TMI Blog2016 (1) TMI 461X X X X Extracts X X X X X X X X Extracts X X X X ..... s which are sought to be raised in the present case had been squarely covered by the decision of this Court in Indian Oil Panipat Power Consortium Limited (2009 (2) TMI 32 - DELHI HIGH COURT ). - Decided in favour of assessee - ITA No. 1011/2015 - - - Dated:- 7-1-2016 - MR BADAR DURREZ AHMED AND MR SANJEEV SACHDEVA, JJ For the Petitioner : Mr Zoheb Hossain for Mr Rohit Madan For the Respondent : None JUDGMENT BADAR DURREZ AHMED, J (ORAL) 1. This appeal under Section 260A of the Income Tax Act (hereinafter referred to as the said Act ) has been filed by the revenue being aggrieved by the order dated 10.06.2015 passed by the Income Tax Appellate Tribunal, New Delhi in ITA 4300/Del/2012 pertaining to the assessment year 2009-10. 2. The revenue has proposed the following questions which, according to the revenue, are substantial questions of law which need to be determined by this Court :- A. Whether the mode and manner of raising funds on which interest is earned, whether by way of loan or through share capital, is a material consideration in deciding the taxability of interest earned on such funds as income from other sources? B. Whether the ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce on the decision of a Division Bench of this Court in the case of Indian Oil Panipat Power Consortium Limited v. Income Tax Officer: 315 ITR 255. 7. After considering the submissions made on the part of the assessee and the material on record, the Commissioner of Income Tax (Appeals), by virtue of his order dated 14.05.2012, allowed the assessee s appeal and deleted the said addition. The relevant portion of the Commissioner of Income Tax (Appeals) s order reads as under:- 7.3 Decision I have considered the submission of the appellant and observation of the ASSESSING OFFICER. It is seen that appellant company was in the process of setting up a power project in Orissa. For that appellant had acquired land in F.Y. 2007-08 and spent ₹ 68.62 lacs on purchase of land etc. During the F.Y.2008-09, appellant company has taken money from share holders as additional share capital in October 2008 for the purpose of acquiring capital assets for setting of the power plant. The money so received was put in FDRs for a temporary period of 3 months till the orders for machinery were placed. In the month of December, appellant awarded contract to M/s Thyssan Krupp Industries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner (Appeals) accepted the stand of the assessee that the interest was in the nature of a capital receipt which was liable to be set off against pre-operative expenses. The Tribunal reversed this order. On appeal: Held , allowing the appeals that the funds in the form of share capital were infused for the specific purpose of acquiring land and the development of infrastructure. Therefore the interest earned on funds primarily brought for infusion in the business could not be classified as Income from the other sources . Since the income was earned in a period prior to commencement of business it was in the nature of a capital receipt and was required to be set off against pre-operative expenses. Tuticorin Alkali Chemicals and Fertilizers Ltd. vs CITI19971 227 ITR 172(SC) distinguished. The facts of the case laws relied upon by the ASSESSING OFFICER were different, therefore, the same are not applicable to the case of the appellant. The additional share capital raised by the appellant was linked with acquisition of capital assets, therefore, interest received from such capital is capital receipt and same can be adjusted against preoperative expenses. Therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the revenue, we are of the view that no substantial question of law arises for our consideration. This is so because, in our view, the Tribunal has correctly placed reliance on the decision of this Court in Indian Oil Panipat Power Consortium Limited (supra). The facts in that case were quite similar. In that case also monies had been received as share capital by the assessee which were temporarily put in fixed deposits awaiting acquisition of land which had run into legal entanglements on account of title. The question of law which was raised before the Division Bench was: Whether the Tribunal misdirected itself in law in holding that interest which accrued on funds deployed with the bank could be taxed as income from other sources and not as capital receipt liable to be set of against pre-operative expenses? The Division Bench considered the decisions of the Supreme Court in Tuticorin Alkali Chemicals and Fertilizers Ltd (supra) and CIT v. Bokaro Steel Limited: (1999) 236 ITR 315. The Division Bench held as under:- 5. In our opinion the Tribunal has misconstrued the ratio of the judgment of the Supreme Court in the case of Tuticorin Alkali Chemicals (supra) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were primarily infused to purchase land and to develop infrastructure then it cannot be held that the income derived by parking the funds temporarily with Tokyo Mitsubishi Bank, will result in the character of the funds being changed, in as much as, the interest earned from the bank would have a hue different than that of business and be brought to tax under the head income from other sources . It is well-settled that an income received by the assessee can be taxed under the head income from other sources only if it does not fall under any other head of income as provided in Section 14 of the Act. The head income from other sources is a residuary head of income. See S.G. Mercantile Corporation P. Ltd vs CIT, Calcutta; (1972) 83 ITR 700 (SC) and CIT vs Govinda Choudhury Sons.; (1993) 203 ITR 881 (SC). 5.2 It is clear upon a perusal of the facts as found by the authorities below that the funds in the form of share capital were infused for a specific purpose of acquiring land and the development of infrastructure. Therefore, the interest earned on funds primarily brought for infusion in the business could not have been classified as income from other sources. Since the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the Tribunal s decision because the Supreme Court in Tuticorin Alkali Chemicals and Fertilizers Ltd (supra) had clearly stated that whether the funds are raised by issue of shares and debentures or through borrowing would not make any difference to the principles set out thereunder. The principle being that if the capital of a company is fruitfully utilised instead of keeping it idle, the income thus generated, will be of a revenue nature and not accretion of capital. 13. In the present case, there is a finding of fact that the money placed in the fixed deposit was inextricably linked with the setting up of the power plant. Thus, the revenue generated on account of interest on the said fixed deposits would be in the nature of a capital receipt and not a revenue receipt. This case has been decided on the basis of this principle and not on the basis that the source of the funds was through raising of share capital and not through borrowings. 14. For the foregoing reasons, we do not find that there is any substantial question of law which arises for our consideration and the very issues which are sought to be raised in the present case had been squarely covered by the decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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