Income Tax Appellate Tribunal - Chandigarh
M/S H.P.. Power Transmission ... vs Dcit, Cricle, Shimla on 24 June, 2021
आयकर अपील य अ धकरण, च डीगढ़ यायपीठ "ए" च डीगढ़
IN THE INCOME TAX APPELLATE TRIBUNAL,
CHANDIGARH BENCH 'A', CHANDIGARH
BEFORE: SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER
AND SHRI R.L. NEGI, JUDICIAL MEMBER
आयकर अपील सं./ ITA No.789/Chd/2019
नधा रण वष / Assessment Year : 2014-15
M/s H.P.Power Transmission बनाम The D.C.I.T. ,
Corporation Limited, Barowalia House, Kasumpti,
Khalini, Shimla. Shimla
थायी लेखा सं./PAN NO: A A C C M 1 5 4 8 M
अपीलाथ /Appellant यथ /Respondent
&
आयकर अपील सं./ ITA No.790/Chd/2019
नधा रण वष / Assessment Year : 2015-16
M/s H.P.Power Transmission बनाम The A.C.I.T. ,
Corporation Limited, Barowalia Kasumpti,
House, Khalini, Shimla. Shimla
थायी लेखा सं./PAN NO: A A C C M 1 5 4 8 M
अपीलाथ /Appellant यथ /Respondent
नधा रती क! ओर से/Assessee by : Shri Vishal Mohan, Adv.,
राज व क! ओर से/ Revenue by : Smt.C.Chandrakanta, CIT DR
सन
ु वाई क! तार&ख/Date of Hearing : 09.06.2021
उदघोषणा क! तार&ख/Date of Pronouncement: .06. 2021
(Hearing through webex)
आदे श/Order
ITA Nos.789 & 790/Chd/2019
A.Ys. 2014-15 &2015-16
Page 2 of 21
Per Annapurna Gupta, Accountant Member :
Th e a b ov e tw o a pp e a ls h a ve b ee n p r e fe r re d b y th e sa me a sse sse e a ga i nst th e con sol i d ate d or de r of th e Le a r ne d C om mis si on e r of I nc ome Ta x ( Ap p e a l s ) [ i n s h o r t t h e ' L d. CI T( A) ] , S h i m l a d a te d 28 .0 3. 2 01 9 r e la ti n g t o a ss e s sme n t yea r s 2 01 4 -1 5 a nd 2 0 1 5 -16 r e sp e c ti ve l y, p a sse d u /s 2 5 0 (6 ) ) of th e I n come Ta x A ct, 1 9 6 1 ( h e re in a f te r re fe r re d to a s 'A ct')
2. A de la y of 1 7 5 d a ys w a s ma rk e d b y R e gi st ry in the f il i ng of bo th th e a p pea l s. A n Ap p l ic a ti on see k in g con dona ti on of t he de la y w a s fi le d sta ti n g the re i n tha t th e a p pe a l h ad be e n f i le d wi th in ti me , how e ve r , the a p pea l fe e s h a d been d e p osi te d un de r the w r on g h e a d a n d d e sp i te the b e s t e ff or ts of t he a pp l ic a nt t he h ea d cou ld n ot be g ot ch a ng e d a n d to cur e t he de fe ct, the re fo re, f ee s we re de p os ite d a g a in on a l a te r d a te re su lti n g i n a de la y , t he re fore , o f 1 7 5 d a ys i n th e f il i ng of t he a pp e a l. The c ont e nt s of t he a p p l ic a ti on f il e d b y th e a sse ssee a re a s u nde r :
"1. The present appeal had been preferred against the orders passed by the Ld Commissioner of Income Tax ( Appeals) dated 28.03.2019 copy of which was received on 05.04.2019 and the last date of [imitation for filing of the appeal expired on 04. 06.2019. .
2. That the said appeal was filed with the registry of the Tribunal on 20/05/2019 however the appeal fees had been deposited under the head tax-on regular assessment whereas the same should have been under the head tax on ITA Nos.789 & 790/Chd/2019 A.Ys. 2014-15 &2015-16 Page 3 of 21 self assessment .That the applicant tried its level best to gel the head of the challan changed but the same could not be done and to cure the defect the applicant again deposited the fees again on 25/1 1/2019 and the same had lead to a delay of 1 75 days in filing of the appeal.
3. The delay in filing of the appeal was neither willful nor intentional but had occasioned due to the reasons aforementioned.
It is, therefore, most respectfully prayed that the delay in filing of the appeal may kindly be condoned and the appeal be ordered to be heard on merits."
3. O n p e r us a l of t he re c or d s be fo re u s, t he f a cts a s sta te d by the a sse ssee in it s co nd on a ti on a p p l ic a ti on w e re ve ri f ie d a nd w e re f oun d to b e c or re ct . I t wa s n ote d tha t th e or igi nal a pp e a l ha d be e n f il e d o n 20 . 05 .2 01 9 w h e n the limi tati on f or fi li n g t he a p p e al w a s to e xp i r e on 0 4 .0 6 .2 0 1 9 . That a d e f e ct noti ce in th e sa i d a pp e a l w a s i ss ue d to t he a s se s se e on 14 . 11 . 2 01 9 p oi nti n g ou t th e f a ct t ha t the a p pe a l fee ha d be e n de po si te d i n the w r ong h e a d a nd th e sa i d re ct if ic a ti on w a s don e b y de p os it in g fee s a ga i n on 25 . 1 1. 2 0 19 a nd t he a p pe a l wa s tr e a te d, th er e a f te r , a s fi l e d on th is da t e ma r ki n g a de la y of 1 75 d a ys in the f il i ng of t he sa me .
4. Th e Ld . DR on b e i ng con vi n ce d w i th th e fa ct s m a d e no obj e c ti on to the con d ona ti on o f the de la y.
