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
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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
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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
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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
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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
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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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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
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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
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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."
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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
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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
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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
