M/s Covanta Samalpatti Operating Private Limited, CHENNAI v. ACIT, CHENNAI

ITA 940/CHNY/2008 | 2005-2006
Pronouncement Date: 30-07-2012 | Result: Partly Allowed

Appeal Details

RSA Number 94021714 RSA 2008
Assessee PAN AAACO4905F
Bench Chennai
Appeal Number ITA 940/CHNY/2008
Duration Of Justice 4 year(s) 3 month(s) 5 day(s)
Appellant M/s Covanta Samalpatti Operating Private Limited, CHENNAI
Respondent ACIT, CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-07-2012
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 30-07-2012
Date Of Final Hearing 19-07-2012
Next Hearing Date 19-07-2012
Assessment Year 2005-2006
Appeal Filed On 25-04-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH CHENNAI BEFORE DR. O. K. NARAYANAN VICE PRESIDENT AND SHRI V. DURGA RAO JUDICIAL MEMBER .. ITA NOS. 2238/MDS/2006 939/MDS/2008 & 940/MDS/2008 ASSESSMENT YEARS : 2003-04 2004-05 & 2005-06 M/S. SHAPOORJI PALLONJI INFRASTRUCTURE CAPITAL CO. LTD. (FORMERLY M/S. COVANTA SAMALPATTI OPERATING PVT. LTD.) SREYAS VIRAT NO. 14 THIRD CROSS ROAD RAJAANNAMALAIPURAM CHENNAI-600 028. (PAN : AAACO4905F) V. THE ASST. COMMISSIONER OF INCOME TAX COMPANY CIRCLE-I(3) CHENNAI. AND ITA NO. 999/MDS/2008 ASSESSMENT YEAR 2005-06 THE ASST. COMMISSIONER OF V. M/S. SHAPO ORJI PALLONJI INCOME-TAX CIRCLE-I(3) CHENNAI. INFRASTRUC TURE CAPITAL CO.LTD. (FORMERLY M/S. COVANTA SAMALPATTI OPERATING PVT. LTD. SREYAS VIRAT NO. 14 THIRD CROSS ROAD RAJA ANNAMALAIPURAM CHENNAI-600 028. (APPELLANTS) (RESPONDENTS) ASSESSEE BY : SHRI S. SRIDHAR AD VOCATE DEPARTMENT BY : SHRI SHAJI P. J ACOB ADDL. CIT ITA NOS..2238/MDS/2006 AND 939 940 & 999 /MDS/2008 2 DATE OF HEARING : 19.07. 2012 DATE OF PRONOUNCEMENT : 30.07.2012 O R D E R PER V. DURGA RAO JUDICIAL MEMBER : ITA NO. 2238/MDS/2006 AND ITA NOS. 939 & 940/MDS/2008 ARE APPEALS FILED BY THE ASSESSEE FOR THE ASSESSMENT YE ARS 2003- 04 2004-05 & 2005-06 AGAINST THE ORDERS OF THE CIT(APPEALS)-III/VIII CHENNAI DATED 06-09-2006 20 -02-2008 & 20-02-2008 RESPECTIVELY. ITA NO. 999/MDS/2008 I S AN APPEAL FILED BY THE REVENUE FOR THE ASSESSMENT YEAR 2005-06 AGAINST THE ORDER OF THE CIT(APPEALS)-VII CHENNAI DATED 20- 02-2008. AS COMMON POINTS ARE INVOLVED IN ALL THES E APPEALS THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR CONVENIENCE. 2. GROUND NO.1 IS GENERAL IN NATURE AND REQUIRES NO ADJUDICATION. 