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TMI Blog2012 (8) TMI 423X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA No.508/Hyd/2005, ITA No.299/Hyd/2008 - - - Dated:- 11-5-2012 - D Karunakara Rao, Saktijit Dey, JJ. For Appellant: Shri T Lucas Peter For Respondent: Shri V Sivakumar ORDER Per: D Karunakara Rao: These appeals-one by the Department and the other by the assessee- are directed against the orders of the CIT(A) II, Hyderabad dated 4.2.2005 for the assessment year 2000-01 and of the CIT(A)-III, Hyderabad dated 22.1.2008 for the assessment year 2004-05. Since common issues are involved, these appeals are being disposed off with this common order for the sake of convenience. Assessee s Appeal: ITA No.299/Hyd/2008 : Assessment Year 2004-05. 2. At the outset, learned counsel for the assessee submitted that grounds No.1 and 5 are general and they do not call for specific adjudication. They are as such rejected. 3. Ground of appeal No.2, together with its sub-grounds (a) to (c) reads as follows- 2(a) The Commissioner of Income-tax(Appeals) grossly erred in confirming the action of the AO in making addition of Rs 2,25,25,104/- representing Income tax receivable from AP TRANSCO as income for the AY 2004-05 ignoring the submissions of the appellant. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... request of the assessee s counsel for setting aside the matter to the file of the assessing officer. In this regard, we have examined the additional evidences furnished before us. These papers constitute the correspondence that took place between the assessee and the APTRANSCO. Further, there is categorical submission by the Ld Counsel that the matter is sub-judice unlike the way the CIT(A) mistakenly concluded stating that there is no dispute on the issue of reimbursebility of the MAT paid by the assessee. Considering the nature of the papers filed before us, we find that the said documents do not require any investigation into the basic facts of the issue as they are merely the correspondence between the assessee and the APTRANSCO. In fact, these documents will help in arriving at a right decision regarding the accrual or otherwise of the receivable. Considering the decision of the Hon ble Supreme Court in the case of NTPC (299 ITR 383), we are of the opinion that the papers filed before us should be admitted. 9. The other limb of the prayer relates to is the request for remanding to the AO is to be allowed or not. In this regard, we find that the same should be considered fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for redeciding the issue, duly considering, among other things, the additional evidence filed before us, in accordance with law, and after giving reasonable opportunity of hearing to the assessee. 5. Ground No.3, together with its sub grounds, reads as follows- 3. a) The Commissioner of Income-tax(Appeals) grossly erred in confirming the action of the Assessing officer in treating excess interest of Rs.2,46,34,667/- collected from A.P. Transco as income of the Appellant ignoring its submissions. b) The Commissioner of Income-tax(Appeals) ought to have seen that excess interest collection has to be paid back to A.P. Transco as soon as A.P. Transco agrees for reimbursement of prepayment premium and other expenditure incurred in connection with raising of loans at lower interest rates, and hence the differential interest of Rs.2,46,34,667/- cannot be treated as income of the Appellant. c) The Commissioner of Income-tax(Appeals) ought to have seen that during the financial year 2004-05 A.P. Transco has accepted for payment of prepayment of premium and other expenses and in fact adjusted the same against the interest excess paid earlier to the Appellant company and there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss interest in the year under consideration. In view of the same, assessee raised the present appeal before us on this issue. 8. The learned counsel submitted at the outset that as is evident from the Power Purchase Agreement entered into by the assessee with APSEB(now TRANSCO partly), there are different components in power tariff to be charged by assessee to AP TRANSCO. One of such items is interest on loans raised as per Article 3.2.1 of Power Purchase Agreement. Narrating the factual background of the case, he submitted that the said loans were borrowed from different institutions at different rates ranging from 10.2% to 21.65% in the years 1994-95 to 1997-98. Since then, the market rates of interest have come down and therefore, the assessee negotiated with the said institutions for prepayment of these loans which was accepted by them after negotiations, subject to payment of certain amount as prepayment premium. The assessee has repaid the original loans by availing loans from various other institutions at lower rates of interest because of which AP TRANSCO would be benefitted because they have to pay the assessee less interest as part of lower tariff than what they were pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee in trust on account of AP TRANSCO. In this view of the matter, he submitted that the addition of Rs.2,46,34,667 made by the assessing officer and confirmed by the CIT(A) be deleted. 