DCIT, New Delhi v. M/s. Energy Infrastructure India Ltd., New Delhi

ITA 4337/DEL/2010 | 2007-2008
Pronouncement Date: 07-01-2011 | Result: Dismissed

Appeal Details

RSA Number 433720114 RSA 2010
Assessee PAN AAACW1044R
Bench Delhi
Appeal Number ITA 4337/DEL/2010
Duration Of Justice 3 month(s) 15 day(s)
Appellant DCIT, New Delhi
Respondent M/s. Energy Infrastructure India Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 07-01-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 07-01-2011
Date Of Final Hearing 26-11-2010
Next Hearing Date 26-11-2010
Assessment Year 2007-2008
Appeal Filed On 22-09-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `B: NEW DELHI BEFORE SHRI C.L.SETHI JUDICIAL MEMBER AND SHRI K.G. BANSAL ACCOUNTANT MEMBER I.T. A. NOS.2337 & 4337/DEL/2010 ASSESSMENT YEARS: 2006-07 & 2007-08 DY. COMMISSIONER OF INCOME-TAX M/S. ENERGY INFRAS TRUCTURE INDIA LTD. CIRCLE 11(1) NEW DELHI. VS. NO.5 E BLOCK LO CAL SHOPPING COMPLEX MASJID MOTH GREATER KAILASH-II NEW DELHI. PAN: AAACW1044R (APPELLANT) (RESPONDENT) APPELLANT BY: MS. Y.S. KAKKAR SR. DR. RESPONDENT BY: SHRI AKASH SINGHAL CA & SHRI NAVIN JAIN. O R D E R PER C.L. SETHI JUDICIAL MEMBER: THESE TWO APPEALS FILED BY THE REVENUE ARE DIRECT ED AGAINST TWO SEPARATE ORDERS DATED 9.03.2010 AND 30.07.2010 PASS ED BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) PERTAINING TO THE ASSESSMENT YEARS 2006-07 AND 2007-08 RESPECTIVELY. ITA NO.2337/DEL/2010 2. WE SHALL FIRST TAKE UP THE APPEAL PERTAINING TO THE ASSESSMENT YEAR 2006-07. IN THIS APPEAL THE ONLY GROUND RAISED BY THE REVENUE IS AS UNDER:- 2 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWING OF SET OFF OF INTEREST INCOME OF RS.33 10 000/- AGAINST THE PRE-O PERATIVE EXPENSES EXPENDED BY THE APPELLANT. 3. IN THIS CASE THE RETURN OF INCOME WAS FILED ON 30.11.2006 DECLARING TOTAL LOSS OF RS.17 49 09 303/-. THE CASE WAS SELE CTED FOR SCRUTINY BY THE ASSESSING OFFICER. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS NOTICED BY THE AO THAT THE ASSESSEE HAS DEDUCTED A SUM OF RS.33 10 000/- FROM THE PRE-OPERATIVE EXPENSES. THE AFORESAID SUM OF RS.33 10 000/- REPRESENTS THE INTEREST INCOME EARNED ON DEPOSITS L YING WITH VARIOUS BANKS. THE ASSESSING OFFICER OBSERVED THAT THE FUNDS LYING WITH THE BANKS ARE OUT OF THE FUNDS RECEIVED BY THE ASSESSEE AS ADVANCE AG AINST EQUITY FROM THE FOREIGN COLLABORATOR. THE ASSESSEE WAS THEREFORE ASKED TO EXPLAIN AS TO WHY THE INTEREST INCOME OF RS.33 10 000/- HAS NOT BEEN SHOWN SEPARATELY CHARGEABLE TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES AND INSTEAD IT HAS BEEN REDUCED FROM THE PRE-OPERATIVE EXPENSES. THE ASSESSEE SUBMITTED ITS REPLY THAT THE ASSESSEE COMPANY HAD GIVEN CERTA IN BANK GUARANTEE WORTH RS.9 CRORE TO STATUTORY BODIES NAMELY GUJARAT MARI TIME BOARD AND GAIL INDIA LTD. IN CONNECTION WITH THE SETTING UP OF LPG PROJECT IMPORT TERMINAL AT THE OKHA GUJARAT AND THE FIXED DEPOSITS WERE KEP T UNDER LIEN WITH BANKS FOR ISSUING THE ABOVE SAID BANK GUARANTEE; THE ASSE SSEE HAD EARNED INTEREST 3 ON THESE FIXED DEPOSITS WHICH WERE REDUCED FROM THE PRE-OPERATIVE EXPENSES INCURRED DURING THE YEAR SINCE THE INTEREST INCOME WAS RECEIVED IN PRE- COMMENCEMENT PERIOD AND WAS DIRECTLY CONNECTED WITH THE SETTING UP OF THE PROJECT. IN SUPPORT OF THE ASSESSEES CLAIM THE A SSESSEE RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF KA RNAL COOPERATIVE SUGAR MILLS LTD. 243 ITR 2 AND IN THE CASE OF BOKARO STE EL LTD. 236 ITR 315 WHERE IT HAS BEEN HELD THAT ANY AMOUNTS WHICH ARE I NEXTRICABLY LINKED WITH THE PROCESS OF SETTING UP OF ITS PLANT AND MACHINER Y SUCH RECEIPTS WILL GO TO REDUCE THE COST OF ITS ASSETS AS THESE RECEIPTS ARE OF CAPITAL NATURE AND CANNOT BE TAXED AS INCOME CHARGEABLE TO TAX. 4. THE AFORESAID EXPLANATION OF THE ASSESSEE WAS CO NSIDERED BY THE AO BUT THE SAME WAS NOT FOUND ACCEPTABLE TO HIM. THE AO THEN CONCLUDED HIS VIEW AS UNDER:- THE ASSESSEE HAS RECEIVED ADVANCE AGAINST SHARE CAPITAL FROM THE HOLDING COMPANY. THE SAID MONEY H AS BEEN DEPOSITED IN BANK. THE FINDINGS GIVEN BY THE SUPRE ME COURT IN THE CASE OF TUTICORIN ALKALIES CHEMICALS & FERTILIZ ERS LTD. 227 ITR 172 ARE CLEARLY APPLICABLE TO THE FACTS OF THE CASE. IN THE SAID CASE SIT HAS BEEN HELD BY THE HONBLE SUPREME COURT THAT INTEREST ON DEPOSITS IS TO BE TAXED IS INCOME FROM OTHER SOURCES AND IT CANNOT BE SET OFF AGAINST PRE-OPERATIVE EXPE NSES. ACCORDINGLY THE SUM OF RS.33 10 000/- IS BROUGHT T O TAX AS INCOME FROM OTHER SOURCES. 5. BEING AGGRIEVED THE ASSESSEE PREFERRED AN APPEA L BEFORE THE CIT(A). 4 6. BEFORE THE CIT(A) THE ASSESSEE SUBMITTED DETAIL ED SUBMISSIONS WHICH READ AS UNDER:- A) THE APPELLANT COMPANY WAS IN THE PROCESS OF SET TING UP A LIQUEFIED PETROLEUM GAS (LPG) IMPORT TERMINAL AT OK HA GUJARAT. THE APPELLANT COMPANY HAD STARTED A MARKE T SEEDING PROGRAM FROM 1 ST DECEMBER 2002. THE MARKET SEEDING PROGRAM INVOLVES MANUFACTURE AND DIRECT PURCHASES O F LPG IN BULK AND ALSO FILLING OF LPG IN CYLINDERS AND SALE TO CUSTOMERS THROUGH A DISTRIBUTION CHANNEL. THE DIRECT INCOME/ EXPENSES PERTAINING TO THE ABOVE