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TMI Blog2017 (9) TMI 1930X X X X Extracts X X X X X X X X Extracts X X X X ..... ted:- 13-9-2017 - SH. N. K. SAINI, AM AND SH. K. N. CHARY, JM For the Assessee : Sh. Ajay Kumar Agarwal, CA Sh. Saurabh Agarwal, CA For the Revenue : Sh. S. P. Gupta, Sr. DR ORDER Per N. K. Saini, AM: These two appeals by the department are directed against the separate orders each dated 28.05.2014 of ld. CIT(A)-XVI, New Delhi. 2. Since the issues involved are common and the appeals were heard together so these are being disposed off by this consolidated order for the sake of convenience and brevity. 3. First we will deal with the appeal in ITA No. 4560/Del/2014 for the assessment year 2011-12. Following grounds have been raised in this appeal: 1. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the interest income amounting to ₹ 2,82,05,091/- by not appreciating the fact the provision laid down in section 5 of the Income Tax Act wherein it has been clearly mentioned that the total income of a person includes all the income earned (received) or deemed to be earned (received) by the person in the previous year. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We have considered the submissions of both the parties and carefully gone through the material available on the record. It is noticed that an identical issue having similar facts was a subject matter of the departmental appeal for the assessment year 2010-11 in ITA No. 6016/Del/2013 in the case of ACIT, Circle-13(1), New Delhi Vs NTPC Tamil Nadu Energy Co. Ltd., New Delhi wherein the issue has been decided in favour of the assessee and against the department vide order dated 15.02.2016 and the relevant findings have been given in para 5 6 which read as under: 5. We have heard the submissions of both the parties, perused the materials available on record, case laws cited by ld. Counsel for assessee, assessment order and the order of the ld. CIT(A). We find that the ld. CIT(A) has elaborately discussed the issue and gave his finding vide para No. 4.1 to 4.9 at page No. 8 to 13 of the impugned order. For the sake of convenience, the relevant finding of the ld. CIT(A) is reproduced below: 4.1 I have carefully considered the facts of the case, the findings of the AO as well as the submissions of the A/R of the appellant. Both the Grounds of appeal are directed against additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .e.f. 29/11/2012, unit - II w.e.f. 25/08/13 and unit 3 is yet to be commissioned. By end of financial year 31-03-2010 the assessee company had raised share holders fund of ₹ 905.5 crores and had borrowed funds in the form of secured loan of ₹ 1808.27 crores. These funds were essentially utilized during the initial period of construction from A.Y. 2004-05 to A.Y. 2010-11 for conducting survey, investigation preliminary expenses, for purchasing land, for infrastructure development work and for disbursement as advance to the contractors engaged for construction of power plant etc. 4.4 Further, there is no finding given by the AO that advances were made by the appellant out of surplus fund. From the balance sheet it is observed that as against the above funds of ₹ 2713.77 crores (without considering amounts due to sundry creditors), sums aggregating to ₹ 2998.02 crores were used for acquiring / construction of fixed assets. Against the liabilities and provisions aggregating to ₹ 293.45 crores, bank and cash balances was ₹ 4.74 crores only. Further, the debit balance of Profit and Loss Account as appearing in the Balance Sheet as on 31.03.2010 wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e staff by the assessee. Secondly, hire charges for plant and machinery which was given to the contractors by the assessee for use in the construction work of the assessee, and thirdly, interest from advances made to the contractors by the assessee for the purpose of facilitating the work of construction. The activities of the assessee in connection with all these three receipts are directly connected with or are incidental to the work of construction of its plant undertaken by the assessee. Broadly speaking, these pertain to the arrangements made by the assessee with its contractors pertaining to the work of construction. To facilitate the work of the contractor, the assessee permitted the contractor to use the premises of the assessee for housing its staff and workers engaged in the construction activity of the assessee's plant. This was clearly to facilitate the work of construction. Had this facility not been provided by the assessee, the contractors would have had to make their own arrangements and this would have been reflected in the charges of the contractors for the construction work. Instead, the assessee has provided these facilities. The same is true of the hire cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re before the apex court in the case of Tuticorin Alkali Chemicals and Fertilizers Ltd. v CIT. The distinction drawn by Delhi High Court, was that that there was a finding of fact recorded in the case before the apex court that whatever money was deposited in the bank was essentially found to be the surplus funds in the hands of that company and the very purpose of making fixed deposits was to earn interest on such surplus money. Apex court under those peculiar circumstances, had held in Tuticorin Alkali Chemicals that interest income arising on surplus funds, was chargeable to tax as income from other sources. 4.7 In identical issue in the case of NTPC Sail Power Company (P) Ltd. vs. CIT in ITA No. 1238, Hon'ble Delhi High Court in its decision on 17/07/2012 held that:- It is no doubt correct that the proviso to section 36 (1) (iii) of the Income Tax Act enacts that any amount of the interest paid towards ( in respect of) capital borrowed for acquisition of an asset or for extension of existing business regardless of its capitalization in the books or otherwise, for any period beginning from the date on which the capital was borrowed for acquisition of the asset till t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.'' 4.9 In view of the above factual and legal positions in the instant AY 2010-11 since the work of construction of the power plant was under progress, interest incomes are also inextricably linked with the setting up of the power plant and such incomes have gone on to reduce the expenses for setting up of the plant and as there was no surplus funds available with the appellant company, therefore, such income is required to be capitalized to be set off against the pre operative expenses. As such the A.O. is not justified in adding the sum of ₹ 1,75,74,129/- as income from other source u/s 56. The appeal is allowed in ground nos. I 2 of appeal. 6. In the background of the aforesaid discussion and the precedents, we are of the view that the ld. CIT(A) has passed a well reasoned order which does not need any interference on our part. Hence, we uphold the same. Accordingly, the appeal of the Revenue is dismissed. 8. Against the aforesaid order dated 15.02.2016, the department preferred an appeal before the Hon ble Jurisdictional High Court in ITA No. 541/2016 wherein vide order dated 20.09.2016, the order of this Bench of the Tribunal was affirmed. 9. Si ..... X X X X Extracts X X X X X X X X Extracts X X X X
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