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TMI Blog2011 (4) TMI 1361X X X X Extracts X X X X X X X X Extracts X X X X ..... r acquisition of land from the Government, interest received there upon was capitalized by reducing the pre-operative expenses for the impugned AYs. This has been denied by the learned CIT(A) and held to be taxed as income from other sources as assessed by the Assessing Officer. Incidentally for the Assessment Year 2006-07, the Assessing Officer had only disallowed fees paid to Registrar of Companies and expenses incurred for geological survey report from the pre-operative expenses which was deleted by the learned CIT(A) but the income was enhanced for the taxation of interest pertaining to that period as "income from other sources". The appellant has raised this issue as an additional ground for the Assessment Year 2006-07 being validity o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tain funds were required for compensating the villagers whose land was being acquired and therefore, the various charges on account of cost of land, trees and re-settlement expenses were called for to be paid by the assessee by an ad hoc addition of 10% was over and above otherwise agreed upon with OMC Ltd., by the assessee. The 10% administrative charges as intimated by IDCO were, therefore, considered for payment only when assurance of refund of the same with interest was granted as agreed upon. He pointed out that the facts of the assessee's case are similar and identical to the one considered by the Hon'ble Delhi High Court in the case of Indian Oil Panipat Power Consortium Limited v. Income-tax Officer [2009] 315 ITR 255 (Del) and he a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee's business was in the nature of capital receipt and was therefore, rightly set off against the pre-operative expenses being major expenses of magnitude as mentioned above for the impugned AYs. The learned Counsel for the assessee submitted that the assessee Company was incorporated on 30.1.2004 with the main object to undertake prospective work of development of coal blocks including drilling, feasibility studies and assessment of mine blocks, mining survey and preparation of coal mine plans which are capitalized in order to pursue the main object of the Company which is raising of coal and stock or dispatch coal, to mine coal either in open case process or underground and undertaking business and activities pursuant to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cited decision of the Hon'ble Delhi High Court does not apply to the facts of the assessee's case which may kindly be taken note of. 6. We have heard the rival contentions and perused the material available on record. On our careful consideration of the facts, we are inclined to agree with the submission of the learned Counsel for the assessee. Petty interest has been earned for both the AYs which has been capitalized by the assessee by reducing the preoperative expenses of such magnitude as mentioned above cannot be isolated for the purpose of taxation as income from other sources unless of course the ratio of the decision of Hon'ble Apex Court as cited by the learned CIT(A) and also distinguished by Hon'ble Delhi High Court are to be ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Paper Book by the learned Counsel that the funds in form of shares was infused for the purpose of acquiring land and for development of infrastructure. In the case of Titucorin Alkali Chemicals & Fertilisers Ltd., (supra) the funds can be identified as surplus insofar as in the case of Bokaro Steel Ltd it was incidental to the business of the assessee and the interest was earned on the advance paid to the contractors during the pre-commencement period was found to be inextricably linked to the setting up of the plant of the assessee. It is not the question of interest having paid on the share capital which under the provisions of the Company Act Section 208 could only be paid for a specific purpose to defray expenses for construction of a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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