2021 (5) TMI 390 - ITAT HYDERABAD

Interest income on fixed deposits received - capital receipt OR income from other sources- whether pre commencement of expenses can be set off against interest income? - Additions made by the AO, deleted by the CIT(A) - HELD THAT:- In the initial year, the assessee himself had offered it as ‘income from other sources and in the following year it has reduced from the cost of the project up to the interest received on FDR. It is also not clear from the orders of the authorities below as well as submission of the ld. AR that when the fixed deposits were made and advances were given to Pact Securities and Financial Services Ltd. When the Bench asked a specific question to assessee that what was the description of the fixed deposits and advances and utilization of income received on fixed deposits and advances, the ld. AR was unable to give any explanation to the said question. He did not produce any terms and conditions regarding the advances given. We find substance in the written submissions filed by the Ld. DR.

Res-judicata does not apply in the Income-tax Act. Earlier the interest was earned from fixed deposits and in this AY the assessee has given some advances to others also and could not respond to our query during the course of hearing. Exercising the powers u/s 254 of the IT Act and relying on the decision of Bombay High Courts full Bench decision in the case of Ahmedabad Electricity CO. Ltd [1992 (4) TMI 29 - BOMBAY HIGH COURT], we observed that section 254 involving the statutory expression “may pass such orders” ‘as it thinks fit’ confers widest possible jurisdiction on the Tribunal.

AO and the Sr. DR has discussed this issue and facts of the case in detail and has relied on the decision of the Hon’ble Apex court in the case of Tuticorin Alkali [1997 (7) TMI 4 - SUPREME COURT]. We support and restore the order of the AO and quash the order passed by the CIT(A).

AO has rightly treated the interest received during the construction period from the money parked as fixed deposits and interest on advance as ‘income from other sources and netting off of capital expenditure from the interest has rightly been disallowed. In support of our above decision, we rely on the judgements of ITAT, Delhi Special Bench – Third Member case in the case of National Thermal Power Vs. IAC[1987 (10) TMI 92 - ITAT DELHI-A]

As assessee has relied on number of judgements, which are not applicable to the facts of the case of the assessee. We allow the grounds raised by the revenue.