3. FOR THE ASSESSMENT YEAR 2003-04 GROUNDS 2 TO 2.1 0 DEAL WITH THE CLAIM OF THE ASSESSEE RELATING TO SECTION 80-IA OF THE INCOME TAX ACT 1961 (THE ACT FOR SHORT). FACTS IN BRIEF ARE ITA NOS..2238/MDS/2006 AND 939 940 & 999 /MDS/2008 3 THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGA GED IN THE BUSINESS OF OPERATION AND MAINTENANCE OF POWER PLAN T. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE YEAR UN DER CONSIDERATION DECLARING A TOTAL INCOME OF ` 48 41 44 760/- AFTER CLAIMING DEDUCTION U/S 80-IA OF THE ACT TO TH E TUNE OF ` 3 32 24 876/-. THE ASSESSMENT WAS COMPLETED U/S 14 3(3) ON A TOTAL INCOME OF ` 5 03 56 230/-. THE AO HAS DISALLOWED THE DEDUCTION OF RS. 3 32 24 876/- CLAIMED BY THE ASSES SEE U/S 80-IA OF THE ACT ON THE GROUND THAT THE ASSESSEE DI D NOT SATISFY THE CONDITIONS PRESCRIBED UNDER THE SAID SE CTION AND THAT THE ASSESSEE HAS NOT SET UP ANY POWER PLANT BU T ONLY OPERATING AND MAINTAINING THE POWER PLANT SET UP BY M/S. SAMALPATTI POWER COMPANY P. LTD. THE AO FURTHER OB SERVED THAT THE ASSESSEE IS ONLY A CONTRACTOR FOR THE PURP OSE OF RENDERING SERVICES AND HENCE THE CHARGES RECEIVED B Y THE ASSESSEE CANNOT BE TREATED AS PROFITS DERIVED FROM THE INDUSTRIAL UNDERTAKING FOR THE PURPOSE OF SECTION 8 0-IA OF THE ACT. 4. THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A ) AND SUBMITTED THAT TO CLAIM DEDUCTION U/S 80-IA OWNERS HIP OF THE POWER PLANT IS NOT THE PRIMARY REQUISITE CONDITION. AS PER ITA NOS..2238/MDS/2006 AND 939 940 & 999 /MDS/2008 4 SECTION 80-IA(4)(IV)(A) OF THE ACT IF THE ASSESSEE SETS UP A POWER PLANT HE WILL BE ELIGIBLE FOR DEDUCTION U/S 80-IA. BEFORE THE CIT(A) THE LEARNED COUNSEL FOR THE ASSESSEE FU RTHER SUBMITTED THAT A NEW SUB-CLAUSE (V) TO SECTION 80-I A(4) HAS BEEN ADDED WHICH DEALS WITH THE UNDERTAKING OWNED B Y A COMPANY SET UP FOR RECONSTRUCTION OR REVIVAL OF A P OWER GENERATING PLANT. THE ABOVE AMENDMENT IS ONLY APPL ICABLE FOR THE ASSESSMENT YEAR 2006-07 ONWARDS. THEREFORE FOR THE YEAR UNDER CONSIDERATION THE OWNERSHIP IS NOT A REQUISIT E CONDITION TO GET THE BENEFIT U/S 80-IA OF THE ACT. THE LEARN ED CIT(A) AFTER CONSIDERING ALL THE ARGUMENTS OF THE ASSESSEE BY FOLLOWING THE DECISION IN THE ASSESSEES OWN CASE F OR THE ASSESSMENT YEAR 2002-03 VIDE ORDER OF THE CIT(A) IN ITA NO. 437/2004-05 DATED 29-03-2005 DISMISSED THE GROUND O F APPEAL RAISED BY THE ASSESSEE. 