10. It is also submitted that while bringing to tax such excess interest received, the assessing officer has excluded the same from eligible profits for the purpose of computing deduction under S.80IA of the Act. It is submitted that for the subsequent and earlier years, the Department has rightly treated the interest receivable as income from eligible business for the reason that the interest receivable is an integral part of the power purchase tariff for sale of power generated by the assessee as per the Power Purchase Agreement and therefore, in case it is held that the excess interest of Rs.2,46,34,667 is assessable as income, the same may be held as eligible for deduction under S.80IA. 11. On the other hand, the learned Departmental Representative for the Revenue relied entirely on the speaking order of the CIT(A) for the assessment year 2002-03, where identical issue was raised in the appeal for that year also 12. We heard both sides and perused the orders of the Revenue and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14. The assessee in the written submissions has submitted that AP TRANSCO has adjusted the entire excess interest collected by the assessee amounting to Rs.2,46,34,667 from its bills raised for the tariff period from 10.5.2004 to 9.6.2004. If the excess interest, in fact, has been paid by way of adjustment to the AP TRANSCO as claimed by the assessee, then deduction of the said amount has to be allowed to the assessee in the year in which it was paid. We direct the assessing officer to verify the claim of the assessee in that behalf, and allow consequential relief in the relevant year. Subject to this adjustment for consequential relief, if any in the relevant year, impugned addition in the year under appeal is confirmed . 15. In connection with Ground No.4 with its sub-grounds (a) to (f), learned counsel for the assessee submitted that the assessee was denied benefit of deduction under S.80IA of the Act, in relation to (a) Refund of excess insurance premium (b) Income tax receivable (c) Excess interest received; (d) Gain on account of foreign exchange variation; (e) Insurance claims received The assessing officer and the CIT(A) are of the opinion that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isk Insurance policy taken by the assessee form United India Insurance Co. Ltd. contains a provision vide memo2 return of premium". It may thus be seen that the refund arises on account of recomputation of premium under the policy after the actual profit of the year are ascertained. It is submitted that the decision of CIT(Appeals) may be reversed. 5.4 In this connection, it is further brought to the kind notice of the Hon ble ITAT that identical issue has been adjudicated upon for Asst. Year 2002-03 in the assessee s own case vide consolidated order in ITA Nos.1659 and 1660/H/08 and 1579 and 1580/H/08 dated 30-03-2012 wherein the main issue of eligibility of the impugned mounts for deduction u/s. 80IA has been dealt in para Nos.17 to 21 of the order. Income Tax receivable: 5.4 The Assessing officer as well as the Commissioner of Incometax(Appeals) held that income Tax receivable is not income derived from the business of generation of power for purposes of computing deduction u/s. 80IA,. In this connection it is submitted that the power purchase agreement the assessee entered into with APSEB contains an article No.3 relating to TARIFF. Tariff, which is the rate for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treated as eligible for deduction u/s. 80IA. The assessee relies on the decision of the ITAT, Mumbai Bench G in the case of Rennaissance Jewellery (P)Ltd. Vs. ITO, Ward 8(3)(3) Mumbai 101 ITD 380 MUM in this regard. The assessee therefore pelads that the decision of CIT(A) may be reversed. 17. We heard both the parties. The main question before us is whether the specific items of receipts mentioned at (a) to (f) above. constitute the income derived from the industrial undertaking, eligible for deduction under S.80IA of the Act, or not. Despite the finding of the Revenue authority with regard to other receipts that they are not derived from the business of the undertaking, there is no clarity as to whether the said items of income fall as operational income or ineligible ancillary profit, which is the expression used by the Apex Court in the case of Liberty India (supra). We find that the judgment of the Apex Court in the case of Liberty India (supra) was not in existence at the relevant point of time. In this view of the matter and in view of the mutually agreed position, we are of the opinion that this issue must also be set aside to the file of the assessing officer for wan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21. On the other hand, the learned counsel for the assessee clarified stating that the assessee earned interest income of Rs.5,45,85,383 which also includes interest earned on fixed deposits. Learned counsel mentioned that the interest expenditure of Rs.22,91,582 incurred by the assessee is directly relatable to the interest earned of Rs.5,45,85,383. On giving a finding as to the nature of the said interest, he submitted that the CIT(A) rightly allowed netting of interest payment against interest earnings relying on the Special Bench decision in the case of Lalson Enterprises (supra). 22. On hearing the parties, we find that the CIT(A) rejected the assessee s claim of not only it being a business receipt/expenditure and in the alternative, he granted relief as per the provisions of S.56 of the Act. In our opinion, the decision of the CIT(A) is fair and it does not call for any interference. Accordingly, ground No.2 of the Revenue is dismissed. 23. Regarding the issue raised in ground HNo.4 of the appeal, relating to prior period expenditure, both the parties have agreed with the view that this issue has to be set aside to the file of the assessing officer for examining the iss ..... X X X X Extracts X X X X X X X X Extracts X X X X
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