MARKET SEEDING PROGRAM HAVE BEEN CONSIDERED IN THE PROFIT AND LOSS ACCOUNT WHILE THE INDIRECT EXPENSES ARE ALLOCATED TO THE MARKET SEEDING PROGRA M AND THE PROJECT TO THE EXTENT THIS EXPENDITURE BENEFITED EA CH ACTIVITY. THE PROJECT EXPENSES ARE CARRIED FORWARD PENDING CAPITALIZATION UPON THE COMMENCEMENT OF PROJECT OPE RATION. THIS FACT WAS MENTIONED BY WAY OF NOTE NO. B(1) OF SCHEDULE 16 TO THE AUDITED BALANCE SHEET AS AT MARCH 31 2006. B) THE COMPANY HAS GIVEN CERTAIN BANK GUARANTEES WO RTH RS.9 CRORES TO STATUTORY BODIES VIZ GUJARAT MARITIME BOA RD AND GAIL INDIA LTD IN CONNECTION WITH THE SETTING UP A LPG PROJECT IMPORT TERMINAL AT THE OKHA GUJARAT. C) THE FIXED DEPOSITS KEPT UNDER LIEN WITH BANKS FO R ISSUING THE ABOVE SAID BANK GUARANTEES HAVE EARNED INTEREST DUR ING THE ASSESSMENT YEAR WHICH HAS BEEN REDUCED FROM PREOPER ATIVE EXPENSES INCURRED DURING THE YEAR SINCE THE INTERES T INCOME IS RECEIVED IN PRECOMMENCEMENT PERIOD AND IS DIRECTLY CONNECTED TO THE SETTING UP OF THE PROJECT. D) IN THE PRESENT CASE THE ASSESSEE CONTENDS THAT AS PER THE LAW LAID DOWN BY SUPREME COURT IN CIT V. KARNAL CO-OP. SUGAR MILLS LTD. 243 ITR 2 AND IN BOKARO STEELS LTD. 236 ITR 315 THE INTEREST WAS CAPITAL RECEIPT AND SHOULD GO TO R EDUCE THE COST OF THE ASSET. 5 FURTHER THE CLOUDS OVER THE LAW RELATING TO TREATM ENT OF RECEIPTS BEFORE BUSINESS IS SET UP COULD BE SAID TO HAVE BEEN FINALLY CLEARED WITH THE DECISION OF SUPREME COURT IN BONGAIGAON REFINERY AND PETROCHEMICALS LTD. V. CIT[ 2001] 251 ITR 329 FOLLOWING THE LAW LAID DOWN IN CIT V. B OKARO STEEL LTD. [1991] 236 ITR 315 (SC) CIT V. KARNAL C O- OPERATIVE SUGAR MILLS LTD. [2000] 243 ITR 2 (SC) AN D CIT V. KARNATAKA POWER CORPORATION [2001] 247 ITR 268 (SC) . SUCH RECEIPTS TO THE EXTENT TO WHICH THEY GET CAPITALIZE D WILL GO TO REDUCE THE CAPITAL INVESTMENT AND THEREFORE THE BOO K VALUE OF ASSETS FOR THE PURPOSE OF DEPRECIATION. THE SUPREME COURT IN THIS ORDER ALSO EMPHASIZED IN LAST LINE OF PARA 3 THAT.. IS THEREFORE NOT POSSIBLE N OW TO TAKE ANY VIEW DIFFERENT FROM THAT TAKEN IN BOKARO STEEL LTD. S CASE [1999] 236 ITR 315 (SC). E) INTEREST TO THE EXTENT OF RS. 3960 THOUSAND WHIC H IS RELATED TO INTEREST INCOME OTHER THAN INTEREST ON MARGIN MONEY HAS BEEN RECOGNIZED AND INCLUDED AS INCOME DURING THE YEAR. F) IN THE EARLIER YEARS I.E. ASSESSMENT YEAR 2001-2 002 AND 2002-2003 ON THE SAME ISSUE I.E. INTEREST ON FIXED DEPOSITS KEPT WITH BANK AS MARGIN MONEY FOR GUARANTEE ISSUED FOR PROJECT THE ASSESSEE HAS MADE CLAIM BY MAKING AN APPLICATI ON UNDER