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TMI Blog2020 (1) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) has erred in law by deleting of additions on account (1) Additional depreciation of Rs. 77,78,79,369/, (2) ERPC charges of Rs. 15,00,000/- and (3) disallowance u/s 14A of Rs. 97,37,654/- and thereby holding that the AO was not justified in making the disallowance as whatever expenses claimed by the appellant are already disallowed by the AO separately". 3. We have heard the arguments of both the sides and also perused the relevant material available on record. It is observed that even though a single ground is raised by the Revenue in its appeal, the same involves three issues relating to the deletion by the ld. CIT(Appeals) of the additions made by the Assessing Officer on account of additional depreciation, ERPC charges and disallowance under section 14A. As agreed by the ld. Representatives of both the sides, all these issues are squarely covered in favour of the assessee by the decision of this Tribunal rendered in assessee's own case for A.Y. 2010-11 and 2011-12 vide its common order dated October 31, 2017 passed in ITA Nos. 871, 872, 1001 & 1002/KOL/2015. A copy of the said order is placed on record before us and perusal of the same shows that the issue relating to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not a precondition for the grant of additional depreciation under section 32(1)(iia). It was further held that the amendment brought about in section 32(1)(iia) by the Finance Act 2012 with effect from 01.04.2013 to include the business of generation of distribution of power to give benefit of additional depreciation was only clarificatory. As submitted by the learned counsel for the assessee, the decision of Bangalore Bench of this Tribunal in the case of Hutti Gold Mines Co. Ltd. (supra) has been upheld by the Hon'ble Karnatake High Court (IT Appeal No 08 of 2014 dated 16.09.2014) by holding that section 32(1)(iia) of the Income Tax Act, 1961 includes the business of generation and distribution of power to avail the benefit of additional depreciation. 8. The learned counsel for the assessee has also relied on the decision of Hon'ble Madras High Court in the case of CIT vs Hi Tech Arai Ltd. 321 ITR 477 wherein the assessee company had set up two windmills in addition to already exceeding four windmills and thereby increased its generation activity by above 50%. The assessee company was engaged in the business by manufacture of oil-seeds, moulded rubber parts etc. and it was usi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o observed that the issue relating to the deletion by the ld. CIT(Appeals) of the addition made by the Assessing Officer on account of ERPC charges was also decided by the Tribunal dated October 31, 2017 in ITA Nos. 871, 872, 1001 & 1002/KOL/2015 in favour of the assessee in A.Y. 2010-11 vide paragraph no. 13 as under:- "13. As regards the issue involved in ground no 2 of the revenue's appeal for A.Y. 2010-11 relating to the deletion by the Ld. CIT (A) of the disallowance made by the A.O. under section 40(a)(ia) on account of payment of ERPC charges without deduction of tax at source, it is observed that the relief on this issue was allowed by the Ld. CIT (A) to the assessee in the year under consideration i.e. A.Y. 2010-11 by relying on the order of his predecessor in assessee's own case for A.Y. 2008-09. As agreed by the learned representatives of both the sides, the decision rendered by the Ld. CIT (A) giving relief to the assessee on the similar issue in A.Y. 2008-09 has been upheld by the Tribunal vide its order dated 04.05.2016 passed in ITA No. 1428/Kol/2013. This issue thus now stands squarely covered in favour of the assessee by the decision of this Tribunal in assessee' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by applying Rule 8D is not sustainable. We, therefore, delete the disallowance made by the A.O. under section 14A read with Rule 8D and sustained by the Ld. CIT (A). Ground no. 3 of the assessee's appeal is accordingly allowed while ground no 1 of the revenue's appeal for A.Y. 2010-11 is dismissed". The aforesaid decision rendered for A.Y. 2010-11 was followed by the Tribunal to decide the similar issue involved in assessee's case for A.Y. 2011-12 vide its order dated October 31, 2017 (supra). 6. As all the three issues involved in Revenue's appeal for the year under consideration as well as all the material facts relevant thereto are similar to that of A.Ys. 2010-11 and 2011-12, we respectfully follow the order of the Coordinate Bench of this Tribunal for the said years and uphold the impugned order of the ld. CIT(Appeals) giving relief to the assessee on these issues. The appeal of the Revenue is accordingly dismissed. 7. Now we shall take up the assessee's appeal being ITA No. 150/KOL/2018. Although as many as six grounds are raised by the assessee in this appeal, the common solitary issue involved therein relates to the addition of Rs. 21,48,33,731/- made by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rse of appellate proceedings before the ld. CIT(Appeals), the following submission was made by the assessee in writing in support of its case on this issue:- "60. For construction of capital asset required for electrification in the rural areas, Government of India sanctioned a project called Rajiv Gandhi Gramin Vidyutikaran Yojana (RGGVY). This is plan scheme of the Government of India. 61. The said scheme was initiated Wholly and exclusively for development of Rural Electricity Infrastructure and Household Electrification. The main emphasis under the scheme was given to effect electricity connection to all rural household belonging to Below Poverty Line (BPL). 