2012 (11) TMI 580 - AT - Income Tax

Disputes on O&M, Land Sale, Interest Levies: Tribunal's Ruling

The Assistant Commissioner of Income Tax, Company Circle- VI(1), Chennai. Versus M/s. Samalpatti Power Co. (P) Ltd.

The Assistant Commissioner of Income Tax, Company Circle- VI(1), Chennai. Versus M/s. Samalpatti Power Co. (P) Ltd. - TMI Issues Involved:1. Inflated Operation and Maintenance (O&M) Expenditure2. Long Term Capital Loss on Sale of Land3. Levy of Interest under Section 234D of the Income Tax Act, 19614. Addition of Start-Up Fuel Costs5. Interest under Sections 234B & 234CDetailed Analysis:1. Inflated Operation and Maintenance (O&M) Expenditure:The Revenue contended that the assessee company had inflated the O&M expenditure by the amount received as a deposit towards Major Maintenance Expenditure (MME). The Tribunal referenced its previous decision in ITA Nos. 894 and 1657/Mds/2009, where it was established that the O&M expenditure was legitimate based on various documents including the Plant Manufacturer's manual, financial statements, and acknowledgments from the O&M contractor. Consequently, the Tribunal dismissed the Revenue's grounds on this issue, following the precedent set in the assessee's own case.2. Long Term Capital Loss on Sale of Land:The assessee incurred a long-term capital loss on the sale of land initially purchased for constructing a power plant. The AO argued that the land was agricultural and not a capital asset, thus the loss could not be carried forward. However, the CIT(A) and the Tribunal, referencing the Tribunal's earlier decision and relevant case law, concluded that the land was a business asset since no agricultural operations were conducted on it post-purchase. Therefore, the loss was recognized as a long-term capital loss eligible for carry forward.3. Levy of Interest under Section 234D of the Income Tax Act, 1961:The AO levied interest under Section 234D, which the assessee contested, arguing that the provision was applicable only from June 2003 and not for the assessment year 2003-04. The CIT(A) agreed with the assessee, but the Tribunal, referencing the jurisdictional High Court's decision in CIT v. Infrastructure Development Finance Co. Ltd., held that since the regular assessment was completed after the provision came into effect, the interest was applicable. Thus, the Revenue's appeal on this issue was allowed.4. Addition of Start-Up Fuel Costs:The AO added start-up fuel costs billed to TNEB but not included in the assessee's receipts. The Tribunal, referencing its previous decision, noted that TNEB had not accepted the liability for these costs, and thus the income had not accrued to the assessee. The Tribunal upheld the CIT(A)'s decision to allow the assessee's appeal, dismissing the Revenue's grounds on this issue.5. Interest under Sections 234B & 234C:The AO charged interest under Sections 234B and 234C, which the assessee contested. The Tribunal, following its earlier decision, held that the interest could not be levied retrospectively on taxes computed based on a law that was not in force at the time of payment. The Tribunal dismissed the Revenue's appeal on this issue.Conclusion:- ITA No. 381/Mds/2011: Partly allowed (Levy of interest under Section 234D allowed; other issues dismissed).- ITA Nos. 382 & 383/Mds/2011: Dismissed.