TaxTMI 
TaxTMI 
2022 (8) TMI 1182
X X X X Extracts X X X X
X X X X Extracts X X X X
....unds of appeal are as under:- I.T.A. No. 3264/DEL/2018 (A.Y 2014-15) "1. Whether on facts and circumstances of the case, the Ld.CIT(A) is legally justified in holding that interest income of Rs. 41,69,22,738/- eared on surplus funds during the precommencement of business is liable to tax u/s 56 of the Income Tax Act (hereinafter referred as "the Act")? 2. Whether on facts and circumstances of the case, the Ld.CIT(A) is legally justified in allowing the appeal of the assessee by ignoring the fact that the assessee ratio decidendi as laid down by Hon'ble Apex Court in case of Tuticorin Alkali Chemicals and Fertilizers Ltd vs. CIT (1997) 227 ITR 172 (SC) and CIT vs. Coromandal Cement Ltd (1998) 234 ITR 412 is applicable to....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... be passed on 27/12/2016 by making an addition of Rs. 41,69,22,731/- under the head of income from other sources by negating the contention of assessee that the deposits are inextricably linked with the funds taken for capital projects. 6. As against the assessment order dated 27/12/2016 , the assessee has preferred an appeal before the CIT(A). The Ld.CIT (A) vide order dated 19/02/2018 deleted the addition made by the Ld. A.O. 7. Aggrieved by the order of the Ld.CIT(A) dated 19/02/2018, the Department of Revenue has preferred the present appeal on the grounds mentioned above. 8. The Ld. DR vehemently submitted that, the Ld.CIT(A) has not justified in holding that, the interest income of Rs. 41,69,22,738/- earned on surplus funds d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ce the cost of assets, cannot be taxed as income. The Ld. Counsel for the aseessee has also relied on the several judgments and submitted that the order of the Ld. CIT(A) is just and proper which requires no interference. 10. We have heard the parties, perused the material on record and gave our thoughtful consideration. It is found that, the Ld. Assessing Officer brought to tax of income of Rs. 41,69,22,738/- earned by the assessee on "margin money deposit for bank guarantee" and " deposits for foreign currency buyer's credit". The Ld. Assessing Officer found that the said FDRs had been made out of surplus fund available to the assessee. Further observed that, the assessee has failed to established that, the deposits are inextricably li....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nancial institutions amounting to Rs. 3762.61 crores and had outstanding current liabilities of Rs. 1,282.34 as on 31.03.2014. It cannot be conclusively said that there was availability of surplus fund for the purpose of investment into deposits for earning interest." 13. In our opinion, the above observation made by the Ld. CIT (A) without bringing on record of any materials and without appreciation of the relevant records on the issue to came to such conclusion and decided the Appeal in favour of the assessee. The Ld. CIT (A) while relying on the documents produced by the Assessee, ought have called for the remand report from the Assessing Officer and should have examined issue. But on going though the Order of the CIT (A), we are unab....
X X X X Extracts X X X X
X X X X Extracts X X X X
....be allowed as deduction out of interest income u/s 57 of the Act;(refer second paragraph on page 180 of the judgment) d) The expenditure incurred by the assessee for the purpose of setting up its business cannot be allowed as deduction, nor can it be adjusted against any other income under any other head; (refer last paragraph on page 180 of the judgment) e) The cost of the construction will be the amount actually spent and also the interest payable on the amount borrowed during period of construction; (refer last paragraph on page 185 of the judgment) f) The application or destination of the income has nothing to do with its accrual or taxability. It is also well settled that interest income is always of a revenu....