TMI Blog2017 (8) TMI 1626X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounts in accordance with the account terms and conditions. The said MODs were reversed automatically as and when the assessee withdrew the amounts from account. There was no intention to earn any interest on such funds. The funds were kept in liquid so as to use them as and when required, since, the interest on short term MODs were inextricably link to the construction and acquisition activities in the regular courses of the assessee s activities. The interest was not earned out of the surplus funds so to treat the said income as income from other source is not justified. This claim of the assessee sustains because the equity contribution by the Joint Venture partners cannot be termed as surplus funds because it was having a short term MO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls) and A.O. has not considered the fact that since the income was earned in a period prior to commencement of business and was directly incidental to acquisition of assets and setting up of plant, it was in the nature of capital receipt and hence was required to be set off against pre-operative expenses. 3. For the sake of convenience, the facts for A.Y. 2009-10 are taken up. The assessee is a private Ltd. company set up and incorporated as a Joint venture of NTPC Ltd. UPRUVN Ltd. to set up a power plant at Meja Urja Allahabad. During the Assessment Year 2009-10 the company was involved in plant set up activities like land acquisition, statutory clearance, development of infrastructure, etc and has not started any business activity s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d were equity contributions for setting up of the business and other infrastructure facilities. The appellant has claimed that the interest earned on short term MODs were inextricably linked to the construction and acquisition activities in the regular course of business. Again, I do not find any such evidences to suggest that the investments made by the assessee were for the construction and acquisition activity. The appellant has not filed any office memo, in this regard or any decision of the concerns forming the joint venture. The appellant has primarily relied on the decision of the Hon'ble Supreme Court in the case of CIT Vs. Bokaro Steel Ltd. (1999) 236 ITR 315. I have gone through the order of the Hon'ble Supreme Court and I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is possible for a company to have six different sources of income, each one of which will be chargeable to income tax. Profits gains of business or profession is only one of the heads under which the company s income is liable to be assessed to tax. If a company has not commenced business, there cannot be any question of assessment of its profits gains of business. That does not mean that until and unless the company commences its business, its income from any other spurge will not be taxed. If the company, even before it commenced business, investments the 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 . The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , such interest was held to be incidental to the acquisition of assets. The facts of this case are also clearly distinguishable from the facts of the present case, therefore, not applicable. In view of the discussions made hereinabove, I uphold the order of the Assessing Officer. 6. The Ld. AR submitted that there is no borrowed fund taken by the assessee for investment for Assessment Year 2009-10 2010-11 and the plant was not functional. Therefore, the amount and deposit was related to the capital receipts and cannot be treated as income from other sources. 7. The Ld. AR relied upon the order of ITAT in case of Adani Power Ltd Vs. ACIT, ITA No. 2755/AHD/2011 dated 27/7/2015 wherein it was held in para 24 that (relevant extra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. 9. The Ld. DR submitted that the Assessing Officer as well as the CIT(A) has rightly disallowed the same interest and held that the same amounts to income from other sources. The Ld. DR further submits that the case laws referred by the Ld. AR are not relevant, but the Ld. DR could not distinguish the same. As related to the commencement of the business, the Ld. DR could not contradict the submissions made by the Ld. DR. 10. We have heard both the parties and perused the material available on record. It can be seen that in both the assessment orders the commencement of the business was not started but was only to the extent that the company was setting up a plant activities like land acquisition, statutory, clearance, development ..... X X X X Extracts X X X X X X X X Extracts X X X X
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