9911796707
TMI Blog2018 (2) TMI 1763X X X X Extracts X X X X X X X X Extracts X X X X ..... filed by assessee against the order dated 04th May, 2017 passed by Ld.CIT(A)-18 for assessment year 2013-14 on the following grounds of appeal: 1. The Ld.CIT has erred in holding that decision of the Supreme Court in Tuticorin Alkalies Fertilizers Ltd. 227 ITR 172 would apply to interest earned during the period of setup of industry rather than the subsequent decisions of the Supreme Court in CIT vs. Bokaro Steels Ltd. 236 ITR 315 and Bongaigoan Refinery Petrochemicals Ltd. 251 ITR 329 which were followed by the jurisdictional High Court of Delhi in a number of cases. 2. The Ld.CIT should have clearly held that the figure of interest earned during the year is higher by ₹ 3,62,05,644/- and it should be reduced. 3. That the above grounds are independent and without prejudice to each other. 4. That the appellant seeks leave to add, amend, alter, abandon or substitute any of the above grounds during the hearing of appeal. 2. Brief facts of the case are as under. Assessee filed its return of income on 28/11/13 declaring nil income. The return was processed and case was selected for scrutiny. Accordingly notices under section 143(2) and 142(1) was issued t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s capitalised, and/or to be amortised after the start of commercial production in accordance to the accepted principles of accounting and applicable provisions of law. Ld. counsel submitted that assessee had bank deposits which were pledged to the bank as margin for LC etc; suppliers and contractors as order advances or as security deposits with authorities in connection with setting up of manufacturing facility. It was submitted that assessee had kept temporarily, surplus funds out of funds raised as share capital and borrowings for setting up the factory as bank deposits, till they were actually defrayed. Small advances were also given to employees as per service rules, against which the interest earned has been ultimately credited to the expense during construction account. Ld.AR submitted that similar and identical treatment of deposits were accepted during the preceding assessment year being 2012-13 in the regular scrutiny assessment, a copy of which has been enclosed in the paper book at page 5. 2.6. Ld.AR submitted that during the year under consideration assessee earned a total interest of ₹ 1643.90 Lacs on the money is kept as deposits which was credited to expens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Other recoverable 2,63,071 Total 3,85,60,108 5,29,368 These interest income has been, inter alia, capitalised by the assessee as shown in Note 12 under the head Capital work in progress. As at 31.3.2013 For the year Ended 31.3.2013 As at 31.3.2012 D. Income From: Interest income as short term deposits (20,05,96,284) (16,43,90,640) (3,62,05,644) Interest received on advances (8,15,33,393) (5,01,36,400) (3,13,96,993) Other receipts (4,28,830) (4,28,830) - Sale of scrap (22,77,129) (22k,77,129) - Total(D) (28,48,35,636) (21,72,32,999) (6,76,02,637) Thu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he heads provided under section 14 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. See Mazagaon Dock Ltd. v. CIT/Excess Profits Tax [1958] 34 ITR 368 (SC) and Narain Swadeshi Weaving Mills v. Commissioner of Excess Profits Tax [1954] 26 ITR 765 (SC). Where 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 Commissioner of Income-tax (Appeals) that the monies which were inducted into the joint venture company by the joint venture partners 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 Tokyo Mitsubishi Bank, will result in the character of the funds being changed, in as much as, the interest earned from the bank would have 'a hue different than that of business and be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ualification by MPSEB. An amount of ₹ 6 crore submitted by assessee to MPSEB was returned by MPSEB amounting to ₹ 5.65 crores. Assessee then got issued 10 fixed deposits of 1 crore each, interest on which was adjusted against preoperative expenses. It was under these circumstances that the Tribunal had held that the income earned would be revenue in nature and was liable to be treated as income from other sources. The order of the Tribunal therein was upheld by Hon ble Delhi High Court subsequently. 3.6. In the facts of the present case assessee reduced the capital work in progress by setting of the interest earned from the deposits. Ld. AO applied the ratio laid down by Hon ble Supreme Court in the case of Tuticorin Alkali Chemicals and Fertilisers Ltd vs. CIT reported in 227 ITR 172, and treated the interest as income from other sources. On a careful perusal of the facts placed before us we observe that the borrowed funds, as well as funds received as share capital from Promoters were temporarily placed with bank has to be treated as income from business or profession. Hon ble Supreme Court in the case of CIT versus Bokaro Steel Ltd., reported in 236 ITR 315 has he ..... X X X X Extracts X X X X X X X X Extracts X X X X
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