2012 (6) TMI 573 - AT - Income Tax

Appeals Allowed for Reconsideration with Emphasis on Natural Justice

The assessee's appeals for AY 2002-03 and 2006-07 were allowed for statistical purposes, with matters remanded to the assessing officer for fresh ... Addition of Income tax Receivable to the income of assessee - ignoring the submissions of the appellant that the said income tax (MAT) receivable has never been reimbursed to the assessee - changing the head of income and taxing the same under the head ‘income from other sources’- Held that:- It is relevant to first adjudicate if the additional evidences should be entertained and the consequences of the said decision thereof - examining the additional evidences furnished reveals the correspondence that took place between the assessee and the APTRANSCO and that the said documents do not require any investigation into the basic facts of the issue as they are merely the correspondence between both the parties - issue relating to the correct head of income will be decided after deciding the issue of chargeability - papers filed being admitted the impugned order of the CIT(A)is set aside and restore the matter to the file of the AO for deciding the issue, duly considering, among other things, the additional evidence filed - in favour of assessee for statistical purposes. Entertaining an additional ground by CIT(A)which was not raised before the AO - AO contested that no revised return was filed - Held that:- As decided in Goetze (India) Ltd. vs. CIT [2006 (3) TMI 75 (SC)]that when making of a new claim before the Tribunal or for that matter the CIT(A), who is also not the assessing officer, but who is the appellate authority, assessee does not have to initiate a new claim before them by way of filing the revised return of income - can be done by way of letters or by way of filing revised computation - against revenue. Granting of deduction u/s 80IA by CIT(A)- deemed income through insurance premia - Held that:- Every receipt of the industrial undertaking is not an eligible profits derived from the said undertaking. With the categorization done by the Supreme Court based on a logic ie eligible profits and ineligible ancillary profits, the said distinction has to be looked into by the AO while adjudicating the issue - no clear finding of the Revenue authority that it is not derived from the business of the undertaking, there is no clarity as to whether the said income falls as operational income or ineligible ancillary profit - directed to AO TO gather the relevant facts and decide the issue afresh - favour of assessee by way of remand. Netting of the excess premium received - Held that:- As decided in Lalsons Enterprises Versus Deputy Commissioner Of Income-Tax [2004 (2) TMI 294 (Tri)]the benefit of netting of the excess premium received against the insurance premium amount paid during the year, for taking into account only the differential amount for exclusion from the income eligible for relief under S.80IA of the Act - against revenue. Issues Involved:1. Addition of income tax receivable from AP TRANSCO as income for the assessment years 2002-03 and 2006-07.2. Correct head of income for the income tax receivable.3. Admissibility of additional evidence.4. Deduction under Section 80IA in respect of income brought to tax under Section 41(1) of the Income Tax Act.5. Netting of excess premium received against insurance premium paid for exclusion from income eligible for relief under Section 80IA.6. Entertaining additional grounds not raised before the assessing officer.Detailed Analysis:1. Addition of Income Tax Receivable from AP TRANSCO:The assessee contested the addition of Rs. 2,40,45,266/- as income for the AY 2002-03, arguing that the reimbursement of income tax by AP TRANSCO was disputed and had not accrued or crystallized. The Tribunal noted that the Power Purchase Agreement provided for reimbursement of income tax, but AP TRANSCO refused to reimburse the tax paid under MAT provisions. The issue was pending before judicial forums, and the Tribunal found merit in the assessee's argument that the income had neither accrued nor crystallized. The Tribunal decided to set aside the matter to the assessing officer for fresh consideration, allowing the assessee to present additional evidence.2. Correct Head of Income for the Income Tax Receivable:The assessee argued that the income tax receivable should be treated as a business receipt under 'profits and gains from business or profession,' while the AO taxed it under 'income from other sources.' The Tribunal noted that this issue was contingent on the core issue of whether the income tax receivable was chargeable to tax at all. Since the core issue was set aside for fresh consideration, the Tribunal also set aside the issue of the correct head of income for fresh adjudication.3. Admissibility of Additional Evidence:The Tribunal considered the additional evidence submitted by the assessee, which included correspondence with AP TRANSCO showing repeated refusals to reimburse the income tax. The Tribunal found that these documents did not require further investigation and would aid in determining the accrual of the income tax receivable. Citing the Supreme Court decision in NTPC (299 ITR 383), the Tribunal admitted the additional evidence and remanded the matter to the assessing officer.4. Deduction Under Section 80IA in Respect of Income Brought to Tax Under Section 41(1):The Revenue contended that the deemed income under Section 41(1), being insurance premia, was not derived from the manufacturing activity and thus not eligible for deduction under Section 80IA. The Tribunal noted the Supreme Court's decision in Liberty India Ltd. (317 ITR 218), which distinguished between eligible profits and ineligible ancillary profits. The Tribunal directed the AO to re-examine the issue, considering whether the insurance premia constituted operational income or ineligible ancillary profit.5. Netting of Excess Premium Received Against Insurance Premium Paid:The CIT(A) had allowed the netting of excess premium received against the insurance premium paid, relying on the Special Bench decision in Lalsons Enterprises (89 ITD 25). The Tribunal upheld this decision, finding no contrary ruling presented by the Revenue.6. Entertaining Additional Grounds Not Raised Before the Assessing Officer:The Revenue challenged the CIT(A)'s decision to entertain an additional ground not raised before the AO. The Tribunal referred to the Supreme Court's judgment in Goetze (India) Ltd. vs. CIT (284 ITR 323), which allowed appellate authorities to entertain new claims not made in the original return. The Tribunal found the CIT(A) justified in entertaining the additional ground and dismissed the Revenue's objection.Conclusion:The assessee's appeals for AY 2002-03 and 2006-07 were allowed for statistical purposes, with the matters remanded to the assessing officer for fresh consideration. The Revenue's appeals for AY 2002-03 and 2006-07 were partly allowed for statistical purposes, with specific issues remanded for re-examination. The Tribunal emphasized the principles of natural justice and the need for a thorough re-evaluation of the disputed matters.