Bongaigaon Refinery & Petrochemicals Ltd. Vs. Commissioner of Income Tax, Assam
EmailAppeal: Civil Appeal No. 3024 of 1999
Petitioner: Bongaigaon Refinery & Petrochemicals Ltd.
Respondent: Commissioner of Income Tax, Assam
Apeal: Civil Appeal No. 3024 of 1999
Judges: S.P. BHARUCHA, Y.K. SABHARWAL & BRIJESH KUMAR, JJ.
Date of Judgment: Jul 24, 2001
Head Note:
INCOME TAX
Income Tax Act, 1961
Taxability – Income derived from interest and house property etc. during formation period of main business. Held that interest income was taxable but income from house property, guest house, charges of equipment and recoveries from contractor etc., were not taxable. Bokaro Steel Ltd.’s case (JT 1998 (8) SC 615) relied upon, followed. (Para 3)
Cases Reffered:
1. Commissioner of Income Tax v. Karnataka Power Corporation (JT 2000 (9) SC 629) (Para 3)
2. Commissioner of Income Tax v. Karnal Co-operative Sugar Mills Ltd. (243 I.T.R. 2) (Para 3)
3. Commissioner of Income Tax v. Bokaro Steel Limited (JT 1998 (8) SC 615) (Para 3)
4. Tuticorin Alkali Chemicals & Fertilizers Ltd. v. Commissioner of Income Tax (JT 1997 (6) SC 129) (Para 2)
2. Commissioner of Income Tax v. Karnal Co-operative Sugar Mills Ltd. (243 I.T.R. 2) (Para 3)
3. Commissioner of Income Tax v. Bokaro Steel Limited (JT 1998 (8) SC 615) (Para 3)
4. Tuticorin Alkali Chemicals & Fertilizers Ltd. v. Commissioner of Income Tax (JT 1997 (6) SC 129) (Para 2)
JUDGEMENT:
ORDER
1. The order under challenge was passed on a reference to the High Court under the Income Tax Act, made at the instance of the revenue. The High Court answered in the negative and against the assessee the following question:
“Whether on the facts and in the circumstances of the case, the tribunal was justified in holding that the items of income derived by 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 set up?”
2. It did so based upon the decision of this Court in Tuticorin Alkali Chemicals & Fertilizers Ltd. v. Commissioner of Income Tax (JT 1997 (6) SC 129).
3. 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 Commissioner of Income Tax v. Bokaro Steel Limited (JT 1998 (8) SC 615) that it is so confined and did not apply where receipts were directly connected with or were incidental to the work of construction of the assessee’s plant. The decision in Bokaro Steel Limited has been followed by a two-judge bench of this Court in Commissioner of Income Tax v. Karnal Co-operative Sugar Mills Ltd. (243 I.T.R. 2) and by a three-judge bench in Commissioner of Income Tax v. Karnataka Power Corporation (JT 2000 (9) SC 629). 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 Limited. It is, therefore, not possible now to take any view different from that taken in Bokaro Steel Limited.
4. 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 Limited. 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.
5. Appeal allowed accordingly.
6. No order as to costs.
1. The order under challenge was passed on a reference to the High Court under the Income Tax Act, made at the instance of the revenue. The High Court answered in the negative and against the assessee the following question:
“Whether on the facts and in the circumstances of the case, the tribunal was justified in holding that the items of income derived by 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 set up?”
2. It did so based upon the decision of this Court in Tuticorin Alkali Chemicals & Fertilizers Ltd. v. Commissioner of Income Tax (JT 1997 (6) SC 129).
3. 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 Commissioner of Income Tax v. Bokaro Steel Limited (JT 1998 (8) SC 615) that it is so confined and did not apply where receipts were directly connected with or were incidental to the work of construction of the assessee’s plant. The decision in Bokaro Steel Limited has been followed by a two-judge bench of this Court in Commissioner of Income Tax v. Karnal Co-operative Sugar Mills Ltd. (243 I.T.R. 2) and by a three-judge bench in Commissioner of Income Tax v. Karnataka Power Corporation (JT 2000 (9) SC 629). 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 Limited. It is, therefore, not possible now to take any view different from that taken in Bokaro Steel Limited.
4. 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 Limited. 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.
5. Appeal allowed accordingly.
6. No order as to costs.