5. C on si d e r i ng t he a b ove , i n o ur view t he re w a s n o de l a y in the fi l in g of a p pea l a t a l l si nce the s ub se q ue nt de p osi t of fe e s in the cor r e c t he a d w a s o nl y to th e e f fe ct of r ect if yi ng t he ITA Nos.789 & 790/Chd/2019 A.Ys. 2014-15 &2015-16 Page 4 of 21 de fe ct of the fee s h a vi n g be e n d e p os ite d i n the w r ong h e a d. Th e fi l in g fe e s und oub te d ly h a d bee n pa id bu t un de r th e w r ong he a d and the su bs e q ue nt re ctif ic a ti on of th is d e fe ct by de po si ti ng fe e s af re sh i n the cor re c t he a d , le git ima t iz e d t he a pp e a l fi le d o n the o ri gi n a l d a te it se l f . The re fore , w e hol d i n the pre se n t f a cts a nd c ir c u mst a n ce s, th er e w a s n o d e l a y i n fi li n g t he a p pe a l a t a l l .
6. I n a ny c a se i t sta nd s r e a son a bl y d e mo ns tr a te d tha t t he de la y w a s i n a d ver te nt . Th a t th e de fe ct in f il i ng the a p p e a l w a s not d e l ibe r a te a n d cor r e c ti ve a cti on w a s ta k e n b y t he a sse ssee im me d i a te l y on b e i ng n oti fie d of th e de fe ct. Th e d e la y i f a ny the re fo re de se r ves to b e c ond oned . A nd w a s a cc or d in gl y do ne so in o pe n cou r t.
7. Th e r e a f te r pr ocee di n g w i th t he a p p e a l , i t w a s c om mon gr oun d tha t a sol i ta r y a n d i d e n ti ca l is su e w a s r ai se d i n b oth the a p pe a l s, re l a ti ng to the t re a tme nt of i nte re st e a rne d on fi xe d de p os it s ma d e o ut of f un d s of the a s se s se e i n the p e ri od pr i or to comme nc e me n t of bu si ne ss , w he the r 'r e ve nue or ca p it a l'.
8. S in ce th e is sue in vol ve d w a s i de nt ic a l i n bo th th e a pp e a l s ,th e y we re ta ken up toge the r fo r he a r in g and are be i ng di sp os e d off b y a com mo n or d e r .F or the s a ke of c onv e n ie nce, ITA Nos.789 & 790/Chd/2019 A.Ys. 2014-15 &2015-16 Page 5 of 21 we s ha l l b e de a li n g w i th th e fa c ts in IT A N o . 78 9 /C h d /2 01 9 re l a ti ng to a sse s sm e nt year 2 01 4- 15 a nd ou r d e ci si on re nde re d i n th i s a pp e a l sh a l l a l so a p pl y mut a ti s muta n d is to the ot he r a p p e a l of th e a sse ssee i n ITA N o . 78 9 /C h d /2 01 9 re l a ti ng to a sse ssm e nt ye a r 20 15 -1 6 ITA N o. 78 9 /C hd /20 19 ( A.Y .2 01 4- 15 ):
9. Th e e f fe cti ve gr ou nd r a i se d by th e a s se s se e re ad s as un de r :
"1. T h a t in th e f ac ts an d c irc u msta nc es of th e c ase th e L d . Co mm is sio n er of Inc o me T ax ( Ap pe al s) i s no t ju stif ie d in u ph ol d in g th e ad d i ti o n of Rs. 1 1, 6 4 ,7 9 , 75 6 mad e b y ta x in g th e in tere st a s th e in co me of th e a p pel l an t un d er the he ad in c o me f rom o th e r sou rce s and th a t too wi th ou t al l o win g the se t of f of the in te res t p a id on borro we d f u n d s f rom th e sa me . F ac t of th e ma tter i s th a t th e in tere st a cc ru ed wa s to be se t of f again s t th e c a p ita l wo r k in pr ogres s an d d id no t ta n ta mo un t to be th e i n co me of th e ap pel l an t. "
10 . D r a w in g our a tte n ti on to the f a ct s of th e c a se f rom th e a sse ssme nt or de r, th e Ld . C oun se l fo r th e a s se s se e p oi n te d o ut tha t the a sse ssee comp a n y n a me l y, H P . Po we r Tr a nsmi ss i on C or po ra t ion Li mi te d ( H P P TC L) , a n un d e r ta k i ng o f G ove r nme n t of H ima c ha l P r a de sh w a s e st a bli sh e d on 2 7 t h Aug ust , 2 0 08 wi th a vi e w to str e n gthe n th e Tr a n s mi ssi on N e tw or k in Hi ma ch a l P r a d e sh a n d to f a ci li ta te e va cu a ti on of P ow e r fr om up comi n g Ge ne ra t in g P la n ts . The j ob s en tr us te d to ITA Nos.789 & 790/Chd/2019 A.Ys. 2014-15 &2015-16 Page 6 of 21 C or po ra t ion by H P . G ove r nme n t i nte r- a li a in cl ude d e xe cu tio n of a l l N e w W or ks - b oth Tr a n s m i ssi on Li n e s a nd Su b sta ti on s of 6 6k v a n d a b ov e Vol ta ge R a ti ngs , F or mul a ti o n, Up d a ti on , Exe c uti on of Tr a n s mi ssi on Ma ste r P la n of HP for Str e n gt he n i ng o f Tr a ns mis si on N e tw or k a n d Eva c ua ti on of Pow e r . B e si de s , coor d i na ti n g th e tr a ns mis si on r e l a te d is sue s wi th C TU , C EA /OP ( GO I ), HP G ove r nme n t and H P S EB L. HP P TC L w a s a ls o r e sp ons ib le for p la n ni n g a n d co -or di n a ti on of tr a n smi ssi on re la te d is sue s w i th I P P s, C P SU s , St a te P SU s, HP P C L a n d ot h e r S ta te /C e n tr a l G ov e r nme nt Age nc ie s. Th e a sse sse e co mpa n y w a s y e t to s ta r t com me r ci a l op e r a t ion . Th e sta te me n t sh ow ing in ci d e n ta l e xpe n d it ure du r in g c ons tr uc ti on (p e n d in g a l l otmen t) h a d b ee n p rep a r e d . Ho we ve r, p r of it & los s a ccou nt f or e a r