TaxTMI 
TaxTMI 
2019 (11) TMI 1653
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.... (iv) CIT Vs Kishan Sahakari Chini Mills (All) 280 ITR 617 (v) CIT Vs Manipur Spinning Mills Corpn. Ltd. (Gau) 226 ITR 551." 3. The facts, in brief, qua the issue involved, are that the assessee company was in process of construction of a hotel and has filed its return of income declaring income of Rs. 1,20,744/- on 29.09.2012. The assessee company acquired an existing hotel at Calwaddo Salcette, Goa under the SARFEASI Act provisions from SBI, Mumbai for a consideration of Rs. 61.40 crores. The assessee had not commenced any business operations, as renovation of the said hotel was being carried out during the year under consideration. The expenditure incurred on renovation and refurbishment of the hotel was shown as capital-work-in-progress pending capitalization in the balance sheet. The assessee company has raised foreign currency ECB loan of US dollars 17.45 million which in terms of INR comes to Rs. 82,36,64,497/- from Axis Bank, Hong Kong for the purpose of renovation and refurbishment of the hotel. Entire ECB was disbursed in a single trench by the bank. As per RBI Guidelines and regulations, ECB amount has to be necessarily kept with 'A' category bank in India. ....
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....cts, the assessee strongly referred and relied on the judgment of Hon'ble Supreme Court in the case of CIT vs. Bokaro Steel Ltd., 236 ITR 315, wherein, the Hon'ble Supreme Court has reiterated the principle that income received from the funds which are inextricably linked with setting up of a plant for acquisition of capital asset is a capital receipt. This judgment has also been followed by the Supreme Court in the case of CIT vs. Karnal Cooperative Sugar Mills Ltd., 243 ITR 2 (SC) and CIT vs. Karnataka Power Corporation, 247 ITR 268. Further reliance was also placed on the judgment of Hon'ble jurisdictional High Court in the case of Indian Oil Panipat Power Consortium Ltd. vs. ITO, 315 ITR 255 (Del), wherein the Hon'ble Delhi High Court have even taken note of the judgment of Hon'ble Supreme Court in the case of Tuticorin Alkali Chemicals and Fertilizers Ltd. (supra). The ld. CIT (A), after considering the entire facts and submissions and various judicial pronouncements including the ratio and principle laid down in judgment of Delhi High Court dated 07.01.2016 in the case of Pr. CIT vs. Facor Power Ltd., 2016-TIOL-82-HC-DEL-IT, has deleted the disallowance. The relevant observat....
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....n ECB loan of Rs. 82.37 crores for the purpose of acquisition of a capital asset, i.e., renovation and refurbishment of hotel acquired by the assessee under SARFEASI Act from SBI, Mumbai. The entire ECB loan was disbursed in a single trench in the year under consideration and till this year, the assessee could utilize only Rs. 33.70 crores and was considered in the capital WIP. The assessee has temporarily parked the ECB loan in FDRs till utilization for fixed asset/capital expenditure strictly in compliance with the RBI instruction. The assessee had paid interest amount of Rs. 13.38 crores and has earned interest on FDRs of Rs. 4.03 crores. The net amount of interest of Rs. 9.35 crores has been added to the preoperative expenditure pending capitalization, i.e. in capital WIP. There is no quarrel that the interest paid on ECB loan has been capitalized. Way back in the year 1974, Hon'ble Supreme Court in the case of Challapalli Sugars Ltd. vs. CIT, 98 ITR 167 (SC) had examined the question whether interest paid before commencement of production by a company on the amount borrowed for acquisition, installation of plant and machinery would form part of actual cost of the asset, assess....
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....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 vs CIT & Excess Profits Tax; (1958) 34 ITR 368 (SC), and Narain Swadeshi Weaving Mills vs Commissioner of Excess Profits Tax; (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 the joint venture partners were primarily infused to purchase land and to develop infrastructure - then it cannot be held that the income derived by park....
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....are inextricably connected to the setting up of the same. In the present case, findings of fact have been returned by the Commissioner of Income Tax (Appeals) and have been confirmed by the Income Tax Appellate Tribunal to the effect that the funds were inextricably connected with the setting up of the power plant of the assessee. The learned counsel for the revenue has also not been able to point out any perversity in such finding and, therefore, the factual findings have to be taken as those accepted by the Income Tax Appellate Tribunal which is the final fact finding authority in the income tax regime. That being the case, the decision of the Division Bench in Indian Oil Panipat Power Consortium Limited (supra) would squarely apply to the facts of the present case and the Tribunal was right in applying the same. 12. Before parting with this decision, we would, however, like to comment upon a contention which has been raised by the learned counsel for the revenue. He submitted that the Tribunal in the impugned order made an observation in paragraph 8 of the impugned order which gives an impression that if funds were obtained through raising share capital as distinct from....