SECTION1 54 FOR SET-OFF OF INTEREST INCOME WITH PRE =OPERATIVE EXPENSES WHICH WAS REJECTED BY THE ASSESSING OFFICE R (AO). THERE AFTER THE TRIBUNAL HAD ALSO REJECTED THE SAME ON THE GROUND THAT ADDITIONAL/NEW CLAIM CANNOT BE MADE UND ER SECTION 154. HOWEVER THE HONBLE ITAT HAS MADE THE FOLLOWI NG OBSERVATIONS IN ITS ORDER AT PARA 4.4:- FURTHER THERE IS NO DISPUTE IN THIS CASE THAT FAC TS ON RECORD CLEARLY SHOW THAT THE ASSESSEE HAD RECEIVED THE INT EREST ON FDRS KEPT ON LIEN WITH THE BANK IN CONNECTION WITH SETTING UP 6 OF THE PROJECT AND THE INTEREST HAD BEEN RECEIVED I N THE PRE COMMENCEMENT PERIOD WHICH AS PER THE JUDGMENTS OF T HE HONBLE SUPREME COURT (SUPRA) IS A CAPITAL RECEIPT AND NOT TAXABLE. G) FURTHER IN THE ASSESSMENT YEAR 2004-05 THE AO IN HIS ORDER UNDER SECTION 143(3) HAS ALLOWED THE INTEREST INCO ME TO BE SET- OFF AGAINST PRE-OPERATIVE EXPENSES. H) HENCE THE ABOVE MENTIONED INTEREST RECEIPT IS OF CAPITAL NATURE AND CANNOT BE TAXED AS INCOME AND HAS TO BE REDUCED FROM THE CAPITAL COST OF THE ASSETS AS HELD BY THE SUPREME COURT IN AFORESAID CASES. 7. AFTER CONSIDERING THE AOS ORDER ASSESSEES SUB MISSIONS AND THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) D ECIDED THE MATTER IN FAVOUR OF THE ASSESSEE. THE CIT(A) NOTED THE FACTS THAT THE ASSESSEE COMPANY WAS ENGAGED IN THE PROCESS OF SETTING UP OF A LIQUEFIED PETROLEUM GAS (LPG) IMPORT TERMINAL AT OKHA GUJARAT. IT HAS RECEIVED ADVANCE FROM THE HOLDING COMPANY. THE SETTING UP OF THE LPG PRO JECT WAS IN PROGRESS AND THE COMPANY WAS REQUIRED TO GIVE BANK GUARANTEE WOR TH RS.9 CRORE TO STATUTORY BODIES NAMELY GUJARAT MARITIME BOARD AND GAIL INDIA LTD. IN CONNECTION WITH THE SETTING UP OF THE LPG PROJECT T ERMINAL AT OKHA GUJARAT. FOR THE PURPOSE OF ISSUING BANK GUARANTEE THE COMPANY MADE FIXED DEPOSIT WITH THE BANK OUT OF THE FUND RECEIVED FROM THE HOLDING COMPANY AND KEPT THE FIXED DEPOSIT UNDER LIEN WITH THE BANK S AS MARGIN MONEY. THE 7 INTERESTS EARNED ON THE FIXED DEPOSITS KEPT UNDER L IEN WERE REDUCED FROM PRE- OPERATIVE EXPENSES INCURRED DURING THE YEAR. THE L EARNED CIT(A) HAS REFERRED TO THE FOLLOWING DECISIONS:- (1) TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. VS. C IT (1997) 227 ITR 172 (SC) WHICH HAS BEEN RELIED UPON BY THE AO. (2) CIT VS. BOKARO STEEL LTD. 236 ITR 315 (SC) RELIED UPON BY THE ASSESSEE. (3) CIT VS. KARNATAKA POWER CORPORATION 247 ITR 268 (S C) RELIED UPON BY THE ASSESSEE. (4) BONGAIGAON REFINERY & PETROCHEMICALS LTD. VS. CIT 251 ITR 351 RELIED UPON BY THE ASSESSEE. (5) CIT VS. VGR FOUNDATIONS 298 ITR 132 (MADRAS). (6) KARNAL CO-OPERATIVE SUGAR MILLS LTD. 243 ITR 2 (SC ). 