ning of o the r i nc ome ha d b ee n p rep a r e d. As p e r the de ta i ls o f "O th e r in come ", t he a s se s se e comp a n y ha d e a r ne d i nte re st on b a n k d e p os it of Rs .1 1 ,6 4 , 79 , 7 56 /- d ur in g the pe r i od re le van t to t he a s se s sme n t ye a r . Th e in te re st w a s e a r ne d on su r pl u s f un d s a v a i la b l e w i th th e a sse sse e comp a ny , how e ve r , the sa me w a s n ot o ffe re d for ta xa ti on . Th e said fa ct was co nf ront e d to the a ss e ssee d ur i ng a s se s sme nt pr oc ee d i ng s wh o fi l e d de ta ile d re ply . Th e AO re je cte d the s a me poi n ti ng ou t th a t id e nti ca l a r gume nt s a n d s ub mis si on s ha d be e n re je cte d b y th e I TA T in th e ca se of the a s se s se e i tse lf in the a pp e a l f or ass e ss me n t ye a r 20 1 0 -1 1 a nd th a t th e i ssu e ITA Nos.789 & 790/Chd/2019 A.Ys. 2014-15 &2015-16 Page 7 of 21 wa s sq ua re ly c ove re d by t he de cisi on of the Hon 'b l e Su p re me C our t in the ca se of Tut ic or in A l k a l i C h e mi ca l s & F e r ti li ze r s Ltd . V s. C I T ( 19 9 7 ) 2 2 7 I TR 1 72 ( S C ) . Acc or d in gl y, th e in te re st of Rs .1 1 ,6 4 , 79 , 7 56 /- w a s a s se s se d to ta x i n the h a nd s o f the a sse sse e a s 'i ncome fr om oth e r s our ce s".
11 . Th e ma tte r w a s c a rr i e d in a p pe a l be fore the Ld .C I T(A ) wh o u p he l d the or de r of the AO sta ti n g th a t n o d isti ng ui sh in g fa ct s h a d b ee n po in te d out b y th e a sse ssee fr om t he p re ce d ing ye a r s w he re i n the i ss ue h a d bee n de ci de d a g a in st th e a sse ssee by th e I TA T. The r e le va n t fi nd i ngs o f t he Ld .C I T(A ) a t p a r a 5 .2 to 5 . 2 .2 o f the o rd e r a re a s un de r :
5.2 The issue is regarding the taxability of interest income received on the funds parked with various banks or otherwise as mentioned above. The issue under consideration is not a new issue. This is a decided issue against the assesses by CIT(A) in its own cases for the A.Y.2010-11 & 2011-12 in appeal No. IT/74/2013- 14/Sml dated 27/06/2014 and Appeal No.lT/375/13-14/Sml dated 05.11.2014. The order of the CIT(A) dated 05.11.2014 for A.Y. 2011-12 has been confirmed by the jurisdictional ITAT in ITA No. 68/Chd/2015 vide order dated 04.08.2015. The appeal has been decided against the assessee by the ITAT by relying on its own order in ITA No. 488/Chd/2012 and 169/Chd/2013 for the A.Y. 2008-09 & 2009-10.
5.2.1 However, during the year the appellant has tried to distinguish on facts by arguing that the funds from ADB were specifically advanced for specific purposes and the interest accrued on the FDRs made from the said accounts and funds and the interest paid on the same are clearly inter linked and need to be set off. The appellant has relied on the judgment of the jurisdictional ITAT in the case of H.P. Power Corporation ITA No.842/Chd/2014 dated 06.05.2015. The appellant in the year under consideration has however relied ITA Nos.789 & 790/Chd/2019 A.Ys. 2014-15 &2015-16 Page 8 of 21 on the order of this office in the case of M/s. H.P. Power Corporation ltd. which has been decided by following the order of the jurisdictional ITAT in ITA No. 842/Chd/2014 dated 06.05.2015. However, the appellant has failed to explain as to how the facts of the case under consideration are different from the facts of the case for A.Y. 2013-14 wherein the appeal of tine assessee has been dismissed vide order dated !T/395/15-16/Shimla dated 28.10.2016. The said order has been upheld by the Jurisdictional ITAT in ITA No. 1443/Chd/2016 dated 18.04.2017 wherein the appellant argued on similar lines as reproduced supra which were dismissed. It is also not out of place to mentioned that the long term loans from ADB as seen from Schedule 4 of the balance sheet in A.Y. 2013-14 is shown at Rs.6136.06 lacs and at Rs.11056.06 in A.Y. 2014-15. Thus, what is seen is that the loans from ADB were raised by the appellant in the preceding year also. Moreover, the appellant vide order sheet dated 22.03.2019 also expressed the inability to bifurcate the use of funds and interest paid w.r.t. equity and REC loans. Accordingly, it is held that the facts in the year under consideration are identical to the facts for A.Y. 2013-14.
The assessee has brought nothing on record to show how the facts or the legal position during the year under consideration is anyway different from the preceding years. The issue is squarely covered by the decisions of this office duly confirmed by ITAT in the preceding years as detailed supra. 5.2.2 Therefore, it is held that there is no infirmity in the order of the A.O. and the order of the A.O. in making the addition of Rs.11,64,79,756/- on account of 'income from other sources' needs no interference and the same is confirmed. In the result, order of the A.O. upheld and the appeal of the assessee is dismissed."
