TMI Blog1987 (10) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... into between the President Of India and the NTPC for the management of Badarpur Thermal Power Station and Badarpur Thermal Power Project. The assessee is a Government of India Undertaking and its entire capital is held by the President of India. The capital has been subscribed as determined from time to time. In the financial year 1975-76 the equity capital of the assessee stood at Rs. 20 lakhs and it came to be increased from year to year and as on31-3-81 it stood at Rs. 203.58 crores. In addition to it there was also a loan granted within the accounting year 1980-81 by the Govt. amounting to Rs. 47.94 crores. The total funds available as at the end of31st March, 1981 stood at Rs. 247.31 crores. 2. One of the major issues raised in the assessee's appeal is about the taxability of a sum of Rs. 1,07,29,848. This amount represents excess of interest income earned over the interest paid. As per the balance sheet of the assesses at page 143 of its paper book, the income derived from interest from banks on short term stood at Rs. 96.60 lakhs. Besides there was other income of interest of Rs. 26.03 lakhs derived from the contractors employed and the employees. The gross amount of inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terveners who also appeared and made their submissions. The three interveners were National Aluminium corporation Ltd, Bhuvaneshwar, M/s Paradeep Phosphates Ltd.New Delhiand M/s Autokast Ltd. S. L. Puram, SheItaly(Kerala). 3. Shri D. K. Sharma, the learned Departmental Representative, raised certain preliminary objections to the constitution of a larger Bench and to the framing of the following question to be considered by the larger Bench : "Whether an interest income of Rs. 1.07 crores earned on short term deposits made with Banks by the assessee a thermal power corporation still to set up its power plants is assessable as income from other sources for the assessment year 1981-82 in the face of the assessee's claim that such interest arise from moneys received by it as equity capital subscriptions and loans that were absorbed immediately by the projects on hand each year from the assessment year 1977-78 onwards and consequently there had been no surplus fund with the assessee so as to create an independent source of income in regard to the interest in question ?" His first objection relating to the constitution of the larger Bench was that it was not open to the Tribunal to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred for the consideration of the larger Bench highlights the various aspects including its factual background on which the assessee based its claim that the sum of Rs. 1,07,29,848 was not income at all. The stand of the Revenue is also reflected in the question when reference is made to the usability of the aforementioned amount under the head 'Income from other sources'. The question is framed in order to enable the possible interveners to understand the issue or the range of controversy going to be considered by the Special Bench, so that they could assist the Bench by placing their views on the issue concerned. However the entire appeal is open before the Special Bench, and is not confined to the question framed like a question of law framed and referred to the High court u/s 256 of the Income tax Act, 1961. We overrule the preliminary objections of the Revenue. 5. Before proceeding to deal with the controversy about the taxability of the sum of Rs. 1,07,29,848 it will be appropriate to indicate the parameters. In the assessment order the Inspecting Asst. Commissioner (Asst). has brought to tax the income from consultancy fees from Badarpur Thermal Power Station and Hindustan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her sources' in the assessment year 1977-78 and again income from interest of Rs. 22,84,994 was subjected to tax in the same manner when the additional ground taken before the Tribunal on this point was not admitted in the assessment year 1978-79 and further interest incomes of Rs. 28,34,451 and Rs. 1,12,46,781 were similarly taxed for the subsequent assessment years 1979-80 and 1980-81 by the Tribunal's order against the assessee, yet the matter deserved to be reconsidered as the assumptions made by Tribunal against the assessee, according to him were not correct nor the authorities relied upon were applicable. He put forward the factual backward of the case. It was stated that all the four thermal power projects at Singrauli, Kobra Ramagundam and Farakka were on the board in the accounting year being in various stages o construction as per the report of directors and none of these was in a position to produce electricity energy for sale which was the main object for which this company was set up by the Govt. of India. He invited our attention to the main object III(A)(1) in the Memorandum of Association of NTPC which is reproduced below : III. Development of Thermal Power (A)(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken from the Supreme Court's decision in Challapalli Sugars Ltd v. CIT [1975] 98 ITR 167. 