TMI Blog2023 (4) TMI 640X X X X Extracts X X X X X X X X Extracts X X X X ..... l the project was completed, was rightly claimed by the assessee under the head of capital receipts. Revenue s stand that this interest income should be treated as revenue receipts so as to make it taxable income is not acceptable in view of the law as laid down in the case of Bokaro Steel Ltd. [ 1998 (12) TMI 4 - SUPREME COURT] - No substantial question of law. - ITA/15/2022, ITA/13/2022 and ITA/16/2022 - - - Dated:- 12-4-2023 - HON BLE THE CHIEF JUSTICE SANDEEP MEHTA AND HON BLE MR. JUSTICE SOUMITRA SAIKIA For the Appellant(s) : Mr. S.C. Keyal, Sr. SC, Income Tax. For the Respondent(s) : Dr. A. Saraf, Senior Advocate assisted by Mr. P. Baruah, Advocate. : Mr. S. Mitra, Advocate. JUDGMENT ORDER [Sandeep Mehta, CJ] These three appeals, namely, ITA No. 15/2022, ITA No. 13/2022 and ITA No. 16/2022, filed under Section 260A of the Income Tax Act, 1961 preferred by the Revenue/Income Tax Department, involve identical question of facts and law and hence, the same are being heard together and decided by this common judgment and order. 2. These appeals are directed against the order passed by the Income Tax Appellate Tribunal (in short, ITAT), Guw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income Tax Vs. M/s. Bajaj Herbals Pvt. Ltd., reported in 2022 0 Supreme (SC)307. 6. Dr. A. Saraf, learned Senior counsel assisted by Mr. P. Baruah and Mr. S. Mitra, learned counsel for the respondents urged that no substantial question of law is involved in these appeals and hence the same do not merit admission. It was submitted that the issue regarding the interest on short term deposits made by the Company from the surplus funds during its formative years being exempted from tax is no longer res integra and has been put to rest beyond the pale of doubt by the Hon ble Supreme Court in the case of Commissioner of Income Tax, Bihar II, Patna Vs. Bokaro Steel Limited, Bokaro, (1999) 1 SCC 645. It was further contended that the ITAT, whilst rejecting the appeals of the Revenue observed that the same view was taken in the case of assessee for the accounting years of 2009-2010, 2010-2011 and the said judgment of the Tribunal not having been challenged any further has attained finality. 7. Dr. Saraf submitted that the assessee is a public sector enterprise working under the Ministry of Chemicals Fertilizers (hereinafter referred to as MoCF) and was promoted to underta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2022 SCC OnLine Del 916 . It was contended that the CIT corrected this aberration in the view of the AO by accepting the appeals of the assessee and the ITAT affirmed the orders of the CIT in the appeals of Revenue by placing reliance on the judgments rendered by the Hon ble Supreme Court on the issues for consideration. 9. Dr. Saraf thus urged that the appeals do not involve any substantial question of law and hence, the same are liable to be dismissed. 10. We have given our thoughtful consideration to the submissions advanced at Bar and gone through the impugned orders, the materials placed on record and the precedents cited at Bar. 11. There is no quarrel on the factual matrix of the case that the respondent assessee is a public sector undertaking which was assigned the task of setting up the integrated Petrochemical Complex at Lepetkata, District Dibrugarh, Assam. The assessee garnered funds for carrying out the Project through capital subsidy, debt and equity. While the project was underway, the unutilized funds from all the three heads were placed in short-term deposits with the Banks and interest was earned thereupon. The assessee in its return for the relevant yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come can be utilized by the assessee whichever way he likes. Merely because he utilized it to repay the interest on the loan taken will not make the interest income a capital receipt. The said judgment is clearly distinguishable in the present set of facts and circumstances because herein, only the unutilized part of the capital raised for setting up the project was parked by the assessee in short term savings. There was a clear and inextricable link between the interest received on this temporary investment with the setting up of the project. There is no indication in the facts of the present case that the assessee utilized these funds for any purpose other than the development of the infrastructure of the plant to be set up. 15. In the case of Bongaigaon Refinery Petrochemicals Ltd. (supra) relied upon by Mr. Keyal, the assessee derived income from housing property, its guest house, charges for equipments, etc. and recoveries from contractors on account of water and electricity supply. These sources of income were held as excluded from capital receipts. In this case, the assessee did not challenge the part of the assessment order wherein, the interest income derived during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- for the Asst. year 2009- 10. It does not matter that the assesse had voluntarily offered the same to tax in its return of income. It is already well settled that there is no estopped against the statute. Reliance in this regard is placed on the decision of the Hon ble Calcutta High Court in the case of Maynak Poddar (HUF) vs. WTO reported in (2003) 262 ITR 633 (Cal). It is also well settled that the revenue cannot take advantage of ignorance of the provisions of the Act on the part of the assesse and on the contrary, the revenue is expected to educate the assesse and not to deprive the legitimate deductions which is otherwise entitled for the assesse. Hence respectfully following these principles and the judicial precedents relied upon we hold that the interest income on deposits earned in the sum of Rs.1,18,85,987/- for the Asst. Year 2009-10 (raised by way of additional ground) out of equity funds, shall have to be treated only as capital receipt as the same is inextricably linked with the business of the assesse and linked with the capital structure of the assesse company. Hence the ld AO is directed to delete the said addition. Accordingly the Additional Ground raised by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where the utilisation of various assets of the company and the payments received for such utilisation are directly linked with the activity of setting up the steel plant of the assessee. These receipts are inextricably linked with the setting up of the capital structure of the assessee-company. They must, therefore, be viewed as capital receipts going to reduce the cost of construction. In the case of Challapalli Sugars Ltd. v. CIT, [(1975) 3 SCC 572] this Court examined the question whether interest paid before the commencement of production by a company on amounts borrowed for the acquisition and installation of plant and machinery would form a part of the actual cost of the asset to the assessee within the meaning of that expression in Section 10(5) of the Indian Income-tax Act, 1922 and whether the assessee will be entitled to depreciation allowances and development rebate with reference to such interest also. The Court held that the accepted accountancy rule for determining cost off fixed assets is to include all expenditure necessary to bring such assets into existence and to put them in working condition. In case money is borrowed by a newly-started company which is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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