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TMI Blog2025 (3) TMI 997X X X X Extracts X X X X X X X X Extracts X X X X ..... in Appeal No.CIT(A), Delhi- 1/10572/2019-20 arising out of the appeal before it against the order dated 22.12.2019 passed u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred as 'the Act') by the ITO, Ward 2(1), Delhi (hereinafter referred to as the Ld. AO). 2. Heard and perused the record. The facts in brief are, the appellant company filed its Return of Income for the A.Y. 2017-18 on 25.10.2017 declaring NIL income. Subsequently, appellant company revised its Return of income on the same date i.e. 25.10.2017, thereby, showing an increase credit of TDS at an income of Rs. NIL. Thereafter, the instant case was selected for limited scrutiny through CASS on the following grounds: a) Share premium b) Investment in immovable proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the said claim in terms of Section 35D of the Act. In response, the appellant had not replied to the show cause notice of the AO that, how the said expense is deductible u/s 35D of the Act. Hence, the Assessing Officer has treated the said expenses as capital in nature and did not allow the same, as revenue expenditure, as per Section 35D of the Act. Hence, the claim of preliminary expenses by the appellant company amounting to Rs. 72, 59, 610/- was disallowed. c) Claim of expenses against interest income of Rs. 94, 78, 739/-: During the course of assessment proceedings, appellant was asked to furnish the explanation with regard to the interest income which was not declared under the head 'Income from other Sources'. In response to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ils and bank statement of investor was provided for verification. In the absence of these details, genuineness & credit worthiness of the said investor was not proved. 4. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal." 4. Ground no. 1 and 2: This issue is arising out of disallowance of interest earned during the set-off of business. We find that the Assessing Officer has made addition of Rs. 94, 78, 739/- as interest earned during the process of setting up of new business under the head 'Income from other sources' by relying on the decision of Hon'ble Supreme Court in the case of Tuticorin Alkalies Chemicals & Ferti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of appellate proceedings, the appellant has reiterated the fact that the appellant has raised capital by way of share capital and convertible debenture. The said receipt was made as deposits in banks pending their utilization for its business activity. The interest earned out of such deposits was set-off against the capital work in progress during the year. Since, the above fund inextricable linked with the setting up of the plant, the decision of Hon. Supreme Court in the case of CIT (vs) Bokaro Steels Limited (cited supra) is clearly applicable in applicant's case. 4.5 The submission of the appellant and the facts stated by the Assessing Officer in assessment order have been considered. It is found that the Assessing Officer has relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised by the appellant is inextricable linked with the setting up of the plant. Accordingly, the said interest earned cannot be treated as 'Income from other sources'. Hence, the Assessing Officer is directed to delete the addition made to the tune of Rs. 12, 02, 649/- and, accordingly, the appeal filed by the appellant on this grounds is allowed. 5. In the end result, the appeal of the appellant is hereby allowed.'' 5. Now in terms of the ground as raised before us, we find that there is no case of department as to how disputed interest is not inextricable linked with the setting up of the plant. The nature of deposits have been duly examined in AY2018-19 and found to be inextricable linked with the setting up of the plant. Since, the ab ..... X X X X Extracts X X X X X X X X Extracts X X X X
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