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TMI Blog2017 (10) TMI 680X X X X Extracts X X X X X X X X Extracts X X X X ..... ably linked with the power project. The other decisions relied upon by the learned Sr. Counsel including the decision in case of CIT v/s Karnal Co–operative Sugar Mills Ltd. (1999 (4) TMI 7 - SUPREME Court) express similar view. That being the case we hold that the interest earned on fixed deposit is capital receipt and has to be set–off against pre–operatives expenditure thereby will go to reduce the cost of CWIP. Ground raised by assessee is allowed. - ITA no.5076/Mum./2016 - - - Dated:- 11-9-2017 - SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER For The Assessee : Shri J.D. Mistry, Sr. Counsel a/w Shri Niraj Sheth For The Revenue : Shri Saurabh Kumar Rai ORDER PER SAKTIJIT DEY, J.M. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p of power plant will go to reduce the cost of the asset. Therefore, the receipt being capital in nature cannot be taxed as income but has to be reduced from the capital work in progress. In support of such contention, the assessee relied upon the decision of the Hon'ble Supreme Court in CIT v/s Bokaro Steel Ltd., [1999] 236 ITR 315 (SC) and few other decisions. The Assessing Officer, however, did not find merit in the submissions of the assessee and relying upon the decision of the Hon'ble Supreme Court in Tuticorin Alkali Chemicals and Fertilisers Ltd. v/s CIT, [1997] 227 ITR 172 (SC), taxed the interest income as income from other sources. Being aggrieved of the addition made by the Assessing Officer the assessee preferred appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulsorily convertible preference shares of the assessee company which resulted in enhancing the net worth of the company to ₹ 60,62,14,526. Thus, on the basis of such net worth, the assessee could participate in bid and being successful was awarded the contract to set up the power plant. He submitted, out of the proceed received from issue of equity shares, the assessee invested a sum of ₹ 40 crore in fixed deposits with HDFC Bank Ltd. on 1st March 2012 since, such fund was immediately not required for setting up a project. He submitted, the assessee entered into an Engineering Procurement and Construction (EPC) contract on 29th May 2012, with Larsen Toubro Ltd. to develop the 20 MW Solar Photo Voltaic Power Plant in Phaladi, R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions: i) CIT v/s Bakaro Steel Ltd., [1991] 236 ITR 315 (SC); ii) CIT v/s Karual Co operative Sugar Mills Ltd. [2001] 243 ITR 2; iii) CIT v/s Koshika Telecom Ltd., [2009] 287 ITR 479; iv) Indian Oil Panipat Power Consortium Ltd. v/s ITO, 230 CTR 199; 7. Learned Departmental Representative on the other hand relying upon the observations of the Assessing Officer and the learned Commissioner (Appeals) submitted that interest income earned on fixed deposit during the pre construction period is assessable as income from other sources. In support of his contention, learned D.R. relied upon the decision of the Hon'ble Supreme Court in Tuticorin Alkali Chemicals and Fertilisers Ltd. (supra). 8. We have heard rival ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y required for implementation of the power project. It is also evident that the assessee only on 29th May 2012, entered into a EPC contract with Larsen Toubro Ltd. for developing the 20 MW Solar Photo Voltaic Power Plant. These facts clearly demonstrate, the funds required for setting up of power project was temporarily parked in fixed deposit, thereby, indicating that the interest earned on such fixed deposit has an immediate and proximate nexus with the setting up of power project. Notably, the Departmental Authorities have rejected assessee s claim that the interest earned is a capital receipt relying upon the decision of the Hon'ble Supreme Court in Tuticorin Alkali Chemicals and Fertilisers Ltd. (supra). On a careful reading of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that by applying the same reasoning if the assessee receives any amounts which are inextricably linked with the process of setting up of plant and machinery such receipts will come to reduce the cost of its assets, hence, are of capital nature. The ratio laid down by the Hon'ble Supreme Court in Bokaro Steels Ltd. (supra) was followed by the Hon'ble Delhi High Court in Indian Oil Panipat Power Consortium Ltd. (supra). The facts of this case are, the assessee a joint venture company was to set up a power project to effectuate the purpose for which joint venture was created. The joint venture partners contributed share capital which included a sum by way of additional share capital. The said fund, though, was required for purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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