M/s Lanco Knodapalli Power Pvt. Ltd., Hyderabad v. DCIT, Hyderabad

ITA 72/HYD/2009 | 2000-2001
Pronouncement Date: 08-01-2010 | Result: Partly Allowed

Appeal Details

RSA Number 7222514 RSA 2009
Assessee PAN AAACK5423A
Bench Hyderabad
Appeal Number ITA 72/HYD/2009
Duration Of Justice 11 month(s) 19 day(s)
Appellant M/s Lanco Knodapalli Power Pvt. Ltd., Hyderabad
Respondent DCIT, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 08-01-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 08-01-2010
Date Of Final Hearing 23-12-2009
Next Hearing Date 23-12-2009
Assessment Year 2000-2001
Appeal Filed On 19-01-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B HYDERABAD BEFORE SHRI N.R.S. GANESAN JUDICIAL MEMBER AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER NO.72/HYD/2009 : ASSTT. YEAR : 2000- 2001 M/S LANCO KONDAPALLI POWER (P) LTD. HYDERABAD (PAN AAACK 5423 A) VS DCIT CIRCLE-16(1) HYDERABAD (APPLICANT) (RESPONDENT) APPLICANT BY : SHRI S. VENKATESWARALU RESPONDENT BY : SMT. VASUNDHARA SINHA DR O R D E R PER: CHANDRA POOJARI ACCOUNTANT MEMBER: THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A) -V HYDERABAD DATED 12.11.2008 AND P ERTAINS TO THE ASSESSMENT YEAR 2000-01. 2. THE FIRST GROUND RAISED BY THE ASSESSEE IS THAT: THE CIT(A) HAS ERRED IN HOLDING THAT THE INCOME TAX PAID BY THE ASSESSEE AMOUNTING TO RS.9 30 285 COMPRISING OF ADVANCE TAX OF RS.88 500 TDS OF RS.8 36 285 AND SELF ASSESSMENT TAX PAID OF RS.5 50 0 AS INCOME OF THE ASSESSEE IN AS MUCH AS THE ASSESSEE IS NOT ENTITLED FOR ANY REIMBURSEMENT OF ADVANCE TAX FROM APTRANSCO UNTIL THE COMMENCEMENT O F GENERATION OF POWER. 4. THE AUTHORIZED REPRESENTATIVE SUBMITTED AS FOLLOW S: I)THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE ASS ESSEE HAS NOT COMMENCED THE GENERATION OF POWER DURING THE ASSESSMENT YEAR 2000-01. II)THE CIT(A) OUGHT TO HAVE APPRECIATED THAT AS PER THE POWER PURCHASE AGREEMENT BETWEEN THE ASSESSEE AND APTRANSCO THE AS SESSEE IS NOT ENTITLED FOR ANY REIMBURSEMENT OF TAXES PAID ON INTEREST INC OME EARNED BY THE ASSESSEE. III)THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE ASSESSEE NEITHER MADE ANY CLAIM FOR REIMBURSEMENT OF ADVANCE TAX FROM APTRANS CO NOR RECEIVED ANY 2 2 REIMBURSEMENT OF ADVANCE TAX FROM APTRANSCO DURING THE ASSESSMENT YEAR 2000-01. IV. THE CIT(A) ERRED IN UPHOLDING THE ADDITION OF RS.26 36 802 BEING THE INTEREST EARNED ON MARGIN MONEY KEPT FOR PROVIDING BANK GUARANTEES IN FAVOUR OF APTRANSCO. V. THE CIT(A) OUGHT TO HAVE APPRECIATED THAT INTER EST INCOME OF RS.26 36 802 IS INCIDENTAL TO BUSINESS AND THE PROVISION OF MARG IN MONEY IS NOT WITH AN INTENTION TO EARN INTEREST BUT TO HONOUR THE CONTRA CTUAL OBLIGATIONS UNDER POWER PURCHASE AGREEMENT. 