2014 (5) TMI 1029 - AT - Income Tax

Income or not - Whether excise duty refund claim made by the assessee is income under the Act u/s 28(iii) - Held that - CIT(Appeals) held that when the business of the assessee is not yet set up then the question on assessing income of the assessee company to the Previous Year does not arise. Even otherwise the excise duty on the question was of material used for construction/erection of the project, which is in the capital filed and the refund of the same goes to reduce the cost of the assessee. Hence we uphold the order of the First Appellate Authority and dismiss this appeal by the Revenue. - Decided against Revenue.

Summary

Issues Involved:
1. Appeal against the order of the Ld.CIT(Appeals)-IX, New Delhi for the Assessment Year 2009-10.
2. Whether the excise duty refund claim made by the assessee is income under the Act u/s 28(iii).

Issue 1: Appeal against the order of the Ld.CIT(Appeals)-IX, New Delhi for the Assessment Year 2009-10:

The appellant company, a joint venture of Tata Power Company Limited and Damodar Valley Corporation, was incorporated to operate and maintain electric power generating stations. The return of income for the A.Y. 2009-10 declared an income of RS.5,17,61,849/-. The assessment was completed u/s 143(3) by the AO at an income of RS. 17,63,90,8501-, making an addition of RS. 12,46,29,000/-. The Revenue appealed against the deletion of this addition by the Ld.CIT(A). The grounds of appeal included contentions that the deletion of the addition was erroneous, contrary to facts and law, and that there was no requirement for the business to be set up or commenced during the year for assessing income u/s 28(b)(iii) of the Act. The Revenue argued that the setting up of the business and commencement of commercial operation are distinct concepts and that the factual aspect of setting up the business should have been verified by the Assessing Officer. The ITAT, after considering all aspects, upheld the order of the Ld.CIT(A) and dismissed the appeal of the Revenue.

Issue 2: Whether the excise duty refund claim made by the assessee is income under the Act u/s 28(iii):

The appellant company was setting up a thermal power generation plant during the relevant assessment year. The company paid excise duty on materials used for construction, and a refund claim of RS. 12,46,29,0001- was lodged with the DGFT. The DGFT admitted a claim of RS. 10,59,34,9301- to be reimbursed to the company. The Ld.CIT(A) held that since the business was not yet set up, the question of assessing income did not arise. Additionally, the excise duty in question was on materials used for construction/erection of the project, which is in the capital field, and the refund would reduce the cost of the assessee. The ITAT concurred with the Ld.CIT(A) and dismissed the appeal by the Revenue. The Cross Objection filed in support of the Ld.CIT(A) was also dismissed as the Ld.Counsel for the assessee did not press on it. In conclusion, both the appeal of the Revenue and the C.O. of the assessee were dismissed by the ITAT.

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