5. ON BEING AGGRIEVED THE ASSESSEE CARRIED THE MAT TER BEFORE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE A SSESSEE RE- ITERATED THE SUBMISSIONS WHICH HE HAD MADE BEFORE T HE LEARNED CIT(A). HOWEVER HE HAS ADMITTED THAT THE ISSUE INVOLVED IN THIS APPEAL IS COVERED AGAINST HIM IN T HE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2002-03. ITA NOS..2238/MDS/2006 AND 939 940 & 999 /MDS/2008 5 6. ON THE OTHER HAND THE LEARNED DR STRONGLY SUPPO RTED THE ORDER PASSED BY THE LEARNED CIT(A) AND RELIED O N THE DECISION OF THE TRIBUNAL IN ITA NO. 1496/MDS/2005 D ATED 19- 12-2007. THE OPERATIVE PORTION OF THE SAID ORDER I S EXTRACTED BELOW : 20. SECTION 80A PROVIDES FOR TAX INCENTIVE BY WAY OF DEDUCTION TO VARIOUS INDUSTRIES. FOR EG. SECTION 80IA(4)(I) CONFERS BENEFIT TO INFRASTRUCTURE FACILITY WHEREIN EVEN AN ENTERPRISE DEVELOPING OR OPERATING AND MAINTAINING SUCH FACILITY ARE ELIGIBLE FOR DEDUCTION. HOWEVER BENEFIT U/S 80IA(4)(IV) IS AVAILABLE ONLY TO UNDERTAKINGS ENGAGED IN GENERATION OR DISTRIBUTION OF ELECTRICITY. UNLIKE SEC. 80IA(4)(I ) THE ENTERPRISE ENGAGED IN OPERATING AND MAINTAINING ANY POWER UNIT IS NOT ELIGIBLE FOR DEDUCTION U/S.80IA(4)(IV). DECISION OF SUPREME COURT IN A.M. MOOSA VS. CIT (294 ITR 1) IS RELEVANT IN THIS CONTEXT. 21. EXPLANATION TO SEC. 80IA(13) CLARIFIES THAT DEDUCTION U/S. 80IA IS NOT ELIGIBLE FOR A PERSON WHO EXECUTES WORKS CONTRACT. THIS EXPLANATION IS INTRODUCED BY FINANCE ACT 2007 WITH RETROSPECTIVE EFFECT FROM 1.4.00. 22. IN VIEW OF THE DISCUSSIONS IN THE FOREGOING PARAGRAPHS AND IN VIEW OF THE CLEAR CUT ITA NOS..2238/MDS/2006 AND 939 940 & 999 /MDS/2008 6 PROVISIONS OF THE STATUTE WE ARE OF THE OPINION THAT THE ASSESSEE IS NOT ENTITLED TO CLAIM DEDUCTION U/S 80IA(4) OF THE INCOMETAX ACT. ACCORDINGLY WE CONFIRM THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS). 7. WE HAVE HEARD BOTH THE SIDES PERUSED THE RECORD S AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. NO MATERIAL WAS BROUGHT TO OUR NOTICE TO SHOW THAT THE SAID DEC ISION OF THE TRIBUNAL HAS EITHER BEEN REVERSED OR MODIFIED BY TH E HONBLE JURISDICTIONAL HIGH COURT. WE THEREFORE RESPECTFUL LY FOLLOWING THE SAME DISMISS THE GROUND RAISED BY THE ASSESSEE. 8. FOR THE REASONS STATED IN PARA 7 ABOVE THE GROU NDS NO. 2 TO 2.5 RAISED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2004- 05 IN ITA NO. 939/MDS/2008 WHICH PERTAIN TO THE SAM E ISSUE WE DISMISS THE ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2004-05 ALSO. LIKEWISE THE GROUNDS NO. 2 TO 2.5 I N ITA NO. 940/MDS/2008 RAISED BY THE ASSESSEE FOR THE ASSESS MENT YEAR 2005-06 IN RESPECT OF THIS ISSUE ARE ALSO DISMISSED FOR THE REASONS STATED IN PARA 7 ABOVE. 