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2015 (7) TMI 115 - ITAT DELHI

2015 (7) TMI 115 - ITAT DELHI - TMI - Addition on account of interest income - revenue v/s capital receipt - diversion of interest at source - Held that:- The interest earned on FDR before commencement of project was to be treated as capital receipt to be adjusted preoperative expenses, since it had a direct link with setting up power project. The interest was not assessable as income from other sources. Section 4 and Section 56 of the Income Tax Act, 1961. We also find that similar decision was .....

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t that was of the Govt. of Gujrat, and therefore, it cannot be taxed in the hands of the assessee. we find considerable cogency in the submissions and the case laws relied upon by the Ld. Counsel of the assessee, therefore, we are of the view that the interest received on FDRs of ₹ 5,91,850/- in the present case is not to be taxed as income from other sources in the hands of the assessee company, hence, we delete the addition made by the AO and confirmed by the Ld. CIT(A) - Decided in fav .....

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ency in the finding of the Ld. CIT(A) wherein he has observed that the addition made by the AO uls 68 of IT Act is correct on account of unproved purchases and subsequent unproved sales thereby leading to unexplained cash credit u/s 68 of IT Act, 1961 at ₹ 49,28,006/-. Keeping in view of the aforesaid facts and circumstances of the case as explained above, in our considered opinion, the Ld. CIT(A) has passed a well reasoned on the issue in dispute - Decided against assessee. - I.T.A. No. 5 .....

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7; 5,91,850/- on account of interest income which was treated as capital receipt by the appellant. 2. That the CIT(A) erred on facts and in law in confirming the addition of ₹ 49,28,006/- on account of sale consideration of the appellant treated as unexplained income under section 68. The appellant craves leave to add, alter, amend or vary from the above grounds of appeal at or before the time of hearing. 3. The brief facts of the case are that the assessee company is engaged in the busine .....

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29.12.2011. 4. Aggrieved with the aforesaid assessment order dated 29.12.2011, assessee appealed before the Ld. CIT(A), who vide impugned order dated 12.8.2013 has confirmed the additions made by the AO by partly allowing the appeal of the assessee vide his order dated 12.8.2013. 5. Against the order of the Ld. CIT(A) dated 12.8.2013 assessee now appealed before the Tribunal. 6. Ld. Counsel of the assessee submitted that AO while completing the assessment treated ₹ 5,91,850/- as income fro .....

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ny purpose. The interest earned shall be indicated in the UC which can either be adjusted in next release or to be refunded to Govt. Of India after in aid sanctioned is utilized. And in view of this clause the Central Govt. released a grant of ₹ 12,91,45,365/- only as against ₹ 14.36 crores which was eligible as the 2nd installment. The assessee also in the balance sheet for FY 2011-12 has reflected the interest earned on grant as capital reserves. Thus, he pleaded that the interest .....

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91,850/- in the present case is not to be taxed as income from other sources in the hands of the assessee company. To substantiate its claim the Ld. Counsel of the assessee relied upon the decision of the Hon ble Delhi High Court in the case Indian Oil Panipat Power Consortium Ltd. Vs. ITO 315 ITR 225 and Gujrat High Court decision in the case of Gujrat Power Corporation Ltd. 354 ITR 201. Ld. Counsel of the assessee further submitted that the case law relied upon by the Ld. CIT(A) of the Hon ble .....

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he books of account has not been rejected by the AO. He further submitted that disregarding the confirmation from the creditor, assessment was shown as completed on 29.12.2011 being antedated which is evident from the fact that the AO has written a line in the assessment order that till the time of conclusion of the instant proceeding no confirmation was filed. Therefore, he submitted that the purchases are duly substantiated, as all the payments have been made to the creditor through the accoun .....

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ount of interest income which was treated as capital receipt by the assessee. As per the P&L A/c, the assessee had earned interest income of ₹ 5,91,850/- on FDR with banks, though simultaneously, the assessee had debited the P&L A/c with a sum of ₹ 47,21,002/- and after setting off such expenditure against interest income, a loss of ₹ 41,29,152/- was capitalised under the Head "Preoperative Expenses', In fact, according to the AO, the assessee has parked the su .....

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m Other Sources', inter alia, includes 'interest on bank deposits . We find that the Ld. CIT(A) in his impugned order has referred the judgment of the Hon'ble Supreme Court of India in CIT Vs. Dr. V Gopinathan (2001) 248 ITR 449 (SC), wherein it has been held that interest received by the asseesee from the bank on a fixed deposit is income in his hands and there could be no deduction therefrom unless there is a law permitting such deduction. Ld. CIT(A) again referred a similar judgme .....

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money received as share capital by the assesssee by temporarily placing the money In a fixed deposit awaiting acquisition of lands, which had run into legal entanglements on account of title decision of Supreme Court in Tuticorin Alkali Chemicals and Fertilizers limited (1997) 227 ITR 172 (SC) is not applicable, in that case on the basis of facts of the case that funds so infused as share capital were inextricably linked with tile setting up the plant-and hence interest earned by the assessee co .....

