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TMI Blog2025 (1) TMI 272X X X X Extracts X X X X X X X X Extracts X X X X ..... he Hon ble NCLAT proceeding in the case of RGPPL, application of AS-9 is justified where the revenue recognition is based on the actual interest received during the year under consideration which is NIL during the impugned year. To corroborate further the assessee being a government entity is subjected to statutory audit by Comptroller and Auditor General of India (CAG) along with supplementary audit which has approved the revenue recognition adopted by the assessee in considering AS-9 to be appropriate in case of uncertainties arising subsequent to preparation of the balance sheet. Assessee relied on the decision of M/s. MMTC Ltd. [ 2024 (2) TMI 785 - ITAT DELHI] to substantiate that Accounting Standard AS-9 on revenue recognition issued by ICAI in case of uncertainty is most appropriate. It is also pertinent to point out that the ld. AO has also not brought on record any fact to establish that the assessee has received the impugned amount during the year under consideration in his remand report. The revenue has nothing to controvert assessee s contentions. Decided in favour of assessee. - Shri. Amarjit Singh, AM And Ms. Kavitha Rajagopal, JM For the Assessee : Shri. Himanshu Ga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lender to RGPPL and the loan given to DPC was settled as per the settlement plan. The assessee submits that it has no employees since inception as it was set up only for a limited purpose. 5. The assessee s case was selected for scrutiny for A.Y. 2010-11 to 2013-14 were addition u/s. 43B was made by the learned Assessing Officer (ld. A.O. for short) by disallowing interest paid on funded interest loan and similar addition was also made for A.Y. 2006-07 to 2009-10 in the reassessment proceeding. In an appeal before the Tribunal, the coordinate bench gave relief to the assessee for A.Y. 2006-07 which was then followed by the ld. CIT(A) for the subsequent assessment years from 2007-08 to 2013-14. The coordinate bench for A.Y. 2010-11 and 2011-12 had remanded the matter back to the ld. AO and as there was no representation on behalf of the assessee, the entire interest on funded loan were disallowed. The ld. CIT(A) for A.Y. 2007-08 to 2009-10 and 2012-13 to 2013-14, vide order dated 31.03.2022 gave relief to the assessee by accepting the returned income. 6. In the above background, the assessee s case was reopened by the ld. AO vide notice u/s. 148 dated 30.03.2021 based on the inform ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO also reopened the assessment of AY 2006-07 to 2009-10 and made similar additions. The ITAT Mumbai granted relief for AY 2006-07 and CIT Appeal granted the relief to assessee from AY 2007-08 to 2013-14. The department preferred an appeal before ITAT. Meanwhile assessee bank accounts and fixed deposits were attached by the department and assessee Substantial amounts (in Cores) of Refunds are adjusted against the demands raised in reopening cases as also in cases scrutinized assessment under section 143 (3). Assessee being a Government Company formed for a special purpose, the Income Tax department had not cooperated and made huge arbitratory additions and its bank accounts were seized, FD were encashed and even funds were directly collected from its debtors and due refunds were not released despite reliefs granted by appeal authority in all cases. Resulting assessee could not represent before ITAT wherein AO had preferred appeal against order of the first appellate authority. Further it could not appoint persons for day to day services as well to pay Statutory Auditors. The Hon'ble tribunal has remanded back the appeal to CIT (A) for AY 2010-11. And for other years the matte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of buy-out/settlement of the debt/claims of offshore stakeholders in relation to the Dabhol Power Project (DPP) through Ratnagiri Gas and Power Pvt Ltd. (RGPPL). GPICL never had undertaken any activity apart from the specific purpose for which it was set up. RGPPL was incorporated in 2005 by NTPC, GAIL, MSEB Holding Co Ltd (MSEB) (representative of Govt. of Maharashtra) and Indian Financial Institutions/Banks, under the aegis of Govt. of India (GoI), to acquire the partially completed project assets of DPP. Equity Investments were made by NTPC, GAIL, MSEB and Indian lenders. The debt was raised from IDBI, SBI, ICICI, Canara Bank, IFCI and Gas and Power Investment Company Ltd (GPICL), promoted by IDBI, SBI, ICICI, Canara Bank and IFCI. GPICL granted loan of Rs. 1552.53 crore to RGPPL by raising funds through Redeemable Non-Convertible Debenture (NCD) of Rs. 1309.25 crore and balance by way of loans from lenders (IDBI, SBI, ICICI, Canara Bank and IFCI) to the extent of Rs. 243.28 crore. GPICL issued Redeemable NCDs in two series (i.e. Rs. 1004 crore Series A and Rs. 305.30 crore Series B) with face value of Rs. 10,00,000/- each and subscribed by Life Insurance Corporation of India (L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f RGPPL) 756.82 (including 107.9 crores towards overdue interest) 512.71 Crores 24.03.2020 One Time Settlement dated 24.03.2020 with RGPPL 269.13 162.02 crores 31.12.2020 In view of the above your honour will appreciate that appellant company had not received the principal loan and had to agree the haircut in Principal amount and partly received interest before implementation of the above settlement and accordingly, in the relevant financial year appellant had considered the interest income of Rs. 9,44,92,035/- which was actually received by the appellant and accordingly computed