BONGAIGAON REFINERY AND PETROCHEMICALS LTD. VS COMMISSIONER OF INCOME-TAX
2002 P T D 1127
[251 I T R 329]
[Supreme Court of India]
Present: S. P. Bharucha, Y. K. Sabharwal and Brijesh Kumar, JJ
BONGAIGAON REFINERY AND PETROCHEMICALS LTD.
Versus
COMMISSIONER OF INCOME-TAX
Civil Appeal No. 3024 of 1999, decided on /01/.
th
July, 2001. (Appeal from the judgment and order, dated July 29, 1998, of the Gauhati High Court in I.T.R. No.6 of 1989).
Income-tax--
----Income or capital---Business of oil refinery and petrochemicals---Period of formation Income from house property, guest house charges for equipment and recoveries from contractors for supply of water and electricity---Received during period of, formation---Capital receipts and not income---To be adjusted against project cost for main business-- Indian Income Tax Act, 1961---[CIT v. Bongaigaon Refinery and Petrochemical Ltd. (2000) 245 ITR 708 reveled].
From the decision of the High Court [see (2000) 245 ITR 708], to the effect that, inter alia, income from house property and guest house, hire charges, for equipment and recoveries from contractors on account of water and electricity supply, received during the period of formation of the assessee-company's main business of oil refinery and petrochemicals which was being set up, were taxable as "Income from other sources", the assessee preferred an appeal to the Supreme Court:
Held, reversing the decision of the High Court in relation to these items of income, that these items of receipts were not taxable income but were to be adjusted against the project cost for the business of oil refinery and petrochemicals.
CIT v. Bokaro Steel Ltd. (1999) 236 ITR 315 (SC) applied.
CIT v. Bongaigaon Refinery and Petrochemical Ltd. (2000) 245
ITR 708 reversed.
CIT v. Karnal Cooperative Sugar Mills Ltd. (2000) 243 ITR 2 (SC); CIT v. Karnataka Power Corporation (2001) 247 ITR 268 (SC) and Tuticorin Alkali Chemicals and Fertilizers Ltd. v. CIT (1997) 227 ITR 172 (SC) ref.
Joseph Vellapally, Senior Advocate (Tarun Gulati and Ajit Puduserry, Advocates with him) for Appellant.
Senior Advocate (Rajiv Tyagi and B.V. Balram Das, Advocate with him) for Respondent.
ORDER
The order under challenge was passed on a reference to the High Court (see (2000) 245 ITR 708), under the Income Tax Act, 1961, made at the instance of the Revenue. The High Court answered in the negative and against the assessee the following question (page 109):
"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the items of income derived by the assessee during the formation period for the main business, were not taxable income but were to be adjusted against the project cost for the oil refinery and petrochemicals, the main business for which the company was
It did so based upon the decision of this Court in Turticorin Alkali Chemicals and Fertilizers Ltd. v. CIT (1997) 227 ITR 172.
That was a case in which the question related to interest earned by a company during its formative period by investments. This Court has held in CIT v. Bokaro Steel Ltd. (1999) 236 ITR 315, that it is so confined and did not apply where the receipts were directly connected with or were incidental to the work of construction of the assessee's plant. The decision in CIT v. Bokaro Steel Ltd. (1999). 236 ITR 315 (SC) has been followed by a two-Judge Bench of this Court in CIT v. Karnal Cooperative Sugar Mills Ltd. (2000) 243 ITR 2 and by a three Judge Bench in CIT v. Karnataka Power Corporation (2001) 247 ITR 268. In fact, in the latter case, it was not disputed by the Revenue that the question that related to hire `charges paid by contractors had to be answered in the light of the judgment in Bokaro Steel Ltd.'s case (1999) ITR 315 (SC). It is, therefore, not possible now to take any view different from that taken in Bokaro Steel Ltd.'s case (1999) 236 ITR
The High Court has already held that the interest income derived by the assessee during its formative period was taxable income. What remains for consideration is the income which the assessee derived from house property, its guest house, charges for equipment and recoveries from the contractors on account of water and electricity supply. These items are covered by the decision in Bokaro Steel Ltd.'s case (1999) 236 ITR 315 (SC). To the extent that it relates to these items, i.e., items excluding interest, the question must be answered in the affirmative and in favour of the assessee. The order under challenge will stand modified to that extent.
Appeal allowed accordingly.
No order as to costs.
M.B.A./1080/FCAppeal allowed.