TMI Blog2011 (5) TMI 1025X X X X Extracts X X X X X X X X Extracts X X X X ..... rcial production on 1.3.2001. In respect of the year under appeal, the assessee-company had returned NIL income under the provisions of the Income-tax Act, 1961 other than u/s 115JB under which the returned income is ₹ 13,28,92,013/-. The return of income was filed on 28.10.2005. The assessment was completed u/s 143(3) on 31.12.2007. In the assessment order, while computing the book profits chargeable to tax, the Assessing Officer had added to the book profits rebate and other provisions amounting to ₹ 15,59,85,460/- on the ground that such provisions represented unascertained liabilities. While computing the tax payable as per the normal provisions of the Act, long term capital loss of ₹ 31,52,033/- was disallowed on the ground that such loss was with reference to sale of an agricultural land which would not come within the category of a capital asset as understood by the provisions of section 2(14) of the Act. In the computation as per the normal provisions of the Act, start up fuel cost of ₹ 8,30,68,193/- for which invoices had been raised by the assessee- company on TNEB had not been recognized as an income by the assessee-company in its books, was add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich states that the officers of the department must not take advantage of the mistakes committed by the Assessee. 5. That, on facts and circumstances of the case, the learned AO has, erred in confirming the additions for provision for auxiliary consumption and dividend distribution tax for the purpose of computation of income under normal provisions of the Act. 6. That, the learned CIT(A) ought to have exercised the powers coterminous to that of the AO in determining the allowability of the said provisions for rebate, auxiliary consumption and dividend distribution tax for the computation of the income under normal provisions of the Act. 7. The Appellant craves leave to add, supplement, amend, delete or otherwise modify any of the grounds stated hereinbefore at the time of hearing. 3. Apart from the above, an additional ground has been raised by the assessee praying that interest u/s 234B cannot be levied on the additional tax, if any, due to retrospective amendment made in section 115JB. The petition for admittance of additional ground states that it is purely a legal one and does not require further investigation of facts. Although the ld.DR has objected to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sis and not on adhoc basis. The income has not accrued to the company since TNEB has never acknowledged the claims of the company. The portions of extracts of PPA in relation to auxiliary consumption placed at pages 21 to 27 of the paper book and in relation to dividend distribution tax as contained at pages 28 to 30 of the paper book, are relevant. The ld.AR has relied on the decisions of Hon'ble Supreme Court rendered in the case of Rotork Control India(P) Ltd vs CIT (314 ITR 62) and in the case of Bharat Earth Movers vs CIT, (245 ITR 428) and that of Hon'ble Kerala High Court rendered in the case of Indian Transformers Ltd (270 ITR 259). The relevant held portion of these cases are as under: Rotork Control India(P) Ltd vs CIT (314 ITR 62) Held, reversing .the decision of the High Court, that the valve actuators, manufactured by the assessee, were sophisticated goods and statistical data indicated that every year some of these were found defective ; that valve actuator being a sophisticated item no customer was prepared to buy a valve actuator without a warranty. Therefore, the warranty became an integral part of the sale price; in other words, the warranty stood ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Held, dismissing the appeal, that the two instances of defects came to the notice of the assessee of which one was with respect to ten numbers of transformers sold to BHEL and as per the complaint all the transformers failed within one year of such purchase. This gave a clear picture that a major portion of the transformers sold were defective and therefore a reasonable provision had to be made. The assessee had made a provision of ₹ 3,50,000 but the actual expenses incurred for that year was ₹ 7,98,958. These circumstances clearly showed that the provision was made on a reasonable basis. The Tribunal had rightly held that the provision made for the three years was based on an ascertained liability and that it could not be treated as a contingent liability. 5. In view of the above facts and circumstances of the case and the legal position on the issue, we restore this issue to the file of the Assessing Officer with a direction to decide the same afresh in the light of our observations made hereinabove, after hearing the assessee. The grounds raised originally are allowed for statistical purposes. 