ITO, WARD- 13(1), New Delhi v. Nabinagar Power Generating Co. Pvt. Ltd, New Delhi

ITA 4748/DEL/2017 | 2013-2014
Pronouncement Date: 11-05-2021 | Result: Dismissed

Appeal Details

RSA Number 474820114 RSA 2017
Assessee PAN AACCN9448C
Bench Delhi
Appeal Number ITA 4748/DEL/2017
Duration Of Justice 3 year(s) 9 month(s) 16 day(s)
Appellant ITO, WARD- 13(1), New Delhi
Respondent Nabinagar Power Generating Co. Pvt. Ltd, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 11-05-2021
Appeal Filed By Department
Order Result Dismissed
Bench Allotted E
Tribunal Order Date 11-05-2021
Assessment Year 2013-2014
Appeal Filed On 25-07-2017
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E NEW DELHI BEFORE SHRI O.P. KANT ACCOUNTANT MEMBER AND SHRI KULDIP SINGH JUDICIAL MEMBER [THROUGH VIDEO CONFERENCING] ITA NO.4748/DEL./2017 ASSESSMENT YEAR: 2013-14 ITO WARD-13(1) NEW DELHI VS. NABINAGAR POWER GENERATING CO. PVT. LTD. CORE-7 SCOPE COMPLEX INDUSTRIAL AREA LODHI ROAD NEW DELHI PAN :AACCN9448C (APPELLANT) (RESPONDENT) ORDER PER O.P. KANT AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST ORD ER DATED 30/05/2017 PASSED BY THE LEARNED COMMISSIONER OF IN COME-TAX (APPEALS)-6 NEW DELHI [IN SHORT THE LEARNED CIT(A )] FOR ASSESSMENT YEAR 2013-14 RAISING FOLLOWING GROUNDS: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) IS LEGALLY JUSTIFIED IN DELETING THE ADDITION OF RS .5 61 63 696/- AND APPELLANT BY SHRI ATIQ AHMED SR.DR RESPONDENT BY NONE DATE OF HEARING 13.04.2021 DATE OF PRONOUNCEMENT 11.05.2021 2 ITA NO.4748/DEL./2017 RS.28 00 638 ON ACCOUNT OF INTEREST RECEIVED FROM B ANK AND ON ADVANCES TO CONTRACTORS RESPECTIVELY DURING THE YEA R BY NOT APPRECIATING THE FACT THE PROVISIONS LAID DOWN IN S ECTION 5 OF THE INCOME TAX ACT 1961 (THE ACT) WHEREIN IT HAS BEEN CLEARLY MENTIONED THAT THE TOTAL INCOME OF A PERSON INCLUDE S ALL THE INCOME EARNED/RECEIVED OR DEEMED TO BE EARNED/RECEI VED BY THE PERSON IN THE PREVIOUS YEAR? 2. WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE THE LD. CIT(A) IS LEGALLY JUSTIFIED IN DELETING THE ADDITIO N OF RS.1 61 296/- ON ACCOUNT OF MISCELLANEOUS INCOME BY SALE OF SCR AP EVEN WHEN THE RECEIPT WAS SQUARELY COVERED UNDER PROVISION TO SECTION 5 OF THE ACT R.W.S. 56(1) & (2) OF THE ACT WHICH SAYS TH AT THE TOTAL INCOME INCLUDES ALL THE INCOME EARNED/RECEIVED OR D EEMED TO BE EARNED/RECEIVED BY THE PERSONS IN THE PREVIOUS YEAR ? 3. WHETHER ON FACTS AND IN CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) IS LEGALLY JUSTIFIED IN DELETING THE ADDITION OF RS .5 61 63 696/- AND RS.28 00 638/- ON ACCOUNT OF INTEREST RECEIVED FROM BANK AND ON ADVANCES TO CONTRACTORS RESPECTIVELY BY IGNORING TH E FINDINGS OF THE ASSESSING OFFICER (THE AO) RECORDED IN ASSESSME NT ORDER THAT THE ASSESSEE INVESTED SURPLUS FUNDS WHICH WERE NOT IMMEDIATELY REQUIRED BY IT IN FDRS AND EARNED INTEREST ON IT WH ICH CLEARLY FALLS IN THE DEFINING OF INCOME FROM OTHER SOURCES AS P ER SUB SECTION (1) & (2) TO SECTION 56 OF THE ACT. 4. THAT THE APPELLANT CRAVES LEAVE TO ADD AMEND A LTER OR FORGO ANY GROUND(S) OF APPEAL EITHER BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSE SSEE COMPANY IS A PRIVATE LIMITED COMPANY WHICH WAS INC ORPORATED ON 09/09/2008 AS A JOINT-VENTURE COMPANY BETWEEN NTPC LTD. AND BIHAR STATE ELECTRICITY BOARD WITH AN EQUAL PERCE NTAGE OF THE SHAREHOLDING AND WITH MAIN OBJECTIVE OF CONSTRUCTIO N OF POWER PLANTS FOR GENERATING ELECTRICITY. THE JOINT-VENTUR E WAS INCORPORATED WITH AN AUTHORISED CAPITAL OF 2000 CRORE. THE JOINT- VENTURE STARTED PRELIMINARY WORK LIKE SURVEY INVEST IGATION ETC. IN FINANCIAL YEAR 2009-10. THE JOINT-VENTURE COMMENCED MAIN WORK OF CONSTRUCTION OF POWER PLANT AT SHIVNAGAR BIHAR IN FINANCIAL 3 ITA NO.4748/DEL./2017 YEAR 2011-12. THE FUNDS FOR THE POWER PLANT HAD BEE N PLANNED TO BE FINANCED BY WAY OF 30% AS EQUITY CONTRIBUTION FR OM THE SHAREHOLDER AND THE BALANCE 70% BY RAISING DEBT FUN DS. 2.1 DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE EARNED A SUM OF 5 29 25 630/- BY WAY OF INTEREST FROM BANKS CONTRACTORS AND MISCELLANEOUS INCOME. THE ASSESSEE CONTENDED THAT INTEREST INCOME IS INEXTRICABLY LINKED WITH SE TTING UP OF THE POWER PLANT AND THE MONEY SIMPLY BEING LYING IN THE BANK FOR CONSTRUCTION OF THE PLANT CANNOT BE CONSIDERED AS SURPLUS MONEY. THE ASSESSEE FURTHER SUBMITTED THAT SINCE TH E INTEREST INCOME WAS EARNED IN THE PERIOD PRIOR TO COMMENCEME NT OF BUSINESS IT WAS IN THE NATURE OF THE CAPITAL RECEI PT AND HENCE WAS REQUIRED TO BE SET-OFF AGAINST PREOPERATIVE EXP ENSES. THE ASSESSEE FURTHER SUBMITTED THAT PURPOSE WAS TO USE THE MONEY IN SUCH A WAY SO AS TO REDUCE COST OF THE POWER PLANT TO THE EXTENT POSSIBLE BY EARNING INTEREST INCOME AND THIS WOULD ALSO BENEFIT THE REVENUE IN A WAY THAT COMPANY WOULD CLAIM LESS AMOUNT OF DEPRECIATION EVERY YEAR AFTER COMPLETION OF THE PRO JECT. 2.2 WHEREAS ACCORDING TO THE ASSESSING OFFICER THE IN TEREST ACCRUED ON FUNDS WHICH WERE NOT REQUIRED IMMEDIATE LY BY THE ASSESSEE COMPANY FOR ITS BUSINESS PURPOSES AND WHIC H WERE INVESTED IN FIXED DEPOSIT AND FOR THE ADVANCES GIVE N TO THE CONTACTORS AND THEREFORE INTEREST WAS NOT EARNED OU T OF BUSINESS REGULARLY CARRIED OUT BY THE ASSESSEE COMPANY. THE ASSESSING OFFICER ASSESSED THE INTEREST INCOME AND MISCELLANE OUS INCOME (FOR SALE OF A SCRAP) UNDER THE HEAD INCOME FROM O THER SOURCES. ON FURTHER APPEAL THE LD. CIT(A) DELETED THE ADDIT ION UNDER THE HEAD INCOME FROM OTHER SOURCES OBSERVING AS UNDER : 4 ITA NO.4748/DEL./2017 3.1.3 THE FACTS OF THE CASE AND THE SUBMISSIONS OF THE AR HAVE BEEN CAREFULLY CONSIDERED. IT IS OBSERVED THAT THE GROUND OF APPEAL RELATES TO THE RECEIPT OF RS. 28 00 638/- ON ACCOUN T OF INTEREST FROM CONTRACTOR'S ADVANCES RS. 5 61 63 696/- ON ACCOUNT OF INTEREST INCOME FROM BANKS AND RS. 1 61 296/- ON ACCOUNT OF MISC. INCOME FROM SALE OF SCRAP ETC.. IT IS SUBMITTED THAT THE C OMPANY IS A PRIVATE LIMITED COMPANY WHICH WAS INCORPORATED ON 09.09.200 8 AS A JOINT VENTURE COMPANY BETWEEN NTPC LTD. AND BIHAR STATE E LECTRICITY BOARD WITH AN EQUAL PERCENTAGE OF SHAREHOLDINGS WI TH THE MAIN OBJECTIVE OF CONSTRUCTION OF POWER PLANT(S) FOR GEN ERATING ELECTRICITY. THE JOINT VENTURE WAS