TaxTMI 
TaxTMI 
2023 (7) TMI 650
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.... passed by learned Commissioner of Income Tax (Appeals)-18, Chennai [CIT(A)] on 30-05-2022 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) r.w.s 92CA(3) of the Act on 27-03- 2015. The impugned order for AY 2012-13 has been passed by same authority on 30-05-2022 in the matter of similar assessment framed by Ld. AO on 10-03-2015. The impugned order for AY 2014-15 has been passed by same authority on 18-01-2017 in the matter of similar assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) of the Act on 20-12-2016. The facts as well as issues are stated to be common in all the years and it is admitted position that adjudication in any one year would equally apply to other appeals also. For the purpose of ad....
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.... and interest was earned during construction period. The same has been reduced from the project construction cost as per settled legal position. The assessee did not commence its business. The Ld. CIT-DR, on the other hand, submitted that deposits were out of surplus funds and the action of Ld. AO was to be upheld. Reliance has been placed on various judicial pronouncements. Having heard rival submissions and upon perusal of case records, our adjudication would be as under. The assessee being resident corporate assessee is stated to be engaged in construction and operation of power plants. 3. Assessment Proceedings 3.1 The assessee admitted loss of Rs. 589.47 Lacs which was subjected to scrutiny by Ld. AO. The Ld. AO noted that assess....
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....ial production had not commenced. In the process of implementation of the project, it had to make certain deposits with the bank for the project on account of customs duty, bank guarantee etc. Therefore, the interest so earned would go on to reduce the expenditure incurred by the assessee during the construction period and the same, therefore, should be adjusted against the cost of the project. 4.2 The assessee's submissions were subjected to remand proceedings. In the remand report, Ld. AO reiterated the stand taken in the assessment order and distinguished the cited case laws as relied upon by the assessee. 4.3 The Ld. CIT(A) rendered a finding that the assessee had not commenced its business. The fact remain that the interest incom....
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....d opinion that there is a difference in set-up of business and commencement of business. Once the business is set up though it may not have yet commenced, the assessee would be eligible to claim the business expenditure as revenue expenditure. On the same very reasoning, any income arising after set-up of the business would be revenue in nature and assessable to tax. It could be seen that the interest income has accrued on fixed deposits made by the assessee and the same has accrued after the business has been set-up. In fact, the assessee itself has offered a part of interest income to tax but claim the set-off of remaining interest from capital work-in-progress on the reasoning that deposits were linked with the project. The same is amply....
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.... deposits were directly linked with the purchase of plant and machinery. It was thus held that earning of interest on such deposit was incidental to the acquisition of assets for the setting up of the plant and machinery and therefore, the interest was a capital receipt which would go to reduce the cost of asset. The same is not the case here. We find that in the present case, the assessee has surplus funds in the Balance Sheet. In fact, cash and cash equivalents are to the tune of Rs. 372.55 Crores. 8. The case law of CIT vs. Bokaro Steels Ltd. (236 ITR 315) is a case where the assessee was in the process of constructing and erecting its plant and had not started any business during relevant assessment years. It received certain receipt....