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TMI Blog2017 (10) TMI 372X X X X Extracts X X X X X X X X Extracts X X X X ..... dition of interest earned amounting to ₹ 6,11,95,775/- was made by the AO treating the same as income from other sources. The contention of the assessee before the ld. CIT(A) was also that similar disallowances were also made by the AO in A. Yrs. 2006-07 and 2007-08 against the same loan and the CIT(A) in both the case had deleted the disallowance made by AO holding that interest received on the borrowed fund exclusively for the purpose of setting up of a unit at Orissa is not taxable as interest income. Nothing is addressed by the Revenue against this contention of the assessee. In presence of all these facts and the issue being debatable at various stages, we are of the opinion that it can hardly be said that the assessee had fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion in this regard. 4. That on the facts and in the circumstances of the case the Ld. CIT (A) has erred in law by not appreciating that a sum of ₹ 132.89 lacs de-capitallized to Orissa Projects is already assessed to tax under the head short term capital gain. 5. That on the fact and in the circumstances of the case the Ld. CIT (A) has erred in law by not appreciating that in the above sprit the interest income of ₹ 6,11,95,775/- was also proposed to be an income to be assessed. Also, the fund raised for expansion of the Orissa Project was temporarily invested to earn invested to earn interest income capital gain. 6. The Ld. CIT (A) while deleting the penalty has ignored the fact that this is a case of under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of investment transferred to Orissa Project. The AO also imposed penalty on this addition u/s. 271(1)(c) of the Act, observing that the assessee had furnished inaccurate particulars of income. The ld. CIT(A) in appeal deleted the penalty relying on various decisions of Hon ble Supreme Court and High Courts vide impugned order, which has been challenged by the Revenue by way of this appeal before the Tribunal. 3. Reiterating the grounds of appeal and relying on the penalty order, the ld. DR submitted that the ld. CIT(A) was not justified in deleting the penalty ignoring the fact that the assessee had furnished inaccurate particulars of its income by reducing the interest earned on investment of borrowed funds from the interest incurred on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the Assessing Officer, as also reflected from the books of account of the assessee. The addition of interest earned amounting to ₹ 6,11,95,775/- was made by the AO treating the same as income from other sources. The AO had relied on the decision of Hon ble Supreme Court in Tuticorin Alkali Chemicals and Fertilizers Ltd. , 227 ITR 172, and the assessee relied on the decision of jurisdictional High Court in NTPC SAIL Power Company Pvt. Ltd. vs. CIT dated 17.07.2012 on the issue of this addition. The assessee has adopted the method of setting off the interest earned on borrowed funds from the interest incurred on such funds. The ld. CIT(A) in the impugned order has observed that from the revenue point of view, whereas income has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is his alternative contention that if the interest income is taxed as income from other sources then deduction should be allowed on the interest expenditure for earning such interest income as per the provisions of section 57(iii). We find merit in the alternate contention of the ld. Counsel for the assessee. The assessee has submitted before the lower authorities that the interest received of ₹ 6,11,95,775/- is on account of investment out of loan funds raised for the Orissa Project. Copy of the loan sanction letter in respect of Orissa project was also submitted during the assessment proceedings. The assessee had categorically submitted before the lower authorities that such interest expenses and the interest income as a resul ..... X X X X Extracts X X X X X X X X Extracts X X X X
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