Gujarat High Court
The Principal Commissioner Of Income ... vs Madhya Gujarat Vij Company Ltd on 24 February, 2025
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
NEUTRAL CITATION
C/TAXAP/362/2024 ORDER DATED: 24/02/2025Th
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/TAX APPEAL NO. 362 of 2024
With
R/TAX APPEAL NO. 363 of 2024
With
R/TAX APPEAL NO. 364 of 2024
With
R/TAX APPEAL NO. 365 of 2024
With
R/TAX APPEAL NO. 366 of 2024
With
R/TAX APPEAL NO. 369 of 2024
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THE PRINCIPAL COMMISSIONER OF INCOME TAX - 1
Versus
MADHYA GUJARAT VIJ COMPANY LTD
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Appearance:
MR NIKUNT K RAVAL(5558) for the Appellant(s) No. 1
MR MANISH J SHAH(1320) for the Opponent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR.JUSTICE D.N.RAY
Date : 24/02/2025
COMMON ORAL ORDER
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
1. Heard learned advocate Mr.Rudram Trivedi for learned Senior Standing Counsel Mr.Nikunt K. Raval for the appellant and learned advocate Mr.Manish J. Shah for the respondent.
2. These appeals are filed under Section 260A Page 1 of 11 Uploaded by PALAK BRAHMBHATT(HC01391) on Mon Mar 10 2025 Downloaded on : Fri Mar 14 22:37:03 IST 2025 NEUTRAL CITATION C/TAXAP/362/2024 ORDER DATED: 24/02/2025Th undefined of the Income Tax Act, 1961 (for short 'the Act') by the appellant-Revenue arising out of the common judgment and order dated 26th July, 2023 passed by the Income Tax Appellate Tribunal for Assessment Years 2010-11 to 2013- 14 in cross-appeals filed by the appellant- Revenue and the respondent-Assessee. The question of law arising in these appeals is re-framed as under :
"Whether on the facts and circumstances of the case and in law, the Income Tax Appellate Tribunal was justified in setting aside the addition made by the Assessing Officer on account of treating interest income earned from loans to staff and other loans as 'Income from other sources'?"
3.1. The Assessing Officer while finalising Page 2 of 11 Uploaded by PALAK BRAHMBHATT(HC01391) on Mon Mar 10 2025 Downloaded on : Fri Mar 14 22:37:03 IST 2025 NEUTRAL CITATION C/TAXAP/362/2024 ORDER DATED: 24/02/2025Th undefined the assessment for the year under consideration treated the interest income earned by the respondent-assessee from staff loans and advances as income from other sources instead of income from business and profession as the respondent-assessee was engaged in the business of distribution of electricity and income was not generated from day to day business of the assessee-company and held that such income should be treated as income from other sources.
3.2. Being aggrieved, the assessee preferred an Appeal before the CIT (Appeals) who confirmed the addition made by the Assessing Officer considering that the interest income on loans and advances given to the employees cannot be said to be arising from the business of the assessee as the Page 3 of 11 Uploaded by PALAK BRAHMBHATT(HC01391) on Mon Mar 10 2025 Downloaded on : Fri Mar 14 22:37:03 IST 2025 NEUTRAL CITATION C/TAXAP/362/2024 ORDER DATED: 24/02/2025Th undefined assessee is not in the business of money lending and held that the Assessing Officer rightly treated the same as income from other sources.
3.3. Being aggrieved, the assessee preferred an Appeal before the Tribunal. The Tribunal followed the decision of the Co- Ordinate Bench on identical issue in case of the sister concern of the assessee-Company namely Gujarat Energy Transmission Corporation Limited (GETCO) in ITA No.735/Ahd/2018 wherein, by order dated 24.08.2022 the issue was set aside to the file of the Assessing Officer for fresh adjudication in view of the decision of the Hon'ble Orissa High Court in case of Odisha Power Generation Corporation Limited to decide the issue upon examining the same in regard to the head of income upon Page 4 of 11 Uploaded by PALAK BRAHMBHATT(HC01391) on Mon Mar 10 2025 Downloaded on : Fri Mar 14 22:37:03 IST 2025 NEUTRAL CITATION C/TAXAP/362/2024 ORDER DATED: 24/02/2025Th undefined considering the relevant evidence in light of the observation made by the Hon'ble Orissa High Court.
3.4. The Tribunal therefore set aside the matter to the Assessing Officer relying upon the aforesaid decision of the Co-Ordinate Bench.
4. Learned advocate Mr.Rudram Trivedi for the appellant-Revenue submitted that though the issue is no-more res-integra in view of the decision of this Court in Tax Appeal No.63 of 2020, the judgment rendered by this Court in the said Tax Appeal is pending for adjudication before the Apex Court and therefore, the question may be admitted to keep the issue alive.
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NEUTRAL CITATION C/TAXAP/362/2024 ORDER DATED: 24/02/2025Th undefined
5. On the other hand, learned advocate Mr.Manish Shah for the respondent submitted that the issue is squarely covered by the decision of this Court in case of the The Principal Commissioner of Income Tax, Vadodara-1 Versus Gujarat Urja Vikas Nigam Limited rendered in Tax Appeal No.63 of 2020 which was later on considered by this Court in Special Civil Application No.20400 of 2023 and other allied matters while considering the order passed by the Tribunal rejecting the application for rectification of mistake filed by the petitioner. Learned advocate Mr.Manish Shah therefore submitted that following the decision of this Court, these Appeals are liable to be dismissed.