3. THE DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF CIT(A). 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. SIMILAR ISSUE WAS CONSIDERED BY THIS TRIBUNAL VIDE ITS ORDER DATED 24.10.2008 IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 1999 -2000 IN ITA NO.207/HYD/2008 WHEREIN IT WAS HELD: 'FROM THE COMBINED READING OF THE ABOVE WE FIND TH AT IT HAS BEEN PROVIDED IN THE ABOVE CLAUSE THAT ANY ADVANCE INCOME TAX FOR TH E PROJECT SHALL BE REIMBURSED BY THE BOARD BUT IT FURTHER SAYS THAT T HE TAX TO BE REIMBURSED WILL BE CALCULATED ON THE INCOME FROM THE PROJECT ONLY. IN THE CASE BEFORE US EXCEPT THE INCOME FROM INTEREST THERE IS NO OTHER INCOME TO THE ASSESSEE. THE REVENUE HAS NOT BROUGHT ANY MATERIAL TO SHOW TH AT THERE WAS ANY INCOME FROM THE PROJECT TO THE ASSESSEE DURING THE FINANCI AL YEAR RELEVANT TO THE ASSESSMENT YEAR 1999-2000. IT IS ALSO NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS CLAIMED THE AMOUNT OF ADVANCE TAX FROM APTRANSCO OR THE SAID BOARD HAS REIMBURSED THE AMOUNT OF TAX TO THE ASSESSEE IN ANY MANNER. IN THIS VIEW OF THE MATTER WE ARE OF THE VIEW THAT THE ADDITION OF REIMBURSEMENT OF ADVANCE TAX OF RS.4 25 000 MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LEARNED CIT(A) IS NOT SUSTAINA BLE AND ACCORDINGLY THE SAME IS DELETED. THE GROUNDS TAKEN BY THE ASSESSEE ARE THEREFORE ALLOWED.' 5. RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY T HE ABOVE ORDER OF THE TRIBUNAL WE REVERSE THE FINDINGS OF THE CIT (A) ON THIS ISSUE AND ALLOW THE GROUND TAKEN BY THE ASSESSEE. 6. THE NEXT ISSUES IN THIS APPEAL ARE AS FOLLOWS: VI. THE CIT(A) ERRED IN UPHOLDING THE ADDITION OF R S.3 33 946 BEING THE INTEREST EARNED ON MARGIN MONEY KEPT FOR PROVIDING BANK GUARANTEE IN FAVOUR OF HPCL. VII. THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE INTEREST INCOME OF RS.3 33 946 IS INCIDENTAL TO BUSINESS AND THE PROVI SION OF MARGIN MONEY IS NOT 3 3 WITH AN INTENTION TO EARN INTEREST BUT TO HONOUR TH E CONTRACTUAL OBLIGATIONS UNDER FUEL SUPPLY AGREEMENT WITH HPCL. 8. AFTER HEARING BOTH THE PARTIES WE ARE OF THE O PINION THAT THESE ISSUES ARE ALSO CONSIDERED BY THIS TRIBUNAL IN ITS ORDER CIT ED SUPRA WHEREIN IT WAS HELD AS FOLLOWS: WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THERE IS NO DISPUTE THAT DURING THE PREVIOUS YEAR RELEVANT TO THE ASSES SMENT YEAR 