8. AFTER NARRATING THE ABOVE MENTIONED FACTS AND DE CISIONS THE LEARNED CIT(A) DECIDED THIS ISSUE BY OBSERVING AS UNDER:- 4. IN THE PRESENT CASE THE APPELLANT HAD UTILIZED ITS FUNDS BEING ADVANCE AGAINST SHARE CAPITAL RECEIVED FROM T HE HOLDING COMPANY IN THE FIXED DEPOSITS KEPT AS MARGIN MONEY WITH BANK. AND IN THE EARLIER ASSESSMENT YEARS ON THE SAME ISS UE THE OBSERVATION MADE BY THE TRIBUNAL AND THE AO IN THE AY 04-05 HAS HIMSELF ALLOWED THE SAME. THUS FROM THE ABOVE DISCUSSION THE OBSERVATIONS MADE BY THE TRIBUNAL ON MERITS TH E ACTION OF THE AO IN THE A.Y. 2004-05 AND RESPECTFULLY FOLLOWI NG THE DECISION GIVEN BY THE MADRAS HIGH COURT IN CASE OF CIT V VGR FOUNDATIONS (298 ITR 132) ON A SIMILAR ISSUE DECIS IONS OF THE SUPREME COURT IN THE CASE OF CIT V. BOKARO STEEL LT D. [1999] 236 ITR 315 IN CIT V. KARNAL COOPERATIVE SUGAR MIL LS LTD. [2000] 243 ITR 2 (SC) KARNATAKA POWER CORPORATION[ 2001] 8 247 ITR 268 THE CLAIM OF THE APPELLANT OF SETTING OFF THE INTEREST INCOME FROM THE EXPENSES INCURRED PRIOR TO THE COMM ENCEMENT OF BUSINESS IS ALLOWABLE. 9. THE LEARNED DR SUPPORTED THE AOS ORDER AND SUBM ITTED THAT THE INTEREST EARNED ON FIXED DEPOSIT MADE OUT OF THE SH ARE CAPITAL CONTRIBUTED BY THE PROMOTERS IS ASSESSABLE AS INCOME FROM OTHER SO URCES AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF TUTICORIN ALKA LI CHEMICALS & FERTILIZERS LTD. (SUPRA). 10. THE LEARNED COUNSEL FOR THE ASSESSEE ON THE OTH ER HAND REITERATED THE CONTENTIONS AND SUBMISSIONS THAT WERE MADE BEFORE T HE AUTHORITIES BELOW AND RELIED UPON THE VARIOUS DECISIONS THAT PLACED B EFORE THE LEARNED CIT(A). 11. WE HAVE HEARD BOTH THE PARTIES AND HAVE GONE TH ROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE DELIBERATED UPON TH E POSITION OF LAW AS EMERGED FROM THE VARIOUS DECISIONS REFERRED TO BY T HE LEARNED CIT(A) WHICH HAVE BEEN RELIED UPON BY BOTH THE PARTIES BEFORE US . 11.1 IN THE PRESENT CASE IT IS NOT IN DISPUTE T HAT THE ASSESSEE HAD RECEIVED SHARE CAPITAL FROM THE HOLDING COMPANY. THE SHARE CAPITAL RECEIVED BY THE ASSESSEE WAS DEPOSITED WITH THE BANK. THE ASSESSEE COMPANY WAS ENGAGED IN THE PROCESS OF SETTING UP OF THE LIQUEFIED PETRO LEUM GAS IMPORT TERMINAL AT OKHA GUJARAT. THE PROJECT HAS NOT YET BEEN COM PLETED AND IT IS IN THE 9 STAGE OF COMPLETION. IN THE COURSE OF SETTING UP O F LPG PROJECT THE ASSESSEE WAS REQUIRED TO GIVE CERTAIN BANK GUARANTEE WORTH R S.9 CRORE TO STATUTORY BODIES NAMELY GUJARAT