62. Rural Electrification Corporation Limited (RECL) is acting as Nodal agency of the project. State owned power utilities and Central Public Sector Undertakings (CPSUs) are acting as implementing agencies of the RGGW Project. 63. Funding of the project is done by Government of India through the Nodal agency RECL. 64. The entire fund of the project was available to the implementing agencies from Government of India through Rural Electrification Corporation Limited (REEL). 65. 90% of the cost of the project is avai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeded to confirm the addition made by the Assessing Officer on account of interest for the following reasons given in his impugned order:- "I have considered the material before me. It is observed that there is no dispute on the fact the appellant company was maintaining its accounts on mercantile basis, and the impugned interest income of Rs. 21,48,33,731/- had arisen and accrued to the appellant for the relevant financial year ending 31.03.2012. The appellant has mainly argued that the interest income was not taxable being capital receipts in its hands and alternatively was not real income on account of diversion of income at source. It is not in dispute that the appellant company had invested the amount of grant received by it in fixed deposits with commercial banks, on which interest income of Rs. 21,48,33,731/- was received/accrued during the previous year relevant to the AY 2012-13 under consideration. In the appellant's case, no material was placed on record by the appellant that there was any surrender of the impugned interest income to the Central Government or the sanctioning authority by the company. The appellant has stated that as per the terms and conditions of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the interest income earned by the assessee from the taxation under the Income Tax Act. On the issue of diversion of income, the factors to be considered were enunciated by the Hon'ble Apex Court in the case of Moti Lal Chhadami Lal Jain v. Commissioner of Income-tax in [199.1] 56 TAXMAN 4A (Se), wherein it was held that, "Obligations, no doubt, there are in every case, but it is the nature of the obligation which is the decisive fact. There is a difference between an amount which a person is obliged to apply out of his income and an amount which by the nature of the obligation cannot be said to be a part of the income of the assessee. Where by the obligation income is diverted before it reaches the assessee, it is deductible; but where the income is required to be applied to discharge an obligation after such income reaches the assessee, the same consequence, in law, does not follow. It is the first kind of payment which can truly be excused and not the second. The second payment is merely an obligation to pay another a portion of one's own income, which has been received and is since applied." The appellant has stated that as per the terms and conditions of the RGG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een issued just to take out the interest income earned by the assessee from the taxation under the Income Tax Act. The A/R has relied upon the ratio of decision of the Calcutta High Court in CIT v. A. Tosh & Sons Pvt. Ltd. (1987) 166 ITR 867 (Cal), which is found to be distinguishable as the facts of the said case are found to be distinct from the facts and circumstances of the appellant's case wherein the interest earned on fixed deposit made out of surplus left with the assessee out of the taxes and rebate raised on behalf of foreign buyers and paid to the Government was held as not taxable in its hands. However, in the appellant's case, the interest income has not been paid to the Central Government by the appellant company. Thus, the ratio of the said decision is found to be not applicable to the appellant's case. In the case of CIT -vs.- Sunil J. Kinariwala (2003) 259 ITR 10, the Apex Court, after referring to the decisions of the Privy Council in the case of Raja Bejoy Singh Dudhuria -vs. - CIT (1933) 1 ITR 135 (PC) and P.C. Mullick -vs.- CIT (1938) 6 ITR 206 (PC); of the Apex Court in the case of Sitaldas Tirathdas (supra), K.A. Ramachar -vs.- CIT (1961) 42 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en resulted or accrued to the assessee. After debiting the debtors account and not reversing that entry but taking the interest merely in suspense account cannot be such evidence to show that no real Income has accrued to the assessee or been treated as such by the assessee. (8) The concept of real income is certainly applicable in judging whether there has been income or not but, in every case, it must be applied with care and within well-recognized limits. In the case of Kedarnath Jute Mfg. Co. Ltd. (1971) 82 ITR 363 (Se), the Hon'ble Apex Court has held that whether the assessee is entitled to a particular deduction or not will depend on the provision of law relating thereto and not on the view which the assessee might take of his rights; nor can the existence or absence of entries ill his books of account be decisive or conclusive in the matter. In tile case of Kedarnath Jute Mfg. Co. Ltd. (supra) the Apex Court has held the provision of law relating thereto and not on the view which the assessee might take of his rights; nor can the existence or absence of entries in his books of account be decisive or conclusive m the matter. Therefore, I am of the view that there is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the amount of interest after its receipt in the hands of the appellant company. In view thereof, I am of the opinion that the appellant's alternative claim of the theory of real income is also not applicable to the facts of the present case inasmuch as the interest has accrued to the appellant which it had retained as income in its own hands, and the interest income has arisen from the fixed deposits are liable to be taxed as income in the hands of the appellant company as held by the Hon'ble Supreme Court in. the case of State Bank of Travancore, (supra). Therefore, it is held that the A.O was correct in treating the impugned amount of interest income Rs. 21,48,33,731/- as revenue receipts in the hands of the appellant company, and addition thereof is confirmed. Thus, ground no. 5 & 6 are not allowed". 