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TMI Blog2017 (4) TMI 515X X X X Extracts X X X X X X X X Extracts X X X X ..... ance given to the contractor were for the purpose of contract work of laying down the railway line and intrinsically connected with the capital expenditure of the appellant prior to the commencement of its business. Thus the interest income earned by the assessee from mobilization advance to contractor Railway Vikash Nigam Ltd., is rightly treated by the assessee as capital receipt which goes on to reduce the cost of capital work in progress. Therefore, delete the addition and allow the grounds of appeal of the assessee. - ITA No. 197/CTK/2016 - - - Dated:- 7-4-2017 - Shri N. S. Saini, Accountant Member Assessee by : Shri P.Venugopala Rao, AR Revenue by : Shri D.K.Pradhan, DR ORDER This is an appeal filed by the assessee against the order of CIT(A)-3, Bhubaneswar, dated 29.2.2016, for the assessment year 2012-13 . 2. The assessee has raised the following grounds of appeal: 1.On the facts and circumstances of the case the Assessing Officer (AO) has erred in computing the assessable income of the appellant at ₹ 38,31,340/- as against returned income of ₹ 11,91,916/-. 2. On the facts and circumstances of the case the AO has erred in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e veracity of the same questioned. But the issue under consideration was the treatment of interest on mobilization advance so made. Now following the decision of Hon ble Supreme Court in the case of Tuticorin Alkali Chemicals and Fertilisers Ltd vs CIT, 227 ITR 172 (SC), it was business expediency for the assessee to keep the money received on share issue in bank account till the funds were utilized. Here also, it was the business expediency to give mobilization advance but just as in Tuticorin Alkali Chemicals and Fertilsiers Ltd (supra), the interest so received is taxable as income from other sources. 5. On appeal, the CIT(A) held that in the case of the assessee, the share capital which was not immediately utilized for construction process of railway line were placed with banks and with contractors as short term deposit and confirmed the action of the Assessing Officer for taxing the interest income received under the head income from other sources . 6. Before me, ld Authorised Representative of the assessee submitted that the Hon ble Gujarat High Court in the case of CIT vs. Sardar Sarovar Narmada Nigam Ltd., (2014) 364 ITR 477 (Guj) has held under: (ii) That the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it cannot be said that the business has been set up. He submitted that considering the decision of Hon ble Gujarat High Court in the case of Sardar Sarovar Narmada Nigam Ltd.,(supra), it can be safely concluded that the decision of Mumbai Tribunal in the case of Whistling Woods International (supra) is not applicable to the case of the assessee. 9. He further submitted that the Ahmedabad Special Bench of the Tribunal in the case of Sardar Sarovar Narmada Nigam Ltd., vs ACIT, (2012) 19 ITR (Trib) 133 (Ahd)(SB) has held that till such time the business is set up, all expenses even if in the nature of revenue expenses will have to be capitalized. Further, the Hon ble Supreme Court in the case of CIT vs. Bokaro Steel Ltd, 236 ITR 315 (SC) held that no activity was carried out to do any earning but all actions undertaken in the execution of the project therefore, any income earned on that process would go to reduce the cost of project. 10. He further submitted that same view was taken by Hon ble Uttarakhand High Court in the case of CIT vs. Tehri Hydro Development Corporation Anr (2009) 25 DTR (UK) 100 with respect to interest earned on rental income earned from contractor duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e business has not yet commenced. On the other hand as per revenue the interest income is liable to tax under the head income from other sources in view of the decision of Hon ble Supreme Court in the case of Tuticorin Alkali Chemicals and Fertilisers Ltd (supra). 15. On appeal, the CIT(A) confirmed the action of the Assessing Officer for the reason that the assessee utilized his surplus funds by lending the same to the contractors as short term deposit and earned interest therefrom. 16. I find that the Assessing Officer in the assessment order has stated that it is found that the assessee company is shown to have earned interest on mobilization advance given to contractors for execution of project amounting to ₹ 26,39,428/-. The Assessing Officer has also observed in his order that neither there was any doubt on its necessity nor was the veracity of the same questioned. But the issue under consideration was the treatment of interest on mobilization advance so made. Therefore, he brought the interest income of ₹ 26,39,428/- to tax under the head income from other sources following the decision of Hon ble Supreme Court in the case of Tuticorin Alkali Chemicals an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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