9. COMING TO GROUND NOS. 3 TO 3.4 FOR THE ASSESSMEN T YEAR 2003-04 GROUNDS 3 TO 3.2 FOR THE ASSESSMENT YEAR 2 004-05 AND GROUNDS 3 TO 3.2 FOR THE ASSESSMENT YEAR 2005-0 6 WHICH ITA NOS..2238/MDS/2006 AND 939 940 & 999 /MDS/2008 7 RELATE TO THE REVERSAL OF EXCESS REVENUE THE FACTS IN BRIEF ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS FO R THE ASSESSMENT YEAR 2003-04 THE AO HAD NOTICED THAT TH E ASSESSEE HAD DEBITED AN AMOUNT OF RS. 1 37 23 566/- IN THE P & L ACCOUNT TOWARDS PLANT MAINTENANCE EXPENDITURE. THE DETAILS FILED IN THIS REGARD REVEALED THAT THIS AMO UNT INCLUDED AN AMOUNT OF RS. 1 29 86 600/- REPRESENTING CONTRIB UTION MADE BY THE ASSESSEE TO THE MAJOR MAINTENANCE RESER VE ACCOUNT. AS PER AGREEMENT BETWEEN THE ASSESSEE AND THE OWNER OF THE POWER PLANT I.E. M/S. SAMALPATTI POWE R COMPANY P. LTD. THE ASSESSEE WAS REQUIRED TO CONTRIBUTE A FIXED AMOUNT EVERY MONTH IN THE SAID ACCOUNT. THE AO FUR THER OBSERVED THAT THE SAID RESERVE WAS CREATED TO TAKE CARE OF THE MAJOR MAINTENANCE ACTIVITIES TO BE UNDERTAKEN IN FU TURE AS AND WHEN THEY OCCUR. THE CONTRIBUTION OF THE ASSESSEE TO THE SAID DEPOSIT WAS THEREFORE TREATED AS APPLICATION OF INC OME WHICH HAS ALREADY BEEN EARNED BY THE ASSESSEE IN THE CURR ENT YEAR. ACCORDING TO THE AO THE ASSESSEE HAD INCURRED THE A BOVE EXPENDITURE AND THEREFORE HE DISALLOWED THE AMOUNT OF ` 1 29 86 600/-. ITA NOS..2238/MDS/2006 AND 939 940 & 999 /MDS/2008 8 10. ON BEING AGGRIEVED THE ASSESSEE CARRIED THE MA TTER BEFORE THECIT(A). IT WAS SUBMITTED THAT THE CONTRA CT RECEIPT OF THE CURRENT YEAR INCLUDED AN EXCESS REVENUE WHIC H NEEDED TO BE REDUCED OR REVERSED FOR THE PURPOSE OF TAXATI ON AND THAT THERE IS LIKELIHOOD OF MAJOR REPAIR EXPENSES IN FUT URE. HENCE THE ENTIRE RECEIPTS OF THE ASSESSEE CANNOT BE TAXED IN THE CURRENT YEAR IN VIEW OF THE ACCOUNTING STANDARD 9 ( AS 9) ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS. IT WAS SUBMITTED THAT THE REAL INCOME HAS TO BE TAXED IN T HE HANDS OF THE ASSESSEE AND THE MAJOR EXPENSES TO BE INCURRED IN FUTURE WAS REQUIRED TO BE SPREAD OVER VARIOUS EARLIER YEAR S ALSO. THE LEARNED CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT AS 9 RELIED UPON BY THE ASSE SSEE HAD NO APPLICATION TO THE FACTS OF THE ASSESSEES CASE FOR THE REASON THAT THE ABOVE-SAID AS 9 IS APPLICABLE ONLY TO THOSE CASES IN WHICH THE CONTRACT IS SPREAD OVER FOR MANY YEARS. IN THE PRESENT CASE ALTHOUGH THE AGREEMENT IS ONE BUT THE CONTRACT IS CLEARLY OPERATIVE FROM YEAR TO YEAR BAS IS. FOR EVERY YEAR THE AMOUNT OF THE CONTRACT MONEY PAYABLE BY TH E OWNER IS CLEARLY MENTIONED IN THE AGREEMENT AND AS 9 AS R ELIED UPON BY THE