TMI Blog2012 (1) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... the interest income & interest expense, both were on capital account. This is not a case of surplus funds, which were available and investment were made in fixed deposits to earn interest. The interest paid to the power procurement utilities on commitment advances was capitalized. Interest paid and interest received were inextricably linked and have a commonality about their nature and character. They cannot be treated differently. - Decided against the Revenue - ITA 10/2012 - - - Dated:- 6-1-2012 - MR. JUSTICE SANJIV KHANNA, MR. JUSTICE R.V. EASWAR, JJ. For Appellant: Mr. Sanjeev Rajpal, sr. standing counsel SANJIV KHANNA, J: (ORAL) The Revenue by present appeal under Section 260A of the Income Tax Act (Act, for short) i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding process was to be incurred by PFC. As noted above, the expenditure of Rs.1,35,81,234/- paid by the respondent-assessee to PFC as document development expenses is not in debate and in appeal before us. 7. To get better and favourable bids i.e. to enable the bidders to quote lower tariff, it was decided that land for the power project and coal mines were required to be acquired. This would minimize the risk associated. In the meeting held on 11.10.2009 by a Secretary (Power) with Member Secretaries of various States, it was decided that the States concerned would provide funds to the SPV as Commitment Advance. This would enable the SPV to leverage these funds to borrow and pay for land acquisition etc. 8. The respondent-assessee rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of India Ltd. Vs. Commissioner of Income Tax (1991) 187 ITR 688 (SC), National Thermal Power Co. Ltd. Vs. Commissioner of Income Tax (1998) 229 ITR 383 (SC). Reference was also made to judgment of the Delhi High Court in CIT Vs. Jai Parabolic Springs Ltd. (2008) 306 ITR 42 (Delhi). The respondent-assessee was allowed to raise the contention that the interest received by the respondent-assessee from PFC was capital in nature and not Revenue in nature. The Commissioner of Income Tax (Appeals) examined the nature and character of the interest received from PFC and after referring to decision of this Court in Indian Oil Panipat Power Consortium, New Delhi Vs. ITO (2009) 315 ITR 255 (Del.) held that the interest income was capital in nature and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set up, the receipts were capital in nature, and therefore, the receipts did not constitute income liable to tax. 9. Further, attention has been drawn to Schedule VII of the Balance Sheet of the assessee, a copy whereof has been placed on record. Para. 5 of the said Schedule VIII, i.e., Notes on Account states as follows: Pursuant to an agreement between PFC and Sasan Power Ltd., the entire expenditure on Development Project shall be incurred by PFC from its own funds until receipt of the Commitment Advance from the Power Utility Commitment Advance received from utility has been given to the holding Company for incurring expenditure for the Project on behalf of the company and for investment of Unutilized Portion of Advance on the Unu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he monthly average short term deposit rate of PFC. The assessee was to pay interest to PFC on the expenditure incurred by it, out of its own funds, when the expenditure was incurred out of the Commitment Advance. The AO treated both, the receipt, as well as the expenditure, as capital in nature. The Interest income had been inadvertently shown by the assessee as income from other sources and deduction was claimed u/s 57 of the Act concerning the interest payment. 11. In Indian Oil Panipat Power Consortium Ltd.‟ (supra), it has been held that where interest is on money received as share capital, which is temporarily placed in fixed deposit awaiting acquisition of land, the Claim that the interest is in the nature of a capital receip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have specifically held that the interest income was on capital account. We have gone through the grounds of appeal and do not find any reason or justification to upset the said finding. The factual findings recorded by the CIT(Appeals) and tribunal are not under challenge. The CIT(Appeals) and the tribunal have held that in view of the factual position quoted above the decision of the Supreme Court in CIT Vs. Bokaro Steel Ltd., (1999) 236 ITR 315 (SC) was applicable as the Commitment Advance, which had been paid to PFC. This is not a case of surplus funds, which were available and investment were made in fixed deposits to earn interest. The interest paid to the power procurement utilities on commitment advances was capitalized. Interest pai ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
