TaxTMI 
TaxTMI 
2015 (2) TMI 581
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....Appeal wise and ground wise adjudication is given in the following paragraphs of this order. 2. Firstly we shall take up the appeal ITA No.1043/M/2013, which is filed by the assessee on 6.2.2013. In this appeal, assessee raised the following grounds which read as under: "1. The CIT (A) erred in confirming the disallowance made by the Income Tax Officer in respect of interest expenditure of Rs. 25,93,348/- on borrowings claimed as deduction under section 57(iii) of the Act against the interest income on fixed deposits with banks. 2. Without prejudice to the above, if the interest expenditure in question is treated as pre-operative expenditure, the same should be allowed to be c....
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....ising to the appellant regarding such borrowed funds would be allowed as deduction to the appellant or not. The appellant has worked out the interest expense on the funds deposited as fixed deposit with the HDFC Bank holding that the average borrowing cost would amount to Rs. 7.81%. However, it is seen that only a proportionate interest cost has been worked out by the appellant without giving any supporting documents to establish as to how a rate of 7.81% has been incorporated / considered by it. It is seen that a general statement has been made and a average proportionate borrowing cost worked out by taking into consideration the opening loan account, closing loan account in the year along with the interest cost. The interest cost, it is s....
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....Assessee filed an appeal before us against the said decision of the CIT (A). 6. During the proceedings before us, Ld Counsel for the assessee brought our attention to the paper book containing 6 pages and demonstrated that the sources of funds for making Fixed Deposit is mostly the borrowed funds and partly the equity of Rs. 8 Crs. He fairly mentioned that if an opportunity is given, the assessee can file proper letters from the financial institution before the AO evidencing the exact amount of interest expenses relatable to the amount of Fixed Deposit which yielded interest income. The paper book filed before us does not bear the certificate that these documents were available before the lower authorities. 7. On the other hand, Ld DR fai....
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....is the submission of the Ld Counsel that the purpose of funds does not determine the allowability of the claim made u/s 57(iii) of the Act. The decisions relied upon by the Ld Counsel in this regard should be examined by the AO in the remand proceedings. AO shall grant a reasonable opportunity of being heard to the assessee. Accordingly, grounds raised by the assessee are allowed for statistical purposes. 9. In the result, appeal of the assessee is allowed for statistical purposes. I.T.A. No.512/M/2013 (AY: 2009-2010) (By Revenue) 10. This appeal filed by the Revenue on 18.1.2013 is against the order of the CIT (A)-12, Mumbai dated 25.10.2012 for the assessment year 2009-2010. 11. In this appeal, Revenue raised the following grounds whi....
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....(3) of the Act by determining the assessed income at Rs. 1,13,41,850/-. During the assessment proceedings, AO noticed that interest income received by the assessee from Paschim Gujarat Vij Co. Ltd (PGVCL) on the security deposit of Rs. 14.788 Crs, which is placed with the assessee, was not offered by the assessee for taxation as it was capitalized. In this regard, AO asked the assessee to substantiate its action. Not satisfied with the explanation of the assessee, AO made an addition of Rs. 94,75,453/- under the head 'income from other sources' by holding that the assessee had not started the business activity as yet and therefore, any income earned before the commencement of business activity has to be treated as 'income from o....
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....on the case laws mentioned above, the interest income earned by the appellant would need to be treated as capital receipt and capitalized as done by the appellant. The action of the AO in treating the interest income earned by the appellant on security deposit placed with PGVCL for availing electricity facility for the purpose of construction of power plant as 'income from other sources' therefore, cannot be upheld. This ground of appeal of the appellant is allowed." 17. While giving the above adjudication, CIT (A) relied on various decisions of the higher judiciary and one of them is the judgment of the Hon'ble Supreme Court in the case of Tuticorin Alkali Chemicals and Fertilizers Ltd vs. CIT [1997] 227 ITR 172 which is relev....