9911796707
TMI Blog1989 (1) TMI 164X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. Hire charges of machinery tools Rs. 8,95,260 2. Interest received on term deposits 5,76,914 3. Other interest 1,67,812 4. Rent 42,499 The assessee is a Government of India Undertaking set up for the generation of hydro electric power. For that purpose, the assessee sets up hydro power projects, some of which were in the relevant accounting year under construction. The actual business of the assessee that was of generation and sale of electric power was thus in the process of setting up. The assessee's contention was that the incomes in question were not taxable. The same was negatived by the ITO. The assessee's objection that the assessment could not be reopened was also neg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to contractors and employees to be used by them in the execution of the assessee's projects. Letting out of machinery and tools on hire is not the assessee's business. Its business on the other hand is to generate and sell electricity and that business was still in the process of being set up by the erection of a hydro electric plant. Therefore, the amounts received by the assessee by way of hire charges were not on account of any income from business but were receipts that would be off set against the capital cost of the project. If the assessee had not hired out such machinery, the contractors and the employees would have procured those things from others and the assessee would have had to compensate them for the hire charges paid to su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise and that income too would not be on revenue account but on capital account and would go to reduce the cost of the project. In Arasan Aluminium Industries Pvt. Ltd. vs. 1st ITO (1982) 30 CTR (Trib) (Mad) 19 (SB) : (1982) 1 ITD 10 (Mad) : (1982) 1 SOT 45 (Mad) a Bench of this Tribunal held that interest income earned by investment of funds during construction stage of business would go to reduce the capital cost and hence is not taxable as revenue receipt. The same view was held by a Special Bench of this Tribunal in Nagarjuna Steels Ltd. vs. ITO (1983) 3 ITD 796 (Hyd) : (1982) 1 SOT 355 (Hyd) in which borrowed funds which were not immediately required were invested and interest income was earned. It was held that such income was not char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quarters to contractors, employees who were engaged in setting up of assessee's business was not chargeable to tax under any head of income. We, therefore, do not find any error in the orders passed by the learned CIT(A) and the Revenue's appeal has to be dismissed. 7. The assessee has filed cross objections challenging the finding of the learned CIT (A) that the reopening of the assessment under s. 147(b) was not valid. The learned counsel for the assessee conceded that in case the findings of the learned CIT (A) on the points raised in the Revenue's appeal are upheld, the assessee's objection would be merely academic. We, therefore, did not hear the parties on this issue and since in view of our findings discussed above, the cross obje ..... X X X X Extracts X X X X X X X X Extracts X X X X
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