AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2015 (7) TMI 151
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....at Rs. 380,00,00,000 as on 31.3.2009 and the amount lying in Share Deposit A/c - Pending Allotment was Rs. 32,00,00,000. The petitioner company had also raised Secured Loans of Rs. 605,61,00,000. The facts of the case are that the petitioner company had started construction of the power generating plant of the capacity to produce 1500 MW of electricity at Vallur, in the outskirts of Chennai, Tamilnadu, in the financial year 2003-04. The actual work of construction of the said power plant was started on 28-03-2007, which is now expected to be completed in the financial year 2912-13. The funds for the entire power plant had been planned to be financed by way of approximately 30% as equity contributions from the shareholder and the balance approximately 70% by raising debt funds. Undisputedly, the aforesaid funds were raised during the initial period of construction by way of equity contributions or by raising debt funds, to meet the cost of purchase of land etc. from the Salt Commissioner, Chennai and for giving advances to the various contractors aggregating to Rs. 285,10,54,363. Thus it may be submitted that the entire funds generated from time to time were utilized to meet the c....
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.... establish any nexus between the earning of such interest with its business i.e setting up of the power plant. In fact it has itself admitted that it had temporarily parked its surplus funds in banks as short term deposits. Therefore the facts of case are similar to the case of Tuticorin Alkali Chemical &Fertilizers Ltd. Vs CIT ( supra). Hence the ratio of the judgement given by the apex court in 'that case is squarely applicable in the case of the assessee. It is also pertinent to mention that the assessee had paid an advance tax of Rs. 1,08,152/- on 13.9.2008 and also of Rs. 3,27,692/- on 13.12.2008. It has also claimed credit for TDS of Rs. 22,56,682/- on interest. Since the assessee knew that it will not earn any income from business during the year and the only income would be interest income, then the payment of advance tax shows that it was fully aware that such interest income is liable to tax." 4. Aggrieved the assessee carried the matter in appeal. The First Appellate Authority applied the decision of the Hon'ble Supreme Court in the case of CIT vs. Bokaro Steel Ltd., 102 Taxman 94 (SC) as well as the judgement of the Jurisdictional High Court in the case of NTPC ....
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..... On a careful consideration of the facts and circumstances of the case, on perusal of material on record, orders of the authorities below, case laws cited, we hold as follows. 10. For the immediately preceding A.Y. 2008-09 the E Bench of the Tribunal in ITA 1520/Del/2013 order dt. 20th June, 2014 has held as follows. "4. We have heard rival parties and have gone through the material placed on record. We find that Ld. CIT(A) had decided the issue in favour of the assessee by relying upon the judicial pronouncements of Hon'ble Supreme Court and Hon'ble Delhi High Court as contained in para 8.1.2 to 8.2, which are reproduced as under: "8.1.2 The appellant company was incorporated on 23-05-2003 as a joint venture company between NTPC Ltd. and Tamil Nadu Electricity Board for the purpose of construction of power plant for generation of electricity. The said power plant was located at Yellur at the outskirt of Chennai, Tamil Nadu. The construction of the power generating unit was started on 28-03-2007 which is expected to be completed by 2012-13. The total authorized capital of the company was Rs. 2000 crores. By end of financial year 31-03-2008 the assessee company had rais....
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....zers Ltd. after considering the decision in the case of Tuticorin Alkali Chemicals and Fertilizers Ltd. held that; "However, while interest earned by investing borrowed capital in short-term deposits is an independent source of income not connected with the construction activities or business activities of the assessee, the same cannot be said in the present case where the utilization of various assets of the company and the payments received for such utilization are directly linked with the activity of setting up the steel plant of the assessee. These receipts are inextricably linked with the setting up of the capital structure of the assessee - company. They must, therefore, be viewed as capital receipts going to reduce the cost of construction. 8.1.3 Hon'ble Delhi High Court in Indian Oil Panipat Power Consortium Ltd. vs. ITA (2009) 315 ITR 255 (De!.) held that where interest on money received as share capital is temporarily placed in fixed deposit awaiting acquisition of land, a claim that such interest is a capital receipt entitled to be set off against pre-operative expenses, is admissible, as the funds received by the assessee company by the joint venture partners ar....
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....ure development work and for disbursement as advance to the contractors engaged for construction of power plant etc., therefore, funds cannot be said to be at surplus. Moreover, the liability towards sundry creditors (Rs.23.52 crores) are far more than the funds lying in bank (Rs.3.34 crores). Interest income is also inextricably linked with the setting up of the power plant because interest income have gone on to reduce the incidental expenses for setting up of the plant as evident from schedule 12 of balance sheet showing details of incidental expenses during construction. In view of the above, as the interest on STDR are "inextricably linked" to the setting up. of the project and the fact that no surplus funds are also available with the appellant company, therefore, such income is required to be capitalized to be set off against the pre operative expenses. As such the A. O. is not justified in adding the sum of Rs. 36,06,774/- as income for other source u/s 56. 8.2 Regarding the forfeited earnest money deposit of Rs. 6 lakhs, the sum represents earnest money deposited to carryon contract for construction of approach road to the project site. The said sum was forfeited for non....