7. To establish the accountancy principle and practice. he referred to a pamphlet ' International Accounting Standard' in respect of ' Capitalization of Borrowing costs' issued by International Accounting Standards Committee, London and another pamphlet of the Institute of Chartered Accountants of India, New Delhi by the name ' Guidance Note on Treatment of Expenditure During Construction Period'. The latter pamphlet was brought out by the Research Committee of the Institute of Chartered Accountants of India. He referred to paragraphs 9, 14 and 16 of the pamphlet 'International Accounting Standard' and support was Sought from the last Sentence in paragraph 16, which paragraph is fully quoted below : "16. Sometimes the fornicating arrangements for specific projects may result in an enterprise incurring a borrowing cost from the commencement date of the agreement on to full amount of the obligation. Under such arrangements, funds are often temporarily invested pending their requirement. Occasionally, interest bearing compensating balances are required. It is appropriate to offset such inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue expenditure to be written off over a period of three to five years after production commences "17.6 The same treatment should be accorded to the various costs and charges incurred for preparing the loan agreements and, other documents as is given to the interest and commitment fees incurred on the loan during the construction period (paragraph 4.6)." 8. In brief the premise on which the arguments of Shri Ganesan were based was that Government of India sanctioned money by way of share capital or loans for the specific purpose of capital outlay on the construction of four thermal power plants and that as per the directions of the President of India, the money was to be spent for that purpose only and the money so earmarked could not at all be called as surplus funds, on which any income by way of interest could be independently earned, nor could it be subjected to tax under the head 'Income from other sources.' He emphasized that the purpose for which money was given by the government was important and that in the construction period all the transactions of the assessee would be governed by that purpose and it is that purpose which should be taken into account while consideri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench decisions of the Tribunal in Nagarjuna Steels Ltd.'s case and Arasan Aluminium Industries (P.) Ltd. 's case and on the Delhi High Court's decision in the case of Indian Drugs Pharmaceuticals Ltd. He explained the decision of the Delhi High Court and submitted that the observations at page 139 about the surplus moneys invested to earn interest were mere other dicta and should not be read against the main proposition laid down on the same page in respect on in come from tender forms and excess realized on account of water and electricity charges. It was also submitted that the High Court had approved the reasoning of the Tribunal and the reasoning as noted at page 138 of the judgment is that the receipts were directly related to the capital structure of the business, which was being set up, and did not by themselves create an independent source of in come unrelated to the business which was being set up. It was also contended that the observations of the Delhi High Court were based on the Calcutta High Court's decision in CIT v. Ajmera Industries (P.) Ltd. [1976] 103 ITR 245 and they were not binding on the Tribunal, such a question not being for decision before the Delhi Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d against the assessee. The Madras High Court decision is CIT v. Seshasayee Paper Boards Ltd. [1985] 156 ITR 542 and the Karnataka High Court decision is CIT v. Cap Steel Ltd. [1986] 162 ITR 533. In regard to the Madras High Court's decision Shri Ganesan's submission was that apparently it may be against the assessee but since it had proceeded on a concession, no law was laid down. For this proposition the Supreme Court's decision in Lakshmi Shankar Srivastava v. Delhi Administration [1979] SCC 229 was cited in support. It was stated that the assessee's case was different on facts. Further it was Shri Ganesan's contention that the High Court had gone beyond its jurisdiction while deciding the matter at page 550. So far as Karnataka High Court's decision is concerned, it was submitted that it was against the assessee but according to Shri Ganesan the High Court had not considered the accountancy practice, which is prevalent as shown by him in his arguments earlier and having ignored that, the High Court had not correctly followed the ratio of the Supreme Court's decision in Challapalli Sugars Ltd.'s case. 12. Shri Ganesan also raised an alternative plea in respect of the interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inium Co. Ltd. made his submissions. He made very brief submissions in view of the fact that the question arising in the interveners case was not involved in the assessee's case as here the assessing officer had already taxed only the net income from interest. In other words the issue in the case of National Aluminium Co. Ltd related only to the claim of deduction of interest paid on borrowings from the income from interest, which was undisputedly liable to tax so far as that case was concerned. He rightly and very fairly appreciated the position that there was no room for raising the same contention of his assessee's case in the case now before the larger Bench of the Tribunal. He nevertheless took the opportunity to touch a few aspects. He emphasized that amounts were borrowed by the assessee to set up the plant and machinery and for setting up of the plant and machinery and the earning of interest from surplus funds not immediately required for that activity constituted one single transaction, which was inextricably mixed up. He further submitted that whether borrowings were used immediately or later on, the activity of earning of interest sprang from the same borrowings and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of earning interest was to be seen in the first instance and the head of income under which such income will be assessable had to be considered only thereafter. He went on to say that the head of income is to be determined only after the nature of activity producing interest is analysed. In support of his argument he cited the decision of the Delhi High Court