TaxTMI 
TaxTMI 
TaxTMI 
2016 (3) TMI 1232
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....as part of its capital work in progress. The assessee stated before the Assessing Officer that it has earned interest on short term deposit held with HDFC bank Ltd. and SBOP and the interest paid was on funds borrowed from PSEB in connection with set up of the power project. It was also stated that the investments are in the form fixed deposits with HDFC Bank Ltd., Patiala against commitment bank guarantee which was issued in favour of M/s South Eastern Coal Fields Ltd.(SECL) for issuance of coal linkage for Rajpura Thermal Power Project. This bank guarantee was essential to ensure fuel linkage for the power project. Since the agreement with SECL was a pre-condition to get fuel linkage for the power project, it was stated that securing supply of coal is an integral part of construction of power project. Reliance was placed on the following judgments : i) Indian Oil Panipat Power Consortium Ltd. Vs. ITO (2009) 315 ITR 255 (Del) ii) CIT Vs. Bokaro Steel Ltd.(1999) 236 ITR 315 (SC) iii) NTPC SAIL Power Company Pvt. Ltd. Vs. CIT, ITA No.1238 of 2011 These judgments were cited for the proposition that where the interest or any other income is earned on funds which are inextric....
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....ort and analyzing all the judgments in detail, the learned CIT (Appeals) held that the bank guarantee against FDRs with HDFC bank are given to secure coal linkage i.e. for supply of coal to run the plant. Therefore, this bank guarantee is given for operation of the plant and not setting up of the plant. In this way, the learned CIT (Appeals) confirmed the addition made by the Assessing Officer. 5. Aggrieved by this, the assessee has come up in appeal before us, raising following grounds of appeal : "1. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in upholding the action of the Assessing Officer ('AO') in assessing the interest income on FDR of Rs. 2,14,35,213/-under the head 'Income from Other Sources'. 2. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in holding that the bank guarantee given by HDFC bank against the FDR is in relation to operation of the plant and not setting up of the plant. 3. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in not appreciating the fact t....
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.... vehemently objected to the admission of additional evidences. He stated that in Rule 29, it has been very clearly stated that the assessee cannot suo moto furnish any additional evidence. It is only when the Tribunal requires, the additional evidence can be produced. 9. We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record. The undisputed facts of the case are that the assessee has earned interest of Rs. 2,14,35,214/- and also paid interest of Rs. 26,87,,93,950/- during the year. The business of the assessee has not commenced. The issue in question is whether the interest earned is to be taxed under the head 'income from other sources' as held by the Assessing Officer stating that the business activity of the assessee has not commenced in this year. The argument of the assessee is that the interest has been earned on FDRs, which were deposited in HDFC bank as margin money, thereby enabling the bank to issue bank guarantee in favour of M/s SECL which was essential for securing coal linkage before setting up its Thermal Power Plant. 10. The judicial view in these circumstances co....
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....eginning with the date of setting up of the business. Therefore, as per the provision of section 4 of the Act which is the charging section income which arises to an assessee from the date of setting of the business but prior to commencement is chargeable to tax depending on whether it is of a revenue nature or capital receipt. The income of a newly set-up business, post the date of its setting up can be taxed if it is of a revenue nature under any of the heads provided under section 14 in Chapter IV of the Act. For an income to be classified as income under the head "profit and gains of business or profession" it would have to be an activity which is in some manner or form connected with business. The word "business" is of wide import which would also include all such activities which coalesce into setting up of the business. See Mazagaon Dock Ltd. v. CIT & EPT [1958] 34 ITR 368 (SC), and Narain Swdeshi Weaving Mills v. CEPT [1954] 26 ITR 765 (SC). Once it is held that the assessee"s income is an income connected with business, which would be so in the present case, in view of the finding of fact by the CIT(A) that the monies which were inducted into the joint venture company by t....
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....e plant in order to get the said benefit. 12. In the present case though the assessee has stated the circumstances under which it has to pay the interest both before the Assessing Officer as well as the learned CIT (Appeals) and the same circumstances have been elaborated before us also, however, in order to buttress the situation, he now wants to file additional evidences, pleading remaining the same. 13. Rule 29 of the Income Tax Appellate Tribunal Rules reads as under : "29. Production of additional evidence before the Tribunal.- The parties to the appeal shall not be entitled to produce additional evidence either oral or documentary before the Tribunal, but if the Tribunal requires any documents to be produced or any witness to be examined or any affidavit to be filed to enable it to pass orders or for any other substantial cause, or, if the income tax authorities have decided the case without giving sufficient opportunity to the assessee to adduce evidence either on points specified by them or not specified by them, the Tribunal, for reasons to be recorded, may allow such document to be produced or witness to be examined or affidavit to be filed or may allow such evidence ....