12 . B e f ore u s the Ld .C o un se l fo r t he a s se sse e th ough f a ir l y a dmi tte d t ha t t h e f in d in gs of th e a u thor i ti e s b e low was cor r e ct tha t thi s i ss ue h a d bee n a d ju d ic a te d i n th e p re ce d ing ye a r s a l so a g a inst th e a s se s see by the I TA T, b u t a t the s a me time h e p oi nte d o ut th a t ce r ta i n f a ct s di s tin gu is he d the ca se of th e a s se sse e fr om th e p r e ce di ng ye a rs a nd i n vie w of tho se ITA Nos.789 & 790/Chd/2019 A.Ys. 2014-15 &2015-16 Page 9 of 21 fa ct s the i ss ue sto od sq ua r e l y cov e re d b y th e o rde r of th e I TA T in th e ca se of M /s H .P . P ow e r C o rp or a ti on Ltd . in I TA N o.8 4 2 /C hd /2 0 1 4 f or a ss e ss me nt ye a r 20 1 0 -1 1 w hi ch ha d a dj ud i ca t e d i n fa v our o f t he a ss e ssee . He fi rst dr e w our a tte n ti on to the or de r of the I TA T i n th e ca se of M /s H .P . Pow e r C or po ra t ion Ltd . (s up r a ) p l a ce d be f ore u s a t p a p e r b ook pa g e no .4 2 -4 7 a nd d r e w our a tten tio n to t he spe cif ic fi n di n gs of th e I TA T a t p a r a 8 of th e or de r a s u nd e r:
8. After considering the rival submissions carefully we find that during this year assessee has borrowed certain funds as mentioned in the submissions before AO from PFC and ADB. The Assessee had earlier taken the money from Delhi Jal Board on which no interest was required to be paid. It was held in the earlier year in assessee's own case that interest on such investment of these funds would be taxable. In view of the decision of Hon'ble Supreme Court in case of Tuticorin Alkali Chemicals And Fertilizers Ltd. Vs. CIT 227 ITR 172. However, the interest earned on temporary investment made out of the borrowed funds can not be taxed because these funds have been specifically borrowed for the purpose of project but project was delayed and therefore funds were parked in temporary investment in the form of FDR. Same view was taken in the case of M/s Beas Valley Power, Corporation Ltd. Vs. The ACIT in ITA No. 857/Chd/2012 it was observed at page 12 & 13 as under:
12. On the other hand, ld. DR relied upon orders of the authorities below. 12(i) On consideration of the above facts and material on record, we do not find any justification to sustain the findings of the authorities below. It is not in dispute that assessee corporation is a government company promoted by H.P. State Electricity Board Ltd. The assessee has admittedly not started commercial operation in the year under consideration and was still in the pre-
operative stage. The assessee claimed that it has no surplus funds but the finding of the authorities below was that assessee earned interest on surplus funds. The accounts of the assessee placed on record clearly support the submission of the assessee that there were no surplus ITA Nos.789 & 790/Chd/2019 A.Ys. 2014-15 &2015-16 Page 10 of 21 funds available with the assessee. The assessee also claimed that its funds were temporarily employed for short term deposits for efficiently and effectively use of its funds so as to reduce the total cost of the project. The ld. CIT(Appeals) also partly agreed with the submission of the assessee that part funds were invested for setting up of the plant & machinery. The assessee's counsel has referred to the accounts of the assessee at page 15 of the Paper Book to show that assessee received lesser interest of Rs. 625.97 lacs and paid interest on loan at Rs. 3652.44 lacs in the year under consideration would show that assessee has to pay more interest as against the small interest received by assessee. Therefore, if any adjustment is made against interest paid, still there is a liability of the assessee to pay interest on the loans. The assessee also explained that for effective funds management, the temporary surplus funds were kept in short term bank deposits and thereafter, interest was earned and so was also used for construction of the project and for paying interest to the power finance company which have not been adversely commented upon by the authorities below. Therefore, the reliance of the Assessing Officer on the decision in the case of Tuticorin Alkali Chemicals and Fertilizers Ltd. Vs. CIT (supra) was totally misplaced. The Hon'ble Supreme Court in the case of CIT Vs Bokaro Steel Ltd. held as under :
Held, dismissing the appeal, that the first three heads of income were (i) the rent charged by the assessee to its contractors for housing workers and staff employed by the contractor for the construction work of the assessee including certain amenities granted to the staff by the assessee, (ii) hire charges for plant and machinery which was given to the contractors by the assessee for use in the construction work of the assessee, and (ii) interest from advances made to the contractors by the assessee for the purpose of facilitating the work of construction. The activities of the assessee in connection with all these three receipts were directly connected with or incidental to the work of construction of its plant undertaken by the assessee. The advances which the assessee made to the contractors to facilitate the construction activity of putting together a very large project was as much to ensure that the work of the contractors proceeded without any financial hitch as to help the contractors. The arrangements which were made between the assessee-company and the contractors pertaining to these three receipts were arrangements which were intrinsically connected with the ITA Nos.789 & 790/Chd/2019 A.Ys. 2014-15 &2015-16 Page 11 of 21 construction of its steel plant. The receipts had been adjusted against the charges payable to the contractors and had gone to reduce the cost of construction. They had, therefore, been rightly held as capital receipts and not income of the assessee any independent source.