6. The additional ground is with regard to charging of intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the start up fuel cost of Rs. 8,30,68,183/- and In respect of such start up fuel cost, no credit note has been issued by the assessee company in favour of TNEB. 4.1. The learned CIT(A) erred in holding that the receipt from Covanta Samalpatti Operating Private Ltd. (CSOPL), classified as deposit, cannot be considered as a revenue receipt in the hands of the assessee company. 4.2. The learned CIT(A) failed to note that to the extent of the amount received back by the assessee from CSOPL, the assessee had not paid for the maintenance expenditure to CSOPL and hence, the amount of receipt from CSOPL will partake the character of income only. 5.1. The learned CIT(A) erred in holding that loss on sale of land, classified as agricultural land by the assessing officer, would constitute a Long Term Capital Loss (LTCL) and would be eligible for carry forward for set off to future years. 5.2. The learned CIT(A) failed to appreciate that the impugned land was classified as agricultural land in the land revenue records and that the land contained coconut and palmyrah trees. For these and other grounds that may be adduced at the time of hearing, it is prayed that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Apex Court in the case of CIT vs Chamanlal Mangaldas and Company(39 ITR 8) and the case of Godhara Electricity Company Ltd vs CIT (225 ITR 746) and that of Hon'ble Jurisdictional High Court in the case of CIT vs Pioneer Engineering Syndicate(234 ITR 503) are relevant. The gist of ratio decidendi of these cases is that since the claim made by the assessee against the Government has not been accepted by the latter, there was no question of the said amount having accrued to the assessee . After considering the rival submissions, we are also of the opinion that the concept of accrual is based on the acquisition of an enforceable right to receive. If such right to receive is subject to certain contingencies, then accrual cannot be said to have taken place. In such circumstances, the payer must also accept the liability failing which, an enforceable right to receive does not arise as per law. Thus, if a receipt is uncertain and is subject to the outcome of the events in future, it cannot be treated as having accrued during the relevant period. Since TNEB has refused to accept as its liability the start up fuel cost incurred by the assessee, the income in respect of start up fuel c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses. The operation and maintenance activity had been sub-contracted by the assessee-company to CSOPL and major maintenance expenses also were to be met out of the operation and maintenance fee paid periodically by the assessee-company to CSOPL. Since the assessee- company had this obligation to deposit an annual installment in the TRA, similar obligation was placed by the assessee-company on CSOPL which, in turn, was required to make an equivalent annual deposit with the assesse-company. The Assessing Officer has noted that out of the operational and maintenance charges paid by the assessee-company to CSOPL, part of it was coming back to it in the form of deposit which indicated that, to the extent of the deposit received from CSOPL by the assessee-company, there is no actual expenditure by way of maintenance fee. In the original return of income filed by CSOPL for assessment years 2003-04 and 2004-05, it had claimed the amount placed as deposit with the assessee-company as an expenditure. From this, the Assessing Officer has concluded that expenditure to the tune of ₹ 1,41,67,200/- would not be allowable as it represented only a notional payment for an expenditure which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue s grounds hence, Ground Nos. 4.1 and 4.2 stand dismissed. 16. The last ground of this appeal relates to the finding of the ld. CIT(A) in holding that loss on sale of land, classified as agricultural land by the Assessing Officer would constitute a Long Term Capital Loss (LTCL) and would be eligible for carry forward for set off to future years. According to the ld.DR, this land has been classified as agricultural land on which coconut and palmyrah trees have been grown, hence, it would not be eligible for carried forward for set off of to future years. The land in question was acquired by the company for the purpose of setting-up of power plant. However, it could not be used for the said purpose due to unavailability of water facilities, railway siding etc. The land was neither acquired nor given by the assessee for agricultural purposes. So, according to the assessee, this cannot be treated as agricultural land. 17. We have gone through the entire records including the letter dated 14.3.1997 from TNEB, Memorandum of Understanding between the promoter and the TNEB dated 18.2.1995; and Shareholders agreement dated 26.2.1999. We have also gone through the relevant prov ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
