TaxTMI 
TaxTMI 
2023 (5) TMI 1106
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....1,08,82,40,918/-. 4. Aggrieved by the order of AO, assessee carried the matter before CIT(A) who vide order dated 11.09.2019 in Appeal No.3/10316/2018- 19 granted substantial relief to the assessee. Aggrieved by the order of CIT(A), Revenue is now in appeal before the Tribunal and has raised the following grounds: "1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.108,74,52,438/- made by the AO treating toll charges as revenue receipts. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.7,88,480/- made by the AO on account of interest income on fixed deposit. 3. The appellant craves leave to add or forego any ground(s) of appeal at any time before or during the hearing of this appeal." 5. Ground No.1 is with respect to the addition of Rs.108,74,52,438/- by treating toll charges as revenue receipts. 6. During the course of assessment proceedings, AO noticed that assessee had received Rs.221,64,64,769/- as toll charges collection which it had reduced from the total cost of construction (WIP). Assessee had thus....
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....s including the construction period. NHAI remains the owner of the project and the appellant only got the concession right for the period of 16 years towards consideration of the project. During the year, the project was under construction only and was not completed. As per the terms and contentions of the CA, the appellant was entitled to collect toll for existing 4 lane Road from the appointed date i.e. from the date from which the construction of the project starts which was 13 March 2013 and a portion of the toll collected is also payable to NHAI towards premium payable to NHAI as per quotation given to NHAI for the project. The net amount of toll collected (Toll receipts less premium paid to NHAI out of such toll receipts) during the construction period was NHAI's contribution to the PPP project and was compulsorily required to be used for the purposes of the construction of the project during construction period as per the terms of the C.A and Escrow Agreement. As per the agreement, the appellant was not entitled to use the net toll receipts for itself or for any purpose other than construction of the project and there was an Escrow Agreement on the toll receipts, I have ....
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....er, appropriate amounts have been amortized from the said capitalized asset. 6.4.1 As against the above arguments of the AR, the AO has treated the toll receipt was revenue in nature by stating that the net toll receipts are not in the nature of capital grant from NHAI but constitute revenue receipts on day to day basis. 6.4.2 It is observed from Article 31 of the CA that all the fee and payments received in respect of the project are mandatorily required to be deposited in the Escrow account opened in Axis Bank as per the agreement and all the funds so deposited are required to be utilized entirely for the purposes of the project only. These terms & conditions have again been reiterated in the Escrow agreement entered by the appellant with Axis Bank and NHAI. It has been contended that due to these conditions there is an overriding obligation on the appellant for diversion of all receipts for the purposes of the project only and therefore, there was no real income arising or accruing to the appellant. In this regard, it is to be noted that as per law, diversion of Income is the process of diverting income before it is earned by the assessee. Such amount shall be ....
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....regard. 6.4.5 It is also observed that in the remand report, the AO has also relied upon the judgment of Hon'ble Madras High Court in the case of Tuticorin Alkali Chemicals and Fertilisers Ltd. vs. CIT, 227 ITR 172. In this regard, it is observed that in the case of Tuticorin Alkali vs. CIT, funds were found to be surplus funds which were invested to earn interest income which is not the case in the present case where funds are neither surplus nor invested for earning any income but were invested in construction of the project as per the overriding obligation under the terms of concession agreement and escrow agreement. It is further observed that the Apex Court has distinguished this case in the case of CIT v. Bokaro Steel Ltd. [1999] 236 ITR 315 (SC) and has held as under: "The appellant, ,..... In this case of the Appellant also, as against the facts in the case of Tuticorin, during construction of the six lane toll road, the appellant was not free to utilize the toll receipts whichever way it liked. Until completion of construction of six lane toll road project, the appellant was obliged to use the toll receipts in construction of the project as p....
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....easoned order which have been reproduced hereinabove has given a finding that during the construction of the 6 lane toll road, assessee was not free to utilize the toll receipts but was obliged to use the toll receipts in construction of the project as per the overriding obligation under the Concession Agreement and Escrow Agreement and assessee had in fact utilized the toll receipts in the project construction. He has further given a finding that toll receipts received during the period of project construction were inextricably linked to the project because it was mandatorily required to be used for the construction of the project. He accordingly concluded the receipts to be capital receipts and held that assessee had rightly reduced the same from the cost of project. Before us, Revenue has not pointed to any fallacy in the findings of CIT(A) nor has placed any material on record to demonstrate that the ratio of various decisions relied upon by the CIT(A) were not applicable to the facts of the present case. In such a situation, we find no reason to interfere with the order of CIT(A) and thus the ground of Revenue is dismissed. 12. Ground No.2 is with respect to the addition of....
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....C Ventures Ltd., [2011] 335 ITR 0132 (Del.), which has the same facts and in which it has been held that furnishing of a bank guarantee was the sine qua non for initiation of the project and only on furnishing the bank guarantee, the assessee could enter into the contract for construction of the project and the interest earned by the assessee on the fixed deposit receipts must go to reduce the preproduction expenses. 7.3.1 Reference is also made to the decision of Hon'ble Delhi High Court in the case of Indian Oil Panipat Power Consortium Limited v. Income-tax Office [2009] 315 ITR 255 (Delhi), in which it has been held that - "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 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 be set off against pre-operative expens....