9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (5) TMI 413 - AT - Income TaxCorrect head of income - income from other sources or business income or capital receipt - interest accrued on funds and other miscellaneous income - as per AO funds not required immediately by the assessee company for its business purposes and which were invested in fixed deposit and for the advances given to the contactors - assessed the interest income and miscellaneous income (for sale of a scrap) under the head Income from other sources - CIT(A) deleted the addition - HELD THAT - As relying on own case 2017 (9) TMI 1930 - ITAT DELHI interest incomes are also inextricably linked with the setting up of the power plant and such incomes have gone on to reduce the expenses for setting up of the plant and as there was no surplus funds available with the appellant company, therefore, such income is required to be capitalized to be set off against the pre operative expenses. As such the A.O. is not justified in adding the sum as income from other source u/s 56 - Decided in favour of assessee.
Issues Involved:
1. Deletion of addition on account of interest received from bank and advances to contractors. 2. Deletion of addition on account of miscellaneous income from the sale of scrap. Issue-wise Detailed Analysis: 1. Deletion of Addition on Account of Interest Received from Bank and Advances to Contractors: The Revenue challenged the deletion of additions amounting to ?5,61,63,696/- and ?28,00,638/- on account of interest received from bank and advances to contractors, respectively. The Assessing Officer (AO) had assessed these amounts under the head 'Income from Other Sources,' arguing that the interest accrued on funds not immediately required for business purposes and invested in fixed deposits or given as advances to contractors. The AO contended that these funds were surplus and thus taxable under Section 56 of the Income Tax Act, 1961. The Learned Commissioner of Income-tax (Appeals) [CIT(A)] deleted these additions, relying on precedents such as the Delhi High Court's judgments in the cases of Facor Power Limited and Indian Oil Panipat Power Consortium. The CIT(A) observed that the interest income was inextricably linked with the setting up of the power plant and should be treated as capital receipts, not liable to tax. The CIT(A) noted that similar additions in previous assessment years (2011-12 and 2012-13) were also deleted, and the AO failed to establish that the funds were surplus. The Tribunal upheld the CIT(A)'s decision, referencing its own earlier rulings for the assessment years 2011-12 and 2012-13, where it had determined that such interest income was capital in nature and should be set off against preoperative expenses. The Tribunal cited the Supreme Court's judgment in CIT vs. Bokaro Steel Limited and the Delhi High Court's ruling in Indian Oil Panipat Power Consortium, which held that interest earned on funds linked to the setting up of a plant should be capitalized. The Tribunal dismissed the Revenue's appeal, affirming that the interest receipts were capital receipts and not taxable as income from other sources. 2. Deletion of Addition on Account of Miscellaneous Income from Sale of Scrap: The Revenue also contested the deletion of ?1,61,296/- added by the AO as 'miscellaneous income' from the sale of scrap. The AO had included this amount under 'Income from Other Sources,' citing Section 56(1) & (2) of the Act. The CIT(A) deleted this addition, referencing the Supreme Court's decision in CIT vs. Bokaro Steel Ltd., which held that income from the sale of scrap, if linked to the construction of a plant, should be treated as a capital receipt and set off against preoperative expenses. The Tribunal upheld the CIT(A)'s decision, noting that the facts and legal positions were consistent with those in earlier years where similar additions were deleted. Conclusion: The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s deletion of additions on account of interest received from banks, advances to contractors, and miscellaneous income from the sale of scrap. The Tribunal affirmed that these receipts were capital in nature and should be set off against preoperative expenses, following established judicial precedents. The appeal was dismissed, and the CIT(A)'s findings were upheld.
|
