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DCIT Circle-16(1) Hyderabad Vs. M/s. Lanco Kondapalli Power Pvt. Ltd., Hyderabad
July, 19th 2012


                      ITA No. 185/Hyd/2011
                     Assessment year 2001-02

DCIT                           Vs.   M/s. Lanco Kondapalli Power
Circle-16(1)                         Pvt. Ltd., Hyderabad
Hyderabad                            PAN: AAACK5423A
Assessee                             Respondent

                      ITA No. 127/Hyd/2011
                     Assessment year 2001-02

M/s. Lanco Kondapalli          Vs.   DCIT
Power Pvt. Ltd., Hyderabad           Circle-16(1)
PAN: AAACK5423A                      Hyderabad
Assessee                             Respondent

                    Revenue by: Shri M. Dayakar
                    Assessee by: Shri S. Rama Rao

                 Date of hearing: 17.07.2012
         Date of pronouncement: 17.07.2012



       The above appeals are cross appeals directed against the
order of the CIT(A)-V, Hyderabad dated 18.11.2010 for assessment
year 2001-02.

2.     The assessee raised the following grounds of appeal:
       a) The order of the learned CIT(A) is erroneous both
          on facts and in law.

       b) The learned CIT(A) ought to have seen that the
          provisions of sec. 147 are not applicable to the
          facts of the case and that the assessment made
          u/s. 143(3) read with sec. 147 is not valid.
                                   2              ITA Nos. 185 & 122 / Hyd/2011
                                            M/s. Lanco Kondapalli Power Pvt. Ltd.

      c) The learned CIT(A) erred in confirming the action of
         the Assessing Officer in treating the interest earned
         of Rs. 25,74,968, Rs. 26,36,802 and Rs. 34,76,199
         on margin money kept for providing bank
         guarantee as the income from other sources. The
         learned CIT(A) ought to have seen that the said
         income represents business income and not
         income from other sources.

      d) The learned CIT(A) ought to have considered the
         fact that only the net interest income after deduc
         ting the expenditure in earning such interest
         income could be treated as income from business.

      e) The learned CIT(A) ought to have considered the
         fact that such interest arose to the appellant on the
         deposits made by it in the process of its business
         activity and the earning of such income is
         inextricably linked to the activity of business.

3.        The Revenue raised the following ground of appeal:
      a) Whether the Hon'ble ITAT erred in holding that the
         reimbursement of taxes for which the company is
         eligible as per the Power Purchase Agreement with
         APTRANSCO/APSEB is not to be treated as taxable
         income in the hands of the assessee.

4.    As seen from the grounds raised by the assessee, the main
issue is on reopening of assessment and the assessee raised the
same before the CIT(A) stating that reopening of assessment u/s.
147 is bad in law which issue was not at all adjudicated by the
CIT(A).     The CIT(A) without adjudicating the issue relating to
reopening of assessment, disposed of the other grounds on merit
which is not proper. The issue relating to reopening of assessment
goes to the root of the matter.        Being so, this issue has to be
adjudicated first before adjudicating the other grounds raised by
the assessee which the CIT(A) failed to do so. In our opinion, it is
fair and proper to set aside the order of the CIT(A) and remit back
the issue relating to reopening of assessment to the file of the
CIT(A) to decide this issue first and thereafter decide the other
issues raised by the assessee before him.
                                    3            ITA Nos. 185 & 122 / Hyd/2011
                                           M/s. Lanco Kondapalli Power Pvt. Ltd.

5.      Accordingly, the issue relating to reopening of assessment is
remitted back to the file of the CIT(A) for his consideration to
decide the same in accordance with law. It is needless to say that
the CIT(A) shall give proper opportunity of hearing to the assessee
before deciding the same.

6.      In the result, assessee appeal is partly allowed for statistical
purposes and Revenue appeal is dismissed being infructuous.

      Order pronounced in the open court on 17th July, 2012.

              Sd/-                              Sd/-
Hyderabad, dated the 17th July, 2012

Copy forwarded to:
1.      The DCIT, Circle-16(1), Room No. 612, 6th Floor, Aayakar
        Bhavan, Basheerbagh, Hyderabad.
2.      M/s. Lanco Kondapalli Power Pvt. Ltd., Lanco House, Plot
        No. 4, Software Units Layout, Hitec City, Madhapur,
3.      The CIT(A)-V, Hyderabad.
4.      The CIT-IV, Hyderabad
5.      The DR ­ B Bench, ITAT, Hyderabad.

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