING TOTAL INCOME OF RS.11 12 14 130/-. THE CASE WAS SELECTED FOR SCRUTI NY AND NOTICE U/S. 143(2) OF THE INCOME-TAX ACT (IN SHORT THE ACT) WAS ISSU ED AND COMPLIED WITH. THE ASSESSMENT U/S. 143(3) WAS COMPLETED ON 24.03.2015 AFTER MAKING DISALLOWANCES OF INTEREST EARNED ON DEPOSIT OF ADVA NCES RECEIVED FROM RURAL ELECTRIFICATION COMPANY (REC) OF RS.64 16 15 379/- AND DISALLOWANCES OF RS.5 99 893/- U/S. 37(1) OF THE ACT. ON FURTHER APP EAL THE LD. CIT(A) DELETED THE ADDITION OF INTEREST EARNED ON DEPOSIT ON ADVAN CES RECEIVED FROM REC HOWEVER SUSTAINED THE DISALLOWANCE OF RS.5 99 893/ -. AGGRIEVED BOTH THE ASSESSEE AND THE REVENUE ARE IN APPEAL BEFORE THE T RIBUNAL RAISING THE GROUNDS AS REPRODUCED ABOVE. ITA NOS. 603 & 777/DEL/2017 4 5. BEFORE US THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THE ISSUE IN DISPUTE OF DISALLOWANCE OF INTEREST EARNED ON DEPOS IT OF ADVANCES RECEIVED FROM REC HAS BEEN DELETED BY THE LD. CIT(A) FOLLOWI NG THE ORDER OF HIS PREDECESSOR FOR THE ASSESSMENT YEAR 2009-10 AND 201 1-12. HE FURTHER SUBMITTED THAT IN EARLIER ASSESSMENT YEARS 2009-10 AND 2011-12 THE ISSUE IN DISPUTE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY TRIBUNAL AND THE HONBLE DELHI HIGH COURT AND FURTHER APPEAL FILED B EFORE THE HONBLE SUPREME COURT HAS ALSO BEEN DISMISSED. ACCORDINGLY HE SUBM ITTED THAT THE ISSUE IN DISPUTE IS COVERED IN FAVOUR OF THE ASSESSEE. 6. THOUGH THE LD. DR RELIED ON THE ORDER OF THE ASS ESSING OFFICER HOWEVER COULD NOT CONTROVERT THE SUBMISSIONS MADE BY LD. CO UNSEL FOR THE ASSESSEE. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTI ES AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT IDENTICAL ISSUE IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2009-10 HAS BEEN D ECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE OBSERVING AS UNDER : 7. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE T HROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT IT IS AN UNDISPUTED THAT THE FUNDS WERE RECEIVED BY THE ASSESSEE COMPANY FOR ONWARD UTILIZA TION FOR VARIOUS PROJECTS. IT IS ALSO AN UNDISPUTED FACT THAT THE IN TEREST EARNED ON FUNDS ITA NOS. 603 & 777/DEL/2017 5 RELEASED BY GOVERNMENT UNDER THE SCHEME WERE ALSO T O BE USED FOR COST OF PROJECTS. THE LETTER DATED 26.3.2009 OF UNDER SECRET ARY OF MINISTRY OF POWER GOVERNMENT OF INDIA TO CHIEF EXECUTIVE OFFIC ER OF THE APPELLANT COMPANY AS REPRODUCED BY LEARNED CIT (A) CLARIFIES T HOSE FACTS. IN HIS ORDER THE LEARNED CIT (A) CLEARLY STATES THAT INTERE ST EARNED WAS TO BE UTILIZED TOWARDS COST OF PROJECT AND INTEREST WAS N OT TO BE TREATED AS INCOME OF THE ASSESSEE. THE LEARNED CIT (A) HAS MADE A FINDING OF FACT THAT ALL FUNDS RECEIVED FROM REC LIMITED FOR IMPLEMENTAT ION OF PROJECTS WAS CREDITED IN SEPARATE BANK ACCOUNTS OF THE