TMI Blog2015 (10) TMI 2712X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome on share application money is more than the expenses incurred for public issue of shares, then such excess interest income should be taxed as income from other sources. Decided in favour of assessee for statistical purposes. Disallowance of depreciation - Held that:- Since business was not in existence, depreciation is not allowable because as per section 32, depreciation is allowable on assets used for business. He has also relied on the judgment of Hon’ble apex court rendered in the case of Bokaro Steel Ltd (1998 (12) TMI 4 - SUPREME Court) and held that if the asset is used in construction of project, depreciation has to be capitalized and not allowable as revenue expenditure. As it is noted by CIT (A) that no submission was made on this issue. We find no infirmity in the assessment order on this issue and therefore, this ground is rejected. - ITA No. 31 & 32/LKW/2013 - - - Dated:- 29-10-2015 - Sunil Kumar Yadav, JM And A. K. Garodia, AM For the Appellant : Shri P K Kapoor, CA For the Respondent : Shri Ranjan Srivastava, Sr. DR ORDER Per A. K. Garodia, AM Both these appeals are filed by the assessee and these are directed against two separate or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .12.2008 (as passed by the Addl.CIT), was not maintainable. 4. BECAUSE in the present case, the Addl. CIT, Range -IV, Kanpur did not even fall within the definition of Assessing Officer as contained in section 2(7A) of the Act and the assessment order as passed by her containing the variation as referred to in ground no.l above, is void ab-initio. WITHOUT PREJUDICE TO THE AFORESAID 5.1 BECAUSE the authorities below have erred in law and on facts in holding that interest amounting to ₹ 17,70,413 (Rs. 17,26,249 + ₹ 44,164) as had been allowed by ICICI Bank on fixed deposit receipts as obtained out of funds received on 'public issue' as had been brought out by the appellant for financing its new project, constituted a separate source of income and in adding the same to its income under the head Income from Other Sources . 5.2 BECAUSE the receipt amounting to Rs, 17,70,413 related to the proceeds of public issue meant for financing the project for manufacturing of poster paper, and the same was liable to be set off against public issue expenses and view to the contrary as has been taken by the authorities below 6.1 BECAUSE the aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry to the facts law and principles of natural justice. 3. The Grounds raised in A.Y. 2007 - 08 are as under:- 1. BECAUSE the variation between the returned income and the assessed income as represented by the disallowance of appellant's claim for set off of interest amounting to ₹ 8,17,855/-, out of cost of capital works-in-progress is wholly illegal and unauthorized too as the notice under section 143(2) had not been validly issued. 2. BECAUSE the mandatory requirement of law as referred to in clause (ii) of subsection^) of section 143 having not been complied with, the notice issued under section 143(2) dated 25.06.2008 is wholly illegal and consequently the variation between the returned income and the assessed income is not sustainable in the eyes of law. WITHOUT PREJUDICE TO THE AFORESAID 3. BECAUSE the authorities below have erred in law and on facts in holding that interest amounting to ₹ 8,17,855/- as had been received on fixed deposit receipts (obtained out of proceeds of term loan meant for financing the project) constituted a separate source of income and in adding /upholding the addition thereof to the income of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he submitted that this interest income is in course of Public issue as per bank Certificate available on pages 28 29 of the paper book. He also placed reliance on the following Judicial Pronouncements:- a) CIT vs. Karnal Co operative Sugar Mills Ltd., 243 ITR 2 (SC) b) CIT vs. Karnatka Power Corporation, 247 ITR 268 (SC) c) CIT vs. Jaypee DSC Ventures Ltd. as reported in 335 ITR 132 (Del) d) NTPC SAIL Power Company Pvt. Ltd. vs. CIT, 210 Taxman 358 (Del) e) CIT vs. VGR Foundations, as reported in 298 ITR 132 (Mad) f) Indian Oil Panipat Power Consortium Ltd. vs. ITO, 315 ITR 255 (Del) 4.1 Learned DR of the revenue supported the orders of the authorities below and reliance was placed by him on the judgment of Hon ble Allahabad High Court rendered in the case of CIT vs. Indo Gulf Fertilizer Chemical Corporation Ltd., 280 ITR 621 and on the tribunal order rendered in the case of ACIT vs. M/s Z Square Shopping Mall Pvt. Ltd., in ITA No. 659 to 661/LKW/2013 Dated 09.09.2015. 