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TMI Blog2017 (12) TMI 1353X X X X Extracts X X X X X X X X Extracts X X X X ..... as under: "1. On the facts and circumstances of the case and in law, Ld. CIT(A) has erred in not considering the interest income as taxable u/s.56 of the Income Tax Act, 1961, as held by Supreme Court of India's decision in the case of Tuticorin Alkali Chemicals & Fertilizers Ltd. [227 ITR 172(SC)] 2. The CIT(A) has erred in applying the ratio of Supreme Court of India's decision in the cases of Bokaro Steel Ltd. and Karnal Co-operative Sugar Mills Ltd. In those cases deposits are directly linked with purchases of assets intrinsically connected with construction of plant but in this case facts are different. The assessee company had surplus fund out of share capital/share application which were deposited in banks for earning interest income, therefore same is taxable u/s. 56 of the I.T. Act. 3. The appellant craves leave to add, alter, amend or modify the grounds of appeal during the course of hearing proceedings of this case." 5. The brief facts qua the issue are that the assessee filed its return of income for the Assessment Year 2010-11 on 29.09.2010, declaring income at Rs. 'NIL'. The said return was processed u/s 143(1) of the IT Act, 1961. Thereafter, theassess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... audited accounts, as amount received during pre-operative period. The A.O in the assessment under section 143(3) of the Act had treated the interest income as revenue receipts and brought the interest income amounting to Rs. 54,86,324/- on short-term bank deposits to tax under the head, "income from other sources". It was clear from documents on record that as per book results of the assessee company, the interest income was accrued during the pre-operative period. During the appellate proceedings, the assessee company relied on the judgment of Delhi High Court in the case Indian Oil Panipat Power Consortium Ltd. v. ITO (2009) 315 ITR 255 (Del), whereinit was held that since the incomes were earned in a period from prior to commencement of the business, in view of the matter, the monies which were inducted into joint venture company by the joint venture partners, primarily to purchase land and develop infrastructure, the Court observed that it cannot be held to be not connected with the business, merely because the relevant funds were temporarily parked with the Bank. The Hon`ble court held that the income by way of interest earned on such funds cannot be said to be income from ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee company and accordingly he directed the Assessing Officer to delete the addition. 7. Not being satisfied with the order of the ld.CIT(A), the Revenue is in appeal before us. The Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity. On the other hand, the ld Counsel for the assessee has reiterated the submissions made before ld CIT(A) and defended the stand taken by the ld CIT(A). 8. We have given a careful consideration to the rival submissions. We note that the Assessee,(Kolkata Metro Rail Corporation Ltd) is a Government company in the form of joint venture of Government of India and Government of West Bengal with equal equity participation for the execution of East -West Metro Corridor Project at Kolkata by creating a rapid transit system surrounding the City of Kolkata and the District of North 24 Parganas. The required fund has been provided from time to time by Govt. of India and Government of West Bengal in the form of equity and Subordinate Debt/Loans. The total funds received by the Assessee from the respective Governments was put i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the date of setting of the business but prior to commencement is chargeable to tax depending on whether it is of a revenue nature or capital receipt. The income of a newly set up business, post the date of its setting up can be taxed if it is of a revenue nature under any of the heads provided under section 14 of the Act, in Chapter IV of the Act. For an income to be classified as income under the head "Profits and gains of business or profession" it would have to be an activity which is in some manner or form connected with business. The word "business" is of wide import which would also include all such activities which coalesce into setting up of the business. We take support of these propositions from the judgments of Hon`ble Supreme Court in the case of Dock Ltd. vs. CIT/CEPT (1958) 34 ITR 368 (SC) and Narain Swadeshi Weaving Mills vs. CEPT (1954) 26 ITR 765 (SC). Once it is held that the assessee's income is an income connected with business, which would be so in the present case, in view of the finding of fact by the CIT(A) that the monies which were inducted into the joint venture company by the joint venture partners were primarily infused to purchase land and to dev ..... X X X X Extracts X X X X X X X X Extracts X X X X
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