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TMI Blog2017 (8) TMI 953X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of provisions of section 14A r.w.r 8D as the assessee has not claimed any expenditure as the entire expenditure has been capitalized under the head work in progress. We are in agreement with the conclusion drawn by the ld.CIT(A) that the assessee has neither claimed any exempt income as the same was reduced from the capital work in progress and all the expenses were capitalized in the capital work in progress thereby not claiming any expenses out of taxable income and accordingly uphold the same by dismissing the ground taken by the revenue. - I.T.A. No.3191/Mum/2013 - - - Dated:- 22-8-2017 - SAKTIJIT DEY, JM AND SHRI RAJESH KUMAR, AM For The Appellant : Shri Rajesh Kumar Yadav For The Respondent : Shri Vijay Mehta ORDER PER RAJESH KUMAR, A. M: This is an appeal filed by the revenue challenging the order of ld. CIT(A)-14, Mumbai, dated 15.1.2013, pertains to the assessment year 2009-10. 2. Grounds of appeal taken by the assessee revenue are as under : 1. On the facts and circumstances of case and the law, the Ld. CIT(A) erred in deleting the addition for interest earned from the fixed deposit of share application money before commence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision in Bokaro Steel. 3. The brief facts of the case are that the assessee filed return of income on 29.9.2009 declaring an income of ₹ 4,39,504/-. The assessee is a private limited company engaged in hotel construction and hospitality services and total Work-in-Progress as on 31.3.2009 was ₹ 38,08,01,798/-. During the year the assessee earned interest on fixed deposit to the tune of ₹ 94,07,568/- on fixed deposits comprising of ₹ 34,40,144/- from Corporation Bank and ₹ 59,67,424/- from Kotak Mahindra Bank. The said FDR were purchased out of the share application money received by the assessee for the construction of hotel. The assessee upon realization that the funds were not required in the present and near future, the same were put in the fixed deposits. The said interest income from FDRs was reduced and adjusted against the capital work in progress as on 31.3.2009. The assessee has claimed refund on TDS on interest income on FDRs to the extent of ₹ 16,19,059/- in the return of income. Accordingly, the AO issued show cause notice to the assessee as to why interest of ₹ 94,07,568/- received should not be brought to tax under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng on the judgment of Hon'ble Supreme Court in the case of Bokaro Steel Ltd. and Karnataka.Power Corporation. I have perused the decision of Chennai High Court in the case of CIT v. VGR Foundation carefully. The Hon'ble Chennai High Court, in the said decision has distinguished the facts in the case of Tuticorin Alkali Chemicals Fertilizers Ltd. with those in the case of VGR Foundation. The Hon'ble Chennai High Court came to the conclusion that in the event, the interest is earned from out of deposits made from borrowed funds, then it would be in the nature of income. However, if it is from own funds, then the same will not be true. 'Share application monies' do not fall into the category of borrowed funds and do not involve payment of interest. Instead, the Share application monies are in the nature of own funds of a company. The Hon ble Chennai High Court has followed the decisions in the case of Bokaro Steel Ltd., Karnal Co-op Sugar Mills Ltd. and Karnataka Power Corporation. Hence, looking to these judgments which are direct on the issue and squarely applicable to the appellant's case, I am of the considered opinion that interest income received on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zers Ltd. was not applicable at all as it is distinguishable on facts. Whereas, the case of the assessee was directly covered by the above cited decisions and therefore the issue decided by the ld.CIT(A) is a reasoned decision and as per the ratio laid down by the above stated decisions and therefore the same should be upheld. 7. We have carefully considered the rival contentions and perused the material placed before us including the decisions relied upon by ld.AR. The undisputed facts of the case are that the funds were raised by way of share application money by the assessee and when the same were not required immediately in the construction activity, the money was put into the Corporation Bank and Kotak Mahindra Bank in short term deposits which yielded an interest of ₹ 34,40,144/- and ₹ 59,67,424/- respectively. The said interest of ₹ 94,07,568/- was reduced from the capital work in progress as on 31.3.2009 and thus capitalized on the ground that the interest was received out of own money and not out of the borrowed funds. The ld. CIT(A) after following the ratio laid down in the case of DCIT V/s VGR Foundations (298 ITR 132);(MAD) and also after following ..... X X X X Extracts X X X X X X X X Extracts X X X X
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