6. Heard learned advocates for both the sides. In case of Gujarat Urja Vikas Nigam Page 6 of 11 Uploaded by PALAK BRAHMBHATT(HC01391) on Mon Mar 10 2025 Downloaded on : Fri Mar 14 22:37:03 IST 2025 NEUTRAL CITATION C/TAXAP/362/2024 ORDER DATED: 24/02/2025Th undefined Limited (Supra), this Court has held as under :
"13. With regard to question No.2[d], the Assessing Officer noticed that as per Schedule 14, the assessee has shown other income consisting of interest on loan and and advances, incentives from CPSU, etc. The Assessing Officer was of the view that this income was to be assessed as income from other sources instead of business income shown by the assessee.
14. On appeal, the CIT(A) as well as the Tribunal held that the interest income is required to be treated as business income instead of income from other sources. The Tribunal in its order observed as under:
"10 We have heard the rival contentions and perused the material on record on this issue. The assessing Officer has treated the aforesaid income under the head income from other sources without Page 7 of 11 Uploaded by PALAK BRAHMBHATT(HC01391) on Mon Mar 10 2025 Downloaded on : Fri Mar 14 22:37:03 IST 2025 NEUTRAL CITATION C/TAXAP/362/2024 ORDER DATED: 24/02/2025Th undefined controverting the submission of the assessee on the basis of which it was claimed that these income were of the nature of business income as elaborated in para seven of this order. The ld. CIT(A) has decided the issue in favour of the assessees taking that this issue was decided in favour of the assessee for assessment year 2009-10. During the course of appellate proceedings, the Revenue has failed to controvert the aforesaid contention and the findings of the ld. CIT (A), therefore after considering the material fact that interest earned on loan and advances from deposit placed with Mega Power Project toward sits sharing of power and interest of UL pool account received from M/s.Power Grid Corporation India Ltd were directly related to the business of the assessee ,therefore, this ground of appeal of the Revenue stands dismissed."Page 8 of 11 Uploaded by PALAK BRAHMBHATT(HC01391) on Mon Mar 10 2025 Downloaded on : Fri Mar 14 22:37:03 IST 2025
NEUTRAL CITATION C/TAXAP/362/2024 ORDER DATED: 24/02/2025Th undefined
15. In view of above findings of acts arrived at by the Tribunal that interest earned by the assessee was directly related to the business of the assessee, no question of law much less substantial question of law arises. Therefore, appeal stands dismissed qua question No.2[d]."
7. Considering the above decision, while rendering the oral judgment in Special Civil Application No.20400 of 2023 in case of Uttar Gujarat Vij Co. Ltd Versus The Income Tax Officer, Ward 2(1)(4), it was observed as under :
"8. Having heard learned advocates for the parties it appears that it is not in dispute that the petitioner has relied upon the decision of this court in case of Gutarat Urja Vikas Nigam Itd vs. DCIT in Tax Appeal No. 63/2020 wherein, the Tax Appeal was preferred by the Revenue Page 9 of 11 Uploaded by PALAK BRAHMBHATT(HC01391) on Mon Mar 10 2025 Downloaded on : Fri Mar 14 22:37:03 IST 2025 NEUTRAL CITATION C/TAXAP/362/2024 ORDER DATED: 24/02/2025Th undefined on the aspect as to whether interest received on staff loan is business income or not for the purpose of consideration of disallowance under section 14A of the Act. The facts of the case of Gujarat Urja Vikas Nigam Ltd vs. DCIT and the facts of the case of the petitioner are identical and not different and as such, the Tribunal could not have relied upon the decision of Orissa High Court while distinguishing the facts of the case of the petitioner by ignoring the decision of the Jurisdictional High Court. More particularly, when the CIT and the Tribunal in case of the Guiarat Urja Vikas Nigam Ltd Vs. DCIT have held that interest income on staff loans is required to be treated as 'business income' instead of 'income from other sources' which is confirmed by this court in the aforesaid Tax Appeal.
9. In case of Gujarat Energy Transmission Corporation Ltd supra) in ITA No. 633/2013, the Coordinate Bench Page 10 of 11 Uploaded by PALAK BRAHMBHATT(HC01391) on Mon Mar 10 2025 Downloaded on : Fri Mar 14 22:37:03 IST 2025 NEUTRAL CITATION C/TAXAP/362/2024 ORDER DATED: 24/02/2025Th undefined of the Tribunal, after considering the decision of this Court, has held that the interest on staff loans and advances are part of the 'business income' only. In such circumstances, the decision of the co-ordinate Bench of the Tribunal as well as this court were binding upon the Tribunal resulting into the mistake apparent on record."
8. In view of the above view taken by this Court, we do not find any merit in these Appeals as no question of law much less any substantial question of law can be said to have arisen in the impugned order passed by the Tribunal so far as the proposed question of law is concerned. The Appeals therefore, being devoid of any merit are accordingly dismissed.
(BHARGAV D. KARIA, J) (D.N.RAY,J) PALAK Page 11 of 11 Uploaded by PALAK BRAHMBHATT(HC01391) on Mon Mar 10 2025 Downloaded on : Fri Mar 14 22:37:03 IST 2025