MARITIME BOARD AND GAIL INDI A LTD. IN ORDER TO AVAIL THE BANK GUARANTEE FROM THE BANK THE COMPANY HAD D EPOSITED ITS FUND RECEIVED FROM THE HOLDING COMPANY TOWARDS FIXED DEP OSIT AND EARNED INTEREST THEREUPON. THE FIXED DEPOSITS MADE WITH T HE BANK WERE KEPT WITH THE BANKS ON LIEN AS MARGIN MONEY AGAINST THE GUARA NTEES ISSUED BY THE BANK. THESE FACTS HAVE NOT BEEN CONTROVERTED BY TH E DEPARTMENT. NOTHING HAS BEEN BROUGHT ON RECORD TO SHOW AND ESTABLISH TH AT THE FIXED DEPOSITS WERE NOT MADE IN CONNECTION WITH OBTAINING BANK GUA RANTEE FROM THE BANK WHICH WERE REQUIRED TO BE FURNISHED TO THE STATUTOR Y BODIES NAMELY GUJARAT MARITIME BOARD AND GAIL INDIA LTD. IN CONNECTION WI TH THE SETTING UP OF THE LPG PROJECT TERMINAL AT OKHA GUJARAT. THE INTERES T EARNED ON THE FIXED DEPOSITS WHICH ARE RELATABLE TO THE BANK GUARANTEE GIVEN BY THE BANK IN CONNECTION WITH THE SETTING UP OF THE LPG PROJECT T ERMINAL AT OKHA GUJARAT HAS BEEN REDUCED FROM THE PRE-OPERATIVE EX PENSES. THE INTEREST RECEIVED BY THE ASSESSEE ON OTHER DEPOSITS WHICH A RE NOT CONNECTED TO THE SETTING UP OF LPG PROJECT TERMINAL HAS BEEN OFFERE D TO TAX AS INCOME FROM OTHER SOURCES. THESE DETAILS HAVE BEEN SUBMITTED B Y THE ASSESSEE BEFORE US AND WE FIND THAT INTEREST OF RS.33 10 000/- WAS EAR NED ON THE FIXED DEPOSIT 10 WHICH WAS KEPT IN LIEN FOR OBTAINING BANK GUARANTEE FURNISHED TO GUJARAT MARITIME BOARD AND GAIL INDIA LTD. IN CONNECTION WI TH THE SETTING UP OF LPG PROJECT TERMINAL AT OKHA GUJARAT. THEREFORE ON T HE FACTS AND CIRCUMSTANCES OF THE CASE THE DECISIONS OF HONBLE SUPREME COURT IN THE CASES OF CIT VS. KARNATAKA POWER CORPORATION (SUPRA ) CIT VS. BOKARO STEEL LTD. (SUPRA) AND CIT VS. BONGAIGAON REFINERY AND PE TROCHEMICALS LTD. (SUPRA) ARE APPLICABLE TO THE PRESENT CASE. THE DE CISION OF HONBLE SUPREME COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS & F ERTILIZERS LTD. (SUPRA) IS NOT APPLICABLE TO THE PRESENT CASE AS IT WAS RENDER ED ON DIFFERENT FACTS AS SO HAS BEEN DISTINGUISHED AND ANALYZED BY THE HONBLE MADRAS HIGH COURT IN THE CASE OF VGR FOUNDATIONS (SUPRA). THE HONBLE S UPREME COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS & FERTILIZERS LT D. (SUPRA) WAS CONSIDERING INVESTMENT OF BORROWED FUNDS PRIOR TO A COMMENCEMENT OF A BUSINESS AND HELD THAT INTEREST EARNED WAS TAXABLE. IN THE CASE OF BOKARO STEEL LTD. (SUPRA) IT WAS A CASE OF GOVERNMENT COMP ANY WHICH DURING THE PERIOD OF CONSTRUCTION OF THE PLANT HAD ADVANCED T HE MONEYS TO THE CONTRACTORS ON WHICH IT WAS EARNING INTEREST RECEI VED