1999-2000 THE POWER PLANT WAS UNDER IMPLEMENTATION STAGE AND STAR TED COMMERCIAL PRODUCTION I.E. GENERATION OF POWER W.E.F. OCTOBER 25 2000. CLAUSE 3.8 OF ARTICLE -3 OF PPA WITH ANDHRA PRADESH STATE ELECTRI CITY BOARD (APSEB) (NOW APTRANSCO) REFERRED TO BY THE ASSESSING OFFICER REA DS AS UNDER:- 3.8: ANY ADVANCE INCOME TAX PAYABLE FOR THE PROJEC T IN ANY MONTH SUPPORTED BY THE CERTIFICATE OF A CHARTERED ACCOUNT ANT APPROVED BY THE BOARD (SUCH APPROVAL NOT TO BE UNREASONABLY WITHHEL D OR DELAYED) SHALL BE REIMBURSED BY THE BOARD. AFTER THE TAX ASSESSME NT IS COMPLETED FOR ANY YEAR AND THE LIABILITY THEREON IS DETERMINED B Y THE TAXATION AUTHORITIES IN INDIA THE EXCESS OR SHORTFALL IN TH E TAX LIABILITY SO DETERMINED WILL BE ADJUSTED IN THE SUPPLEMENTARY BI LL (AS DEFINED IN ARTICLE 5.5) FOR THE SUCCEEDING MONTH OR ON THE DUE DATE OF PAYMENT THEREOF WHICHEVER IS LATER SUBJECT TO ARTICLE 3.9 TAX TO BE REIMBURSED WILL BE CALCULATED ON THE INCOME FROM THE PROJECT O NLY AND CALCULATED ON THE ASSUMPTION THAT THE COMPANY IS ENGAGED SOLEL Y IN THE OWNERSHIP DESIGN FINANCING CONSTRUCTION OPERATI ON AND MAINTENANCE OF THE PROJECT AND WILL NOT INCLUDE TAX REIMBURSEME NTS OF THE PREVIOUS YEAR. HERE IT IS ALSO NECESSARY TO EXTRACT CLAUSE 3.9 ART ICLE 3 AND DEFINITION CLAUSE NO.47 OF ARTICLE 1 OF THE AFORESAID AGREEMENT WHICH ARE AS UNDER: 3.9 THE COMPANY SHALL TAKE ALL REASONABLE STEPS T O ENSURE THAT ITS LIABILITY DUE TO TAXES ON INCOME IN RESPECT OF ITS INCOME FROM THE PROJECT IS MINIMIZED BY OBTAINING OR BY SUITABLE A RRANGEMENT ALL PERMISSIBLE BENEFITS REBATES CONCESSIONS AND THE LIKE IN ACCORDANCE WITH LAW. THE COMPANY HOWEVER IS NOT REQUIRED U NDER THIS ARTICLE 3.9 TO PASS ON TO THE BOARD ANY BENEFITS REBATES CONC ESSIONS AND THE LIKE IN TAXATION OBTAINED BY IT AS A RESULT OF ANY TAX P LANNING OR OTHERWISE NOT CONNECTED WITH THE INCOME EXPENDITURE AND OPER ATIONS OF THIS PROJECT. PROJECT: MEANS THE COMBINED CYCLE POWER STATION PR OPOSED TO BE ESTABLISHED AT KONDAPALLI KRISHNA DISTRICT IN AND HRA PRADESH INDIA CONSISTING OF 2 (TWO) GENERATING UNITS WHICH ARE D ESIGNED FOR POLY FUELFIRING AND 1 (ONE) STEAM GENERATING UNIT HAVIN G A NOMINAL INSTALLED CAPACITY OF 355 MEGA WATTS (ISO) ADJUSTED TO AMBIENT REFERENCE CONDITIONS FURTHER IT IS ALSO NECESSARY TO TAKE NOTE OF SCHED ULE 9 OF THE ANNUAL REPORT FOR THE YEAR 1998-99 RELEVANT TO THE ASSESSMENT YEAR 19 99-2000 THE YEAR UNDER 4 4 CONSIDERATION WHEREIN POINT NO.2 OF NOTES OF ACCOUN TS APPEARING AT PAGE 125 OF THE ASSESSEES PAPERBOOK STATES AS UNDER:- 