APPELLANT AND INTEREST ACCRUED THEREON WAS ALSO CREDITED IN THE SAME BANK ACCOUNT. THE LEARNED CIT (A) HAS ALSO MADE FINDING OF FACT THAT OUT OF TOTAL INT EREST EARNED BY ASSESSEE INTEREST AMOUNTING TO RS.19 87 59 407/- RELATED TO THIS ACCOUNT. THE LEARNED CIT(A) HAS ALSO MADE A FINDING OF FACT THA T THE CONDITIONS STIPULATED FOR GRANTS OF FUNDS TO THE APPELLANT CL EARLY PROVIDES THAT INTEREST EARNED ON THE DEPOSITS SHALL BE UTILIZED F OR COST OF THE PROJECTS BY WAY OF ADJUSTMENT IN THE LAST INSTALMENT AND THEREF ORE THERE WAS NO DIFFERENCE BETWEEN FUNDS GRANTED BY THE GOVERNMENT AND THE INTEREST CREDITED BY THE BANK IN THE ACCOUNT OF THE APPELLAN T. WE FIND THAT LEARNED CIT (A) HAS CORRECTLY ALLOWED RELIEF TO THE ASSESSEE AND WE DO NOT FIND ANY INFIRMITY IN HIS ORDER. 8. WE ALSO NOTE THAT HONBLE HIGH COURT HAS UPHELD THE DECISION OF THE TRIBUNAL OBSERVING AS UNDER : 2. THE QUESTION OF LAW URGED BY THE REVENUE IS WHET HER THE ITAT ERRED IN LAW IN HOLDING THAT TAXABILITY OF INTEREST INCOM E OF RS.19 87 59 407/- WILL DEPEND UPON SUBSEQUENT USE OF THE INTEREST INC OME? 3. THE UNDISPUTED FACT AS NOTED BY THE ITAT IS THA T THE SAID INTEREST INCOME WAS EARNED BY THE ASSESSEE ON THE DEPOSIT OF ADVANCES RECEIVED FROM REC LTD. FOR RAJIV GANDHI GRAMIN VIDYUTIKARAN YOJANA (RGGVY). A MEMORANDUM OF UNDERSTANDING (MOU) WAS SIGNED ON 1 6 TH AUGUST 2004 ITA NOS. 603 & 777/DEL/2017 6 BETWEEN REC AND THE ASSESSEE WHEREBY INTER ALIA IT WAS AGREED THAT INTEREST EARNED ON THE DEPOSITS WOULD BE USED AS PA RT OF THE COST OF THE PROJECTS AND NO OTHER PURPOSE. 4. IN THE CIRCUMSTANCES THE VIEW TAKEN BY THE CIT(A ) AND AFFIRMED BY THE ITAT DOES NOT SUFFER FROM LEGAL INFIRMITY SO A S TO GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. 9. THE HONBLE SUPREME COURT IN SLP(CIVIL) DIARY NO . (5) 11488/2018 VIDE ORDER DATED 23.04.2018 HAS ALSO UPHELD THE ORDER OF HONBLE HIGH COURT. 10. IN VIEW OF THE ABOVE RESPECTFULLY FOLLOWING TH E FINDINGS OF HONBLE COURTS THE ACTION OF THE LD. CIT(A) IN DELETING TH E DISALLOWANCE IS UPHELD. GROUNDS NOS. 1 & 2 OF THE APPEAL OF REVENUE ARE ACC ORDINGLY DISMISSED. 11. GROUND NO. 3 BEING GENERAL IN NATURE WE ARE N OT REQUIRED TO ADJUDICATE UPON. 12. REGARDING THE ISSUE AND DISPUTE RAISED IN APPEA L OF THE ASSESSEE THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT EXPENDITURE OF RS.5 99 893/- WAS INCURRED ON SOCIAL RESPONSIBILITY ACTIVITIES IN THE AREA IN WHICH THE PROJECT ACTIVITIES WERE CARRIED OUT. ACCORDING TO THE LD. C OUNSEL THE EXPENDITURE INCURRED WAS FOR SMOOTH FUNCTIONING OF THE PROJECT ACTIVITIES IN THE RURAL AREAS AND THUS BEING IN THE NATURE OF EXPENDITURE INCURRE D WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS THE SAME SHOULD BE ALL OWED. FURTHER HE RELIED ON ITA NOS. 603 & 777/DEL/2017 7 THE DECISION OF TRIBUNAL IN THE CASE OF NATIONAL SE EDS CORPORATION LTD. VS. ADDL. CIT IN ITA NO. 6794/DEL/2014 DATED 04.04.2018 WHEREIN IT IS HELD THAT THE EXPLANATION TO SEC. 37(1) HAS BEEN INSERTED W.E .F. 01.04.2015 AND CANNOT BE CONSTRUED AS TO DISADVANTAGE TO THE ASSESSEE IN THE PERIOD PRIOR TO THIS AMENDMENT. 