TaxTMI 
TaxTMI 
TaxTMI 
2018 (9) TMI 1935
X X X X Extracts X X X X
X X X X Extracts X X X X
....e appellant prays that the addition made by the Ld. AO and confirmed by the Ld. CIT(A) be deleted. 3. On the facts & circumstances of the case the Learned Commissioner of Income Tax (Appeals) has erred in not allowing the deduction of interest payment of Rs. 22,96,439/- against the determination of taxable income of Rs. 31,13,010/- under the head Income from other sources. The appellant prays that the deduction of Rs. 22,96,439/- be allowed while computing the taxable income under the head Income from other sources. 4. On the facts & circumstances of the case the Learned Commissioner of Income Tax (Appeals) has erred in not adjudicating on ground raised before him on the subject of allowability of the revenue expenditure of Rs. 66,77,379/- The appellant prays that the deduction of Rs. 66,77,379/- be allowed in computing the income under the head Income from business and profession. 5. On the facts & circumstances of the case the Learned Commissioner of Income Tax (Appeals) has erred in not adjudicating on ground raised before him on the subject of capitalization of the revenue expenditure of Rs. 66,77,379/- and adding the same to the capital work in progress. The appellant....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tive of the assessee has placed reliance upon the law settled by the different authorities cited as Indian Oil Panipat Power Consortium Ltd. Vs. ITO reported in 181 Taxmann page 249, 315 ITR 255 (Delhi High Court), Bokaro Steel Ltd. 236 ITR pg. 315 (SC), The Road Infrastructure Development Company of Rajasthan Ltd. ITA. No. 628/JP/2014 Jaipur, Andhra Pradesh Expressway Ltd. ITA. No. 663/M/2015 & Karnataka Power Corporation Ltd. 247 ITR 268. However, on the other hand, the Ld. Representative of the revenue has refuted the said contention. The factual situation is not in dispute to the fact that the assessee received the loan and credited in his account lies with Bank of India who credited the interest in the account of the assessee. It is to be seen whether the said interest income is required to be treated as income from business or income from other sources. The assessee company is a special purpose vehicle (SPV) promoted by IL&FS Transportation Network Ltd. The company has entered into a Concession Agreement on 08.10.2009 with the National Highways Authority of India to Design, Engineers, Finance, Procure, Construct, Operate and Maintain 4 laning, Hazaribagh-Ranchi section of NH-....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Ltd (supra), held that the interest income is assessable under the head Income from business." 5. In the similar circumstances, the Hon'ble ITAT Jaipur Bench in the case of ITA. No. 628/JP/2014 title as Infrastructure Development Company of Rajasthan Ltd. Vs. DCIT dated 11.08.2016 has held that the interest income upon the deposit by the assessee for the utilization of fund for the project, is liable to be treated as business income. The finding is hereby mentioned below for ready reference.: - "2.10 We have heard the rival contentions and pursued the material available on record. We find that both the parties have relied upon the decisions of the Hon'ble Supreme Court and in addition, the assessee has relied upon the decisions of Hon'ble Delhi High Court. Therefore, it would be appropriate to first refer to these decisions and some of the other recent decisions of Hon'ble High Courts and Coordinate Bench decisions. 2.11 In the case of Tuticorin Alkali Chemicals & Fertilizers Ltd. (supra), the Hon'ble Supreme Court held as under:- "The facts of this case were not in dispute. In the usual course, interest received by the company from bank deposits and loans would be....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cted at the point when the income is earned Taxability of income is not dependent upon its destination or the manner of its utilisation. It has to be seen whether at the point of accrual, the amount is of the revenue nature and if so, the amount will have to be taxed. It is true that the Supreme Court has very often referred to accounting practice for ascertainment of profit made by a company or value of the assets of a company. But when the question is whether a receipt of money is taxable or not or whether certain deductions from that receipt are permissible in law or not, the question has to be decided according to the principles of law and not in accordance with accountancy practice. Accounting practice cannot override section 56 or any other provision of the Act. Whether a particular receipt is of the nature of income and falls within the charge of section 4 is a question of law which has to be decided by the Court on the basis of the provisions of the Act and the interpretation of the term 'income' given in a large number of decisions of the High Courts, the Privy Council and also this Court. It is well-settled that income attracts tax as soon as it accrues. The appli....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ement of production on such borrowed money can be capitalised and added to the cost of the fixed assets created as a result of such expenditure. By the same reasoning if the assessee received any amounts which were inextricably linked with the process of setting up its plant and machinery, such receipts would go to reduce the cost of its assets. These were receipts of a capital nature and could not be taxed as income. The same reasoning would apply to royalty received by the assessee company for stones, etc., excavated from the assessee-company's land. The land had been allowed to be utilised by the contractors for the purpose of excavating stones to be used in the construction work of the assessee's steel plant. The cost of the plant to the extent of such royalty received, was reduced for the assessee. It was, therefore, rightly taken as a capital receipt." 2.13 That the Hon'ble Delhi High Court in the case of Indian Oil Panipat Power Consortium Ltd. (supra), after considering the decisions in the case of Tuticorin Alkali Chemicals & Fertilizers Ltd. (supra) and Bokaro Steel Ltd. (supra) at length, held as under:- "5. In our opinion the Tribunal has misconstrued th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ding of fact by the CIT(A) that the monies which were inducted into the joint venture company by the joint venture partners were primarily infused to purchase land and to develop infrastructure - then it cannot be held that the income derived by parking the funds temporarily with Tokyo Mitsubishi Bank, will result in the character of the funds being changed, inasmuch as, the interest earned from the bank would have a hue different than that of business and be brought to tax under the head 'income from other sources'. It is well-settled that an income received by the assessee can be taxed under the head "income from other sources" only if it does not fall under any other head of income as provided in section 14 of the Act. The head "income from other sources" is a residuary head of income. See S.G. Mercantile Corpn. (P.) Ltd. v. CIT [1972] 83 ITR 700 (SC) and CIT v. Govinda Choudhury & Sons [1993] 203 ITR 881 (SC). 5.2 It is clear upon a perusal of the facts as found by the authorities below that the funds in the form of share capital were infused for a specific purpose of acquiring land and the development of infrastructure. Therefore, the interest earned on funds primarily....