ASSESSEE IS NOT A NOTIFIED ACCOUNTING STANDA RD BY THE ITA NOS..2238/MDS/2006 AND 939 940 & 999 /MDS/2008 9 BOARD AS PRESCRIBED UNDER THE PROVISIONS OF SEC. 145 OF THE ACT. IN VIEW OF THE ABOVE HE CONFIRMED THE ORDER OF THE AO. 11. ON BEING AGGRIEVED THE ASSESSEE CARRIED THE MA TTER BEFORE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE A SSESSEE HAS SUBMITTED THAT CONTRACT IS FOR THE PERIOD 15 YEARS. THE QUANTIFICATION OF FEES IS FOR ONE YEAR. SO THE ENT IRE CONTRACT HAS TO BE TAKEN INTO CONSIDERATION FOR THE PURPOSE OF TAXATION. ONE YEAR IS NOT THE DECISIVE FACTOR. 12. ON THE OTHER HAND THE LEARNED DR STRONGLY SUPP ORTED THE ORDER PASSED BY THE LEARNED CIT(A) AND SUBMITTE D THAT THE ASSESSEE IS RECEIVING THE RECEIPTS ON YEARLY BASIS. THEREFORE ONLY THE YEAR IS THE DECISIVE FACTOR. IT IS SUBMIT TED THAT THE ASSESSEE WANTS TO FOLLOW NEW METHOD OF ACCOUNTING W HICH IS NOT PERMISSIBLE AND IN SUPPORT OF HIS CONTENTION HE RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF CIT V. HINDUSTAN ZINC LTD. (291 ITR 391). HE FURTHER S UBMITTED THAT THE ASSESSEE FOLLOWING THE MERCANTILE SYSTEM O F ACCOUNTING AS 9 HAS NO APPLICATION. FOR THIS CONT ENTION HE RELIED UPON THE DECISIONS IN THE CASE OF CIT V. SHI V PRAKASH JANAK RAJ AND CO. PVT. LTD. (222 ITR 583) (SC) AND IN THE CASE ITA NOS..2238/MDS/2006 AND 939 940 & 999 /MDS/2008 10 OF H.P. MINERAL AND IND. DEVELOPMENT CORPORATION V. CIT (302 ITR 120) (HP). 13. WE HAVE HEARD BOTH THE SIDES PERUSED THE RECOR DS AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. AFTER CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE WE FIND THAT THE AO HAS NOT EXAMINED THE CONTRACT AGRE EMENT ENTERED INTO BY THE ASSESSEE WHICH IS FOR A PERIOD OF 15 YEARS AND HE HAS ONLY CONSIDERED THE QUANTIFICATION OF FE E AS FOR ONE YEAR. WE THEREFORE IN THE INTEREST OF JUSTICE HO LD THAT THIS ISSUE NEEDS DETAILED EXAMINATION BY THE AO. WE THE REFORE SET ASIDE THE ORDER PASSED BY THE LEARNED CIT(A) AN D REMIT THE MATTER BACK TO THE FILE OF THE AO TO EXAMINE THE EN TIRE ISSUE DE NOVO. THEREFORE THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 14. IN THE LIGHT OF OUR FINDING IN PARAGRAPH 13 ABO VE THE GROUNDS NO. 3 TO 3.2 FOR THE ASSESSMENT YEAR 2004-0 5 IN ITA NO. 939/MDS/2008 AND GROUNDS NO. 3 TO 3.2 FOR THE ASSESSMENT YEAR 2005-06 IN ITA NO. 940/MDS/2008 RAI SED BY THE ASSESSEE ARE ALSO ALLOWED FOR STATISTICAL PURPO SES. ITA NOS..2238/MDS/2006 AND 939 940 & 999 /MDS/2008 11 15. GROUND NO. 4 RAISED IN THE ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2003-04 IN ITA NO. 2238/MDS/2006 WA S NOT PRESSED. ACCORDINGLY THE SAME IS DISMISSED AS NOT PRESSED. 