its taxable income of Rs. 7,95,21,680/-. The financial statement was prepared considering the relevant accounting standard for Revenue Recognition. Assessee being a Government Company, its auditors is appointed by CAG as also supplementary Audit is also conducted by the team of CAG. The above revenue recognition is accepted by the Statutory Auditors appointed by the CAG and also by the CAG while conducting supplementary audit For your ready reference we are enclosing herewith the followings: 1. Audited Annual report for the relevant financial year 2013-14 2. Tax Audit Report 3. SAT Challan 4. Bank Statemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in computation of income. However, as per the form 26AS and assessment order, the interest of Rs. 140,49,65,231/- was received by the assessee during the year under consideration. Further, the assessee submitted that assessee had never received the differential interest not recognized in the annual report in view of the settlement. The assessee also relied upon the Accounting Standard-9. The Accounting Standard-9 is not applicable in the case of the assessee as this Accounting Standard assumes that the three fundamental accounting assumptions i.e., going concern, consistency and accrual have been followed in the preparation and presentation of financial statements. However, there is no consistency in interest recognition in the case of Assessee Company as no original ITR was filed by the assessee after the AY 2013-14 and the assessee is also following the mercantile method of accounting. The assessee has filed ITRs after receiving notices u/s 148 of the Act for the AY 2015-16, 2016-17, 2018-19 and 2019-20. Therefore, the claim of the assessee for recognized of interest as per Accounting Standard-9, is not acceptable. Thus, the then AO made addition correctly on account of intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plant generally operated satisfactorily during FY 2011 and FY 2012. However from the year 2013, operations of the plants were impacted due to acute shortage of domestic gas supply. Power blocks were completely shut downed from December 2013. Accordingly RGPPL faced stiff liquidity. constraints and could not meet the debt obligations regularly 6.5 With a view to find a viable solution, numbers of Inter-Ministerial Meetings were held at the aegis GOI office. At one such high level meeting, convened by Department of Economic Affairs (DEA) on September 25, 2014, lenders suggested for hiving-off LNG Terminal into a separate SPV (with appropriated debt) and restructure the debt in both the resulting companies. Lenders kept DEA informed about the developments and also continuation of guarantee as well. The Demerger Scheme was approved by NCLAT, vide its order dated February 28, 2018 and implemented in FY 19. LNG Terminal got demerged into a separate entity viz. Konkan LNG Private Limited (KLPL) and entire assets and liabilities of LNG terminal have been shifted to KLPL Lenders. Subsequently during FY 2020- 21, outstanding debts of both KLPL and RGPPL were settled under a One Time Settlem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 In addition, the appellant has submitted its Bank statement from FY 2012-13 to FY 2018-19 and it is also observed that any amount on account of Interest component received from RGPPL has been received in the subsequent years 6.11 A comparison of the Bank statement of SBI submitted by the appellant showing credits from RGPPL with the amount of Revenue against such income shown in Profit and loss account is as under: Sl. No. Amount received from RGPPL A.Y. Amount shown in Profit and loss 1. Gas and Power to RGPPL 13-14 140,21,47,133/- Date : Amount 01.05.2012 1,66,66,019 01.06.2012 1,72,21,553 30.06.2021 1,66,66,019 01.08.2012 1,72,21,553 01.09.2012 1,72,21,553 01.10.2012 1,66,66,019 01.11.2012 1,72,21,553 01.12.2012 1,66,66,019 01.01.2013 1,72,21,553 01.02.2013 1,72,21,553 01.03.2013 1,55,54,951 30.03.2013 39,00,00,000 30.03.2013 39,00,00,000 30.03.2013 39,00,00,000 30.03.2013 2,28,21,658 Total 137,83,70,003 2. Date : Amount 2014-15 9,44,92,035/- 01.05.2013 : 16666019 01.06.2013 : 17221553 29.06.2013 : 16666019 Total 8,50,38,218 3. NIL 2015-16 NIL 4. Gas and Power to RGPPL 2019-20 Date : Amount 31.10.2018 : 14347958 30.11.2018 : 13885121 31.12.2018 : 14347958 47646300 Total 9,02,2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due date, the refund/loss if any claimed by the appellant may not be allowed. 12. From the above, it is observed that RGPPL and KLNG has settled the loan as per the one time settlement scheme (OTS) pursuant to the Hon ble NCLAT order and the assessee has received part of the principal and interest component even before the settlement was effected. The ld. CIT(A) has accepted the assessee s contentions that it has not received any principal or interest subsequent to the settlement of loan post the order of Hon ble NCLAT. Further, it is also observed that though RGPPL has deducted TDS amounting to Rs. 14,02,42,588/- as per form 26AS, the assessee has not received the impugned payment of Rs. 140,24,25,867/- from RGPPL in its bank account which reflects NIL receipts during the year under consideration. The ld. CIT(A) has also perused the bank statement of the assessee pertaining to the SBI account which reflects credits from RGPPL which tallies with the P L Account of the assessee. Further, the assessee has declared the impugned amount of Rs. 140,21,47,133/- as revenue received from RGPPL in its P L against the credit of Rs. 137,83,70,003/- in F.Y. 2012-13 which substantiates the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X
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