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Income Tax Appellate Tribunal, DELHI BENCH: ‘A’, NEW DELHI
Before: SHRI AMIT SHUKLA & SHRI O.P. KANT
Date of hearing 05.08.2019 Date of pronouncement 09.08.2019 ORDER PER O.P. KANT, A.M.: This appeal by the Revenue is directed against order dated 21/06/2016 passed by the Ld. Commissioner of Income-tax (Appeals)-2, New Delhi[in short the Ld. CIT(A)] for assessment year 2012-13, raising following grounds:
1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Capitalization of Interest of Rs.66,77,000/- ignoring the fact that this amount is part of actual cost of asset and therefore Capital in nature.
The appellant craves leave for reserving the right to amend, modify, alter, add or forego any grounds of appeal at any time before or during the hearing of this appeal.
2. Briefly stated facts of the case are that the assessee filed return of income on 29/09/2012 declaring total income of Rs.73,82,48,170/-. The case of the assessee was selected for scrutiny and notice under section 143(2) of the Income-tax Act, 1961 (in short ‘the Act’) was issued and complied with. During the year under consideration, the assessee was engaged in generation of the power from thermal plants at Bokaro. The Assessing Officer observed that the assessee had shown interest receipt of Rs.2196.73 Lacs, under the income from other sources. The Assessing Officer noticed that assessee deducted an amount of Rs. 69.77 lakhs toward interest on expansion Fund capitalized and shown net income of Rs.2126.96 Lacs. According to Assessing Officer, the interest paid by the assessee was to be allowed as capital expenditure if the asset is not put to use and to be allowed as revenue expenditure if the asset is put to use. The Assessing Officer disallowed the interest expenditure of Rs.69,77,000/-claimed as revenue expenditure holding that it is part of actual cost of the asset and therefore, capital in nature and added to the total income of the assessee. The Ld. CIT(A) following the finding of the Tribunal in the case of the assessee itself for assessment year 2009-10 in vide order dated 26/07/2013, allowed the appeal of the assessee. Aggrieved, the Revenue is in appeal before the Tribunal raising the grounds as reproduced above.
3. Before us, the Ld. counsel of the assessee submitted that issue in dispute is covered in favour of the assessee by the order of the Tribunal cited by the Ld. CIT(A), which has been further Tribunal in assessment year 2010-11 in the case of the assessee itself.
The Ld. DR could not controvert this statement of the Ld. counsel of the assessee.
5. We have heard the rival submission and perused the relevant material on record. The finding of the Ld. CIT(A) on the issue in dispute is reproduced as under : “3.1.2 Similar additions were also made in the case of the appellant in previous assessment years which were duly held allowed by CIT(A) for A.Y. 2009-10 and/upheld by the orders of Hon’ble ITAT, Delhi. Hon’ble ITAT Delhi in the case of the appellant for A.Y. 2009- 10 in vide order dt. 26.07.2013 on the similar issue held as under:- “3. We have heard both the sides and perused the material placed before us. The learned CIT(A) has allowed the relief with the following finding:- "4.1 I have carefully considered the submissions made by Id.AR and have gone through the assessment order. It is seen that similar issue was decided in the case of CIT Vs. Sasan Power Ltd. on 6 January, 2012 (ITA 10/2012) by the Hon'ble High Court of Delhi as follows:- "11. In "Indian Oil Panipat Power Consortium Ltd." (supra), it has been held that m>here interest is on money received as share capital, which is temporarily placed in fixed deposit awaiting acquisition of land, the claim that the interest is in the nature of a capital receipt liable to be set off against pre- operative expenses, is acceptable, since the funds infused in the assessee company by the joint venture partners are inextricably linked with the setting up of the plant and the interest earned cannot be treated as income from other sources. "Indian Oil Panipat Power Consortium Ltd." (supra) is squarely applicable to the present case, as discussed. This is in consonance with "Bokaro Steel Ltd." (supra), "Karnal Cooperative Sugar Mill" (supra), "CIT Vs. Karnataka Power Corporation", 247 ITR 268 (SC) and "Bongaigaon Refinery and Petro Chemical Co. Ltd. vs. CIT", 251 ITR 329 (SC), wherein also, it has been laid down that any receipt inextricably linked to the setting up of the project is capital receipt not liable to tax and going to reduce the cost of the project. In the present case too. the funds infused by the assessee company were inextricably linked with the setting up of the power plant. Likewise, the interest payment was also capital expenditure, which fact was confirmed by the AO. while 3 ITA-183/Del/2013 observing the entire income of the entire expenditure was capital in nature.
All these facts have been duly taken into consideration by the CIT(A) while passing the order under appeal. Therefore, there is no merit in the grievance raised by the department by way of ground nos. 1 & 2. Accordingly, ground nos. 1 & 2 are rejected." It is further seen that the Jurisdictional High Court of Delhi in the case of CIT Vs. Shree Ram Honda Power Equipment, 289 ITR 475 has held that for the purposes of excluding interest receipts from business income for determining the business profit, the net interest has to be excluded and not the gross receipts. In other words, the principle of netting of has been upheld by the Hon'ble High Court of Delhi. In view of the aforesaid decision of the Hon'ble High Court of Delhi, the AO is directed to allow the netting off of interest before determining the business profit of the appellant company."
4. From the above, it is evident that the learned CIT(A) allowed the relief following the decision of Hon'ble Jurisdictional High Court in the case of CIT Vs. Sasan Power Ltd. vide and Shree Ram Honda Power Equipment - 289 ITR 475. The Revenue has not disputed the applicability of the above decisions to the facts of the assessee's case. From ground No.2 of the Revenue's appeal, it is evident that the Revenue is disputing the matter in appeal because the Revenue has filed the SLP against the decision of Hon'ble Jurisdictional High Court in the case of Sasan Power Ltd. (supra) which is pending for adjudication. The decision of Hon'ble Jurisdictional High Court is binding upon all the authorities working within the jurisdiction of the said High Court. Therefore, the decision of Hon'ble Jurisdictional High Court in the case of Sasan Power Ltd. (supra) is binding on the IT AT as well as the CIT (A) in Delhi irrespective of the Revenue's challenge to the above decision in SLP before the Hon'ble Apex Court. Unless and until the said decision is modified or reversed by the Hon'ble Jurisdictional High 4 ITA-183/Del/2013 Court, the same would be binding on all the authorities within the jurisdiction of Hon'ble Delhi High Court. In view of the above, we find no infirmity in the order of learned CIT(A). The same is sustained and the Revenue's appeal is dismissed.
In the result, the appeal of the Revenue is dismissed. ”
As the facts and circumstances in the issue under consideration are identical, therefore, following the above decision of Hon’ble ITAT in the appellant’s own case, the ground of appeal stands allowed.”
6. We find that the Ld. CIT(A) has followed a binding precedent on the issue in dispute in the case of the assessee itself. We also noticed that the finding of the Tribunal in assessment year 2009- 10 has been followed by the Tribunal in for assessment 2010-11. 6. In our opinion, the finding of the Ld. CIT(A) on the issue and dispute is well reasoned and we do not find any error in the order of the Ld. CIT(A). Accordingly, we uphold the same.
7. The ground of the appeal of the Revenue is accordingly dismissed. 8. In the result, the appeal of the Revenue is dismissed. Order is pronounced in the open court on 9th August, 2019.