TaxTMI 
TaxTMI 
2024 (10) TMI 758
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....accine Complex, the Government of India sanctioned a total amount of Rs. 285 Crores. The amount was to be released in tranches. As evidenced by Annexures A, B, C and D, Rs. 28 crores, Rs. 150 crores, Rs. 40 crores and Rs. 56.88 crores were released by the Government on 28.02.2012, 25.09.2012, 18.03.2015 and 19.08.2015 respectively. The balance amount of Rs. 10.12 crores was invested towards 100 acres of land provided for setting up of the unit. 4. As per Annexure-E letter dated 14.06.2018, the Government of India clarified that the funds and the income earned out of the funds are to be utilized only for the purpose of setting up/establishing the project and not for any other purpose. 5. Though the construction works for setting up of the project commenced during the assessment year 2013-14 (Financial Year 2012-13) for completing the project in four years, it did not work out as planned. The assessee has sought the support of the Government of India for meeting the cost escalation, through additional funding. 6. Since the construction activities proceeded in a phased manner, the assessee had parked certain amounts which were not immediately required for construction, in Banks and....
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....tricably linked with the setting up of the project. Such income could not be treated as "income from other sources" exigible to tax, it is contended. 12. The learned Standing Counsel for the Department would on the other hand contend that, the Apex Court has in Tuticorin Alkali Chemicals & Fertilizers v. Commissioner of Income Tax (supra) held that interest income from deposits made by the assessee during pre-setting up period, is exigible to tax treating the income as "income from other sources". 13. We have considered the rival submissions. 14. In Tuticorin Alkali Chemicals & Fertilizers v. Commissioner of Income Tax (supra), the Company was incorporated on 03.12.1971, and the trial production commenced on 30.06.1982. For the purpose of setting up of the factories, the Company had availed loans. That part of the funds that were not immediately required were invested in short-term deposits with Banks. Issue arose whether the interest income derived from such deposit is taxable. Holding that such interest income is taxable, the Apex Court noted that the funds invested were "surplus funds". It was also noted that, the company was at liberty to use the interest income according to....
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....pany also advanced amounts to its contractors on interest, to enable them to execute the works smoothly. The interest was later adjusted against the dues of the contractors. So also, for the purpose of the construction work, certain plant and machinery were given on hire by the assessee to the contractors. The Apex Court, after referring to its judgment in Tuticorin Alkali Chemicals & Frerilizers v. Commissioner of Income Tax (supra), held that the receipts under the above heads were intrinsically connected with the construction of its plant. The receipts went to reduce the cost of construction and therefore, were capital receipts and not income of the assessee. Referring to the Tuticorin Alkali Chemicals & Fertilizers case it was observed, "This Court held that if a person borrows money for business purposes but utilises that money to earn interest, however, temporarily, the interest so generated will be his income. This income can be utilised by the assessee whichever way he likes". . . . "The Company was free to use this income in any manner it liked. However, while interest earned by investing borrowed capital in short-term deposits is an independent source of income not conn....
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....court in Indian Oil Panipat Power Consortium Ltd. v. ITO (2009) 315 ITR 255 (Del) wherein, after referring to the judgment of the Apex Court in Tuticorin Alkali Chemicals & Fertilizers case and Bokaro Steel Ltd. (supra) held :- "... The test which permeates through the judgment of the Supreme Court in Tuticorin Alkali Chemicals (supra) is that if funds have been borrowed for setting up of a plant and if the funds are 'surplus' and then by virtue of that circumstance they are invested in fixed deposits the income earned in the form of interest will be taxable under the head 'Income from other sources'. On the other hand the ratio of the Supreme Court judgment in Bokaro Steel Ltd. (supra) to our mind is that if income is earned, whether by way of interest or in any other manner on funds which are otherwise inextricably linked to the setting up of the plant, such income is required to be capitalized to be set off against pre-operative expenses. 5.1 The test, therefore, to our mind is whether the activity which is taken up for setting up of the business and the funds which are garnered are inextricably connected to the setting up of the plant. The clue is perhaps a....
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....in the nature of capital receipts. 19. With the above in mind, we proceed to consider the facts of the present case. 20. While considering the nature of the amount received by the assessee and the purpose of its utilisation, Annexure-E communication dated 14.06.2018, from the Government of India to the assessee is of much significance. The same is extracted hereunder :- " F. No. A-450 13/07/2018-HPE Government of India Ministry of Health & Family Welfare Nirman Bhawan, New Delhi Dated the 14th June, 2018 To The Chief Executive Officer, M/s HLL Biotech Limited, SR No: 192 & 195, Tirumani Village, Chengalpattu-603001. Subject: Utilisation of Interest earned on equity fund of Rs.274.88 Crore-reg. Sir, The undersigned is directed to refer to your letter dated 22nd January 2018. The GOI has infused Rs.285 Crore towards equity fund through HLL Lifecare Limited for establishing Integrated Vaccine Complex at Chengalpattu out of which Rs.274.88 Cr. was paid in cash and 100 acre of land in kind with a valuation of Rs.10.12 Cr. As a general policy, any income earned out of funds provided by GOI for any specific purpose, must be utilised only for the purpose for w....