9911796707
TMI Blog2009 (2) TMI 232X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee has received an interest income of Rs. 1,72,42,199 which consisted of an amount of Rs. 68,36,851 towards interest on advances given to the contractors and an amount of Rs. 1,04,05,348 as interest on amount advanced to New Mangalore Port Trust (NMPT). The assessee treated the amount as income earned during the pre-operative period on the refinery which is under construction (in Phase-II) and adjusted the amount in the work-in-progress. The AO treated the same as income under the head 'Other sources' and brought to tax separately. The learned CIT(A) has considered the submissions of the assessee and while upholding that the decision of the Hon'ble Supreme Court in the case of CIT vs. Bokaro Steel Ltd. (1999) 151 CTR (SC) 276 : (199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f loan advanced to the NMPT the learned counsel submitted that the advance was given as a part of the expansion project and so the interest income, following the same ratio, will apply to the above also and this amount also is to be adjusted in the pre-operative expenditure. He distinguished the decision of the Hon'ble Supreme Court in the case of Tuticorin Alkali on facts. It was his submission that the entire interest income was received as part of the refinery under construction and since the refinery was still in expansion and has not yet capitalised in the books of account the income would go to reduce the capital work-in-progress and accordingly the order of the learned CIT(A) is not correct. He also referred to various agreements and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the appellant is concerned, the same is covered by the decision of the Hon'ble Supreme Court in the case of CIT vs. Bokaro Steel Ltd. relied upon by the appellant and not by the decision of the Hon'ble Supreme Court in the case of Tuticorin Alkali relied by the AO because the facts of the case are exactly on fours with the facts of the case of Bokaro Steel Ltd., wherein the interest from advances given to the contractors for execution of the various projects of the appellant was treated as business income. Accordingly the interest of Rs. 68,36,851 is held as business income." 7. With reference to the advance given to the NMPT, the assessee in the course of business has entered into an agreement with NMPT vide MoU dt. 9th Feb., 2000 for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... direction that the amount may have to be adjusted in the work-in-progress. On that the assessee is aggrieved. 9. We are in agreement with assessee's contention that once the principles established by the Hon'ble Supreme Court in the case of Bokaro Steel Ltd. is accepted the interest received from advances given to the contractors would go to reduce the cost of construction. Consequently, even though it is treated as part of business income the same is to be adjusted in the work-in-progress. Accordingly the learned CIT(A)'s order to that extent is modified and the AO is directed to adjust the amount of Rs. 68,36,851 in the work-in-progress, which is yet to be capitalised. With reference to the interest received on advance given to the NMPT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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