2025 (10) TMI 359

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....d by the judgement in the Appellant's own case by the order of the ITAT (ITA No. 4341 & 4342/Del/2019) in Appellant's own case for AYs 2012-13 and 2013-14, wherein it was held as under: "Hon'ble jurisdictional High court considered the decision of the Hon'ble Apex Court in the case of Ms. Tuticorin Alkal Chemicals and Fertilizers Ltd (supra) and Bokaro Steel Ltd (supra) in Indian Of Panipat Power Consortium Ltd Vs ITO (2009) 315 ITR 255(Del) and held that the interest earned on funds primarily brought for infusion in the business could not have been classified as income from other sources. Further, unlike in the case of M/s. Tuticorin Alkali Chemicals and Fertilizers Ltd (para in the case on hand, the assessee had already commenced business (Para 15) 6. The aforesaid observation was made by the ITAT while adjudicating the appeal against the order passed under section 263 of the Act by the Ld. Principal Commissioner of Income Tax for AYS 2012-13 and 2013-14. The Ld. PCIT has passed an order dated 28 March 2019, directing the AO to re-examine the treatment of interest on deposits for AYS 2012-13 and 2013-14 The ITAT quashed the order passed under section 263....

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....investors outside India through Compulsory Convertible Debentures ('CCDs') bearing interest cost of 12% per annum, to fulfil its payment obligation towards HSIIDC. The amount of interest payable on CCDs have been duly capitalised to the cost of the project. 5. The surplus amount of funds raised by the assessee, which were not due immediately by way of instalment payment were deposited in the bank as FDR. It was argued on behalf of the assessee that the FDR has a close nexus to the project and hence, the interest from FDR should not be treated as income from other sources. 6. On the issue of taxability of interest from FDRs, the Tribunal relied upon the judgment in the assessee/respondent's own case decided by the ITAT being ITA No. 4341 & 4342/Del/2019 relatable to the Assessment Years ('AYs') 2012-13 and 2013-14. The observation of the ITAT in those appeals has been reproduced in paragraph 5 of the impugned order, which have already referred to above. 7. The conclusion of the ITAT in the impugned order is that the aforesaid was the observation made by the ITAT in the appeal against the order passed under Section 263 of the Income Tax Act, 1961 ('the Act') whereby the Prin....

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....in the concerned AYs, against inventory, concluded that, there was a nexus between the receipt of funds from investors located abroad and the real estate project, which upon being invested generated interest. Thus, it cannot be said that the conclusion arrived by the AO, that such adjustment was permissible in law, was erroneous. 12.1. The reliance placed on behalf of the revenue on the judgement of Supreme Court in Tuticorin Alkali Chemicals & Fertilizers Limited v. CIT, (1997) 227 ITR 172 (SC) was not apposite, given the finding of fact returned by the Tribunal that there was a nexus between the investment of funds received from investors located abroad and the real estate project. The Tribunal, in paragraph 15 of the impugned order, has distinguished (and, in our view, correctly) the judgement of the Supreme Court in Tuticorin Alkali Chemicals Case and applied the later judgement of the same Court in CIT v. Bokaro Steels Limited, (1999) 236 ITR 315 (SC). 12.2. Furthermore, these judgements were also considered by a Division Bench of this Court in Indian Oil Panipat Power Consortium Ltd. vs. Income-tax Officer, [2009] 181 Taxman 249 (Delhi)/[2009] 315 ITR 255 (D....

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....tive expenses." 12.3. Indian Oil Panipat Power Case has also been cited with approval NTPC Sail Power Company (P.) Ltd. vs. Commissioner of Income-tax, [2012] 25 taxmann.com 401 (Delhi); the relevant observations are extracted hereafter. "9. This Court, in Indian Oil Panipat Power Consortium Ltd. v. ITO [2009] 315 ITR 255/181 Taxman 249 (Delhi) held that where interest on money received as share capital is temporarily placed in fixed deposit awaiting acquisition of land, a claim that such interest is a capital receipt entitled to be set off against pre-operative expenses, is admissible, as the funds received by the assessee company by the joint venture partners are "inextricably linked" with the setting up of the plant and such interest earned cannot be treated as income from other sources. The reasoning in Indian Oil is in line with Bokaro Steel Ltd. Similarly, the Supreme Court in CIT v. Karnataka Power Corpn. [2001] 247 ITR 268/[2000] 112 Taxman 629 (SC) and Bongaigaon v Refinery & Petrochemicals Co. Ltd. v. CIT [2001] 251 ITR 329/119 Taxman 488 (SC) held that such receipts are not income. 10. It is no doubt correct that the proviso to section 36(1)(ii....