16. GROUND NO. 4 RAISED BY THE ASSESSEE IN ITS APPE AL IN ITA NOS. 939 & 940/MDS/2008 IS ALSO DISMISSED AS NOT PR ESSED. 17. GROUND NO. 5 RAISED BY THE ASSESSEE IN ITS APPE AL FOR THE ASSESSMENT YEAR 2003-04 IN ITA NO. 2238/MDS/2006 WA S NOT PRESSED. THE SAME IS THEREFORE DISMISSED AS NOT PR ESSED. 18. GROUND NO. 5 IN THE ASSESSEES APPEALS FOR THE ASSESSMENT YEARS 2004-05 AND 2005-06 IS GENERAL IN NATURE WHICH REQUIRES NO ADJUDICATION. 19. GROUND NO. 7 IN ITA NO. 2238/MDS/2006 IS GENERA L IN NATURE WHICH REQUIRES NO ADJUDICATION. 20. THE ONLY OTHER GROUND RAISED BY THE ASSESSEE IN ITS APPEAL FOR THE ASSESSMENT YEAR 2003-04 IN ITA NO. 2238/MDS/2006 RELATES TO INTEREST U/S 234D OF THE A CT. THE AO HAS CHARGED INTEREST U/S 234D AND THE ASSESSEE H AS RAISED AN ADDITIONAL GROUND BEFORE THE LEARNED CIT(A) AND SUBMITTED BEFORE HIM THAT SEC. 234D CAME INTO EFFECT W.E.F. 1 .6.2003. HENCE THE AO WAS NOT JUSTIFIED IN LEVYING THE INTER EST U/S. 234D FOR THE ASSESSMENT YEAR UNDER APPEAL. FURTHER IT WAS ITA NOS..2238/MDS/2006 AND 939 940 & 999 /MDS/2008 12 SUBMITTED THAT THE SAID PROVISION WAS APPLICABLE ON LY FROM THE ASSESSMENT YEAR 2004-05 ONWARDS. THE LEARNED CIT(A ) CONSIDERED THE ISSUE AND OBSERVED THAT SECTION 234D WAS INSERTED IN THE ACT BY THE FINANCE ACT 2003 W.E.F. 1.6.2003. THERE IS NO MENTION IN THE SAID PROVISION THAT THIS SECTION IS APPLICABLE FROM ASSESSMENT YEAR 2004-05 ONWARDS. S CRUTINY ASSESSMENT OF THE ASSESSEE FOR THE YEAR UNDER CONSI DERATION WAS COMPLETED SUBSEQUENT TO THE INSERTION OF THIS P ROVISION. THEREFORE THE INTEREST DERIVED BY THE ASSESSEE ON THE REFUND RESULTING FROM THE SUMMARY ASSESSMENT IS REQUIRED T O BE WITHDRAWN U/S 234D OF THE ACT FROM THE DATE OF INSE RTION OF THIS PROVISION I.E. FROM 1.6.2003 AND THE GROUND OF APPEAL RAISED BY THE ASSESSEE WAS DISMISSED. HOWEVER HE DIRECTED THE AO TO COMPUTE THE INTEREST U/S. 234D W.E.F. 1.6 .2003. 21. THE ASSESSEE CARRIED THE MATTER BEFORE THE TRIB UNAL. IT WAS SUBMITTED THAT SEC. 234D OF THE ACT APPLIES ONL Y TO THE ASSESSMENT YEAR 2004-05 AND NOT TO ASSESSMENT YEAR 2003- 04. 22. THE LEARNED DR HAS SUBMITTED THAT THE ISSUE IS COVERED BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE ITA NOS..2238/MDS/2006 AND 939 940 & 999 /MDS/2008 13 CASE OF CIT V. INFRASTRUCTURE DEVELOPMENT FINANCE C O. LTD. (340 ITR 580) (MAD). 