TaxTMI 
TaxTMI 
2014 (9) TMI 1108
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....he attachment and to refund the amount remitted by the bank. 2. The assessee has raised the following issues in the present Stay Applications: i) Recording of satisfaction ii) Treatment of interest income on deposits made during construction period. iii) Taxability of interest income accrued on deposits of Rs. 7,50,00,000/- made with District Court, Bathinda under the direction of the Hon'ble Supreme Court. a. Bona fide legal claim b. Debatable issue iv) Claim of Carry Forward of business loss v) Bonafide/Inadvertent mistake. 3. Regarding recording of satisfaction, it has been submitted on behalf the assessee, that no finding/satisfaction to the effect that the assessee has filed inaccurate particulars of income, was recorded in the assessment order, rendering that recording of satisfaction merely a formality ; that the AO initiated penalty proceedings under section 271(1)(c) of the I.T. Act for alleged concealment of particulars of income, whereas penalty was levied for alleged "concealment/furnishing of inaccurate particulars of income". ; that, therefore, the AO failed to specify the inaccurate particulars of i....
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....remium and share application in the assessee, that since the funds were infused specifically for the purpose of meeting the capital cost of the project by share capital, obviously, the funds were inextricably linked with the setting up of the oil refinery., that during the year, the oil refinery was under construction; that due to the fact the that capital received could not have been deployed at one go for setting up of the oil refinery and its utilization was linked to the stage/progress of construction, the share capital, to the extent which was not immediately required, was temporarily parked in short term deposits, for effective cash management and to reduce the project cost; that this interest income accruing on such short term deposits having direct nexus with the setting up of the refinery was, in fact, set off against the project cost in the books of account; that the funds were obtained in the form of share capital, in the mandatory debt-equity ratio of 60 : 40, for the purpose of setting up the project., that, however, since the loan installment was awaited and since it was for effective cash management and for ensuring liquidity, that the funds parked temporarily in sho....
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....t income accruing thereon was automatically reinvested at the time of renewal of the fixed deposit, that on this deposit interest of Rs. 72,99,696/- accrued during the year; that this interest was set off against the cost of the refinery project in the books of account of the assessee, since the interest income was directly linked to the land on which the refinery was to be set up; that the AO and the Tribunal held that the fixed deposit vested with the assessee and income accruing thereon was to be taxed in the hands of the assessee as "income from other sources"; that however, since the deposit was made with the District Court, Bathinda on the direction of the Hon'ble Supreme Court, the interest thereon is not taxable, because the assessee did not have any right, title or domain over such income pending final adjudication by the Hon'ble Supreme Court and the right of the assessee was inchoate; that even otherwise, there is no question of treating the interest accrued as the assessee's income from other sources; that if at all, it requires to be treated as a capital receipt to be set off against the cost of the refinery.; that alternatively, since complete disclosure was made with....
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.... been contended that as such, the balance of convenience is also in favour of the assessees. Agreeing about the financial condition of the assessee, it has been contended that the assessee has been incurring huge losses right from the inception. Attention in this regard has been drawn to the table at page 30 of the Stay Application [SA No.69(Asr)/2014], wherein huge losses have been shown from A.Y. 2009-10 to A.Y. 2013-14. It has been contended that as per the assessee's balance sheet (copy filed) as on 31.03.2014, the assessee was having availability of funds Rs. 19 crores only. It has been contended that thereafter, the assessee does not have any bank balance but has only over-draft facility and so, irreparable loss would occur, causing financial hardship, if stay is not granted and that after the attachment of the bank accounts and withdrawal by the department, the cheques are not honoured and the assessee's goodwill is also being adversely affected. 10. The Ld. DR, on the other hand, arguing against the Say Applications, has, at the outset, objected to the filing of the letter/application seeking lifting of attachment and refund of the amount. It has been submitted that ther....
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.... during the construction period, the assessee followed the decision of the Hon'ble Delhi High Court in the case of "Indian Oil Panipat Power Consortium Limited vs. ITO" 315 ITR 255 (Delhi); wherein, it was held that where funds are infused specifically for purposes of construction or setting up of the plant, interest earned on temporary deposit of funds not immediately required for such purposes would be regarded as inextricably linked to setting up of plant and would, therefore, go to reduce the project cost. It was on the basis of the said decision that the assessee revised its return and claimed that interest income, which had been set off against the project cost in its books of account, was not chargeable to tax as "income from other sources". The factum of the deposits having been made shortterm nowhere stands challenged. Thus, on this score also, the assessee has a prima facie good case. The Ld. AR relied upon the decision of the Hon'ble Delhi High Court, in the case of "NTPC Sail Power Company (P) Ltd. vs. CIT" 210 Taxman 358 (Delhi), wherein it was held that interest earned on temporary deposit of funds borrowed for explansion of plant needs to be treated as capital receip....
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.... and the department regarding taxability of the interest income during the pre construction period. We find a prima facie case in favour of the assessee. 22. So far as concerning the claim with regard to carry forward of business loss, the AO admitted, while completing assessment, that there was an inadvertent mistake pointed out by the assessee itself, it was argued that no penalty is leviable, as held in "Price Water House Coopers P. Ltd vs. CIT", 384 ITR 306 (SC), and also in the following cases: i) CIT vs. Societex Ltd: 229 CTR 325 (Del) ii) CIT vs. IFCI Ltd: 328 ITR 611 (Del) iii) CIT vs. Mahavir Irrigation Pvt. Ltd: 347 ITR 241 iv) CIT vs. Brahmaputra Consortium Ltd: 348 ITR 339 (Del) v) CIT vs. Hans Christian Grass : ITA No.2209/2010 (Bom) vi) CIT vs. Manjunath Cotton and Ginning Factory : 35 Taxman.com 250 (Kar.) vii) CIT vs. M/s. Bennett Coleman & Co. Ltd: (2013) 259 CTR 83 (Bom.) viii) CIT vs. Sania Mirza : 259 CTR 386 (AP) ix) Glow Tech Steels Pvt. Ltd: 280 ITR 133 (Guj.) x) CIT vs. Manibhai & Bros.: 209 CTR 46 (Guj.) xi) CIT vs. Union Electric Corporation: 281 ITR 266 (Guj....