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TMI Blog2015 (7) TMI 193X X X X Extracts X X X X X X X X Extracts X X X X ..... y Kumar Agarwal, CA ORDER PER T.S. KAPOOR, AM: This appeal is filed by the Revenue against the order of Ld. CIT(A)- XVI, New Delhi dated 17.12.2012 for the assessment year 2008-09. The Revenue has taken five grounds of appeal but the crux of the grounds of appeal is the grievance of the Revenue with the action of Ld. CIT(A) by which he had deleted the income earned by the assessee on Fixed Deposits. 2. At the outset, Ld. A.R. submitted that it was a covered case and Ld. CIT(A) has decided the issue relying upon the two case laws which were in favour of the assessee. Whereas, Ld. D.R. immediately interrupted and argued that the surplus funds which have been earned, were liable to tax as income from other sources . He fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t company was incorporated on 23-05-2003 as a joint venture company between NTPC Ltd. and Tamil Nadu Electricity Board for the purpose of construction of power plant for generation of electricity. The said power plant was located at Yellur at the outskirt of Chennai, Tamil Nadu. The construction of the power generating unit was started on 28-03-2007 which is expected to be completed by 2012-13. The total authorized capital of the company was ₹ 2000 crores. By end of financial year 31-03-2008 the assessee company had raised ₹ 380,00,00,000/-. These funds were essentially utilized during the initial period of construction from A.Y. 2004-05 to A.Y. 2008-09 for conducting survey, investigation preliminary expenses, for purchasing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yielding interest was evidently to maintain liquidity of funds and to reduce the cost of construction of the power plant. Interest income was inextricably linked with the setting up of the power plant because interest income have gone on to reduce the incidental expenses for setting up of the plant as evident from schedule 12 of balance sheet showing details of incidental expenses during construction. Further, when amounts of liability towards sundry creditors (Rs.23.52 crores) are far more than the funds lying in bank (Rs.3.34 crores), it cannot be said that there are surplus funds available with the company. Hon'ble Supreme Court in Bokaro Alkali Chemicals and Fertilizers Ltd. after considering the decision in the case of Tuticorin A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court, was that that there was a finding of fact recorded in the case before the apex court that whatever money was deposited in the bank was essentially found to be the surplus funds in the hands of that company and the very purpose of making fixed deposits was to earn interest on such surplus money. Apex court under those peculiar circumstances, had held that interest income arising of surplus funds, was chargeable to tax as income from other sources. 8.1.4 In identical issue in the case of NTPC Sail Power Company (P) Ltd. VS. CIT in ITA No. 1238, Hon'ble Delhi High Court in its decision on 17/07/2012 held that:- It is no doubt correct that the proviso to section 36 (I) (iii) of the Income Tax Act enacts that any amount of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creditors (Rs.23.52 crores) are far more than the funds lying in bank (Rs.3.34 crores). Interest income is also inextricably linked with the setting up of the power plant because interest income have gone on to reduce the incidental expenses for setting up of the plant as evident from schedule 12 of balance sheet showing details of incidental expenses during construction. In view of the above, as the interest on STDR are inextricably linked to the setting up of the project and the fact that no surplus funds are also 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 of ₹ 36,06,774/- as income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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