2016 (7) TMI 1096

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....he assessee has stated that the issues involved in both the appeals are almost identical in nature and further that the assessment relevant to assessment year 2009-10 was reopened on the basis of observation made by the Assessing Officer [hereinafter referred to as AO] for A.Y. 2010-11. He therefore, has submitted that the facts from appeal for assessment year 2010-11 be taken for adjudication of the above appeals. We, accordingly, take the ITA No.6718/Mum/2014 for A.Y.2010-11 as lead case. ITA No. 6718/Mum/2014 (A.Y.2010-11): The assessee in this appeal has taken the following grounds of appeal: 1. "The Learned CIT (A) has erred in law and on facts in upholding the order passed by the Assessing Officer u/s. 143 (3) of the Income-t....

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....nd No.2:- 4. The brief facts of the case relating to issues taken vide these grounds of appeal are that the assessee is a Private Limited company engaged in the business of Builders and Civil Contractors. The assessee had entered into an agreement with the Government of Maharashtra for construction and development of a project at Plot CTS No.469-A at Chembur, Mumbai. As per the terms of the agreement with Government of Maharashtra, the assessee had to keep a performance security Deposit of Rs. 6,70,00,000/-. The assessee had delivered to the Government of Maharashtra performance security for construction in the Form of FDR of Rs. 6,70,00,000/- with Dena Bank. The assessee earned interest of Rs. 40,90,696/- for F.Y. 2008-09 and Rs. 69,42,....

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.... Ltd.' (supra) was not applicable to the facts of the case of the assessee as in that case the concerned assessee had surplus funds in its hands and in order to earn income out of the surplus funds the same were invested for the purpose of earning interest income. Further in the case of the assessee, the decision of the Hon'ble Supreme Court in the case of 'CIT vs. Bokaro Steel Ltd' [236 ITR 315] was applicable wherein, the Hon'ble Supreme Court in somewhat similar circumstances has held that where the utilization of various assets of the company and the payments received from such utilization are directly linked with the activity of setting up the business of the assessee and such receipts are inextricably linked with the setting up of the....

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.... the Hon'ble Delhi High Court in favour of the assessee. The question of law framed by the Hon'ble Delhi High Court for the purpose of ready reference is reproduced as under: "Whether in the facts and circumstances of the case the Income-tax Appellate Tribunal was justified in deleting the addition of Rs. 16,36,039/- on the ground that interest earned by the assessee on the fixed deposit receipt being capital in nature cannot be assessed as income from other sources solely on the foundation that the fixed deposit was made for submitting the performance guarantee to the National Highways Authority of India?" The Hon'ble Delhi High Court while relying upon various case laws including that of the Hon'ble Supreme Court in the case of CIT ....

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....sessee preferred appeal before the Ld. CIT(A). The ld. CIT(A) however also rejected the contention of the assessee observing that since the project of the assessee had not started yielding any revenue hence all the expenses relating to the incomplete project should have been capitalized. 11. Being aggrieved by the order of CIT(A), the assessee has come in appeal before us. The assessee before us had relied upon the decision of Hon'ble Delhi High Court in the case of CIT Vs. Dhoomketu Builders and Development P. Ltd. [2014]368 ITR 680 (Delhi), wherein, Hon'ble Delhi High Court has held that there is a difference between the setting up and commencement of business. When a business is established and is ready to commence, then it can be sai....