13. ON THE CONTRARY THE LD. DR RELIED ON THE FINDI NGS OF THE LD. CIT(A) AND SUBMITTED THAT THE EXPENSES INCURRED WERE NOT BEING INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND THEREF ORE THE ACTION OF THE ASSESSING OFFICER AND THE LD. CIT(A) IS JUSTIFIED. 13. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. BEFORE US THE LD. COUNSEL OF THE ASSESSEE HAS SUBM ITTED THE LIST OF EXPENDITURE INCURRED ON VARIOUS ITEMS LIKE MOSQUITO NETS SCHOO L BAGS BLANKETS ETC. AND CLAIMED THAT SAME WERE DISTRIBUTED IN THE AREA IN WHICH THE ASSESSEE WAS OPERATING. IN OUR OPINION IN COMPARISON TO THE BUS INESS TURNOVER OF THE ASSESSEE THE AMOUNT INCURRED ON COMMUNITY DEVELOPM ENT AND WELFARE IS VERY MINISCULE AMOUNT AND HAS BEEN INCURRED TO ENCO URAGE A CONDUCIVE ATMOSPHERE IN THE AREA OF WORKING OF THE ASSESSEE. IN VIEW OF THE FACT THE FINDING OF THE LD. CIT(A) THAT EXPENDITURE HAS NOT BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS CAN NOT BE SAID TO BE CORRECT. FURTHER ITA NOS. 603 & 777/DEL/2017 8 EXPLANATION-2 TO SECTION 37(1) WHICH HAS PROHIBITED EXPENDITURE ON CORPORATE SOCIAL RESPONSIBILITY FOR CLAIMING U/S. 3 7(1) HAS BEEN INSERTED BY THE FINANCE ACT NO. 2 OF 2014 W.E.F. 01.04.2015 WH ICH READS AS UNDER : EXPLANATION 2.FOR THE REMOVAL OF DOUBTS IT IS HE REBY DECLARED THAT FOR THE PURPOSES OF SUB-SECTION (1) ANY EXPENDITURE INCURR ED BY AN ASSESSEE ON THE ACTIVITIES RELATING TO CORPORATE SOCIAL RESPONSIBIL ITY REFERRED TO IN SECTION 135 OF THE COMPANIES ACT 2013 (18 OF 2013) SHALL NOT BE DEEME D TO BE AN EXPENDITURE INCURRED BY THE ASSESSEE FOR THE PURPOSES OF THE BU SINESS OR PROFESSION. 14. THE TRIBUNAL IN THE CASE OF NATIONAL SEEDS CORP ORATION LTD. (SUPRA) HAS HELD THE ABOVE EXPLANATION 2 TO BE PROSPECTIVE AND NOT TO BE OPERATED RETROSPECTIVELY. SINCE THE ASSESSMENT YEAR INVOLVED IN THE INSTANT CASE IS A.Y. 2012-13 THE ABOVE EXPLANATION CANNOT BE INVOKED IN THE CASE OF ASSESSEE. ACCORDINGLY THE EXPENDITURE INCURRED OF RS.5 99 89 3/- ON COMMUNITY DEVELOPMENT AND WELFARE IS ALLOWED. GROUND OF APPE AL OF THE ASSESSEE IS ALLOWED. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED. 15 . IN THE RESULT THE APPEAL OF THE REVENUE IS D ISMISSED AND THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15/11/201 9 SD/- SD/- (BHAVNESH SAINI) (O.P. KANT) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 15 TH NOV. 2019 *AKS* ITA NOS. 603 & 777/DEL/2017 9 COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES NEW DELHI