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TMI Blog2023 (12) TMI 1024X X X X Extracts X X X X X X X X Extracts X X X X ..... n both the appeals is with regard to the relief given by the CIT(A) by deleting the addition made by the Assessing Officer holding that the interest earned by the assessee from short term investments in unutilized funds is capital receipt. 3. The assessee company was formed in the year 2010 and is in the process of developing port facilities at Karanja in the state of Maharashtra. The assessee received share capital of Rs. 449.86 crores from Karanja Terminal Logistics Ltd Cyprus Ltd. The Initial Public Offering (IPO) was raised for the specific purpose of developing multipurpose port terminal facility and logistics facility at Karanja Creek. The assessee filed the return of income on 31/03/2017 for A.Y. 2016-17 and on 12/10/2018 for A.Y. 2017-18 declaring nil income. The case was selected for scrutiny and the statutory notices were duly served on the assessee. For the assessment year 2016-17, the assessee has received an interest income of Rs. 30,99,26,463/- and for A.Y. 2017-18, the assessee earned an interest income of Rs. 22,00,00,010/-. The assessee had shown the interest received as a capital receipt and has not credited the said amount in the P L Account. 4. The Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. In the notes to accounts, the assessee in Sr. No. 2.5 of revenue recognition has stated that all incomes and expenditure are accounted on accrual basis except where stated otherwise. Therefore, the interest on ICDs maintained with NBFCs and banks are accrual in nature and need to be offered for tax on accrual basis, which has not been done by the assessee in his return of income, since he has declared return of income as Nil. 5. CIT(A) has also dismissed the appeal of assessee and confirmed the issue in the favour of revenue from A.Y. 2013-14 2015-16. 5. Aggrieved, the assessee filed appeal before the CIT(A). The CIT(A) deleted the addition by relying on the decision of the co-ordinate bench in assessee s own case for A.Y. 2013-14 to 2015-16. Aggrieved, the revenue is in appeal before the Tribunal. 6. The Ld.AR submitted that this is a recurring issue in assessee s own case from A.Y. 2013-14 onwards and that the coordinate bench of the Tribunal has been consistently holding the issue in favour of the assessee that the interest received by the assessee is capital in nature. The Ld.AR further submitted that the facts for the current year being identical, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oard bearing ref. no. MMB/Planning -1/KIPL/Maint. Dredging/249, dtd.21 st Jan.2017 granting extension for dredging/249, dtd. 21 st Jan.2017-granting extension for dredging work. 11 KTPL letter dated 23 rd August 2017 addressed to Maharashtra Martitime Board, providing Project update of Karanja Port 12 7 KTPL letter dated 4 th April 2018 seeking extension of Term of Deed of Lease / Expansion of Port Limit 13-17 8 Letter from Maharashtra Maritime Board bearing ref. no. MMB/Planning-2/Karanja Terminal 75-2018/2288. Dtd. 11 th May, 2018 extending the period of lease from 30 years to 50 years and providing additional 200 Acres land with 1000 metres of waterfront. (Marathi transcript ). 18-19 9 Letter from Maharashtra Maritime Board bearing ref. no. MMB/Planning-2/Karanja Terminal/75-2018/2288. Dtd 11 th May, 2018 extending the period of lease from 30 years to 50 years and providing additional 200 Acres land with 1000 metres of waterfront. (Englis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectly 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 contractor; pertaining to the work of construction. To facilitate the work of the contractor, the assesses permitted the contractor to us 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 had provided these facilities. The same is true of the hire charges for plant and machinery which was given by the assessee to the contractor for the assessee's construction work. The receipts in this connection also go to compensate the assessee for the wear and tear on the machinery. The advances which the assessee made to the contractor to facilitate the construction activity of putting together a very large project was as much to ensure that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of Tuticorin Alkali-Chemicals Fertilisers Ltd. will not be attracted. In the present case also the interest is earned on FDRs/ICDs made out of unutilized funds meant for port development which could not be used due to various beyond the control of the assessee. Similarly, we have perused carefully the other decisions relied upon the in defense of his arguments and are of the view that the ratio coming out of those decisions squarely applies to the assessee s case. Now we relied by the id DR as under: Interest on bank deposits made out of loans and borrowings for setting up the factory of the company is taxable as income from other sources. The facts of this case are distinguishable from that of assessee's case as in the assessee case the funds were raised by way share capita! and therefore not applicable arid distinguishable. In the case of Shree Krishna Polyster Ltd (Supra) the facts are distinguishable as the assessee is carrying on the business and interest on surplus funds in short term deposits with the banks was offered as business income whereas the Hon'ble Bombay Court held that such income is assessable as income from other sources. So the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , tribunal held that in case the surplus fund arises out of loans from various banks and financial institutions and the decision of the Tuticorin Alkali Chemicals Fertilizers Ltd is applicable and accordingly the interest earned is taxable under the head Income from Other Sources. The ld DR has also relied on the decision of the Hyderabad in the case of Thermal Powertech Corporation India Ltd. (Supra). The facts of the case are different as in that KJ interest income was earned out of the borrowed funds. The head note of the decision slates: where company formed to build, own and operate a power plant, deposited unutilised borrowed funds in short term fixed deposits during construction of power, plant, interest earned on those deposits was to be taxed as income from other sources - Held yes. 20. So far as the provisions of section 115JB are concerned, in the Asst year 2013-14 2014-15 the assessee has credited the interest received in the P L account however, in the statement of total income the same is reduced being capital receipt. In the notes forming part of the financial accounts for the asst year 2013-14 and 2014-15 it is mentioned that Interest Income accrue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed from book profit because capital receipt cannot be considered as a part of book profit liable to tax. In the case of DCIT, c-XXVIII V/s. Binani Industries Ltd., 178 TTJ 658(Kol) ITAT the facts were that on receipt of forfeiture of share warrants being capital receipt would hot be liable for book profits tax under section 115JB of IT Act. 1961. The genesis of Sec 115J, thereafter section 115JA and now section 115JB was to ensure that the assessee, while making profit from operations, should not enjoy tax free status due to various deductions available under the Income Tax Act. There was never any intention of the legislature to tax what is not income at all. in the case of ACIT, Circle-2 V/s. Shree Cement Ltd., ITA NO.614, 615 635/JP/2010.152 ITR 561 (Jaipur ITAT) the issue is as to whether sales tax subsidy received which was admittedly capital in nature can be subjected to MAT. The ITAT held that there was never any intention behind introduction of section 115JB to tax something which is not taxable at all. 21. In the case of Veekaylal Investment Co. Pvt. Ltd. 249 ITR 597(Bom) the Hon'ble Bombay High Court has held that direct transfer of an item to ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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