Income Tax Appellate Tribunal - Chandigarh
H.P. Power Transmission Corporation ... vs Ito, Shimla on 7 December, 2016
I N T H E I N C O M E T A X AP P EL L AT E T R I BU N A L
D I VI S I O N B EN C H , C H AN D I G A R H
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER
AND Ms.ANNAPURNA GUPTA, ACCOUNTANT MEMBER
ITA No. 530/CHD/2016
Assessment Year : 2012-13
M/s H.P. Power Transmission Corp.Ltd. Vs The ITO,
Barowalia House, Khalini, Ward - 1,
Shimla - 2. Shimla.
PAN: AACCH1548M
(Appellant) (Respondent)
Appellant by : Shri Tej Mohan Singh,
Proxy Counsel for Shri Vishal Mohan
Respondent by : Shri Manjit Singh
Date of Hearing : 05.12.2016
Date of Pronouncement : 07.12.2016
O R D E R
PER BHAVNESH SAINI,JM This appeal by assessee has been directed against order of ld. CIT(Appeals) Shimla dated 04.03.2016 for assessment years 2012-13 on the following ground :
"That in the facts and circumstances of the case the Ld Commissioner of Income Tax ( Appeals) is not justified in upholding the addition of Rs 9,46,51,086/- made to the taxable income of the assessee by treating the interest accrued on FDR's as income from other sources and subjecting the same for taxation . Fact of the matter is that the' assessee's business was in a pre-operational stage and the interest had been rightly reduced from the capital work in progress." 2
2. Brief facts of the case are that return declaring 'nil' income was e-filed by the assessee-corporation on 29/09/2012. The case was selected for scrutiny through CASS. The assessee company namely, H.P. Power Transmission Corporation Limited (HPPTCL), an undertaking of Government of Himachal Pradesh was established on 27th August, 2008 with a view to strengthen the Transmission Network in Himachal Pradesh and to facilitate evacuation of Power from upcoming Generating Plants. The jobs entrusted to Corporation by GOHP inter-alia included execution of all New Works - both Transmission Lines and Substations of 66kv and above Voltage Ratings, Formulation, Updation, Execution of Transmission Master Plan of HP for Strengthening of Transmission Network and Evacuation of Power. Besides, coordinating the transmission related issues with CTU, CEA/OP (GOI), HP Government and HPSEBL. HPPTCL was also responsible for planning and co-ordination of transmission related issues with IPPs, CPSUs, State PSUs, HPPCL and other State/Central Government Agencies. The assessee company has not prepared Profit and Loss Account, as the company was yet to start commercial operation. However, the statement showing incidental expenditure during construction (pending allotment) has been prepared. Thus, it is an undisputed fact that business of the assessee company is yet in pre-operative stage and it has not commenced business 3 operations. Nor it has undertaken any production in the relevant assessment year. The assessee company had earned interest income of Rs.9,46,51,086/- in the assessment year 20l2-13. The interest was earned on surplus funds available with the assessee company. This fact was duly noted by the Statutory Auditors of the assessee company in their Audit Report dated 26.10.2012. The statutory auditors commented on the accounting policies as under :
" T a x o n i n c o me f o r t h e c u r r e n t p e r i o d i s determined on the basis of various j u d g me n t s o f H o n ' b l e C o u r t s t h a t i n c o me earned during construction period is not taxable and accordingly no current tax liability is determined."
3. The auditors further in para (E)(ii) of their "Auditor's Reports " has categorically mentioned about the change of accounting policies and accounting assumption during the previous year and reported as under :
"During the year on the basis of various j u d g me n t s o f H o n ' b l e c o u r t s t h e c o r p o r a t i o n h a s n o t m a d e a n y i n c o me t a x p r o v i s i o n wh i c h i s i n contravention to Accounting Standard AS-22 "
A c c o u n t i n g f o r T a x e s o n i n c o m e " wh i c h s t a t e s t h e i n c o me - t a x p r o v i s i o n s t o b e c a l c u l a t e d o n t h e b a s i s o f p r e v a i l i n g t a x l a ws .
