TMI Blog2018 (5) TMI 2059X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed. - ITA No.1608/Hyd/2017 - - - Dated:- 31-5-2018 - SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER For the ssessee : Shri V. Siva Kumar For the Revenue : Smt. Anjala Sahu, DR ORDER Per Smt. P. Madhavi Devi, J.M This is assessee s appeal for the A.Y 2014-15 against the order of the CIT (A)-5, Hyderabad, dated 24.08.2017. The assessee has raised the following grounds of appeal: 1. The order of the learned CIT (A) is against law, weight of evidence and probabilities of the case. 2. The learned CIT (A) erred in confirming the order of the AO and holding that the interest amount of ₹ 2,94,09,230 is assessable as income from other sources . 2. Brief facts of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench of the Tribunal in ITA Nos. 1286 1287/Hyd/2016 and vide orders dated 29.11.2017, the Tribunal has held that the interest income can be set off against the pre commencement expenses during the year. A copy of the decision has been filed before us. 4. The learned DR, however, supported the orders of the authorities below. 5. Having regard to the rival contentions and the material on record, we find that the Coordinate Bench of the Tribunal in the assessee s own case (Supra) has considered the issue at length and at paras 9 to 9.6 of its order, has held as under: 9. Considered the rival submissions and perused the material facts on record. The assessee has brought share capital for the sole purpose of establishing power gen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ements of Hon'ble Supreme Court, High Courts and coordinate benches. The major decisions of Hon'ble Supreme Court in this subject are as under: 1. Tuticorin Alkali Chemicals and Fertilizers Ltd., Vs CIT, [1997] 227 ITR 172 (SC): If funds have been borrowed for setting up of a plant and the funds are 'surplus', then by virtue of that circumstances they are invested in fixed deposits, the income earned in the form of interest will be taxable under head 'income from other sources'. 2. CIT Vs. Bokaro Steel Ltd. [1999] 236 ITR 315 (SC): If income is earned, whether by way of interest or in any other manner on funds, which are otherwise 'inextricably linked' to the setting up of the plant, such income is requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses. In the case of Pr. CIT Vs. Facor Power Ltd.,[2016] 66 Taxmann.com 178 (Delhi), there is a finding of fact that the money placed in the fixed deposits was inextricably linked with the setting up of the power plant. Thus, the revenue generated on account of interest on Fixed Deposit would be in the nature of a capital receipt and not revenue. This case has been decided on the basis of this principle and not on the basis that the source of the funds was through raising of share capital and not through borrowings. 9.2 In the above two decisions, it is clear that in case the share capital is brought for specific purpose for the implementation of the particular project, and interest is earned by temporarily depositing in the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same footing as the interest incurred during preproduction period, so that one could be set off against the other. In the above case, the issue was, can the assessee set off the interest income earned by depositing the share capital money against the interest expenses incurred during pre-production period. This ratio cannot be applied to the case of the assessee under consideration. 9.6 Considering the above discussion, in our considered view, the interest income earned by assessee by depositing the share capital in Fixed Deposits under constraint are eligible to treat the income as capital in nature and allowed to set off against the pre- commencement expenses during the year. Accordingly, grounds raised by the assessee are allowe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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