TMI Blog2018 (8) TMI 1542X X X X Extracts X X X X X X X X Extracts X X X X ..... y Ld CIT(A) on this issue and restore the order passed by the AO on this issue. Interest income assessed by the AO as income from other sources - Held that:- We notice that the Ld CIT(A) has examined the submissions made by the assessee that the fixed deposits have been kept with ICICI Bank in connection with the L/C facility availed by the assessee for import of DG sets for the corporate office constructed by the assessee. The assessee has furnished relevant documents before the Ld CIT(A). It is an admitted fact that the expenditure incurred in construction of corporate office has been shown as work in progress. The interest paid on loan taken for the purpose of construction of corporate officer has also been capitalized under the head “Capital Work in Progress”. The assessee has imported DG sets from Singapore for the use of corporate office only. The assessee has made the fixed deposits out of loan funds with ICICI Bank for availing L/C facility for importing the DG sets only. Under these set of facts, there is link between the fixed deposits and the Corporate office constructed by the assessee. Hence the decision rendered in the case of Karnal Co-operative Sugar Mills Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2010-11. In the return of income, the assessee sought set off of brought forward losses of AY 2010-11 to the extent of ₹ 61, 39, 706/-. The AO took the view that the assessee was not entitled to claim set off of brought forward losses, since the provisions of sec. 79 prohibits such a set off when there was a change in shareholding exceeding 49%. The provisions of sec. 70 read as under:- Sec 79 . Carry forward and set off of losses in the case of certain companies Notwithstanding anything contained in this Chapter, where a change in shareholding has taken place in a previous year in the case of a company, not being a company in which the public are substantially interested, no loss incurred in any year prior to the previous year shall be carried forward and set off against the income of the previous year unless- ( a) on the last day of the previous year the shares of the company carrying not less than fifty- one per cent of the voting power were beneficially held by persons who beneficially held shares of the company carrying not less than fifty- one per cent of the voting power on the last day of the year or years in which the loss was incurred . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petition:- Sec 79 . Carry forward and set off of losses in the case of certain companies Notwithstanding anything contained in this Chapter, where a change in shareholding has taken place in a previous year in the case of a company, not being a company in which the public are substantially interested, no loss incurred in any year prior to the previous year shall be carried forward and set off against the income of the previous year unless 4 ( a) on the last day of the previous year the shares of the company carrying not less than fifty- one per cent of the voting power were beneficially held by persons who beneficially held shares of the company carrying not less than fifty- one per cent of the voting power on the last day of the year or years in which the loss was incurred ] Provided that nothing contained in this section shall apply to a case where a change in the said voting power takes place in a previous year consequent upon the death of a shareholder or on account of transfer of shares by way of gift to any relative of the shareholder making such gift . 9. We have carefully perused the provisions of sec. 79 of the Act, more particu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which public are substantially interested). 12. Viewed from the object of introducing the provisions of sec. 79 of the Act, we may notice that the status of company at the time when the change in shareholding pattern takes place is relevant to determine the applicability of provisions of sec. 79 of the Act, i. e. , whether it is a closely held company or widely held company at the time when the change in shareholding pattern takes place. If it is a closely held company at that point of time, then the provisions of sec 79 would apply and if it is a widely held company at that point of time, the provisions of sec. 79 will not apply. Hence the status of the company after the change in shareholding pattern is not relevant, i. e. , even if the company becomes a widely held company, i. e. , a company in which public are substantially interested, after the change in shareholding, even then the provisions of sec. 79 would apply, if it was a closely held company at the time when change in shareholding takes place. 13. In the instant case, the assessee company was a closely held company at the time when the change in shareholding took place. It has become widely held company after th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank as Fixed Deposit for availing Letter of Credit facility for importing DG sets for the new building constructed by the assessee. Accordingly it was submitted that the interest income should be reduced from Capital work in progress as per the decision rendered by Hon ble Supreme Court in the case of Karnal Cooperative Sugar Mills Ltd (243 ITR 2) and Bokaro Steels Ltd (236 ITR 315). 17. The Ld CIT(A) was convinced with the contentions of the assessee and accordingly directed the AO to delete the addition of interest income of ₹ 4, 74, 658/-. The revenue is aggrieved by the decision of Ld CIT(A). 18. We heard rival contentions on this issue and perused the record. We notice that the Ld CIT(A) has examined the submissions made by the assessee that the fixed deposits have been kept with ICICI Bank in connection with the L/C facility availed by the assessee for import of DG sets for the corporate office constructed by the assessee. The assessee has furnished relevant documents before the Ld CIT(A). It is an admitted fact that the expenditure incurred in construction of corporate office has been shown as work in progress. The interest paid on loan taken for the purpose of c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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