TaxTMI 
TaxTMI 
2026 (9) TMI 1978
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in including the sum of Rs.898.42 lakhs received as signature bonus in the total income of the appellant? 3. The brief facts of the case are as under: 3.1. The appellant - assessee is formed and promoted by the Gujarat Electricity Board and Government of Gujarat with an object to augment power generating capacity in the State of Gujarat by attracting private sector partners or on its own. The assessee filed return of income for assessment year 1995-96 on 29.11.1995 declaring loss of Rs. 1,25,35,115/- after deducting deductions under Section 32 of the Income Tax Act, 1961 (for short "The Act") of Rs. 10,09,97,023/- and expenses under Section 35D amounting to Rs. 3,03,704/-. Thereafter, the return of income was taken up for scrutiny and the Assessing Officer, by order dated 27.01.1998, revised the loss to Rs. 97,37,286/- by adding the interest income of Rs. 27,86,000/- and disallowing the entertainment expense of Rs. 11,829/-. 3.2. Being aggrieved, the appellant assessee preferred an appeal before the CIT (Appeals). 3.3. The assessee, during the course of the appellate proceedings, submitted that the Assessing Officer should not have assessed the interest income, however....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... reason that the omission at the initial stage was apparently willful. 5.3 Notwithstanding the above, it is essential to consider the merits of the appellant's claim. The ld. counsel for the appellant submitted as under in the matter: "The appellant company has been incorporated to generate power and also to act as a nodal agency in the power sector. Copy of object clause is enclosed - Annexure D). The Company has started with various power projects in the State of Guajrat. The licenses were issued in the name of Corporation and all initial works put in power plant namely land survey, soil testing, govt. approval etc. were being obtained by the appellant company and the projects were in progress. During the year, Company has transferred 250MW Lignite based power project at Akrimota in Kutch Dist. to GMDC and 250 MW Lignite based power project at Mangrol Taluka of Surat Dist to GIPCL. As per the approval given by the Govt. of Gujarat, the Company is entitled to receive signature bonus at 0.5% for the project assigned for implementation. 20% of such signature bonus was to be straight away handed over to GEB as per the direction of the Government. (Copy of letter....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tal in nature. Reliance is placed upon Kettlewell Bullen & Co. Lt V. CIT (1964) 53 ITR 261, 282 (SC). (Extract of headnote filed - Annexure G). Appellant also relies upon Supreme Court decision in the case of Prabhu Dayal 82 ITR 804 (Extract of headnote filed - Annexure H) and also Bombay Burmah Trading Co. V/s. CIT 161 ITR 386 (SC) (Extract of headnote filed - Annexure I) wherein it is held that if the compensation for termination of an income producing assets, the same is in the nature of capital receipt." 5.4 After careful consideration of relevant facts, I find that the signature bonus received by the appellant was forming the substantial portion of its revenue which is evident from the following: "Income from signature bonus: Gujarat Power Corporation Ltd. has been playing the role of developer and catalyser in the energy sector in the state of Gujarat. The company identifies suitable parties and implement such power project through independent power investors. During the year, company has passed on 250 MW Lignite based power project at Akrimota in Kutch Dist. To GMDC and 250 MW Lignite based power project at Mangrol Taluka of Surat Dist. To GIPCL and had rec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd catalyser in the energy sector in the state of Gujarat. The appellant company was engaged in the business of identifying suitable parties and implement such power project through independent power investors. It is thus obvious that the whole establishment of the appellant company and the major portion of its expenditure was directed towards bringing up such power projects and transferring them to other organisation in lieu of charging signature bonus which obviously is bound to form normal business receipts of the appellant company. The decision of Hon'ble Supreme Court in the case of B.C. Srinivasan Shetty cited at 128 ITR 294 (Supreme Court) was not applicable in the appellant's case for the simple reason that it was not a case of transfer of a capital asset where no cost was involved. In the appellant's case, substantial cost was involved and that as far as appellant was concerned, the projects so prepared were the normal business activity of the appellant as the related expenditure was claimed by the appellant as revenue expenditure. The other judicial pronouncements relied upon by the appellant company are also distinguishable on the basis of facts for ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ithout any cost. The assessee admitted that the expenses incurred by the assessee in relation to the development of the projects were claimed as revenue expenditure by them. Thus, we do not find any error in the order of the learned CIT(A) and the ground of appeal of the assessee is dismissed." 4. Learned Sr. Advocate Mr. Soparkar for the appellant submitted that so far as the question no. 1 is concerned, the same is answered in favour of the assessee in Tax Appeal No. 306 of 2004 for the earlier assessment year. It was therefore submitted that the question no. 1 may be answered in favour of the assessee. Learned Sr. Standing Counsel for the respondent - Revenue was unable to controvert the same. This Court in Tax Appeal No. 306 of 2004 has observed as under: "3. The case in brief giving rise to this Appeal are as under:- The assessee herein was a company promoted by Gujarat Electricity Board and Government of Gujarat with an objective to augment power generating capacity in the State of Gujarat. The assessee in the year under consideration entered into a Memorandum of Understanding with Torrent Exports Limited for implementation of 615 MW Gandhar Gas Project. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... was whether the assessee is legally correct in asserting that the income did not belong to the assessee, but that was of the Government of Gujarat and that therefore, it cannot be taxed in the hands of assessee. In our opinion, the assessee is perfectly justified in raising such a contention what was, to our mind, erroneously turned down by the Tribunal." 5. Having heard the learned Advocates for the parties, the factual matrix will permit this Court to hold that the interest of Rs.53.08 Lakhs cannot be taxed in the hands of the assessee and in view of the findings and the law enunciated in the decision of Gujarat Power Corporation Ltd. (supra), and hence, we are of the view that the question is answered in favour of the assessee and the Appeal is partly allowed." 5. In view of the above, we answer the question no. 1 in favour of the assessee and against the Revenue. The appeal is accordingly partly allowed to that extent. 6. So far as question no. 2 is concerned, the CIT (Appeals) and Tribunal have arrived at a concurrent findings of fact that the appellant - assessee was engaged in the business of development and carrying on of the implementation of the power plan....