12(ii) The Hon'ble Delhi High Court in the case of Indian Oil Panipat Power Consortium Ltd. V ITO 315 ITR 255 (Delhi) held as under : The assessee-company was incorporated in pursuance of a joint venture entered into between Indian Oil Corporation and M of Japan to set up a power project. In order to effectuate the purpose for which the joint venture was conceived, share capital was contributed by these two corporations which included Rs. 20 crores by way of additional share capital. The Assessing Officer treated the interest earned on monies received as share capital by the assessee temporarily placed in a fixed deposit awaiting acquisition of land which had run into legal entanglements on account of title as "Income from other sources". The Commissioner (Appeals) accepted the stand of the assessee that the interest was in the nature of a capital receipt which was liable to be set off against pre- operative expenses. The Tribunal reversed this order. On appeal : Held, allowing the appeals, that the funds in the form of share capital were infused for the specific purpose of acquiring land and the development of infrastructure. Therefore the interest earned on funds primarily brought for in the business could not be classified as "Income from other sources". Since the income was earned in a period prior to commencement of business it was in the nature of a capital receipt and was required to be set off against pre- operative expenses. 13. Considering the facts of the case in the light of the above decisions, it is clear that the funds with the assessee, even if temporarily used for savings/short term deposits, but the earning of the interest were directly connected with work of construction of the project employed by the assessee. Therefore, the earning of interest could not be treated as income from other sources, since the income was earned in the period prior to commencement of the business and it was the nature of capital receipt and was required to be set off against pre- operative expenses. We, therefore, set aside the orders of authorities below and delete the addition of Rs. 83,06,897/-.
However the details of these funds are not available on record therefore, we set aside the order of Ld. CIT(A) and remit the ITA Nos.789 & 790/Chd/2019 A.Ys. 2014-15 &2015-16 Page 12 of 21 matter back to the file of AO with a direction to examine bifurcation of funds borrowed by the assessee and funds owned by the assessee. Interest earned on account of funds borrowed should not be subjected to tax and only interest on balance surplus funds should be subjected to tax."
13 . Re fe rr i ng to the s a me h e p oi nte d out t ha t in th e fa cts of the sa i d c a se the a s se s se e h a d b or r ow e d f un ds f r om AD B (A si a n D e ve lop me nt B a n k) s pe ci fic a ll y fo r th e pur po se of the pr oj e c t b ut si nce the p r oje c t wa s d e l a ye d the fu n ds w e re pa r k e d i n te mpo r a r y in ve stme nt in t he for m of F D R. I n t hi s fa ct ua l b a ck g ro un d th e I TA T, fo ll ow i ng it s d e ci si on i n the ca s e of M /s B e a s Va lle y P owe r C or p or a ti on Ltd . V s. AC I T i n I TA N o.8 5 7 /C hd /2 0 1 2 , ha d held t ha t t he i n te res t of suc h sp e ci f ic a ll y b or row e d f un d s be n ot su b je cte d to ta x. Th e Ld. C ou ns e l f or the a sse ssee the re a f te r s ta te d th a t i n the imp ug ne d ca s e a ls o th e a ss e ssee h a d b or r ow e d p r oj e ct sp e ci fi c fu nd s fr om A D B a n d on a cc oun t o f c e r ta i n de la y s i n e xe cu tion of th e p r oje ct the fu nd s c oul d not b e u ti li z ed a nd w e re , the re fo re , p a r ked in FD Rs e a r n in g i nt e re s t th e re on . Th e a for e s a i d fa c ts w e re p oi nte d out to us fr o m t he An nu a l Re p or t of th e a sse s see , p l a ce d be f ore us a s An n e xu re -A to t he P a pe r B ook . Ou r a tte nt ion w a s d r a w n t o p a ge 1 7 of th e An nu a l Re p or t a nd i t wa s p oi n te d ou t the r e fr om th a t th e a ss e ssee ha d ta k e n loa n f r om AD B a mou n ti n g to Rs .1 1 ,0 5 6 l a cs in the imp ug ne d ye a r wh ic h st ood r e fle cte d in the s che dul e of Lo ng te r m b or r ow in gs ( S ch e d ule N o. 4 of the An nu a l R e p or t) . He ITA Nos.789 & 790/Chd/2019 A.Ys. 2014-15 &2015-16 Page 13 of 21 Fu r the r d re w ou r a tte nti on to th e c op y o f l oan a gr e e me nt e nte re d i nt o b y th e a s se s se e w i th A D B p la c e d be f or e u s a t P B pa g e N o. 2-2 9 . Ld . C ou nse l s pe ci fic a ll y d r e w our a tt e nt ion to cl a use 5 of S ch e d u le 3 of t he a gre e me n t dea l in g w i th Al loc a ti on a n d W ith d r a wa l of L oa n p r oce e d s , whi ch r e a d a s un de r :
Imprest Accounts and Statement cf Expenditures
5. Except as ADB may otherwise agree, the Borrower may establish, and cause to be established, immediately after the Effective Date, (i) a first generation imprest account at the Reserve Bank of India, and (ii) a second generation imprest account for HPPTCL at a commercial bank acceptable to ADB (collectively, imprest accounts). The imprest accounts shall be established, managed, replenished and liquidated in accordance with ADB's Loan Disbursement Handbook, and detailed arrangements agreed upon between the Borrower and ADB. The imprest accounts shall only be used for the purposes of the Project. The currency of the first generation imprest sccount shall be the Dollar, and the currency of the second generation imprest accounts deposited into the imprest accounts shall be the Rupee. The aggregate amount to be expenditure to be deposited into the imprest accounts shall not exceed the lower of (i) the estimated expenditure to be financed from the imprest accounts for the first 6 months of Project implementation, or (ii) the equivalent of 10% of the Loan amount."