in Snam Progetti S. P. A. v. Addl. CIT [1981] 132 ITR 70. He referred to the observations of the Delhi High Court in the head note to the effect that the assessee had not come from Italy (assessee being an Italian company carrying on business as Engineering and contractors in the field of Petroleum and Petro-Chemicals Plants) to make deposits in India but had come to carry on business and that the income earned by depositing spare funds in the banks and earning interest thereon would also be business income and for the purpose of set off of brought forward business loss from the earlier assessment years, it could not be treated as separate from business income. He also contended that theMadrasand Karnataka High Court decisions in Seshasayee Paper Boards Ltd.'s case and Cap Steel Ltd.'s case did not consider or deal with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of advice to the assessee and it is the assessee, which has to act upon it. The assessees instead of following the guidelines given in that letter has chosen to pursue the appeal before the Tribunal, which the Tribunal was duty bound to decide. Despite this letter the assessee has chosen to pursue the appeal before the Tribunal. 17. Shri Sharma next submitted that the stand of the assessee is the same as was taken for the preceding two assessment years when the Tribunal had not accepted it. He referred to the Tribunal's order for the earlier two assessment years and the relevant paragraphs and relied upon its findings which were in favour of the Revenue. He next joined issue on the argument of Shri Ganesan that there were no surplus funds. He invited our attention to page 148, Schedule 'E', of the printed balance sheet of the assessee to show that the assessee was maintaining two separate types of accounts with banks, namely (i) balances with the Scheduled Banks in current accounts amounting to Rs. 13.12 crores; (ii) Short term deposits with Scheduled Banks amounting To Rs. 45 lakhs. He referred to a comparative statement at page 5 of the paper book of the Revenue showing surp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposits were out of funds given for constructional activity. He also stated that only with the surplus funds available, the assessee could advance loans to contractors and employees on which it received a substantial interest of Rs. 26.03 lakhs as per details on page 3 of the paper book of the Revenue. He also took pains to say that the funds of the assessee were not made up exclusively of borrowed funds but included income derived from consultancy services, miscellaneous income of Rs. 49 lakhs, hire charges of Rs. 35.65 lakhs and interest receipts of Rs. 26.03 lakhs from contractors and employees and all theses funds got intermixed with the capital provided and loan funds and it could not be said that the funds going into short term deposits were only the funds supplied by the Govt. for construction activity. He also claimed that maximum funds of the assessee remained atDELHIwhere there was no construction activity and again according to him large funds atDelhiwere surplus funds and because of such funds, loans could be given to the contractors and employees. He contended that it was not correct to say on the part of the assessee that surplus funds could only result from income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y by putting those funds in current account along with other funds lying there. Finally, he stated that borrowed funds, if at all, could be said to be a remote source of the funds put in short term deposits and the income from interest did not arise from the act of bowel of funds. In regard to the concept of surplus funds being put into banks, he referred to the ancillary object B 14 was not activated. It was pointed out that against the finding of the Tribunal on this point in its order for the preceding two assessment years, the assessee had moved a miscellaneous application in respect of which the order is at page 82 of the assessee's paper book. It was submitted that the Tribunal had overrule those objections and the clause has therefor to be considered to have been put in operation and further there is no material brought before this Bench to prove that the position in that regard has undergone a change of the assessment year under Appellate was also contended that the argument about the compliance with the requirements of the Companies Act, 1956 for activating this ancillary object by passing a special resolution before acting on it, is of no assistance as it is not a conclus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Other sources' and not "Business". He contended that the High Courts therefore had held that income from interest by the investment of surplus funds was from an independent source unconnected with the business to be set up and therefore it was to be taxed under the head 'Income from other sources.' He contended that the direct decision in favour of the Revenue was of the Karnataka High Court in Cap Steel Ltd.'s case. He finally submitted that the view taken by the Delhi High Court in the case of Indian Drugs Pharmaceuticals Ltd. if correctly read and understood, was in favour of the Revenue an also in consonance with the views of large number of other High Courts. He submitted that what the assessee's counsel called an other dictum in the decision of the Delhi High Court in Indian drugs Pharmaceuticals Ltd.'s case was a necessary finding of the High Court which could not be brushed aside by saying that that was not the issue before it. Regarding the ratio and dicta of a judgment, he cited the Madras High Court's decision in CIT v. Indian Express (Madurai) (P.) Ltd. [1983] 140 ITR 705. He finally submitted that observations of the Delhi High court in Indian drugs Pharmaceutica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interveners, Shri Sharma submitted that their arguments did not go further than those of Shri Ganesan about which he had already made his submissions. 