TMI Blog2019 (8) TMI 843X X X X Extracts X X X X X X X X Extracts X X X X ..... d of project, it needs to be reduced from working progress. - appeal filed by the assessee is allowed - ITA No.6674/Mum/2017 Pune Sholapur Road Dev.Co.Ltd. - - - Dated:- 9-8-2019 - SHRI G. MANJUNATHA, ACCOUNTANT MEMBER SHRI RAM LAL NEGI, JUDICIAL MEMBER Assessee by - Niti Agarwal Revenue by - Abi Rama Kartikeyan ORDER This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax (Appeals) 22, Mumbai, dated 08/08/2017 and it pertains to the Assessment Year 2011-12. The assessee has raised the following grounds of appeal:- 1. On the facts circumstances of the case the Learned Commissioner of Income Tax (Appeals) has erred in confirming that the sum of ₹ 1,46.89,403/- be taxed under the head Income from other sources. The appellant prays that the conclusion reached by the Learned Commissioner of Income Tax (Appeals) that the sum of ₹ 1,46,89,403/- is chargeable to tax under the head Income from other sources. 2. On the facts circumstances of the case the appellant prays that the addition made by the Learned Assessing Officer and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned on short term fixed deposits kept at bank, on the ground that the funds from which interest has been earned are exclusively meant for development of project, and hence, interest earned on short term fixed deposits is necessarily should be reduced from work in progress. The assessee has filed its return of income on 23/09/2011 declaring nil total income. The case was selected for scrutiny and the assessment has been completed u/s 143(3) of the I.T.Act, 1961 on 28/03/2014, where the AO has determined total income of the assessee at ₹ 1,46,89,403/-., after considering, interest on fixed deposits under the head income from other sources. The relevant findings of the AO are as under:- 5. The submission made by the assessee company are considered carefully. The contention of the assessee is not acceptable because though the assessee has earned the interest on unutilized borrowed fund parked in fixed deposit, it is not business of assessee. The interest was earned on the unutilized borrowed fund and the same were not parked with the banks for the purpose of any business obligation. The fund was parked with clear intention to earn the extra income by way of inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion work. Therefore, the fact of the case of Bokaro Steel Ltd, is not relevant to this case as advances given in the case of Bokaro Steel Ltd. was a business obligation. 6. In view of the above decision and the facts of the case , after examination of case records and submissions made, the interest income of ₹ 1,46,89,403/- is hereby treated as income from other source as against business income treated by assessee. Accordingly, the total income of the assesee for assessment year 2011-12 is computed as under. Further in view of the above discussion, it is clear that the assessee has furnished inaccurate particulars of income and has concealed the particulars of income which may attract penalty proceeding. Therefore, penalty proceeding u/s 27(1)(c) of the I.T.Act is being initiated. Not profit as per P L account (-)13,05,991 Add: Wealth Tax 1,44,070 (-)11,61,921 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrowed funds as its income. It was rightly pointed out in the case of Kedar Narain Singh vs. CIT that anything which can properly be described as income is taxable under the Act unless expressly exempted . The interest earned by the assessee is clearly its income and unless it can be shown that any provision like s. 10 has exempted it from tax, it will be taxable. The fact that the source of income was borrowed money does not detract anything from the Revenue character of the receipt. The question of adjustment of interest payable by the company against the interest earned by it will depend upon the provisions of the Act. The expenditure would have been deductible as incurred for the purpose of business if the assessees business had commenced. But that is not the case here. The assessee may be entitled to capitalise the interest payable by it. But what the assessee cannot claim is adjustment of this expenditure against interest assessable under s. 56. Sec. 57 of the Act sets out in its cls. (i) to (iii) the expenditures which are allowable as deduction from income assessable under s. 56. It is not the case of the assessee that the interest payable by it on term loans are allowable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat on disbursement of loans, the idle surplus funds which could not be immediately utilized for the purpose of business were kept in fixed deposits on which interest income of ₹ 1,46,89,403/- was earned. In view of the above decision of the Hon'ble Supreme Court which is squarely applicable in the appellant's case, the interest payable on the amount borrowed for the business purpose of design engineering,construction development finance operation and maintenance of 4 laning of Pune-Sholapur Section of NH-9 cannot be adjusted against the interest income of ₹ 1,46,89,403/- which has been considered as income from Other Sources The appellant's grounds of appeal are dismissed 4. The Ld. AR for the assessee, at the time of hearing submitted that this issue is squarely covered in favour of the assessee by the decision of ITAT, Mumbai G Bench in assessee sister concern case of Hazaribag Ranchi Expressway Ltd. vs. ITO in ITA.No. 3669/Mum/2016, where under identical set of facts the Tribunal held that interest earned from short term fixed deposits is assessable under the head income from business, as part of business receipts, consequently during the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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