Itxa/251/2012 Of The Commissioner Of Income Tax - 2 v. The Tata Power Co Ltd

sbw *1* IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.251 OF 2012 Commissioner of Income Tax-2` ..Appellant -Versus-The Tata Power Co. Ltd. ..Respondent ........... Mr. Suresh Kumar for the Appellant.Mr. Ajit Shah i/b. Srihari M. Iyer for the Respondent. ........... CORAM: S.C. DHARMADHIKARIAND B.P. COLABAWALLA, JJ. DATE :- 11[th] June, 2014 P.C.: 1]This appeal is directed against the order passed by the Income Tax Appellate Tribunal on 9[th] September, 2011. The assessment year in question is 2001-02. 2]The limited issue arising out of the question projected as a substantial question of law, is with regard to the use of repatriated funds. 3]The factual position and which appears to be undisputed is that the return of income along with statutory audit report were filed by the respondent-assessee on 31[st] October, 2001 declaring a certain income. *2* 10.itxa251.12 Subsequently the revised return was filed on 26[th] March, 2003. During assessment proceedings, Assessing Officer, inter alia, taxed an amount of Rs.45,84,92,096/- being the profit on foreign exchange on repatriation of certificates of deposits. Aggrieved by this exercise and the order of the Assessing Officer, the matter was carried in appeal to the Commissioner of Income Tax (Appeals). The assessee's appeal was allowed on 25[th] April, 2008. Against this order, the revenue approached the Income Tax Appellate Tribunal. The Income Tax Appellate Tribunal noted the admitted factual position and concurred with the Commissioner of Income Tax (Appeals). It held that the earstwhile Tata Power Co. had issued Euro Notes in 1997 for raising funds for financing the companies' ongoing and future capital expenditure programmes and for general corporate purposes. The companies intended to expand their generating capacity to meet the growing demand of their existing customers as well as to add new direct customers in the License area. The entire proceeds raised abroad were held in interest for a period of 3 years pending deployment and utilization. During the year ended 31[st] March, 2001, the funds were repatriated to India as per the requirement of Reserve Bank of India. As a result of the intervening fall in the value of the Indian Rupee, a gain in terms of Indian rupees has arisen to the company on the repatriation of funds. The above gain was credited to Profit and Loss Account. The Assessing Officer has treated the profit on repatriation of certificates of deposit as taxable income. 4]The Commissioner of income tax (Appeals) held that the purposes for which the notes were raised was capital. The gain arose, not in the course of trading activities but merely due to conversion of the currency of one country into the currency of another country. The gain is, therefore, on capital account and not in the nature of income. Further, the gain has arisen at that point of time when the funds were repatriated to India. If the Notes were issued for meeting capital expenditure, and remained outside India, the taxability has to be determined at the point of time when the profit arose. Their subsequent utilization was, therefore, not relevant. It is in that regard that the failure of the assessee to explain the utilization of the funds repatriated was held to be a factor not against the assessee. The facts of the case, therefore, justified the stand of the assessee. Once the admitted purpose was noted and remained undisputed throughout, then, merely because an entry was made in the Profit and Loss Account on the credit side does not change the nature of the receipt. In such circumstances, the view taken by the Tribunal and by the Commissioner of Income Tax (Appeals) cannot be termed as perverse. It is a view in consonance with the factual material placed before both. Such a view does not raise any substantial question of law. The appeal is devoid of any merits and is dismissed.