TMI Blog2018 (2) TMI 425X X X X Extracts X X X X X X X X Extracts X X X X ..... nd since such utilization was directly linked with the activity of construction of Mall-cum-Shopping Complex, which formed the capital structure of the assessee-company, the interest earned on investment was viewed as capital receipts, which was going to reduce the cost of construction - if the said interest income was to be held as liable to tax in the hands of the assessee under the head “income from other sources”, the assessee was entitled for deduction on account of interest paid to Allahabad Bank on the borrowed funds under section 57(iii) as held in the case of Karnal Cooperative Sugar Mills Limited (supra) and such interest payment being more than the interest earned in both the years under consideration, no addition was liable to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s from its investments and is its income and is clearly taxable even though the interest amount is earned by utilizing borrowed capital in the judgment of Tuticorin Alkali Chemicals vs.- CIT (1997) 141 CTR (SC) 387 . 3. The assessee in the present case is a Company. It had obtained huge Term Loan from Allahabad Bank for construction of a Mall-cum-Shopping Complex. During the years under consideration, a portion of the said loan was invested by the assessee for earning interest and after adjusting the interest so earned against the amount of interest paid to Allahabad Bank on the Term Loan, the net interest paid was transferred to capital work in-progress. According to the Assessing Officer, the interest income earned by the assessee o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee, the facts of the case and the case laws relied upon, the ld. CIT(Appeals) deleted the addition made by the Assessing Officer on account of interest income in both the years under consideration for the following reasons given in his impugned order, which are identical in both the years under consideration except the amounts:- A.Y. 2010-11 I have gone through the A.Os finding, documents on record and written submissions and case laws cited by the appellant. It was found from perusal of documents that during the relevant assessment year 2010-11 under consideration that the appellant company had paid interest to Allahabad Bank of ₹ 2,81,40,502/- after adjusting interest income of Rs.l,57,93,739/-, the balance of ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... source of income not concerned with the construction activities or business activities of the assessee, the same cannot be said in the present case where the utilization of various assets of the company and the payments received for such utilization are directly linked with the activity of setting up the steel plant of the assessee. These receipts are inextricably linked with the setting up of the capital structure of the assessee company. They must, therefore, be viewed as capital receipts going to reduce the cost of construction . On careful consideration of the totality of the facts and circumstances of the appellant's case, the facts of the appellant's are found to be covered by issue of the decision of the of Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciding the issue on taxability of interest: income on short term bank deposits in the case of Bokaro Steel Ltd. 236 ITR 315(SC)(Supra), the Hon'ble Supreme Court has considered and distinguishes its earlier judgement !1 the case of Tuticron Alkali Chemicals Fertilizers Ltd.. vs. CIT in 141 CTR 387(SC) which was relied upon by the A.O The Hon'ble Supreme Court has observed in para-7 of the said judgement that The company may also, as in that case, keep the surplus funds in short term deposits in order to earn interest. Such interest will be chargeable under section 56 of the Act. This court also emphasized the fact that the company was not bound to utilise the interest so earned to adjust it against the interest paid on borrowed c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eferred these appeals before the Tribunal. 6. We have heard the arguments of both the sides and also perused the relevant material available on record. Although the ld. D.R. has relied on the decision of the Hon ble Supreme Court in the case of Tuticorin Alkali Chemicals Fertilizer Limited (supra) in support of the Revenue s case on the issue under consideration, we find that this issue is squarely covered in favour of the assessee by the decisions of the Hon ble Supreme Court in the cases of Bokaro Steel Limited (supra) and Karnal Cooperative Sugar Mills Limited (supra) as rightly held by the ld. CIT(Appeals). The relevant facts involved in the case of the assessee clearly show that the investment out of funds borrowed from Bank was t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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