23. WE HAVE HEARD BOTH THE SIDES PERUSED THE RECOR DS AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IN THE CASE OF INFRASTRUCTURE DEVELOPMENT FINANCE CO. LTD. (SUP RA) THE HONBLE JURISDICTIONAL HIGH COURT HAS HELD THAT .....SINCE THE REGULAR ASSESSMENT HAD BEEN COMPLETED ON MARCH 30 2004 AND SECTION 234D CAME INTO OPERATION ON AND FROM JUNE 1 2003 WHICH WAS PRIOR TO THE COMPLETION OF THE REGULAR ASSESSMENT THE ASSESSEE WAS LIABLE TO PAY INTEREST ON THE EXCESS REFUND AMOUNT RECEIVED AS CONTEMPLATED UNDER SECTIO N 234D OF THE ACT. IT IS NOT THE YEAR OF ASSESSMENT THAT FALLS FOR CONSIDERATION IN SUCH CIRCUMSTANCES BUT THE DATE ON WHICH THE REGULAR ASSESSMENT ORDER HAS BEEN PASSED. IN THE LIGHT OF THE DECISION OF THE HONBLE JURISDI CTIONAL HIGH COURT IN THE CASE OF INFRASTRUCTURE DEVELOPMENT FIN ANCE CO. LTD. (SUPRA) RESPECTFULLY FOLLOWING THE SAME THE GROUND OF APPEAL RAISED BY THE ASSESSEE FOR THE ASSESSMENT YE AR 2003- 04 IS DISMISSED. ITA NOS..2238/MDS/2006 AND 939 940 & 999 /MDS/2008 14 24. IN VIEW OF OUR FINDING IN THE FOREGOING PARA GRAPHS THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED FOR STAT ISTICAL PURPOSE. 25. COMING TO THE REVENUES APPEAL IN ITA NO. 99 9/MDS 2008 THE ONLY GROUND RAISED RELATES TO THE DELETIO N OF THE DISALLOWANCE OF BAD DEBTS AMOUNTING TO ` 35.89 LAKHS. THE FACTS IN BRIEF ARE THAT DURING THE COURSE OF ASSESS MENT PROCEEDINGS THE AO NOTICED FROM THE PROFIT & LOSS A CCOUNHT THAT THE ASSESSEE HAD DEBITED ` 35 89 601/- AS BAD DEBT AND DOUBTFUL DEBTS WRITTEN OFF DURING THE YEAR. AO ASK ED THE ASSESSEE TO EXPLAIN WHY THIS AMOUNT WAS WRITTEN OFF . IN RESPONSE TO THE QUERY RAISED THE ASSESSEE SUBMITTE D BEFORE THE AO THAT DURING THE FINANCIAL YEAR 2004-05 THE C OMPANY HAD WRITTEN OFF ` 35 89 601/- AS BAD DEBT. IT WAS FURTHER EXPLAINED THAT THIS BAD DEBT HAD ARISEN OUT OF THE FACT THAT COMPANYS CUSTOMER M/S. SAMALPATTI POWER CORPORATIO N (P) LTD. HAD WITHDRAWN THE CLAIM OF SERVICE TAX FOR THE FINANCIAL YEARS 2003-04 AND 2004-05. THE AO AFTER CONSIDERIN G THE EXPLANATION OF THE ASSESSEE DISALLOWED THE CLAIM ON THE GROUND THAT THE INTRODUCTION OF NEW SERVICE TAX IS NOT DUE TO ITA NOS..2238/MDS/2006 AND 939 940 & 999 /MDS/2008 15 CHANGE OF LAW AND THE PROVISIONS OF O & M AGREEMENT WOULD NOT APPLY. THE CLAIM OF THE ASSESSEE WAS REJECTED. 