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TMI Blog2023 (12) TMI 1024X X X X Extracts X X X X X X X X Extracts X X X X ..... as raised for the specific purpose of developing multipurpose port terminal facility and logistics facility at Karanja Creek. The assessee filed the return of income on 31/03/2017 for A.Y. 2016-17 and on 12/10/2018 for A.Y. 2017-18 declaring nil income. The case was selected for scrutiny and the statutory notices were duly served on the assessee. For the assessment year 2016-17, the assessee has received an interest income of Rs. 30,99,26,463/- and for A.Y. 2017-18, the assessee earned an interest income of Rs. 22,00,00,010/-. The assessee had shown the interest received as a capital receipt and has not credited the said amount in the P&L Account. 4. The Assessing Officer issued a show cause notice calling on the assessee why the interest income should not be taxed as "Income from other sources". The assessee submitted before the Assessing Officer that the project of setting up the port facilities was getting delayed because of the reason beyond the control of the assessee and the unutilised funds received from IPO were kept in FDs with NBFC & banks from which the interest was received. The assessee further submitted that the interest income earned is prior to the commencement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m A.Y. 2013-14 & 2015-16." 5. Aggrieved, the assessee filed appeal before the CIT(A). The CIT(A) deleted the addition by relying on the decision of the co-ordinate bench in assessee's own case for A.Y. 2013-14 to 2015-16. Aggrieved, the revenue is in appeal before the Tribunal. 6. The Ld.AR submitted that this is a recurring issue in assessee's own case from A.Y. 2013-14 onwards and that the coordinate bench of the Tribunal has been consistently holding the issue in favour of the assessee that the interest received by the assessee is capital in nature. The Ld.AR further submitted that the facts for the current year being identical, the issue is covered by the decision of the co-ordinate bench in assessee's own case. 7. The Ld.DR, on the other hand, relied on the order of the Assessing Officer. 8. We heard the parties and perused the material on record. We notice that the co-ordinate bench in assessee's own case for A.Y. 2013-14 to 2015-16 (ITA No.2472, 2473 & 5752/Mum/2018 dated 20.03.2019) has considered the similar issue and held that - "17. Only issue involved in the present of the assessee is that whether the interest received on FDRs/ICDs with bank/NBFCs made out of fun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 50 years and providing additional 200 Acres land with 1000 metres of waterfront. (English Translation). 20-21 10. Letter from Maharashtra Maritime Board bearing MMB/Planning-2/Karanja Terminal/6526 Dtd.22nd October 2018 - Permission to carry out trial Operation of JSW Cargo at Karanja Creek Jetty. 22-23 11. KTPL letter to Maharashtra Maritime Board bearing ref. no. KTPL/MMB 7201 8/09-027 dtd 27th Sept.2018 -requesting permission to carry out trial operation of JSW Cargo at Karanja Port 24-27 18. We may add that these document have no bearing on the issue involved in these appeals. However, these documents are filed just to prove various issues / problems faced by the appellant company in starting the project. It is also apparent from the above that the lease agreement granted by the Maharashtra Maritime Board has been extended from 30 years to 50 years. Maharashtra Maritime Board have further given more 200 acres land and 1000 metres of water front and even permission of the trial operation has been granted vide their letter dated 22/10/2018. 19. We observe that the above letters have no bearing on the issue to be adjudicated by us but only reinforces the stand of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hes as to help the contractors. The arrangements which were made between the assessee-company and the contractors pertaining to these three receipts are arrangements which are intrinsically connected with the construction of its steel plant. The receipts have been adjusted against the charges payable to the contractors and have gone to reduce the cost of construction. They have, therefore, been rightly held as capita! receipts and not income of the assessee from any independent source. In case money is borrowed by a newly started company which is in the process of constructing and erecting its plant, the interest incurred before the commencement of production of such borrowed money can be capitalised and added to the cost of the assets created as a result of such expenditure. By the same reasoning if the such expenditure. By the same reasoning if the assessee receives any amounts which are inextrically linked with the process of setting up its plant and machinery, such go to reduce the cost of its assets. These are receipts of a capital nature and cannot be taxed as income. The same reasoning would apply to royalty received by the assessee company for stone from the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation Ltd (Supra) the facts are distinguishable as the issue was whether the interest received on surplus funds is business income or income from other sources. * The Hon'ble Bombay High Court in the case of Shree Maheshwar Hydel Power Corporation Ltd., (supra) has held that interest earned is not inextricably linked to the setting up of the plant and Machinery. Further it is also given in the finding that money, raised by way of Optional Fully Convertible Debentures, were not received for setting up of the plant and machinery. This decision is not applicable on the case as in this case the money was collected under Fully Convertible Debenture. At Para (v) the Bombay High Court in the decision referred to supra while deciding the matter in the Revenue held as follows: (v) In the decisions of the Delhi High Court in Sasan Power Ltd. (Supra) » and Facor Power Ltd. (Supra) the Tribunal had come to finding of fact that interest which has been earned Is In respect of deposits made In the course of/for setting ua of plant. Thus, the interest was capitalised. So far as Indian Oil Panipat Power Consortium Ltd. (Supra) is concerned, it was earned prior to commencement of bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not taxable under the normal tax provisions nor under section u/s 115JB of the Act. We observe from the records that in the AY 2015-16 the interest received on FDRs/ICDs not been credited to the profit and loss account and was directly reduced from the capital work in progress. In the case of Indo Rama Synthetics (I) Ltd. versus. CIT, 330 ITR 363(SC the Hon'ble Apex Court has held that the object of MAT provisions is put the real profit of the companies. The thrust is to find out the results of the company. Inclusion of receipt in the ton of MAT would defeat two fundamental principles, it would receipt which is 'not in the nature of income at all and it would not result in arriving at real working results of the real working result can be arrived at only after excluding this receipt which has been credited to P&L a/c and not otherwise. The case of the assessee is supported by the following decisions: * In the case of Shivalik Venture Pvt. Ltd. V/s. Dy. CIT, 43 ITR (Murr Trib) 187 the issue was, profits and gains arising on transfer of capital asset by a company to its subsidiary company does not fallen under definition of income .as given in section 2(24) of The Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to recompute the book profit as per the Companies Act. However, the said judgement was rendered prior to the judgment of the Hon'ble Supreme Court in case of Appollo Tyres and therefore, now has no binding effect. In fact, there are subsequent Bombay High Court judgments deviating from the ratio laid down in the said judgment. Thus, the settled position now is that such capital receipts not forming part of the P&L account cannot be brought to fax" by excluding it in the book profit. 22. Accordingly, even for the Asst year 13-14 & 14-15 interest earned is credited to the P&L account but at the same time it was mentioned in the notes to the audited statement of accounts that interest is not taxable under the normal provisions of the Act as well as u/s. 115JB the Act. In the assessment year 2015-15 the interest was not credited to the profit and loss account at all and was reduced from the capital work in progress. Finally, after considering the facts of the assessee case in the light of various decisions by the Hon'ble Apex court, Hon'ble High Court and coordinate benches, we hold that the interest income received by the assessee from the FDRs/ICDs made out of funds a ..... 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