2. THE 355 MV SHORT GESTATION LIQUID FUEL (NAPTHA) BASED COMBINED CYCLE POWER PLANT AT KONDAPALLI VILLAGE KRISHNA DISTRICT ANDHRA PRADESH IS UNDER CONSTRUCTION. PENDING COMMENCEMENT OF COMMERCIAL O PERATIONS ALL EXPENSES INCURRED ARE CARRIED FORWARD UNDER THE HEAD INCIDE NTAL EXPENDITURE DURING CONSTRUCTION FOR ALLOCATION BETWEEN CAPITAL AND RE VENUE. FROM THE ABOVE IT WOULD BE CLEAR THAT PRIMA FACIE TO CL AIM DEDUCTION OF INTEREST INCOME ONE OF THE REQUIREMENTS IS THAT THE DEDUCTION OR EXEMPTION SHOULD BE PROVIDED UNDER THE PROVISIONS OF THE ACT. EVEN AT THIS STAGE THE LEARNED COUNSEL FOR THE ASSESSEE HAS PLACED NO MATE RIAL TO SHOW AS TO HOW SUCH INTEREST INCOME IS NOT TAXABLE OR EXEMPT UNDER THE RELEVANT PROVISIONS OF THE ACT. MERELY BECAUSE THE SAID INTEREST INCOME I S EARNED BY THE ASSESSEE ON ACCOUNT OF CONTRACTUAL OBLIGATION AND THE SAME HAS BEEN ACCEPTED IN THE REGULAR U/S 143(3) DOES NOT MEAN THAT INTEREST INCO ME IS NOT TAXABLE UNDER THE ACT. IT WOULD BE A TRAVESTY OF JUSTICE TO ALLO W THE ASSESSEE THAT LATITUDE. THERE IS NO SUCH PROVISION UNDER THE ACT TO EXEMPT ANY SUCH INCOME BECAUSE IT IS CONTRACTUAL. THIS BEING SO AND KEEPING IN VI EW THE RATIO OF THE ABOVE DECISIONS HOLDING THAT THE ASSESSING OFFICER IS FUL LY COMPETENT AND IS ENTITLED TO CONSIDER OTHER ITEMS OF INCOME ALSO IF SUCH ITE MS OF ESCAPED INCOME COME TO HIS NOTICE DURING THE COURSE OF REASSESSMENT PR OCEEDINGS AND HE IS NOT CONFINED TO THOSE MATTERS OR ITEMS OF INCOME ALONE ON THE BASIS OF WHICH THE PROCEEDINGS U/S 148 WERE INITIATED WE ARE OF THE V IEW THAT THERE WAS NO TRUE AND FULL DISCLOSURE BY THE ASSESSEE IN TERMS OF EXP LANATION 2 ( C) (IV) OF SECTION 147 OF THE ACT AND CONSEQUENTLY THE ASSESSE E'S CASE DOES NOT FALL UNDER THE EXCEPTIONS OF THE PROVISO TO S.147 OF THE ACT AND ACCORDINGLY THE ASSESSING OFFICER WAS FULLY JUSTIFIED IN ADDING THE INTEREST INCOME OF RS.25 83 848 AS 'INCOME FROM OTHER SOURCES' TO THE INCOME OF THE ASSESSEE COMPANY. THIS VIEW ALSO FINDS SUPPORT FROM THE REC ENT JUDGEMENT IN GIRILAL AND COMPANY VS. S.L. MEENA ITO & OTHERS (2008) 300 ITR 432 (BOM.). THE ORDER PASSED BY THE LEARNED CIT(A) TO THIS EXTENT I S REVERSED AND THAT OF THE ASSESSING OFFICER IS RESTORED. THE GROUNDS TAKEN B Y THE REVENUE ARE THEREFORE ALLOWED.' 