RENT FROM QUARTERS LET OUT TO EMPLOYEES RECEIVED HIRE CHARGES ON PLANT LE T OUT TO CONTRACTORS AND RECEIVED ROYALTY ON STONES REMOVED FROM THE ASSESSE ES LANDS. THE HONBLE SUPREME COURT CONSIDERED ALL THESE ACTIVITIES TO BE INSTRICABLY CONNECTED 11 WITH THE CONSTRUCTION ACTIVITY AND ACCORDINGLY HELD THAT INTEREST RECEIVED RENT RECEIVED HIRE CHARGES AND ROYALTY ETC. WOULD BE REDUCED FROM THE COST OF THE ASSETS AND IT WOULD NOT BE TREATED AS INCOME . SIMILAR VIEW WAS EXPRESSED BY THE HONBLE SUPREME COURT IN THE CASE OF BONGAIGAON REFINERY AND PETROCHEMICALS LTD. (SUPRA) KARNAL CO -OPERATIVE SUGAR MILLS LTD. (SUPRA) AND KARNATAKA POWER CORPORATION (SUPRA ). 12. FOR THE FOREGOING REASONS WE ARE THEREFORE I NCLINED TO UPHOLD THE ORDER OF THE CIT(A) IN HOLDING THAT THE INTEREST EA RNED BY THE ASSESSEE ON FIXED DEPOSITS WHICH WERE KEPT AS LIEN AGAINST BAN K GUARANTEE REQUIRED TO BE FURNISHED TO THE STATUTORY BODIES NAMELY GUJARAT M ARITIME BOARD AND GAIL INDIA LTD. IN CONNECTION WITH THE SETTING UP OF LPG PROJECT TERMINAL AT OKHA GUJARAT SHALL BE REDUCED FROM THE COST OF T HE PRE-OPERATIVE EXPENSES OF THE PLANT AND SHALL NOT BE ASSESSABLE SEPARATELY AS INCOME FROM OTHER SOURCES INASMUCH AS THE INTEREST EARNED IS INEXTRIC ABLY CONNECTED WITH THE SETTING UP OF THE LPG PROJECT TERMINAL AT OKHA GUJ ARAT. THE ORDER OF THE LEARNED CIT(A) IS THUS UPHELD. ITA NO.4337/DEL/2010 13. NOW WE SHALL TAKE UP THE APPEAL FOR THE ASSESS MENT YEAR 2007-2008. IN THIS APPEAL THE GROUND RAISED IS AS UNDER:- 12 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWING OF RS. 39 96 000/- ON ACCOUNT OF INTEREST INCOME TREATING IT AS INCOME FROM OTHER SOURCES. 14. THE FACTS AND CIRCUMSTANCES IN THE PRESENT ASSE SSMENT YEAR ARE SIMILAR TO THAT OF THE ASSESSMENT YEAR 2006-07 BEING CONNEC TED TO THE INTEREST INCOME EARNED ON FIXED DEPOSITS MADE WITH THE BANK TO OBTAIN BANK GUARANTEE REQUIRED TO BE SUBMITTED TO THE STATUTORY BODIES NAMELY GUJARAT MARITIME BOARD AND GAIL INDIA LTD. IN CONNECTION WI TH THE SETTING UP OF LPG PROJECT TERMINAL AT OKHA GUJARAT. IN THE LIGHT OF THE DECISION FOR THE ASSESSMENT YEAR 2006-07 THE ORDER OF THE CIT(A) IN THIS ASSESSMENT YEAR 2007-08 IS UPHELD. 15. IN THE RESULT BOTH THE APPEALS FILED BY THE RE VENUE ARE DISMISSED. 16. THIS DECISION IS PRONOUNCED IN THE OPEN COURT O N 7 TH JANUARY 2011. SD/- SD/- (K.G. BANSAL) (C.L. SETHI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 7 TH JANUARY 2011. COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) BY ORDER 5. DR *MG DEPUTY REGISTRAR ITAT.