As per Note 22 During the year the Corporation h a s n o t m a d e a n y i n c o me t a x p r o v i s i o n s o n t h e b a s i s o f v a r i o u s j u d g me n t s o f H o n ' b l e C o u r t s . H o we v e r , the Corporation has deposited a d v a n c e i n c o me t a x o f R s . 2 , 3 5 , 0 0 , 0 0 0 / - . "
3(i) Thus during the year under consideration 4 assessee has change accounting system wherein interest earned on funds received from government has been set off against the capital expenditure incurred on projects as earnings of interest being incidental to main activity of company and company indisputably is in preoperative stage i.e. company has not commenced his operations.
3(ii) The assessee was confronted by the assessing officer with a show cause as to why the interest earned by it on surplus and borrowed funds should not be brought to tax under the head 'income from other sources', in view of the ratio of judgment of the Hon'ble Supreme Court in Tuticorin Alkali Chemicals & fertilizers Ltd. Vs. CIT (1997) 227 ITR172 (SC). In response, the assessee company has filed reply vide their counsel's letter dated 27.01.2015. The reply of the assessee was not found satisfactory and after elaborate discussion and relying on judgment of the Hon'ble Supreme Court in Tuticorin Alkali Chemicals & fertilizers Ltd. Vs. CIT (1997) 227 ITR 172 (SC) Apex Court, made in the assessment order, the A.O. held that the gross interest earned by assessee was assessable under the head income from other sources. Therefore, it was concluded that interest of Rs.9,46,51,086/-was assessable in the hands of HPPTCL for Assessment Year 2012-13 as income from the other sources. Aggrieved by the same, assessee filed appeal.5
4. The assessee challenged the order of the Assessing Officer before ld. CIT(Appeals) and his submissions are reproduced in the appellate order. The ld. CIT(Appeals) noted that the identical issue have been decided against the assessee by ld. CIT(Appeals) for assessment year 2010-11 and 2011-12 vide order dated 05.11.2014. The order of the ld. CIT(Appeals) dated 05.11.2014 has been confirmed by jurisdictional ITAT in ITA No. 68/CHD/2015 vide order dated 04.08.2015. The appeal has been decided against the assessee by ITAT by relying upon its own order in ITA 488/2012 and ITA 169/2013 for assessment year 2008-09 and 2009-10. The ld. CIT(Appeals), therefore, found that issue is covered against the assessee by order of ITAT Chandigarh Bench in preceding assessment years as noted above and accordingly, appeal of the assessee was dismissed.
5. The ld. counsel for the assessee, very fairly conceded that the issue is covered against the assessee by order of ITAT Chandigarh Bench referred to above by the ld. CIT(Appeals). He has submitted that the same order for assessment year 2008-09 and 2009-10 in ITA 488/2012 and 169/2013 (supra) have been followed by the Tribunal in the case of same assessee in assessment year 2010-11 in ITA 799/2014 and appeal of the assessee have been dismissed on the identical ground vide order dated June,2015, copy of the order is placed 6 on record.
6. Considering the above facts, we are of the view issue is covered against the assessee by various orders of ITAT Chandigarh Bench in the case of the assessee itself. The latest order of June, 2015 have been placed on record (supra) in which the Tribunal following earlier order in the case of the assessee, decided the issue against the assessee. No error have been pointed out in the order of the ld. CIT(Appeals) in following the order of the Tribunal in the case of the assessee. The appeal of the assessee has no merit. Same is accordingly, dismissed.
Order pronounced in the Open Court.
Sd/- Sd/-
( ANNAPURNA GUPTA) (BHAVNESH SAINI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 7th December,2016.
'Poonam'
Copy to:
1. The Appellant
2. The Respondent
3. The CIT(A)
4. The CIT,DR
Assistant Registrar,
ITAT/CHD