22. Now we take up the submission of the other Departmental Representative Smt. Archana Ranjan in respect of accountancy principles and practice referred to by the assessee's counsel Shri Ganesan. She submitted that it was clear from a parcel of the two pamphlets filed by Shri Ganesan that no final accountancy practice in respect of the taxability of interest income by investing surplus funds in the construction phase of a business to be set up had been shown to exist. In this connection she invited our attention to paras 6 and 7 of the pamphlet ' International Accounting Standard-Capitalization of Borrowing Cost '. which mentioned the views held for and against capitalization of borrowing costs. So far as the other pamphlet issued by the Research Committee of the Institute of Chartered Accountants of India briefly called 'Guidance Note on Treatment of Expenditure During Construction Period 'is concerned she invited our attention para 8.2 quoted below stating clearly that the question relating to tax liability of income during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arn income from miscellaneous sources for example, share transfer fees, interest income, income from hire of equipment or assets and income from sale of products manufactured during the period of test runs and experimental production. It is recommended that such income should be set off against the related items of expenditure so that only the net amount of the expenditure is capitalize or treated as deferred revenue expenditure, as the case may be. In either case, consideration may have to be given to the question of providing for the income tax liability on such income." In regard to paragraph 11.4 of the same pamphlet-already quoted above-it was the argument of the learned Departmental Representative that this was merely in the nature of a suggestion and the question of treatment of income was to be governed by paragraph 15.2-reproduced earlier. It was further contended that accountancy principle or practice should be such which is finally established and such practice any commercial person should be able to understand easily and clearly. It was submitted that there was no such practice established by the assessee and consequently the assessee's repeated reliance on the Suprem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herein and dealt with the argument of the principle of accountancy raised before it on the basis of another pamphlet issued by India by the name "Study on Expenditure During Construction Period ". The High Court rejected the principle recommended by the Institute of chartered Accountants of India by observing that it could not be taken advantage of by the assessee since it appeared to be contrary to the statutory taxability of interest income and that under the Income Tax Act interest earned or interest income accrued to the assessee, whether out of borrowed money or out of one's own capital was liable to tax. Finally it was submitted that no accountancy principle could override the provisions of the Income tax Act and that to repel the assessee's arguments interest received from short-term deposits cannot be said to be of the same nature as expenditure incurred to bring an assets into existence. Reliance was placed on the Madras and Karnataka High Court's decisions in Seshasayee Paper Boards Ltd.'s case and Cap Steel Ltd.'s case which laid down that gross interest income without the deduction of interest paid on borrowed funds was liable to tax under the head 'Income from other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orities cited by both the sides and the interveners, we are inclined to uphold the stand of the revenue which is indeed supported by the views of several High Courts. Certain important questions that arise in this case are - (i) Whether the assessee had surplus funds which it invested in short term deposits to earn interest; (ii) Whether an independent source of income had come into being giving rise to interest income; and (iii) whether there is any well established accountancy practice in respect of treating the aforementioned interest income to be a capital receipt of the business to be set up, which was to be adjusted against the capital expenditure incurred, for the setting up of the business; and finally (iv) what is the true ratio of the binding authority of the Delhi High Court in Indian Drugs Pharmaceuticals Ltd.'s case. 26. Taking up first the issue about surplus funds, it is difficult to accept the contention of Shri Ganesan, the learned counsel for the assessee, that the assessee had no surplus funds as the amounts were sanctioned by the Govt. of India for capital outlay on the construction of four thermal power plants. The question of funds being surplus is not dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the scheduled banks and the short term deposits taken. In fact once the funds contributed by way of share capital or the loan granted by the Govt. of India reach the hands of the assessee they become the property of the assessee and the assessee is at liberty to utilize and hold those in the manner it liked prior to their being finally utilized for the main object of setting up of thermal power plants. The fact the funds were borrowed initially loses its importance when the issue to be considered is the manner in which these funds are utilized and the taxability of the income resulting therefrom. There are a number of authorities of the High Courts, which we will presently refer to show that in the case of a business yet to be set up, interest earned by placing surplus funds in