5. We have considered the rival submissions. First we examine the applicability of the judgment of Hon ble Jurisdictional High Court rendered in the case of CIT vs. Indo Gulf Fertilizer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... covered against the assessee by this judgment of Hon ble Jurisdictional High Court unless we find that any judgment of Hon ble apex court is rendering any help to the assessee or there is some other judgment in favour of the assessee on identical facts on a different aspect of the present matter and that aspect was not considered and decided by Hon ble Jurisdictional High Court. 6. Now we examine the applicability of two judgments of Hon ble Apex Court cited by the learned AR of the assessee as noted above. The first judgment of Hon ble Apex Court is the judgment rendered in the case of CIT vs. Karnal Co operative Sugar Mills Ltd. (Supra). In this case, interest was earned on money deposited to open Letter of Credit for purchase of Machinery required for setting up the plant and under these facts, it was found that the deposit is directly linked with purchase of Machinery and hence, any income earned on such deposit is incidental to acquisition of assets and has to be capitalized and cannot be assessed as income from other sources. In the present case, deposit is not incidental to acquisition of assets as in that case and therefore, this judgment is not applicable in the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esent case, we find that the Profit Loss A/c for the year ending on 31.03.2006 available on page 7 of the paper book, it is seen that there was sales of ₹ 32.61 Lacs in the present year and ₹ 27.82 Lacs in the preceding year. Hence, in the present case, business of the assessee was not only set up but commenced also and that too in the earlier period prior to commencement of the previous year relevant to A. Y. 2006 - 07 and the assessee is putting up a new project only. Therefore, in the present case, the facts are different. It is not a case where the business of the assessee was not set up. After setting up of business, the receipt of revenue nature is taxable as per this judgment and as per the judgment of Hon ble Jurisdictional High Court in the case of CIT vs. Indo Gulf Fertilizer Chemical Corporation Ltd. (Supra), the receipt in question is of revenue nature. Therefore, the assessee does not get any help from this judgment of Hon ble Deli High Court. 7.1 In the case of CIT vs. Jaypee DSC Ventures Ltd. (Supra), there was direct nexus of interest income and the project being put up because it was on FD for Performance Guarantee of Contract and since the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mited in Tax Appeal No. 315 of 2010 Dated 26.07.2011 and also by a tribunal order of Ahmedabad Bench rendered in the case of ACIT vs. Shree Rama Multitech Ltd., ITA No. 240/Ahd/2008 Dated 21.10.2011. We hold accordingly and direct the A.O. that to the extent of expenses incurred for public issue of shares, the amount of interest income of ₹ 17,70,413/- earned in course of public issue of shares should be set off against such expenses but if the amount of interest income on share application money is more than the expenses incurred for public issue of shares, then such excess interest income should be taxed as income from other sources. Ground No. 5.1 5.2 are allowed for statistical purposes. 9. Regarding Ground No. 7 8, we find that these issues are covered against the assessee by the same judgment of Hon ble Jurisdictional High Court rendered in the case of CIT vs. Indo Gulf Fertilizer Chemical Corporation Ltd. (Supra). Respectfully following the same, these grounds are rejected. 10. Now we deal with Ground No. 10.1 and 10.2. On this issue, Learned AR of the assessee reiterated the submissions made before CIT (A) and learned DR of the revenue supported the orders ..... X X X X Extracts X X X X X X X X Extracts X X X X
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