14 . Re fe rr i ng t o t he s a me he p oi n te d out th a t the lo a n di sb u rs e d c oul d n ot ha ve bee n use d b y t he a s se ssee f or a n y pu r po se o the r tha n th a t f or w hi ch i t w a s g ra n te d be ing fu nd i ng o f f our Tr a n s mi ssi on p ro je cts a s me n tion e d in the a gr ee me nt a s und e r :( P .B 3 ) Whereas the Government of India is taking a loan of 350 million U S Dollar from Asian Development Bank in various branches under Himachal Pradesh Clean Energy Transmission Investment Programme for execution of various Transmission projects covered in Power, System Master Plan for Himachal Pradesh. Out of the above loan of 350 Million U S Dollar, Tranche-1 loan of 113 Million U S Dollar shall fund following four number Transmission ITA Nos.789 & 790/Chd/2019 A.Ys. 2014-15 &2015-16 Page 14 of 21 Projects :
i ) 22/66/220 kV, '(22/66 kV, 2x10 MVA +66/220 kV, 31.5 MVA) GIS sub station at Bhoktoo in Distt. Kinnaur with LILO of one circuit of 220 kV Kashang-Bhaba D/C line.
ii) 220 kV (Twin MOOSE) D/C line from Hatkoti to planned 220/400 kV sub station at Pragati Nagar in Distt. Shimia. ;
iii) 220/400 kV, 315 MVA GIS Sub station at Pragati Nagar in Distt. Shimla with LILO of both circuits of 400 kV Jhakri- Abdullapur D/C line of PGCIL.
iv) 66/220/400 kV GIS sub station ( 65/220 kV, 2x80/100 MVA+220/400 kV, 2x315 MVA) at Wangtoo in Distt. Kinnaur with LILO of both circuits | of 220 kV Kashang- Bhaba and 400 kV Wangtoo- Abdullapur D/C Lines.
AND WHEREAS future Tranches shall fund Transmission Projects in Distt. Kullu, Distt Kangra & Distt. Mandi (Reas Basin), Distt. Chamba (Ravi Basin), Distt Kinnaur (Satluj Basin) and Distt. Shimla (Yamuna Basin). AND WHEREAS the Government of India will further transfer this loan granted by Asian Development Bank to the Government of Himachal Pradesh, which interalia shall transfer the same to H.P. Power Transmission Corporation Limited (Second Party) which is designated; implementing agency for these Transmission Projects. 15 . Th e r e a fte r he to ok u s to p a ge N o. 21 of the An nu a l Re p or t, S che d ule-1 1 b e in g t he sche d ule o f I n come a nd p oin te d out th a t on a cc oun t of th e i nve stme n ts ma d e out of the s a id fu nd s i nt e re s t of Rs. 2 46 . 96 l a c s ha d b e e n e a rn e d b y the a sse sse e . He a l so p oin te d ou t tha t i n the p re ce d ing ye a r the a moun t o f in te r e st e a r ne d w a s a me a ge r a mou n t of Rs .3 . 3 4 la c s a nd w a s, t he re fo re , i m ma te r ia l f or the de ci sion r e n de red in th e ca se o f the a s se s se e a g ain st i t b y th e ITA T in th e pr e ce d i ng ye a r. H e con te n de d t ha t in v ie w of the i de n ti ty of fa ct s of t he a ssess ee in the imp u gne d ye a r w ith t hat in the ca se of M/s H . P . P ow e r C or p or a tion Ltd . (s up r a ) a n d the fa c ts be in g d i sti n gui sha b l e w i th tha t i n the ca se of the a ss e ssee for the p re ce d in g y ea r , th e d e ci si on in t he ca s e of M /s H . P. P ow e r ITA Nos.789 & 790/Chd/2019 A.Ys. 2014-15 &2015-16 Page 15 of 21 C or po ra t ion Ltd .( su p ra ) was sq u a r e l y a p pl i ca b le and th e in te re st e a r ne d, th e re fore , w a s not l ia bl e to be taxe d in the ha n ds o f the a s se sse e .
16 . Th e Ld . DR , on t he othe r h a n d, ve he me n tl y c onte st e d the cl a im of the Ld. C ou ns e l f or the a ss e ssee p oi n ti ng ou t th a t as pe r the a d mi ss ion o f t he Ld .C o un se l f or the a sse ss ee i tse l f the AD B lo a n w a s v e r y mu ch the r e w it h th e a s ses se e i n th e pr e ce d i ng ye a r a lso a mo un tin g to Rs .6 , 1 36 l a c s a s r e f le cte d in the sc he du le of Lon g te r m b or r ow i ngs of th e Sc he du le -4 of the An nu a l Re p or t a nd e ve n th ou gh me a ge r ,the fa c t r e ma i n e d th a t in te re st w a s e a rne d b y the a s se sse e in t he p rec e d in g ye a r a ls o. S he , the re for e , sta te d t ha t th e re we re no d isti ng ui sh in g fa ct s fr om th e p re ce di n g ye a r a nd th e i ssu e ha d b ee n r ig htl y he l d to be c ove red b y th e or de r of th e I TA T in th e c a se of the a sse sse e for the pr e ce d i ng ye a r .
17 . W e h a ve he a r d th e c on te n ti ons of b oth th e p a r tie s a nd ha v e a l so go ne thr oug h th e o rde rs o f the a u th or itie s b e low a nd doc ume nts re fe rre d to be fore u s. Th e i ssu e to be a d j ud ic a te d is r e ga r d in g th e tre a t me nt of i nt e re st re ce i ve d on FD Rs /De po si ts ma d e o ut of f un d s d u ri n g t he p e r iod p e r ta i n in g to t he p re -c omm e n ce me nt of b u si ne ss of t he a s ses se e , w h ich ha s b ee n he l d to b e ta xa b le a s b ei ng r e ve nue in n a tur e by the Re ve nue Aut hor i ti e s , w h i le the a sse sse e c la ims th e s a me t o be ITA Nos.789 & 790/Chd/2019 A.Ys. 2014-15 &2015-16 Page 16 of 21 ca p it a l i n na tu r e.