9. FURTHER THE AR TRIED TO DISTINGUISH THE ABOVE OR DER OF THE TRIBUNAL AND SUBMITTED THAT THE TRIBUNAL IN THE YEAR 1999-200 0 DECIDED ONLY ON THE ISSUE RELATING TO THE RE-OPENING AND NOT DECIDED O N THE MERIT OF THE ISSUE AND FURTHER ON MERIT HE RELIED ON THE FOLLOWIN G JUDGMENTS: 1. CIT VS. KARNAL COOPERATIVE SUGAR MILLS LTD. (243 ITR 2) (SC) 2. CIT VS. WILLIAMSON FINANCIAL SERVICES & OTHERS (297 ITR 17) (SC) 5 5 10. WE HAVE CAREFULLY GONE THROUGH THE ABOVE CASE L AWS CITED BY THE PARTIES. IN OUR OPINION THIS ISSUE HAS SQUAREL Y COVERED BY THE EARLIER ORDER OF THE TRIBUNAL AND THE ASSESSEE RECEIVED THE INTEREST ON THE SAME EXISTING FIXED DEPOSITS. AS SUCH IN OUR OPINIO N THE INTEREST INCOME WAS HAVING NO NEXUS WITH THE INTEREST PAID BY TH E ASSESSEE DURING THIS PERIOD. SINCE THERE WAS NO NEXUS BETWEEN THE INTEREST PAID AND INTEREST RECEIVED THE SET OFF CANNOT BE ALLOWED. AS SUCH THE INTEREST ON DEPOSITS MADE FOR THE PURPOSE OF MARGIN MO NEY FOR GETTING THE BANK GUARANTEE THE SET OFF CANNOT BE ALLOWED AND PLACING RELIANCE ON THE EARLIER ORDER OF THE TRIBUNAL CITED SUPRA T HE INTEREST RECEIVED ON MARGIN MONEY TO BE ASSESSED AS INCOME FROM OTHER SOURCES ONL Y. ACCORDINGLY THE ORDER OF THE CIT(A) ON THIS ISSUE IS CONF IRMED. THIS GROUND OF THE ASSESSEE STANDS DISMISSED. 11. THE LAST GROUND OF APPEAL TAKEN BY THE ASSESSEE IS F OLLOWS: 10. THAT THE CIT(A) ERRED IN UPHOLDING THE ADDITIO N OF RS. 3 87 386 BEING DIFFERENCE IN THE INTEREST INCOME SHOWN IN THE BOOK S AND IN THE TDS CERTIFICATES IN AS MUCH AS THE SAID SUM OF INTEREST OF RS.3 87 386 IS OFFERED TO TAX IN THE EARLIER ASSESSMENT YEAR 1999-2000. 12. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. RECONCILIATION IS REQUIRED WITH REFERENCE TO TH E INCOME OFFERED AS INTEREST INCOME IN THE ASSESSMENT YEAR 1999-2000 AND 20 00-01 SINCE THE ASSESSEE ALREADY OFFERED CERTAIN PORTION OF INC OME IN EARLIER YEAR AND IT AMOUNTS TO DOUBLE TAXATION IF THE SAME AM OUNT IS BROUGHT INTO TAXATION IN THE ASSESSMENT YEAR 2000-01. ACCORDINGL Y WE DIRECT THE ASSESSEE TO RECONCILE THE INCOME OFFERED UNDER THE TDS CERTIFICATE IN THE ASSESSMENT YEAR 1999-2000 AND 2000-01 AND THEREAFTE R THE ASSESSING OFFICER IS DIRECTED TO BRING THE RIGHT AMOUNT I NTO TAXATION IN THE ASSESSMENT YEAR UNDER CONSIDERATION. ACCORDINGLY WE SE T ASIDE THIS ISSUE FOR THE PURPOSE OF FRESH CONSIDERATION TO THE FILE OF ASSESSING OFFICER. 6 6 13. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON : . 8.01.201 0. SD/- SD/- ( N.R.S. GANESAH) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 8 TH JANUARY 2010. COPY FORWARDED TO: 1. M/S LANCO KONDAPALLI POWER (P) LTD. PLOT NO.4 SO FTWARE UNITS LAYOUT HITECH CITY MADHAPUR HYDERABAD-500081. 2. DCIT CIRCLE 16 (1) HYDERABAD 3. CIT(A)-V HYDERABAD. 4. CIT III HYDERABAD 5. THE D.R. ITAT HYDERABAD.