TMI Blog2019 (11) TMI 642X X X X Extracts X X X X X X X X Extracts X X X X ..... ingh (DR) For the Respondent : Shri Vijay Mehta (AR) Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. These three appeals by revenue are directed against the separate orders of ld. Commissioner of Income Tax (Appeals)-32, [CIT(A)], Mumbai dated 08.12.2017 for Assessment Year 2013-14, passed against the three different but group entities. In appeal appeals, the revenue has raised identical grounds of appeal except variation of figure, facts in all appeals are also similar, therefore, all the appeals were clubbed, heard and are decided by a consolidated order. With the consent of parties, the appeal in ITA No. 1504/Mum/2018 is treated as lead case. The revenue has raised the following grounds of appeal: 1. On the facts and circumstances of the case and in law, the Ld CIT(A) has erred in giving finding that interest of ₹ 2, 65, 85, 922/ - on margin money kept for obtaining bank guarantee / letters for credit for power business is to be assessed under the head (Business Income' and upholding the action of the assessee in reducing the above amount fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st earned by assessee on deposit of margin money was reduced by assessee from capital work-in-progress in A.Y. 2012-13 and the Assessing Officer accepted the same in assessment order passed under section 143(3) dated 3.03.2015, copy of which is placed on record. 5. On the other hand, the ld. DR for the revenue after going through the order of Tribunal relied upon the order of Assessing Officer. 6. We have considered the rival submission of both the parties and perused the order of lower authorities. We have noted that there is no dispute that during the relevant period, the assessee earned interest income on deposit of margin money with Bank. The assessee reduced the interest income from capital work-in-progress (CWIP). The treatment of income so earned was not accepted by Assessing Officer. The Assessing Officer treated the same as Income from Other Sources . The ld. CIT(A) while granting relief to the assessee followed the decision of Hon ble Supreme Court in CIT vs. Bokaro Steel Ltd. [236 ITR 315 (SC)] and CIT vs. Karnal Co-operative Sugar Mills Ltd. [243 ITR 2(SC), wherein it was held that such interest received partake the character of capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to make investment with banks for availing various facilities. We find that the FAA had placed reliance on the cases of Bokaro Steel Ltd. (supra), Indian Drugs and Pharmaceuticals Ltd.(supra),Karnal Cooperative Sugar Mills Ltd (supra)and Karnataka Power Corporation. It is found that the judgment of Bokaro Steel(supra)case was followed in the case of Karnal Cooperative Sugar Mills Ltd.(supra),wherein the interest earned by the assessee on amounts deposited with banks to open letters of credit, for purchase of machinery required for setting up its plant, was held to be directly linked with the purchase of plant and machinery and therefore was held to be a capital receipt on the ground that the same was directly connected and incidental to the construction of plant. We are reproducing a portion of the judgment delivered by the Hon'ble Apex Court in the matter of Karnal Cooperative Sugar Mills Ltd.(supra)wherein the Court, after taking note of the facts of the case, has held as under: ...in the present case, the assessee had deposited money to open a letter of credit for the purchase of the machinery required for setting up its plant in terms of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perspective while holding such interest income to be capital in nature and would consequently go to reduce the power project costs being set up. It is primarily the case of the assessee that the interest income derived from margin money deposits is inextricably linked to the project being set up. Hence, the interest income is required to be regarded as income of capital nature for the purposes of project. We concur with the view taken by the CIT(A) that interest income so earned on deposits placed with Bank to obtain the bank guarantee have been rightly reduced from the project development expenditure incurred for set up of power plant. We note that identical issue came up for consideration of the co-ordinate bench in the case of M/s. Adani Power Rajasthan Ltd. (supra) in a similarly placed situation. We find that the CIT(A) has rightly applied the law laid down by the Hon'ble Supreme Court in Bokaro Steel Ltd. (supra) and Karnal Co-operative Sugar Mills Ltd. (supra). The case in hand is clearly distinguishable from the facts placed before the Hon'ble Supreme Court in Tuticorin Alkali Chemicals Fertilisers Ltd. (supra). It is not the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have the required net worth connected to the capacity of the power project. Thus, as per the pre-condition, the assessee was required to have the net worth of ₹ 60 crore. Since, the assessee was not having the required net worth it had to infuse fund for enabiling itself to meet the qualification criteria and for this purpose, assessee's parent company KESPPL stepped in and invested fund in acquiring 98,500 equity shares and 1,00,000 compulsorily convertible preference shares of the assessee company, thereby, enabling the assessee to have the required net worth. Thus, as could be seen, the infusion of fund was integrally and inextricably connected with the setting-up of the power project. As evident from the facts on record, out of the funds available with the assessee from issue of equity shares an amount of 40 crore was temporarily parked in fixed deposit with HDFC Bank Ltd. on 1st March 2012, since, wasn't immediately required for implementation of the power project. It is also evident that the assessee only on 29th May 2012, entered into a EPC contract with Larsen Toubro Ltd. for developing the 20 MW Solar Photo Voltaic Power Plant. These facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;ble Delhi High Court in Indian Oil Panipat Power Consortium Ltd. (supra). The facts of this case are, the assessee a joint venture company was to set-up a power project to effectuate the purpose for which joint venture was created. The joint venture partners contributed share capital which included a sum by way of additional share capital. The said fund, though, was required for purchase of land and development of infrastructure, however, due to legal entanglement with regard to title of land, the funds were temporarily invested in fixed deposit with bank earning interest thereon. The assessee claimed such interest as capital receipt and set it off against pre-operative expenditure. However, the Assessing Officer assessed the interest as income from other sources. The learned Commissioner (Appeals) having found that interest earned was inextricably linked with the setting-up of the power plant allowed the claim of the assessee following the decisions of the Hon'ble Supreme Court in Bokaro Steels Ltd. (supra). However, while deciding Department's appeal, the Tribunal followed the decision in Tuticorin Alkali Chemicals and Fertilisers Ltd. (supra) and reversed the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. The revenue has raised the identical grounds of appeal as raised in ITA No. 1504/Mum/2018. Facts in the appeal under consideration are almost identical. The assessee earned identical interest income, which was reduced from work-in-progress. 13. Considering our decision in ITA No. 1504/Mum/2018 and respectfully following the same, the appeal under consideration is also dismissed with similar directions. 14. In the result, this appeal is also dismissed. ITA No. 1507/Mum/2018 (Essar Power Hazira Ltd) 15. At the outset of hearing, the ld. AR of the assessee submits that the tax effect involved in the present appeals is less than the monetary limit prescribed by CBDT in its Circular No.17/2019 dated 8th August 2019. The ld. AR of the assessee also furnished the working of tax effect of ₹ 40,20,918/-. 16. On the other hand, the ld. Departmental Representative (DR) for the revenue after going through the working of tax effect submits that he may be given liberty to verify the tax effect in the grounds of appeal raised before the Tribunal. 17. We have cons ..... X X X X Extracts X X X X X X X X Extracts X X X X
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