18 . Th e c on te n tio n of th e Ld. C oun se l for th e a s se sse e is th a t thou gh a d mi tte dl y id e nti ca l is sue sta n d s de ci de d a g a in st the a sse sse e in t he p re ce d in g yea r s but t he f a cts are di st in gu is ha b l e a nd t he f a cts are , on t he c ont ra r y , i de nti ca l to th a t i n th e c ase of M/s H. P . P ow e r C o rp or a ti on Ltd .( s up r a ) wh e re the is sue w a s d e ci de d i n f avou r of th e a s se sse e . 19 . W e ha v e gone thr ou gh th e a fo re me n ti one d or d e rs of th e I TA T. I n the ord e r p a sse d b y the I TA T in the ca se of the a sse sse e (i n I TA N o.1 4 4 3/C h d /2 0 1 6 d a t e d 1 8 .0 4 .2 0 1 7 ) w e fi nd tha t t he fa c t note d in the sa me at p a r a 4 o f th e or d e r i s th a t the i nte re s t w a s e a r ne d b y the a sse ssee on sur p lu s f un d s a va i la b l e wi th i t. O n th e ba s is of t he se fa c ts, w h ic h w e re fou nd to be i de ntic a l w i th tha t in the pre ce d i ng ye a r w he re in the I TA T h a d he ld th e s a i d i n com e to b e ta x a ble f ol l ow in g th e de ci si on of t he Ho n'b l e A pe x C ou r t i n th e c a se of Tu ti cor i n Al ka l i C h e mi ca l s & F e r ti li z e r s Ltd . ( sup r a ) , t he is su e w a s de ci de d a ga i n st the a sse s see . The I TA T no t e d th a t no di st in gu is hi ng f a cts w e re fou nd in the p re ce d i ng ye a r a n d, the re fo re , tre a ted th e is su e a s cov e re d b y th e or d e r of th e I TA T in t he p r e ce d in g ye a r in the c a se of the a sse ssee . 20 . I n the or de r p a ss e d b y the I TA T in the ca se of HP P ow e r ITA Nos.789 & 790/Chd/2019 A.Ys. 2014-15 &2015-16 Page 17 of 21 C or po ra t ion i n I TA N o.8 4 2 /C hd /2 0 14 d a te d 0 6 .0 5 .2 0 1 6, we fi nd t ha t it w a s n ote d in t he or der a t p a ra 6 th a t th e a sse ssee ha d be e n f ou nd to ha v e bo rr owe d c e r ta i n a mou nt f ro m A si a n De ve l op me n t B a nk (A D B ) fo r sp e ci fi c p ro je ct a nd on a cc oun t of de la y in th e p roje ct the y had b ee n p a rk e d in te mp or a r y in ve s tme n ts i n F D Rs. Th e i n te r e st e a rne d the re on w as he l d b y the I TA T to b e n ot ta x a bl e f ol lowi n g th e vie w ta k e n b y the I TA T i n th e c a se of M /s B e a s Val l e y P owe r C or p or a ti on Ltd . (s up r a ) w h e re i n the de ci si on of the H on'b le A pe x Cou r t i n th e ca se of Tuti cor i n Al k a li C h e mi ca l s & F e r ti l ize r s Ltd . ( su p r a ) wa s f oun d n ot a p p l ic a b le a n d th e de c is i on of th e CI T Vs . B ok a ro S tee l Ltd . on i de nt ic a l is su e w a s f ol lowe d. We f in d th a t in t he s a id ca se a ls o the a sse sse e ha d su b mitt ed t ha t i n the e a r lie r ye a r s the is sue h a d be e n d e ci de d b y the ITA T a ga i n st the a sse s see b ut i t wa s n ote d i n the or de r tha t th e fa c ts du r in g th e ye a r w e re p a rt ly d i ffer e n t w ith fu nd s h avi ng b ee n bor r ow e d for sp e ci f ic p ur p os e and p a r ke d in F D Rs as te mp or a r y i nv e s tme n ts on a ccou n t of d e l a y i n the p r oj e ct . Th e re le va n t f in d in gs to t hi s e ffe c t b y t he I TA T a re a t pa r a s 6 to 8 of i ts or d e r w hi ch s ta n ds re p ro du ce d a b ove i n e ar li e r p a r t of our or de r .
Th us the d i sti n cti on i n f a cts in the a f ore s ta te d tw o or d e r s i s tha t w h il e i n the ca se of t he as se sse e in e a r l ie r y e a r s the ITA Nos.789 & 790/Chd/2019 A.Ys. 2014-15 &2015-16 Page 18 of 21 in te re st w a s foun d to b e e a r ne d on su r pl us fu nd s a n d h e nce he l d ta xa b le , in the ca se of H P P ow e r cor p or a ti on ( su p r a ) th e in te re st w a s e a rn e d on s pe ci fi c p u r po se f un ds de p osi te d in FD R's on a c cou nt of delay in e xe cu ti on of p ro je cts a nd the re fo re he l d n ot ta xa b l e .
21 . I n the pre se n t ca s e the Ld .C ou ns e l for the a sse ss ee h as dr a w n o ur a tte n ti on t o the f a ct s poi n ti ng ou t th a t the l oa n s ha d be e n t a k e n f r om A D B b y th e a ss e s see a l s o a mo un tin g t o Rs. 11 , 0 56 la c s o n w hi ch in te re st in come o f Rs. 2 46 . 96 la cs ha d be e n e a r ne d a n d t ha t the se loa ns we re to b e ut il i ze d for sp e ci f ic p ro je cts a nd on a c cou nt o f d e l a y in th e pr oj e ct in the pr oj e c t the sa me ha d bee n p a rk e d in te mp or a r y f un d s. Th e a for e s a i d fa c ts, cle a r l y, a re i de n ti ca l to th a t i n th e c a se of M/s H. P . P ow e r C o rp or a ti on Lt d. ( sup r a ) .