short term deposits with the banks, arise from an independent source i.e. a source independent from the business to be set up. 28. We may now examine the authorities of the various High Court's. First we take up the Karnataka High court's decision in the case of Karnataka Forest Plantations Corpn. Ltd. The assessee-company had borrowed large amounts from the Govt. of Karnataka and banks for the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal took the view that as the business had not been started and the assessee was in pre-production stage, any earning of income should be viewed from the point of view of reduction in the commitments and that all interest payment incurred during the precommencement period, would go to increase the cost of construction and will have et be capitalized and, therefore, any interest earned during the period irrespective of whether it was out of own funds or borrowed funds, will have to be judged from the point of view of the total outlay in the construction and the setting up of the factory and as such it was justifiable for the assessee to claim set off of the entire interest as attributable to its project cost getting reduced. The Madras High Court, to which the matter was taken by the Commissioner of Income-tax negatived the finding of the Tribunal that interest receipts could not be assessed and the difference between the interest paid and the interest earned by the assessee on investment of share capital in call deposits could be assessed separately under the head "Other sources." Shri Ganesan had seriously objected to the decision of the High court due to a sentence in the last ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plea of accountancy practice in a direct manner after taking not of the safe guards contained in the supreme court judgment about accepting and applying and accountancy practice. It further impliedly upholds the separate assessment of interest income by the ITO. The decision of the Karnataka High court was admitted by the counsel Shri Ganesan to be against the assessee and so it is. 31. Next we come to the binding authority of Delhi High court in Indian Drugs Pharmaceuticals Ltd.'s case. We are unable to share the interpretation of that decision put forward on behalf of the assessee. Shri Ganesan relied on this authority to say that tall receipts during the construction period of a business to be set up would be on capital account and set off against the capital expenditure. He relied upon the observation of the Tribunal at page 137 to the effect that since the business was not fully set up, the receipts and payments would be clearly on capital account. The decision and the finding of the Tribunal cannot be rest party but as a whole. On page 138 the Tribunal had explained that there were receipts which were directly related to the capital structure of the business, being set u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies, which the counsel for the assessee and one of the interveners considered to be in favour of the assessee. The first one is State Trading Corpn. of India Ltd.'s Case. We do not consider this authority to be of any help to the assessee. That was a case of a grant-in-aid received for administrative expenses of State Trading Corporation of India Ltd., which if the business had already been set up and carried on, would have been of revenue receipt of such business. The High Court noticed that when the business was not set up, such a receipt could not be treated to be its business income and utilized t reduce the revenue expenditure of the company, considered by the ITO. This is not a case of the Kind which is before us. 34. The second authority of Delhi High Court which was cited by Shri O. P. Vaish and also relied upon by Shri Ganesan later on, is in the case of Snam Progetti S. P. A. Here also, it is clear from the facts of the case that it is not a case of construction period of a business to be set up like that of the assessee. In that case the Italian company had started carrying on business as engineers and contractors in the field of purloin and petrochemical plants and fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... offset such investment income against the associated borrowing costs in determining the capitalization rate. Apart from the fact that this International Accounting Standard becomes operative for financial statements covering the period after1-1-86the observation also does not authorize the set off of interest income towards the cost of construction. However, the actual cost of the assets installed as held by the Supreme Court in the case of Challapalli Sugars Ltd. 36. The other pamphlet entitled ' Guidance Note on Treatment of Expenditure During Construction Period' issued by the Institute of Chartered Accountants of India essentially deals with the treatment of various items of expenditure incurred during the period of construction. Extracts from this pamphlet have already been reproduced elsewhere in this order. In para 8.1 it is stated that the income during the construction period like interest income from temporary investment of surplus funds should be shown separately in the 'Incidental Expenditure during construction Period Account' and necessary provision for the tax liability should be made in the accounts. In para 11.4 it is suggested that income from sale of merchandi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income tax law. Interest on short term bank deposits is from an independent source not directly related to the construction work and therefore such an income cannot be taken out of the net of taxation. The 'Guidance Note' of theInstituteofChartered Accountantshas itself illustrated the issue by showing such incomes separately in the accounts and by deduction the provision of income tax while taking these to the Balance Sheet. As already discussed above the decisions of the Madras High Court in the case of Seshasayee Paper Boards Ltd.'s case and of the Karnataka High Court in the case of Cap Steels Ltd. have rejected the argument of the kind raised by Shri Ganesan. The Delhi High Court has also taken the same view while giving the illustration in the case of Indian Drugs Pharmaceuticals Ltd. vide page 139 of the law report. For the above reasons we are of the considered opinion the views expressed by the two earlier Special Benches would run contrary to the legal position emerging from the decisions of the High Courts referred to above. We, therefore, uphold the action of the lower authorities in taxing the interest income from short-term bank deposits. 