26. ON BEING AGGRIEVED THE ASSESSEE CARRIED THE MA TTER BEFORE THE CIT(A). IT WAS SUBMITTED BEFORE THE LEA RNED CIT(A) THAT THE CLAIM OF BAD DEBT WAS BASED ON LETTER DATE D 05-10- 2005 WRITTEN BY M/S. SAMALPATTI POWER CORPORATION ( P) LTD. ASKING THE ASSESSEE TO WITHDRAW THE CLAIM OF SERVIC E TAX ON OPERATION AND MAINTENANCE CHARGES FOR THE FINANCIAL YEARS 2003-04 AND 2004-05. HE FURTHER SUBMITTED THAT AS PER CLAUSE 4.10 OF O & M AGREEMENT ANY LIABILITY ON ACCOUNT O F CHANGE IN LAW IS PAYABLE ONLY IF IT IS REIMBURSED BY TNEB TO M /S. SAMALPATTI POWER CORPORATION (P) LTD. AND AS PER CL AUSE 16.3 OF PPA BETWEEN TNEB AND M/S. SAMALPATTI POWER CORPOR ATION (P) LTD. ANY LIABILITY ON ACCOUNT OF CHANGE IN LAW IS PAYABLE TO TNEB ONLY IF IT EXCEEDS US $ 100 000 PER YEAR. THE ASSESSEES COUNSEL SUBMITTED THAT SERVICE TAX LIABILITY DID NO T EXIST IF IT EXCEEDED US $ 100 000 PER YEAR AND M/S. SAMALPATTI POWER CORPORATION (P) LTD. ASKED THE ASSESSEE TO WITHDRAW THE CLAIM OF SERVICE TAX AND THE SAME WAS WRITTEN OFF AS BAD DEBT. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASS ESSEE ALLOWED THE CLAIM OF BAD DEBTS. ITA NOS..2238/MDS/2006 AND 939 940 & 999 /MDS/2008 16 26. ON BEING AGGRIEVED THE REVENUE HAS CARRIED THE MATTER BEFORE THE TRIBUNAL. THE LEARNED DR SUBMITTED THAT THE CLAIM OF THE ASSESSEE IS NOT ALLOWABLE AS PER SECTION 36( 1)(VII) OF THE ACT. FURTHER HE SUBMITTED THAT THE LEARNED CIT(A) WITHOUT CONSIDERING THE ABOVE PROVISIONS ALLOWED THE CLAIM OF THE ASSESSEE BASED ON THE SUBMISSIONS MADE BY IT. 27. ON THE OTHER HAND THE LEARNED COUNSEL FOR T HE ASSESSEE STRONGLY SUPPORTED THE ORDER PASSED BY THE LEARNED CIT(A) AND SUBMITTED THAT THE CLAIM OF BAD DEBT AMOUNT CLAIMED AS BAD WAS OFFERED FOR EARLIER TAXATION. THEREFORE HE SU BMITTED THAT THE ASSESSEE IS ELIGIBLE TO CLAIM BAD DEBT. 28. WE HAVE HEARD BOTH THE SIDES PERUSED THE RECOR DS AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. NEITHER THE AO NOR THE CIT(A) HAS CONSIDERED SECTION 36(1)(VII) OF THE ACT. WE THEREFORE SET ASIDE THE ORDER PASSED BY THE LE ARNED CIT(A) AND REMIT THE MATTER BACK TO THE AO WITH THE DIRECTION TO EXAMINE SEC. 36(1)(VII) OF THE ACT AND DECIDE TH E ISSUE AFRESH IN ACCORDANCE WITH LAW. 29. IN THE CIRCUMSTANCES THE REVENUES APPEAL IS A LLOWED FOR STATISTICAL PURPOSES. ITA NOS..2238/MDS/2006 AND 939 940 & 999 /MDS/2008 17 30. IN THE RESULT ALL THE THREE APPEALS FILED BY T HE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES AND THE REVENUES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON MONDAY THE 30 TH OF JULY 2012 AT CHENNAI. SD/- SD/- (DR. O. K. NARAYANAN) ( V.DURGA RAO ) VICE PRESIDENT JUDICIAL MEMBER CHENNAI DATED THE 30 TH JULY 2012. H. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE