9911796707
TMI Blog2009 (7) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... come Tax Appellate Tribunal (for short ITAT has erred in law in deleting addition of 2.5% on income earned by way of interest by the respondent-assessee Tehri Hydro Development Corporation (for short THDC), claimed by it as deduction under Section 57(iii) of the Income Tax Act, 1961? 2. Whether, the Commissioner of Income Tax (Appeals) [for short CIT(A)] and ITAT have erred in law in accepting the rent and interest received from its employees and oustees in Dam area as capital receipts and thereby excluding the same from taxability? 3. Brief facts giving rise to these appeals are that assessee company is a public sector undertaking of Government of India, which is engaged in construction of Hydro-Electric project for generation of power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue. The ITAT dismissed the cross appeal filed by the Revenue, but the appeal of the respondent-assessee (I.T.A. No. 2139 / Del / 2004) was allowed permitting deductions of administrative expenditure to the extent of 2.5% on interest income. The Misc. Application No. 222 / Del / 2006 was also dismissed, as the ITAT found no error apparent on the record in its order dated 11.01.2001, passed in ITA No. 3371 and 3556 / Del / 1994, as alleged by the Revenue. Hence, these appeals. 4. We have heard learned counsel for the parties and perused the impugned orders passed by the ITAT. 5. Section 14 of the Income Tax Act, 1961, provides 'heads of income' for the purposes of charging income tax and computing total income. Said Section classifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or compensation, but it has been further held that the assessee may be entitled to capitalize the interest payable by it. It is also observed by the Apex court in said case that expenditure would be taxable as indicated for the purposes of business if the assessee's business had commenced. (In the present case, the THDC was still at the stage of construction). 7. In Commissioner of Income Tax Vs. Bokaro Steel Ltd.; Vol. 236 I.T.R. page 315, in similar circumstances, the Apex court has held as under:- "We have to consider whether the amounts received by the assessee under these five heads can be treated as income of the assessee for the relevant assessment years. The Tribunal has held that all these amounts (under items Nos. 1 to 4) re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose of facilitating the work of construction. The activities of the assessee in connection with all these three receipts are directly connected with or are incidental to the work of construction of its plant undertaken by the assessee. Broadly speaking, these pertain to the arrangements made by the assessee with its contractors pertaining to the work of construction. To facilitate the work of the contractors, the assessee permitted the contractors to use the premises of the assessee for housing its staff and workers engaged in the construction activity of the assessee's plant. This was clearly to facilitate the work of construction. Had this facility not been provided by the assessee, the contractors would have had to make their own arran ..... X X X X Extracts X X X X X X X X Extracts X X X X
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