11. The ld. Counsel for the assessee invited our attention to the copy of letter dated 25.09.2008 issued by the Government of India, Ministry of Power while releasing the funds to Rural Electrification Corporation Limited (REC) under Rajiv Gandhi Gramin Vaidutikiran Yojona (RGGVY) and pointed out that as per paragraph no. 5 of the said letter, REC and Implementing Agenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said interest thus was not in the nature of income earned by the assessee and as per the specific terms of the Government of India, it was diverted even at the inception by an overriding charge in favour of the Government of India. In support of this contention, he relied on the decision of the Hon'ble Calcutta High Court in the case of CIT -vs.- A. Tosh & Sons Pvt. Limited [166 ITR 867], wherein it was held that when it was clear under the agreements that the assessee would be entitled to receive the excise duty rebate and customs duty drawback only on the account of the foreign buyers and not on its own account and the assessee was also under an obligation under the agreements to remit the said amounts received to the foreign buyers, It, followed that the said amounts never reached the hands of the assesese as its own receipt or income and the assessee had received the same on behalf of its foreign buyers. It was held that the said amounts were never the real income of the assessee as they were diverted even at the inception by an overriding title in favour of the foreign buyers. 12. The ld. D.R., on the other hand, submitted that the entire correspondence of the Ministry of Pow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he earlier correspondence, which is sufficient to show that the assessee-company was involved in the Project as Implementing Agency and the correspondence of REC and Government of India, Ministry of Power relied upon by him is a relevant evidence to decide the issue under consideration involved in the assessee's case. 14. We have heard the arguments of both the sides and also perused the relevant material available on record. It is observed that the Rural Electrification Programme was implemented by the Government of India, Ministry of Power through Rural Electrification Corporation Limited (in short REC) called Rajiv Gandhi Gramin Vidyutikaran Yojana and for implementation of the same, various Implementing Agencies were appointed by the REC including the assessee-company. While releasing funds for the said Programme in the form of capital subsidy vide letter dated 25.09.2008, it was specifically stipulated by the Government of India, Ministry of Power that a separate account will be maintained in respect of the capital subsidy and REC and Implementing Agencies will keep the funds in interest bearing deposits of Nationalised Banks till the payments are made to the Contracting Agen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decided to recover the amount of interest in question earned by the REC as well as the Implementing Agencies including the assessee-company and the same was indeed remitted back by the assessee-company finally to the Government of India, Ministry of Power. 16. At the time of hearing before us, the ld. D.R. has contended that the assessee-company was an Executing Agency and not the Implementing Agency. However, as rightly contended by the ld. Counsel for the assesese, there is no difference between the Implementing Agency and the Executing Agency and both of them are one and the same. Moreover the fact that the relevant correspondence meant for Implementing Agencies was addressed by the Ministry of Power, Government of India as well as REC specifically to the assessee-company clearly establishes that the assessee-company was an Implementing Agency and the interest in question received by it for and on behalf of the Government of India, Ministry of Power and subsequently remitted back was in the capacity as an Implementing Agency. 17. The ld. D.R. has relied on Accounting Standard 12 in support of the Revenue's case on the issue under consideration. A careful perusal of the said Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the ld. D.R. actually supports the case of the assessee, inasmuch as, the assessee-company as per the letter dated 25.09.2008 issued by the Government of India, Ministry of Power while releasing the funds was under an obligation to adjust the interest amount in question against the capital subsidy receivable from the Government and the said interest amount having been finally remitted back by it entirely to the Government of India, Ministry of Power, it cannot be said to have accrued to the assessee as income and it was a case of diversion of interest income at source. 19. It is observed that the decision of the Hon'ble Calcutta High Court in the case of CIT -vs.- A. Tosh & Sons Pvt. Limited (supra) relied upon by the ld. Counsel for the assessee also fully supports the case of the assessee. In the said case, the assessee had exported tea to foreign countries and under the agreements entered into with the foreign buyers, any refund or rebate of taxes and duties payable by the foreign buyers was liable to be remitted to them by the ld. CIT(Appeals). In these facts and circumstances of the case, it was held by the Hon'ble Calcutta High Court that the amount of rebate and duty dr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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