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2011 (2) TMI 1520 - DELHI HIGH COURT

2011 (2) TMI 1520 - DELHI HIGH COURT - TMI - ITA No.290 of 2011 & ITA No.292 of 2011 - Dated:- 17-2-2011 - HON'BLE MR. JUSTICE A.K. SIKRI AND HON'BLE MR. JUSTICE M.L. MEHTA For the Appellant : Mr. M.P. Sharma, Sr. Standing Counsel. For the Respondent : Mr. C.S. Aggarwal, Sr. Advocate with Mr. Prakash Kumar, Advocate. ORDER A.K. SIKRI, J. (ORAL) 1. CM Nos. 2744/2011, 2747/2011 (Exemption) Exemption is allowed subject to just exception. These applications stand disposed of. 2. ITA Nos.292/ .....

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; 70 crores in the assessment year 2000-01 and ₹ 40 crores in the assessment 2001-02 as share capital money. The shares were yet to be allowed. Since the business was in the process of being set up in these assessment years, in respect of which appeals are filed are A.Y. 2001-02, 2002-03 and 2003-04. These funds are lying with the bank on which the interest was received. The assessee had also pledged 25 lacs with the Indian Overseas Bank against bank guarantee issued FDR and some interest .....

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s of the Assessing Officer and CIT (A) by a common decision dated 31st March, 2010 passed in respect of all these three assessment years holding that the said interest, in the facts and circumstances of these cases, shall be treated as capital receipt not exigible to tax under the head "income from other sources". As pointed out above, the assessee had not started its business and was in the process of setting up of the business in these years. Thus, there was no income otherwise which .....

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be utilized for the purpose of purchasing requisite plant and machinery. This application money was thus to be utilized for the purchase of capital assets. This fact is specially taken note and discussed in para 9 of the impugned order, inter alia observing as under:- "the learned counsel for the assessee has then drawn attention to page 91 (back) of the APB, i.e., the assesee's Annual Report for assessment Year 2000-01. Item © at this page is "EPC Contract". It states th .....

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. Ms/ IHI is one of the most reputed construction companies in the field of LNG regasification terminals; that the project implementation activities gathered momentum with the award of the EPCC contract; that the major portion of the Basic Engineering Package had already been completed; that the site offices for IHI Consortium and Tank Civil Contractor had already been completed; that the site grading for the wro tanks had also been completed; that the piling work for the LNG tanks was in progre .....

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ted the interest income. 4. On the aforesaid facts, the Tribunal arrived at a finding that the interest earned on the aforesaid amount was not inextricably linked for the setting up of the project. On these facts being established, the Tribunal applied the ratio of the judgment of this Court in the case of Indian Oil Panipat Power Consortium Ltd. Vs. ITO, 315 ITR 254 as well as the Commissioner of Income Tax Vs. Panem Coal Mines Ltd. ( ITA No. 639/2008 decided on 17th September, 2009). 5. In the .....

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in the case of Bokaro Steel Ltd., 236 ITR 315 wherein the Court laid down the aforesaid test in the following manner:- "The test, therefore, to our mind is whether the activity which is taken up for setting up of the business and the funds which are garnered are inextricably connected to the setting up of the plant. The clue is perhaps available in Section 3 of the Act which states that for newly set up business the previous year shall be the period beginning with the date of setting up of .....

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