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TMI Blog2015 (7) TMI 1231X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, in my view, the income on FDRs is required to be capitalized to be reducd from the capital work-in-progress, and is fully covered by the ratio of the judgment of the Hon'ble Supreme Court in the case of CIT v/s Bokaro Steel Ltd., [1998 (12) TMI 4 - SUPREME Court], and not by the judgment of Hon'ble Supreme Court in Tuticorin Alkali Chemicals & Fertilisers Ltd. (1997 (7) TMI 4 - SUPREME Court a), as contended by the Revenue. Thus conclude by holding that the assessee has rightly reduced the said interest income from the capital work-in-progress, because the funds deployed are only for an ultra short period which in inextricably linked with the project. Hence, set aside the impugned order passed by the learned Commissioner (Appeals) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it from Corporation Bank amounting to ₹ 7,35,675, and it was observed by the Assessing Officer from audit report that the assessee has netted off interest earned on fixed deposits of ₹ 7,35,674, against various expenditures under the head Project Development Expenses . It was also observed by the Assessing Officer that the assessee has not commenced business during the impugned assessment year and, hence, netting off of interest cannot be allowed against the project development expenditure. The assessee submitted before the assessing authority that it is in the business of development of commercial, retail and entertainment complexes. During the current year, the assessee was engaged in a project of development of integrated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tand which was rejected by the learned CIT(A). Aggrieved, the assessee is in further appeal before the Tribunal. 4. The learned Counsel for the assessee contended before me that the assessee is engaged in the business of development of commercial, retail and entertainment complex. The assessee took me through the audited accounts for the year ending 31st March 2010 which showed that ₹ 359.04 crore has been invested towards the fixed assets including capital work-in-progress. The assessee said that there is no income earned during the year as the capital work-in-progress was there for the construction and development of an integrated market complex at White Field, Bangalore. The assessee submitted that it has raised loans of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g-up of the project. 5. The learned Departmental Representative relied upon the orders of the authorities below and submitted that in view of the decisions of the Hon'ble Supreme Court in Tuticorin Alkali Chemicals Fertilisers Ltd. (supra), this addition needs to be upheld. 6. I have heard the rival contentions and perused the material available on record. It is observed that the assessee is engaged in the business of construction of shopping centers, shopping malls, arcades, as per the main object of memorandum of association of the assessee company. In the current year, assessee is engaged in the development of an integrated market complex at White Field, Bangalore, and the said project is still under the implementation stage. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for a very short period of time. The details are placed in the paper book at Pages-23 to 25, which show that the FDRs are placed for periods ranging from 10 to 30 days. The learned Representative explains that the term loan was borrowed for the purpose of the project and in the interregnum i.e., between the date of receipt of loan funds from bank and its disbursal towards the project, assessee used to place it temporarily for an ultra short period in FDRs, which have yielded income. The aforesaid fact/situation is not in dispute. Thus, it is quite apparent that the funds deployed in FDRs are tied up funds and not surplus funds. Rather, in my considered opinion, the impugned funds are inextricably linked to the development and construction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is that if income is earned, whether by way of interest or in any other manner on funds which are otherwise inextricably linked to the setting up of the plant, such income is required to be capitalized to be set off against pre-operative expenses. 8. In the case before the Hon'ble Delhi High Court, issue related to the treatment to be accorded to the interest earned the monies received as share capital by the assessee which were temporarily put in a fixed deposit awaiting acquisition of land which had run into legal entanglements. The Revenue treated such income as income under the head Income From Other Sources . As per the Hon'ble High Court, since the funds infused in the assessee were inextricably linked with the setti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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