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TMI Blog2018 (2) TMI 1152X X X X Extracts X X X X X X X X Extracts X X X X ..... - Dated:- 15-2-2018 - SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER For The Assessee by : Shri B.K.Mohapatra, AR For The Revenue : Shri Saad Kidwai, CIT DR ORDER Per Pavan Kumar Gadale, JM These are appeals filed by the revenue and cross objections of the assessee against the order of the CIT(A)- 1, Bhubaneswar dated 12.1.2017 for the assessment years 2010-2011 and 2012-13, respectively. 2. Since common issue is involved in both the appeals of the revenue and cross objections by the assessee, they are disposed of by this common order for the sake of convenience. 3. The only common issue taken by the revenue in both the appeas is that the CIT(A) erred in deleting addition of interest income of ₹ 1,73,30,736/- for the assessment year 2010-2011 and ₹ 13,64,57,044/- for the assessment year 2012-13 holding that such interest on FDs cannot be taxed in the hands of the assessee u/s.56 of the I.T.Act. 3. The brief facts of the case are that during the course of assessment proceedings, the Assessing Officer found that the assessee has earned interest of ₹ 1,73,30,736/- for the assessment year 2010-2011 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the share capital and it is in the nature of trade operative business activity and, therefore, the income has to be taxed under the head income from other sources . However, ld D.R. on this disputed issue conceded that the issue is covered by the decision of the Tribunal in assessee s own case for the assessment years 2006-07 to 2008-09 (supra). We find that the coordinate of this Tribunal while considering this issue has held as under: We have heard the rival parties and perused the material available on record. On our careful consideration of the facts and circumstances of case as brought on record by the authorities below, we are inclined to find the contention of the learned Counsel of the assessee appropriate to the extent that it was never a change of stance on the facts remaining the same beginning from Assessment Year 2006-07. It was a misconstruction of the facts for the purpose of finding applicability of the provisions of law enunciated by the Hon'ble Apex Court in the case of Tuticorin Alkali Chemicals Fertilizers Ltd v. CIT (supra). The law enunciated in the case of Tuticorin Alkali Chemicals Fertilizers Ltd v. CIT(supra) cannot alone be considered as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of fact by the Commissioner of Income-tax (Appeals) that the monies which were inducted into the joint venture by the Koreans were primarily infused to purchase land and to develop infrastructure then it cannot be held that the income derived by parking the funds temporarily with Bank, will result in the character of the funds being changed, inasmuch as, the interest earned from the bank would have a huge different than that of business and be brought to tax under the head Income from other sources . It is well-settled that an income received by the assessee can be taxed under the head Income from other sources only if it does not fall under any other head of income as provided in section 14 of the Act. The head Income from other sources is a residuary head of income. In the instant case, it was clear upon a perusal of the facts as found by the authorities below that the funds in the form of share capital were infused for a specific purpose of acquiring land and the development of infrastructure. Therefore, the interest earned on funds primarily brought for infusion in the business could not have been classified as 'income from other sources Since the income was earne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany and the payments received for such utilisation are directly linked with the activity of setting up the steel plant of the assessee. These receipts are inextricably linked with the setting up of the capital structure of the assessee company. They must, therefore, be viewed as capital receipts going to reduce the cost of construction. Merits for consideration as brought on record for the AYs in appeal before us are as under : Rs. in Lakhs Particulars. As on 31.3.2006 As on 31.3.2007 As on 31.3.2008 1. Share Capital 22500.00 22500.00 22500.00 2. Land(CWIP) 307.00 664.74 1440.85 3. Bank Deposit. 19190.00 1289.00 - 4. Interest from Bank 637.44 1,04.17 432.67 5.Pre-operative Expenses. 629.76 3736.28 5280.69 The returns filed by the assessee for the AYs 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the Assessment Year 2008-09 the interest cannot be taxed as income from other sources in the hands of the assessee and therefore, the subsequent disallowance of expenses claimed at 10% to earn that income has been infused in the total project cost cannot be disallowed insofar as the whole of the income has been capitalized was rightly considered for revision by the assessee before the Assessing Officer filing NIL return. The appeal for the Assessment Year 2008-09, therefore, is allowed on the basis of facts and figures brought on record by the Assessing Officer as well as the learned CIT(A) and as mentioned above. However in view of the principles laid out above, we are inclined to restore the issue to the file of the Assessing Officer for the Assessment 2006-07 and 2007-08 to consider the case of the assessee de novo on establishing the fact that the interest has been earned on the parking of share generated as was considered by the Hon'ble Apex Court insofar as the earning of interest has been capitalized by reducing the project cost to be amortized has to be considered as a nullity after verification. Needless to say, an opportunity of being heard to the assessee be grant ..... X X X X Extracts X X X X X X X X Extracts X X X X
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