22 . Mor e o ve r , the fa cts in the p re se nt c a se ha ve bee n de mons tr a te d be for e us to be d i sti n gui sh a b le fr om tha t in th e pr e ce d i ng ye a r in th e ca se o f th e a sse sse e w he re onl y s ur p lu s fu nd s w e re f ound to be a va i l a ble w it h the a sse ssee . N o d oub t in th e p re ce d i ng ye a r a ls o i nte re s t was e a r ne d on AD B fu nd s( sp e c i fi c p ur p ose f un ds ) d e p os ite d i n F D R's , b ut th e sa me wa s a me a ge r a moun t of Rs . 3 . 3 4 la c s a s a ga i n st in te re st e a r ne d on o the r fu nd s of R s. 12 0 6 .7 8 l a cs ,w h ic h f acts a re re cor de d i n the ann ua l a c cou nt s of t he a sse ss ee . W hi l e i n the ITA Nos.789 & 790/Chd/2019 A.Ys. 2014-15 &2015-16 Page 19 of 21 imp ug ne d ye a r the a moun t o f i n te re s t e a r ne d on AD B f un d s i s Rs. 24 6 . 96 la c s wh i le th a t e ar n e d on ot he r d e p osi ts is Rs. 91 8 . 30 la c s. Th e f a ct s re la tin g to the i ss ue be f or e us , be in g in te re st e a r ned on de po si ts, are th e re for e cle a r l y di st in gu is ha b l e fr om t he p r e ce din g ye a r w h e re i n th e re w a s ha r d ly a ny in come e a r ne d fr om sp e ci fi c p ur p os e l oa n f unds de po si te d in F DR's( A DB l oa ns ) a n d p ri ma r i ly i nt e re st i nc ome wa s e a r ne d f r om oth e r sur p l us fun d s, W h i le i n the i mp ugn ed ye a r a s ub sta n ti a l po rt ion of i nte r e st in come is fo un d t o ha ve be e n e a r ne d fr om d e p os it s ma d e f r om sp e c if i c p ur p ose lo a n fu nd s( AD B lo a ns ).
23 . Th e a rg u me n t of th e Ld .D R th a t A D B Loa n w a s be in g a va i le d b y t he a sse sse e i n b oth th e ye a rs e st a bl i sh e s i de n ti ty of fa c ts, w e f ind , i s no t cor r e ct. S in ce t he i ssue be fore us re la te s to i n te re s t i n come e a r ned , the re le v a nt fa c t is the na tu r e a n d c omp osi ti on of i nt e re s t in co me e a rne d ,i .e on sur p l us fu nd s and sp e c if i c p u r po se fu nd s, w hi ch ha s b ee n cl e a r ly d i sti n guish e d fr om th e p r e ce d i ng ye a r , a nd not th e fa ct um of l oa n.
24 . W e the re f ore a gre e wi th the Ld. C ou ns e l f or the a sse sse e tha t th e is sue sta n d s sq ua r e ly co ve re d by the deci si on of th e I TA T i n t he ca se of H P P owe r C or p or a ti on (s up r a ) , w h ere id e n ti ca l l y the fa ct s w e re f oun d to be d i ff e re n t from th e ITA Nos.789 & 790/Chd/2019 A.Ys. 2014-15 &2015-16 Page 20 of 21 pr e ce d i ng ye a r on a c cou nt o f i d e n ti ca l AD B l oa n tak e n for sp e ci f ic p r oje ct pa rk e d te mp or a r y in F D Rs o n a ccoun t of d e l ay in th e p r oje ct and th e I TA T hol d i ng t he c a se to be di st in gu is ha b l e fr om th e pre ce d i ng ye a r h a d ru le d i n fa v our of the a sse sse e f ollow i ng the de ci sion o f the I TA T i n t he c a se of M /s B e a s Va l l e y P ow e r C o rp or a ti on Lt d. (s up r a ). 2 5 . I n v ie w of the s ame , w e h ol d th a t th e i n te re s t re cei v e d to the e xte nt of AD B l oa n p a r k e d in in ve stme nts in FD Rs is n ot re ve n ue i n n a tu re a nd not l ia b le to b e ta xe d un de r the he a d "in come f r om ot h e r sou r ce s".
26 . I n t he re s ul t, the a p pe a ls of the as se s se e a re a l l owe d i n a bo ve te r ms .
O r de r p r on oun ce d on 2 4 t h Jun e , 20 2 1 .
Sd/- Sd/-
(R.L. NEGI) (ANNAPURNA GUPTA)
याय क सद य/Judicial Member लेखा सद य/Accountant Member
Dated: 24th June, 2021
*रती*
आदे श क! त,ल-प अ.े-षत/ Copy of the order forwarded to :
• अपीलाथ / The Appellant • यथ / The Respondent • आयकर आयु/त/ CIT • आयकर आयु/त (अपील)/ The CIT(A) • -वभागीय त न2ध, आयकर अपील&य आ2धकरण, च4डीगढ़/ DR, ITAT, CHANDIGARH • गाड फाईल/ Guard File आदे शानस ु ार/ By order, सहायक पंजीकार/ Assistant Registrar ITA Nos.789 & 790/Chd/2019 A.Ys. 2014-15 &2015-16 Page 21 of 21 Draft dictated 09.06.2021 Sr.PS Draft placed before author 06.2021 Sr.PS Approved Draft comes to the Sr.PS/PS 06.2021 Sr.PS Order signed and pronounced on File sent to the Bench Clerk Sr.PS Date on which file goes to the AR Date on which file goes to the Head Clerk.
Date of dispatch of Order.