X X X X Extracts X X X X
X X X X Extracts X X X X
....finding of fact returned by the CIT(A) that the funds infused in the assessee by the joint venture partner were inextricably linked with the setting up of the plant, the interest earned by the assessee could not be treated as income from other sources. In the result we answer the question as framed in favour of the assessee and against the revenue. These appeals are allowed and the impugned judgment is set aside." 2.14 That the Hon'ble Delhi High Court in the case of Sasan Power Ltd (supra) following the decision in case of Indian Oil Panipat Power Consortium Ltd. (supra), has held as under: "14. It is clear from the facts stated above that Commissioner of Income Tax (Appeals) and tribunal have specifically held that the interest income was on capital account. We have gone through the grounds of appeal and do not find any reason or justification to upset the said finding. The factual findings recorded by the CIT(Appeals) and tribunal are not under challenge. The CIT(Appeals) and the tribunal have held that in view of the factual position quoted above the decision of the Supreme Court in CIT v. Bokaro Steel Ltd. [1999] 236 ITR 315 / 102 Taxman 94 was applicable as the Commitment....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e case, the decision of the Division Bench in Indian Oil Panipat Power Consortium Ltd. (supra) would squarely apply to the facts of the present case and the Tribunal was right in applying the same. 13. In the present case, there is a finding of fact that the money placed in the fixed deposit was inextricably linked with the setting up of the power plant. Thus, the revenue generated on account of interest on the said fixed deposits would be in the nature of a capital receipt and not a revenue receipt. This case has been decided on the basis of this principle and not on the basis that the source of the funds was through raising of share capital and not through borrowings." 2.16 The Coordinate Bench in case of Adani Power Ltd. v. Assistant Commissioner of Income-tax, Range-1, Ahmedabad [2015] 61 taxmann.com 355 (Ahmedabad - Trib.) has held as under: "2.16 From the above, it is evident that the Hon'ble Delhi High Court has considered and interpreted the decisions of Hon'ble Apex Court in the case of Tuticorin Alkali Chemicals & Fertilizers Ltd. (supra) as well as Bokaro Steel Ltd. (supra). The conclusion of the Delhi High Court is in fact the law which emerges as per the de....
X X X X Extracts X X X X
X X X X Extracts X X X X
....endered in Tuticorin's case (supra), or that, the Tribunal was justified in applying the judgments given in Bokaro Steel, and Karnal Cooperative Sugar Mill's case. If this question were to come originally before us, perhaps we might have taken a task of undertaking the exercise, as to which of the views is required to be followed, and may be, that we might have come to any conclusion, either ways. In such circumstances, when the learned Tribunal, after examining all the three judgments, in Tuticorin's case (supra), Karnal Cooperative Sugar Mill's case (supra), and Bokaro Steel's case (supra), has examined the question, and found Karnal Cooperative's case (supra) to be the nearest, and latest case, on facts, in our view, it cannot be said, that the Tribunal was wholly wrong in adopting this course. It would have been equally the same situation, if the learned Tribunal would have adopted the other line of reasoning, following the judgment in Tuticorin's case (supra). 14. Therefore, when there are two sets of judgments of Hon'ble Supreme Court, proceeding on different lines of reasoning's, and both stand on their own logical footing, and in that event, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the setting up of the mega road projects and interest earned on such borrowed funds infused in the business could not be classified as income from other sources. We also note a distinguishing feature in the instant case that the assessee is not at liberty to use the interest so earned as per its will and discretion unlike the case in Tuticorin Alkali Chemicals & Fertilizers (supra) and the interest has to be used solely for the purposes of implementation of the specified projects only. The impunged interest receipt of Rs. 35,39,479/- on such borrowed funds relates to the mega road projects/stretches which were under construction and the completed road projects/stretches upto the date of commencement of commercial operations. Therefore, the interest received prior to commencement of commercial operations of the specified mega road projects will be in the nature of capital receipt and will be required to be set off against the pre-operative expenditure capitalized under the head "Capital work in progress" and the same cannot be brought to tax under the head "income from other sources". Hence, ground no. 1 of the assessee is allowed. 3. In ground No.2, the assessee has challenged t....