TaxTMI 
TaxTMI 
2018 (2) TMI 1152
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....he assessee u/s.56 of the I.T.Act. 3. The brief facts of the case are that during the course of assessment proceedings, the Assessing Officer found that the assessee has earned interest of Rs. 1,73,30,736/- for the assessment year 2010-2011 and Rs. 13,64,57,044/- for the assessment year 2012-13 on fixed deposits utilising a part of the unutilised capital and the interest income was claimed to be exempt as capital receipts. The Assessing Officer referring to various judicial pronouncement observed that the inextricable link with the process of setting up the project with deposits in banks has not been explained by the assessee. The Assessing Officer observed that the facts of the assessee's case is similar to the decision of Hon'ble Supreme Court in the case of Tuticorin Alkali,227 ITR 172 (SC) and, therefore, following the same, he rejected the plea of the assessee and taxed the interest income u/s.56 of the Act. 4. On appeal, the CIT(A) following the decision of this Tribunal in assessee's own case for the assessment year 2008-09 in ITA No.462/CTK/2011 has held that the interest income on FDs cannot be taxed being capital receipts. The CIT(A) also observed that in the assess....
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.... law enunciated by the Hon'ble Apex Court in the case of Tuticorin Alkali Chemicals & Fertilizers Ltd v. CIT (supra). The law enunciated in the case of Tuticorin Alkali Chemicals & Fertilizers Ltd v. CIT(supra) cannot alone be considered as favoring Revenue insofar as it also talks about capitalization of the interest and the circumstances, which circumstances have been dealt with by the Hon'ble Delhi High Court in the case of India Oil Panipat Power Consortium Ltd v. ITO (supra) and further more in the case of NTPC Sail Power Company Pvt. Ltd., v. CIT decided on 17.07.2012 in ITA No.1238/2011 (copy placed on record) which has also been relied on by the learned Counsel of the assessee. The learned Counsel of the assessee has submitted the financial statements duly audited under the provisions of the I.TAct as well as under the Companies Act which have been verified by the Assessing Officer requiring no reference to be made to the Transfer Pricing Officer under the provisions of Section 92CA. In other words, no business income has been generated by the assessee. The expenditure claimed therefore was only for the purpose of setting up the project envisaged and there is no met....
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....c purpose of acquiring land and the development of infrastructure. Therefore, the interest earned on funds primarily brought for infusion in the business could not have been classified as 'income from other sources Since the income was earned in a period prior to commencement of business, it was in the nature of capital receipt and, hence, was required to he set off against preoperative expenses. We are inclined to find a meaning to the insertion of the proviso to Section 36(l)(iii) that interest paid, in respect of capital borrowed for acquisition of an asset for extension of existing business or profession was being allowed as deduction u/.s.36(l)(iii) of the Act as revenue expenditure was amended w.e.f. 1.4.2004 when the amount of interest paid in respect of capital borrowed for acquisition of an asset for extension of existing business or profession whether capitalized in the books of account or not for any period beginning from the date on which the capital was borrowed for acquisition of the asset till the date on which such asset was first put to use, shall not be allowed as deduction, holds true for the income insofar as once having identified that the income from inter....
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....ources irrespective of the accounting of the income having been capitalized when the claim of expenditure of 10% was purely on estimation when apparently it was not the business of the assessee to earn income but parking of its funds when the interest income sought to be considered exempt for computing expenditure under the provisions of Section 14A for the purpose of I.T.Act. The learned Counsel of the assessee, therefore, has clarified that the assessee cannot be subjected to taxation in the impugned Assessment Year on the interest income capitalized and at the same time allow amortization thereof in the hope that project will see the light of the day in the years to come when the I.T. Department will allow less deduction than otherwise claimed will be multiplication of assessments for no fault of the assessee appellant. We are therefore inclined to hold that the learned Counsel of the assessee has submitted a bulk Paper Book which inter alia correlates to earning of interest on the amounts deposited in the Banks to be utilised for the purpose of business of the assessee as per the project envisaged and as per the project approved by the Government of Orissa but taken time due to....
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....t is not a change of stance as contested by the learned DR but on the same set of facts the interest portion cannot be isolated for the purpose of taxation. 6. In the result, the appeal for the Assessment Year 2008-09 is allowed and the learned Assessing Officer is directed to accept the NIL revised return and the appeals for the AYs 2006-07 and 2007- 08 are restored to the file of the Assessing Officer for consideration afresh in the light of our decision for the assessment year 2008-09 above. The same are considered to be allowed for statistical purposes." 8. We, considering the apparent facts on record and following the judicial precedent are of the opinion that the interest on fixed deposits are not taxable under income from other sources and, accordingly, we uphold the findings of the CIT(A) and dismiss the ground of appeal taken by the revenue for both the assessment years. 9. In the cross objections, the assessee has agitated the sustenance of reduction of expenses of Rs. 7,12,500/- u/s.14A for both the assessment years under appeal. 10. Before us, ld A.R. of the assessee submitted that the assessee has not claimed any expenses in the return of income under....