2013 (8) TMI 660 - AT - Income Tax

Computation of book profit - MAT u/s 115JA - Treatment of interest income for the purpose of section 80IA and thereafter book adjustment u/s 115JA - Deletion of business income - Held that - The Assessing Officer, while working out the deemed income under S.115JA treated an amount of Rs.3,52,98,854 shown as other income as not earned from business of power generation. It is the contention of the assessee that this income is part of the business of the assessee eligible for deduction under S.80IA, so that the same can be excluded from the provisions of S.115JA as well. The Assessing Officer did not agree and before the CIT(A), the same contentions were reiterated. However, it was also submitted that an amount of Rs.17,75,951 was earned on deposits made for procuring spares which has a direct nexus with the amount borrowed - It is already on record that the amount of Rs.17,75,951 was earned from the deposits made from the borrowals on which interest was also paid. Therefore, there was a nexus with the interest paid to the interest earned - Following decision of Lalsons Enterprises V/s. DCIT 2004 (2) TMI 294 - ITAT DELHI-E - Decided against Revenue. Deletion of addition made by A.O. - Foreign exchange fluctuations - Held that - The assessee has furnished the return admitting loss at Rs.9,91,61,190 in the re-assessment proceedings. It is also noticed that the assessment was reopened under S.148 issuing notice on 29.01.2003 for the purpose of bringing to tax the income under the MAT provisions of S.115JA. Since this issue of deduction of foreign exchange claim was also crystalised in the original assessment, and since it was not an issue for reopening the assessment, we are of the opinion that the order of the CIT(A) is justified. Further, the assessee has already offered the same amount as income in assessment year 2002-03 - Decided against Revenue. Deduction u/s. 115JA(2)(iv) - Deduction u/s 80IA - Income from business of power - Held that - It is the assessee s income which has various components for working out the purchase price of energy from the assessee by the AP Transco and one of the components was capital cost of the power project. Since the amount accounted for as income was component of the enhanced capital cost which is directly related to sale of energy, we do not see any reason to treat it as other income . The Assessing Officer s objection that it has not been taken to Profit & Loss Account is not correct, as the assessee has adjusted under the head prior period adjustments and has offered as income during the year. This was also accepted in the regular computation of income - Decided against Revenue. Reopening of assessment - Held that - reopening of the assessment after four years from the end of the assessment year is bad in law - no new information has been brought on record and the entire information having been placed on record before the Assessing Officer in the course of original assessment, the opinion of the Assessing Officer now can only be considered as change of opinion based on the order for assessment year 2003-04. Since there is no failure on the part of the Assessing Officer in disclosing the material facts at the time of completion of assessment, the reopening after four years from the end of the assessment year, is certainly not as per the provisions of S.147, which empowers the Assessing Officer to reopen only if the conditions are satisfied. Since the proviso to S.147 is clearly applicable - Decided against Revenue.

Issues Involved:
1. Exclusion of Rs.17,75,851 from other income for computation of book profit.
2. Deletion of an amount of Rs.3,10,20,000 while computing income under regular provisions.
3. Non-allowance of deduction of Rs.9,36,09,750 under S.80IA while computing income under S.115JA.
4. Validity of reopening assessment for the assessment year 2001-02.

Detailed Analysis:

1. Exclusion of Rs.17,75,851 from Other Income for Computation of Book Profit:
The issue in grounds No.2 and 3 was whether Rs.17,75,851, shown as part of other income of Rs.3,52,98,874, should be excluded from the computation of book profit. The Assessing Officer argued that this amount was not earned from the business of power generation and thus should not be excluded under S.115JA. The assessee contended that this income was eligible for deduction under S.80IA. The CIT(A) found a direct nexus between the interest earned on deposits and the interest paid on borrowings, following the Special Bench decision in Lalsons Enterprises. The Tribunal upheld the CIT(A)'s decision, referencing the Supreme Court's confirmation in ACG Associated Capsules P. Ltd. v. CIT, and rejected the Revenue's grounds.

2. Deletion of Rs.3,10,20,000 While Computing Income Under Regular Provisions:
Ground No.4 pertained to the deletion of Rs.3,10,20,000, which the assessee claimed as a deduction for foreign exchange fluctuations offered as income in the prior year. The Assessing Officer did not allow this deduction, arguing that the assessee had already offered this amount as income in the earlier year. The CIT(A) noted that the foreign exchange debt repayment was to be borne by APSEB and that the assessee had accounted for this gain in the assessment year 2002-03. The Tribunal agreed with the CIT(A), emphasizing that the issue was crystallized in the original assessment and was not a reason for reopening the assessment. Thus, the Tribunal upheld the CIT(A)'s order and rejected the Revenue's ground.

3. Non-Allowance of Deduction of Rs.9,36,09,750 Under S.80IA While Computing Income Under S.115JA:
Grounds No.5 and 6 concerned the non-allowance of a deduction of Rs.9,36,09,750 under S.80IA while computing income under S.115JA. The Assessing Officer disallowed this amount, claiming it was not related to the business of power generation. The CIT(A) found that the additional revenue was derived from the business of power, including components like foreign exchange variation recovery. The Tribunal upheld the CIT(A)'s decision, noting that the amount was part of the enhanced capital cost directly related to the sale of energy and should not be treated as 'other income.' The Tribunal rejected the Revenue's grounds.

4. Validity of Reopening Assessment for the Assessment Year 2001-02:
The Revenue challenged the CIT(A)'s decision to invalidate the notice issued under S.148 for reopening the assessment after four years. The CIT(A) held that the reopening was invalid as the assessee had disclosed all material facts during the original assessment. The Tribunal agreed, stating that the reopening was based on information already on record and constituted a change of opinion, which is not permissible under S.147 after four years. The Tribunal upheld the CIT(A)'s order and rejected the Revenue's grounds.

Conclusion:
Both appeals by the Revenue were dismissed. The Tribunal upheld the CIT(A)'s orders on all issues, including the exclusion of Rs.17,75,851 from other income, deletion of Rs.3,10,20,000, non-allowance of deduction of Rs.9,36,09,750, and the invalidity of reopening the assessment for the assessment year 2001-02. The Tribunal emphasized the importance of direct nexus, proper disclosure of material facts, and adherence to legal provisions under S.147 and S.115JA.

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