2017 (10) TMI 1595

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....14-15, dated 14.11.2014. The assessment was framed by the Deputy Commissioner of Income Tax / Assessing Officer, Circle 3(1), Mumbai, (in short DCIT /AO) for Assessment Year 2011-12, vide order dated 21.01.2014, u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"). 2. The only issue involved in the appeal by the revenue and the cross-objection of the assessee is with regard to the order of the CIT(A) holding that interest income of Rs. 4,24,30,920/- is assessable as income from other sources but interest expenses are to be allowed which are meant for earning of such interest income. For this the Revenue has raised following ground no.1: - "1. Whether on the facts and circumstances of the case and in law, the Ld.....

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....fixed deposits to earn interest. According to the Assessing Officer the assessee, instead of offering the amount earned as interest as "Income from other sources", has reduced the same from capital work-in-progress and avoided paying tax. According to the Assessing Officer, the assessee has reduced an amount of Rs. 4,24,40,920/- on account of interest received on Fixed Deposits from the capital work-in-progress and Rs. 90,45,333/- being interest received against margin money. The Assessing Officer was of the view that this income is taxable as "Income from other sources" and, accordingly, he treated both the amounts i.e. Rs. 4,24,40,920/- & Rs. 90,45,333/- as "Income from other sources". Accordingly, he made an addiction of Rs. 5,14,76,310/....

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....ave heard the rival contentions and gone through the facts and circumstances of the case. We find that the assessee had been sanctioned a term loan of Rs. 1740 crores by consortium of Banks to part finance for setting up power generating plant. Surplus funds had arisen due to gap between fund borrowed as per the disbursement schedule prefixed by lender banks and actual utilization for the project. In between the surplus funds were kept as fixed deposits and earned interest by the assessee amounting to Rs. 4,24,30,920/-. The assessee while filing return of income claimed the interest from aforesaid fixed deposit and reduced it from cost of project as fixed deposit claiming that interest thereon was inextricably linked with the setting up of ....