TMI Blog2016 (8) TMI 1227X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be said to be linked to the business of the assessee and further that there was no restriction on the usage of interest earned for the purpose of setting up of projects only, therefore, the interest earned could not be said to be capital in nature. We find that the Delhi High Court in the case of Indian Oil Panipat (2009 (2) TMI 32 - DELHI HIGH COURT ),while holding preoperative period interest earned to be capital in nature, had distinguished the apex court decision in Tuticorin Alkali (1997 (7) TMI 4 - SUPREME Court) stating that that the nature of the funds whether surplus or specific purpose, was the determinative factor of the nature of interest earned thereon and went on to distinguish the apex court decision by stating that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and upheld is absolutely illegal and not sustainable in the eyes of law. 2. That no penalty could have been imposed as no income whatsoever had accured to the appellant as the same was in the construction phase and as such much less is the question of any concealment of income or filing of inaccurate particulars in respect of the same. 3. That the order of the Ld Commissioner of Income Tax (Appeals) is bad in law and facts. 3. The brief facts of the case are that the assessee is a Government Company incorporated in December, 2006 under the Companies Act, 1956, to plan, promote and organize the development of all aspects of hydroelectric power in the State of Himachal Pradesh on behalf of the Government of Himachal Prade ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, therefore, levied penalty on the addition made. 6. The matter was carried in appeal before the learned CIT (Appeals), where the assessee made detailed submissions reproduced at para 4 of the CIT (Appeals) order. The gist of the submissions was that the assessee had deposited its specific purpose funds in short term deposits to meet its urgent work requirements, and therefore interest earned thereon had been set off against pre-operative expenses being inextricably linked with the setting up of its projects. Also the assessee had prepared its financials in compliance with the Accounting Standards issued by the Institute of Chartered Accountants of India and as per the Guidance Note on expenditure incurred during pre-construction period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ering the above facts coupled with the fact that the accounts are audited, the appellant has the help of professionals, the income earned is on surplus funds which is and was squarely covered with the judgment of the Hon'ble Supreme Court in the case of M/s Tuticorin Alkali Chemicals available to the assessee on the date of filing of return chose not the offer the same for tax is clearly an act of furnishing inaccurate particulars. This is more so in view of the order of my learned predecessor referred supra which brought out that the appellant ha made special deliberations to find ways to adopt window dressing and avoid payment of due taxes. The appellant paid the advance taxes on the interest income but choose not to include it in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). Ld.DR further relied upon the order of the Ld.CIT(A). 12. We have heard the rival contentions and perused the orders of the authorities below. 13. In the present case, we find that penalty under section 271(1)(c) of the Act has been levied for the addition made on account of interest income earned on deposits made from funds available during preoperative period of the assessee. 14. Undisputedly development of Hydro electric power projects, in the State of Himachal Pradesh, was the business of the assessee and the impugned funds, on which it had earned interest, had been received from the Delhi Jal Board for implementing the Renuka Dam Project and from the State Government of Himachal Pradesh as share capital for construction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rces. Undisputedly, the funds in the present case were given for setting up projects and on account of delay in starting the projects, the funds were invested in short term deposits. The assessee was of the belief that the funds were inextricably linked to the setting up of business of the assessee and therefore the interest earned thereon was a capital receipt. The claim of the assessee was denied for the reason that since no business had commenced the income could not be said to be linked to the business of the assessee and further that there was no restriction on the usage of interest earned for the purpose of setting up of projects only, therefore, the interest earned could not be said to be capital in nature. It was held that the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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