TMI Blog2022 (8) TMI 1182X X X X Extracts X X X X X X X X Extracts X X X X ..... s observation made by the Ld. CIT (A) without bringing on record of any materials and without appreciation of the relevant records on the issue to came to such conclusion and decided the Appeal in favour of the assessee. The Ld. CIT (A) while relying on the documents produced by the Assessee, ought have called for the remand report from the Assessing Officer and should have examined issue. But on going though the Order of the CIT (A), we are unable to understand the basis for such observations and the conclusion arrived by the CIT(A) in favour of the Assessee. Thus, the said approach of the CIT (A) is found to be erroneous. CIT (A) should examine the cash/fund flow statement to decide as to whether the interest on FDR s from the surplus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eferred as the Act )? 2. Whether on facts and circumstances of the case, the Ld.CIT(A) is legally justified in allowing the appeal of the assessee by ignoring the fact that the assessee ratio decidendi as laid down by Hon ble Apex Court in case of Tuticorin Alkali Chemicals and Fertilizers Ltd vs. CIT (1997) 227 ITR 172 (SC) and CIT vs. Coromandal Cement Ltd (1998) 234 ITR 412 is applicable to the facts and circumstances of the present case? I.T.A. No. 4348/DEL/2019 (A.Y 2013-14) Whether on facts and circumstances of the case, the Ld.CIT(A) is legally justified in holding that interest income of Rs 18,96,92,680/- earned on surplus funds during the pre-commencement of business is not liable to tax u/s 56 of the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A). The Ld.CIT (A) vide order dated 19/02/2018 deleted the addition made by the Ld. A.O. 7. Aggrieved by the order of the Ld.CIT(A) dated 19/02/2018, the Department of Revenue has preferred the present appeal on the grounds mentioned above. 8. The Ld. DR vehemently submitted that, the Ld.CIT(A) has not justified in holding that, the interest income of Rs. 41,69,22,738/- earned on surplus funds during the pre commencement of business is not liable to tax u/s 56 of Income Tax Act. Further submitted that, the Ld.CIT(A) has also ignored the ratio decidendi laid down by the Hon ble Apex Court in the case of Tuticorin Alkali Chemicals and Fertilizers Ltd vs CIT (1997) 227 ITR 172 (SC) and CIT vs. Coromandal Cement Ltd. (1998) 234 ITR 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, the Ld. Assessing Officer brought to tax of income of Rs. 41,69,22,738/- earned by the assessee on margin money deposit for bank guarantee and deposits for foreign currency buyer s credit . The Ld. Assessing Officer found that the said FDRs had been made out of surplus fund available to the assessee. Further observed that, the assessee has failed to established that, the deposits are inextricably linked with the funds taken for capital projects. The relevant portion of the said observation of the A.O is as under:- 3.5 In this case the assessee has also failed to establish the fact that how such deposits are inextricably linked with the funds taken for capital projects. The assessee has also failed to substantiate the case on fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ringing on record of any materials and without appreciation of the relevant records on the issue to came to such conclusion and decided the Appeal in favour of the assessee. The Ld. CIT (A) while relying on the documents produced by the Assessee, ought have called for the remand report from the Assessing Officer and should have examined issue. But on going though the Order of the CIT (A), we are unable to understand the basis for such observations and the conclusion arrived by the CIT(A) in favour of the Assessee. Thus, the said approach of the CIT (A) is found to be erroneous. 14. The CIT (A) should examine the cash/fund flow statement to decide as to whether the interest on FDR s from the surplus funds or not. Further the Ld. CIT(A) ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment) e) The cost of the construction will be the amount actually spent and also the interest payable on the amount borrowed during period of construction; (refer last paragraph on page 185 of the judgment) f) The application or destination of the income has nothing to do with its accrual or taxability. It is also well settled that interest income is always of a revenue nature unless it is received by way of damages or compensation.(refer second paragraph on page 186 of the judgment). 15. In view of the above discussions and on the facts and circumstances of the case, we deem it appropriate to remit the issue in dispute to the file of Ld. CIT(A) to decide in light of our above observations. Accordingly we partly allow the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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