39. However, we hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from other sources'. The Inspection Assistant Commissioner (Assessment) had restricted the claim to Rs. 1,11,96,268 by allowing depreciation in respect of the hired machinery which was actually put to uses in the previous year. It is the contention of the assessee that the Commissioner of Income tax (Appeals) should have allowed depreciation on all items of construction equipment as claimed by the assessee. Shri Ganesan the learned counsel of the assessee fairly pointed out that this issue had been decided consistently against the assessee by the Tribunal right from assessment year 1978-79. The decision for assessment year 1978-79 was of the Special Bench atDelhiand it is National Thermal Power Corpn. Ltd.'s case. Similarly the Tribunal's decision for the preceding two assessment years by an order dated 28 the Feb., 1984 and further order of the Tribunal on assessee's miscellaneous application dated31st December 1984are included in assessee's paper book. However, Shri Ganesan again urged that ground and contended that depreciation on machinery not actually put to use is allowable on the theory of passive user accepted by the courts. He once again cited Delhi High Court's decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r assessment as income from other sources. Shri Ganesan in his submission had explained that capital equipment which was hired was of such a nature that it was to aid the construction of power plant and would be useful for rendering help to the contractors and will not be required of running the power plant later on. In such a situation and on the facts as explained by Shri Ganesan, it is clear that depreciation could only be admissible in respect of plant and machinery / hired to the contractors and not in respect of plant and machinery not so hired. The theory of passive user applicable in the as of a person who carries on the business of hiring of plant and machinery will not hold good in the case of the assessee. Following the view taken by the Tribunal for the preceding three assessment years, we uphold the order of the authorities below on this point and reject the contention of the assessee. 44. Ground No. 5 of the assessee seeks to challenge the order of the Commissioner of Income-tax (Appeals) in sustaining the disallowance of an expense of Rs. 69,60,452 under the head ' Training and Recruitment Expenses' against the assessee's income from Management Fees. Shri Ganesan s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undertakes to provide whatever the information that may be required to determine the part of expenditure that is accordingly admissible. 47. Ground of appeal No. 6 in respect of disallowance of initial depreciation claim of Rs. 32,27,020 was not pressed by the assessee's learned counsel, Shri Ganesan. It is rejected. 48. Ground No. 7 challenges the order of the commissioner of Income-tax (Appeals) in upholding the action of Inspection Assistant Commissioner (Assessment) in bringing to tax miscellaneous income of Rs. 49,00,000 under the head 'Income from other sources'. According to the ground of appeal itself the amount was not tax able and the commission of Income - tax (Appeals) had erred in not treating the same as receipts on capital account going to reduce the capital cost of construction of the company's projects. Shri Ganesan, firstly referred to page 59 of his paper book, which has details of miscellaneous income of the financial year 1980-81. These details are reproduced below : NATIONAL THERMAL POWER CORPORATION LTD. Assessment year 1981-82 Details of miscellaneous income during the financial y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from any independent source of income, but were closely connected and inter-linked with the construction activity of setting up of the thermal power projects. These are in our view inextricably linked up with the process of construction of thermal power project. Consequently we accept the contention of the assessee by following the Delhi High Court Authority in the case of Indian Drugs Pharmaceuticals Ltd. and delete the income of Rs. 49,00,000 brought to tax under the head ' Income from other sources. 51. The remaining two grounds of appeal relate to the charging of interest under sections 139 and 217 of the Income tax Act. Shri Ganesan, at the outset, very fairly admitted that this was not a case of assessee denying liability to the charging of both the types of interest and as per the decision of the Supreme court in the case of Central Provinces Manganese Ore Co. Ltd. v. CIT [1986] 160 ITR 961, no appeal in such a situation would lie with the commissioner of Income-tax (Appeals). He in view of the Supreme Court's decision, did not press grounds of appeal Nos. 8 and 9 was clear that consequential relief will no doubt be available to the assessee when the income computed is r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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