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There are specific rules of deduction and allowance under each head. No deduction or adjustment on account of any expenditure can be made except as provided by the Act. It was further held in this case that interest income is always of a revenue nature, unless it is received by way of damages or compensation. If a person borrows money for business purposes but utilises that money to earn interest, howsoever, temporarily, the interest so generated will be his income. Merely because it was utilize .....

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ops Development Corporation Ltd. (1996) 221 ITR 392 (Gau), that section 56 envisages that income of every kind which is not to be excluded from total income under the Act, shall be chargeable to Income Tax, if it is not chargeable under any of the heads in section 14. The interest so earned on share capital funds on short term FDs undoubtedly fell in the category of 'Income from Other Sources'. We note that Ld. CIT(A) has observed that in view the fact that the Hon ble Apex Court In Tuti .....

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business is 'Income from Other Sources'. In other words, interest income in respect of surplus money, not immediately required for business and deposited, in bank, as idle money for safe, keeping or otherwise, would be assessable as Income from Other Sources Further, if the income from interest is from a fund or grant, which has been brought as surplus capital. It would still be assessable as 'Income from Other Sources. Even, the funds received from Central Govt. and required to be .....

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. Ld. CIT(A) confirmed the addition made by the AO. 8.1 We find considerable cogency in the assessee s submissions that assessee was sanctioned a total grant of ₹ 43.07 crores which was to be paid in staggered manner. We also find that as per point no. 2 (xviii) at page 28 of the Disbursement letter it was mentioned that the SPV shall not utilize the interest earned on grant so released to it for any purpose. The interest earned shall be indicated in the UC which can either be adjusted in .....

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rather it was to be refunded to the Central Govt. or to be adjusted against the future grant. Ld. Counsel of the assessee further submitted that it is of capital nature. He further submitted that the AO while passing the assessment order of the AY 2011-012 and the 2012-13 has also not treated the interest earned on FD as income of the assessee. 8.2 We also find that Ld. Counsel has relied upon the decision of the Hon ble Delhi High Court in the case of Indian Oil Panipat Power Consortium Ltd. vs .....

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t to be adjusted preoperative expenses, since it had a direct link with setting up power project. The interest was not assessable as income from other sources. Section 4 and Section 56 of the Income Tax Act, 1961. We also find that similar decision was also relied upon by the assessee s counsel of the Hon ble Gujrat High Court in the case of Gujrat Corporation Ltd. 354 ITR 201, wherein it was held that the assessee corporation was promoted by Government for augmenting power supply. The share cap .....

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Fertilizers Ltd. vs. CIT 227 ITR 172 (SC) has been distinguished in the above said case of the Hon ble Delhi High Court. 8.3 In the background of the aforesaid discussions and precedents, we find considerable cogency in the submissions and the case laws relied upon by the Ld. Counsel of the assessee, therefore, we are of the view that the interest received on FDR s of ₹ 5,91,850/- in the present case is not to be taxed as income from other sources in the hands of the assessee company, henc .....

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ceedings, it was found by him that assessee had shown sales and purchases of an equivalent amount i.e. ₹ 49,28,006/- though the assessee claimed to be in the business of setting up infrastructure projects, as a part of Central Government Scheme, on PPP Basis. Therefore, the AO was of the view that though the purchases were stated to have been effected from one party i.e. M/s Shyam Lal Goyal Textiles (Pvt.) Ltd, over the period May-July, of F.Y. 2008-09, but the same was sold through 33 dif .....

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Moreover. There was no description of the quality or the make of the fabric, on the face of the bills. Even there were no details of cartage or transportation of consignment. We further find that AO has given the following finding that since: (i) the names and addresses in respect of all the 33 sales invoices were not made available, thus stone walling any efforts at verification of such transactions. (ii) the entire sale being in cash, also has not been explained and it is too much of a coinci .....

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e of cloths remained unproved and that the evidence in the form of sales bills etc were in the nature of "in house" evidence, manufactured for the purpose of generating cash for purchase of land in Madhya Pradesh and therefore, by invoking the provisions of Section 68 of IT Act that the transactions of sale as credited in the books of account of the assessee of ₹ 49,28,006/- remained unexplained, added the same to the total income of the assessee u/s 68 of l.T. Act, 1961. On the .....

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In that even tile purchase transaction was unproved is baseless. The assessee cited the case law of ITO Vs T&T Metals Pvt Ltd delivered on 29th June, 2012 by Kolkata Bench of ITAT and stated that if assuming that there is no sales, the entire amount of purchases would have remained in the closing stock as purchase was never disputed in the instant case. 9.1 As compared to the case law cited by the assessee as above, Ld. CIT(A) has observed that where only sales remain unproved, according to .....

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