TMI Blog2019 (2) TMI 1460X X X X Extracts X X X X X X X X Extracts X X X X ..... .R. KUMAR, A.M: The present appeal has been filed by the Assessee against the order of the Ld. CIT(A), Patiala dt. 28/03/2018. 2. In the present appeal Assessee has raised the following grounds: 1. The order of the Worthy Commissioner of Income Tax (Appeals), Patiala is against the law, facts, circumstances, natural justice, equity, bad in law and all other known principles of law. 2. The Worthy Commissioner of Income Tax (Appeals), Patiala is not justified in sustaining the addition of Rs, 3,91,497/- made on account of Interest on Income Tax Refund under the head Income from other Sources as the assessment has been framed by applying a net profit @ 7% on the Gross receipt of the assessee. 3. The brief facts taken from the order of the Ld. CIT(A) is that the assessee is a partnership firm and filed its return declaring Income of ₹ 48,90,510/- The case was selected was scrutiny and assessed u/s 143 (3) by applying the flat rate of @ 7% and the Assessing Officer also made an addition of ₹ 6,45,921/- on account of Interest from FDR, ₹ 3,91,497/- on account of Interest from Income Tax Refund and ₹ 1621/- on account of rebate and discount s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on plant let out to the contractors and received royalty on stones removed from its land. In that factual backdrop, their Lordships referred to the decision in Tuticorin Alkali Chemicals Fertilizers Ltd. (supra) and analysed the facts and came to opine thus (page 322) : That case dealt with the question whether investment of borrowed funds prior to commencement of business, resulting in earning of interest by the assessee would amount to the assessee earning any income. This court held that if a person borrows money for business purposes, but utilises that money to earn interest, however temporarily, the interest so generated will be his income. This income can be utilised by the assessee whichever way he likes. Merely because he utilised it to repay the interest on the loan taken, will not make the interest income as a capital receipt. The Department relied upon the observations made in that judgment (at page 179) to the effect that 'if the company, even before it commences business, invests surplus funds in its hands for purchase of land or house property and later sells it at profit, the gain made by the company will be assessable under the head Capital gains . Simi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 (SO. 16. In Bongaigaon Refinary Petrochemicals Ltd. v. CTT[2001] 251 ITR 329/119 Taxman 488 (SC), the question that arose for consideration was whether the Tribunal was justified in holding that the items of income derived by the assessee during the formation period for the main business were not taxable income but were to be adjusted against the project cost for the oil refinery and petrochemicals, the main business for which the company was set up. It is worth noting that the High Court had answered the issue in negative relying on the decision in Tuticorin Alkali Chemicals Fertilizers Ltd. (supra). In that context, their Lordships opined thus (page 330): 'That was a case in which the question related to interest earned by a company during its formative period by investments. This court has held in CIT v. Bokaro Steel Ltd. 119991236 ITR 315 (SCI that it is so confined and did not apply where the receipts were directly connected with or were incidental to the work of construction of the assessee's plant. The decision in CIT v. Bokaro Steel Ltd.119991 236 ITR 315 (SC) has been followed by a two-judge Bench of this court in CIT v. Karnal Co-operative Sugar M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 292 TTR 504/ 159 Taxman 24 (Delhi), following the law in Tuticorin Alkali Chemicals Fertilizers Ltd. (supra), it was held that where the authorities below concurrently took the view that the assessee had not carried on any business during the relevant assessment year and that the interest earned by the assessee on surplus funds deposited with different companies was taxable as income from other sources, the view taken could not be faulted with. 19. In Indian Oil Pan/pat Power Consortium Ltd. v. TTO[2009] 315 TTR 255/ 181 Taxman 249 (Delhi), this court had posed the question regarding the treatment which was to be accorded to the interest earned on monies received as share capital by the assessee which were temporarily put in a fixed deposit awaiting acquisition of land which had run into legal entanglements on account of title. The Assessing Officer and the Commissioner of Income-tax (Appeals) had treated that the interest was in the nature of capital receipt which was liable to be set off against pre-operative expenses. The Tribunal, relying on Tuticorin Alkali Chemicals and Fertilizers Ltd. (supra), dislodged the finding recorded by the first appellate authority. While de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been made. It is not clear whether the contract between the parties was examined or not. The High Court while disposing of the matter has also not examined the factual basis. According to the Department, it was the case of surplus being invested in FDR whereas according to the assessee it was the case of advance having been received from the exporter which was invested in FDR for short duration. In view of the absence of factual matrix we are of the view that to decide the question as to whether the receipt fell under section 28 or under section 56 the matter needs to be remitted to the Tribunal for fresh consideration in accordance with law. 21. Keeping in view the aforesaid pronouncements in the field, the present controversy is to be adjudged. As is noticeable from the stipulations in the agreement, the performance guarantee by way of bank guarantee was required for faithful performance of its obligations. The non-submission of the guarantee would have entailed termination of the agreement and NHAI would have been at liberty to appropriate the bid security. That apart, the release of such performance security depended upon certain conditions. Thus, it is clearly e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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