INCORPORATED WITH AN AUTHORIZ ED CAPITAL OF RS. 2000 CRORE. IT HAD STARTED IN THE FINANCIAL YEAR 20 09-10 THE PRELIMINARY WORK LIKE SURVEY AND INVESTIGATIONS ETC I.E. BEFORE UNDERTAKING THE CONSTRUCTION OF THE POWER GENERATIN G PLANT OF THE CAPACITY TO PRODUCE 3960 MW (660 MWX6 UNITS) OF ELE CTRICITY AT SHIVANPUR DISTT- AURANGABAD BIHAR. THE TOTAL ESTI MATED COST OF THE PROJECT IS RS. 12 600 CRORE. THE MAIN WORK OF CONST RUCTION OF THE SAID POWER PLANT WAS STARTED IN THE YEAR 2011-12 WHICH IS NOW EXPECTED TO BE COMPLETED IN THE FINANCIAL YEAR 2018 -19 (STAGE-1). THE FUNDS FOR THE ENTIRE POWER PLANT HAD BEEN PLANN ED TO BE FINANCED BY WAY OF 30% AS EQUITY CONTRIBUTIONS FROM THE SHAREHOLDERS AND THE BALANCE 70% BY RAISING DEBT FU NDS. I FIND THAT GOING BY THE FACTS AND THE NATURE OF RE CEIPTS THE JUDGMENT IN THE CASE OF FACOR POWER LIMITED AND INDIAN OIL P ANIPAT POWER CONSORTIUM (BOTH HON'BLE HIGH COURT OF DELHI) SQUA RELY APPLIES TO PRESENT CASE. IN THE CASE OF FACOR POWER LIMITED H ON'BLE DELHI HIGH COURT HELD THAT 'WHERE ASSESSEE ENGAGED IN GENERATI NG ELECTRIC POWER KEPT MARGIN MONEY IN FORM OF FIXED DEPOSITS FOR PROCUREMENT OF VARIOUS CAPITAL GOODS FOR SETTING UP OF POWER PR OJECT INTEREST EARNED ON SAID DEPOSITS WOULD BE IN NATURE OF CAPIT AL RECEIPT NOT LIABLE TO TAX'. IN THE CASE OF INDIAN OIL PANIPAT P OWER CONSORTIUM HON'BLE HIGH COURT OF DELHI RELIED ON THE HON'BLE S UPREME COURT JUDGMENT IN CIT VS. BOKARO STEEL LIMITED THAT IF IN COME IS EARNED WHETHER BY WAY OF INTEREST OR IN ANY OTHER MANNER O N FUNDS WHICH ARE OTHERWISE 'INEXTRICABLY LINKED' TO THE SETTING UP OF PLANT SUCH INCOME IS REQUIRED TO BE CAPITALIZED TO BE SET OFF AGAINST PRE- OPERATIVE EXPENSES. THE HON'BLE DELHI HIGH COURT HA D ALSO DISTINGUISHED THE FACTS BEFORE THEM FROM THOSE WHIC H WERE BEFORE THE APEX COURT IN THE CASE OF TUTICORIN ALKALI CHEM ICALS AND FETILIZERS LTD. VS CIT. THE AO FAILED TO ESTABLISH THAT THESE WERE SURPLUS FUNDS PARKED IN THE BANK TO EARN INTEREST. GOING BY THE FACTS OF THE CASE AND VARIOUS DECISIONS CITED ABOVE THE INTEREST RECEIPTS ARE TREATED AS CAPITAL IN NATURE AND THE ADDITIONS DESERVE TO BE DELETED. BESIDES IT IS OBSERVED THAT THE SIMILAR ADDITION O F INTEREST INCOME FROM BANK AND INTEREST FROM CONTRACTOR'S ADVANCES I N A.Y. 2011-12 5 ITA NO.4748/DEL./2017 AND A.Y. 2012-13 WAS ALSO DELETED BY CIT(A) IN THE APPELLANT'S OWN CASE. HOWEVER MISCELLANEOUS INCOME OF RS. 1 61 296 /- ON ACCOUNT OF SALE OF SCRAP ETC. IS ALSO COVERED BY SUPREME CO URT IN THE CASE OF CIT VS. BOKARO STEEL LTD. [1999] 236 ITR 315. THERE FORE THE ADDITION OF RS. 5 91 25 630/- IS HEREBY DELETED. THESE GROUN DS OF APPEAL ARE THEREFORE ALLOWED. 3. BEFORE US NONE APPEARED ON BEHALF OF THE ASSESSEE . 4. THE LEARNED DEPARTMENT REPRESENTATIVE RELIED ON T HE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT MONEY W AS RAISED BY WAY OF SHARE CAPITAL WHICH WAS NOT SPECIFICALLY LIN KED WITH THE SETTING UP OF THE PLANT AND THEREFORE THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF INDIAN OIL PANIPAT POWER CONSORTIUM (SUPRA) IS NOT APPLICABLE OVER THE FACTS OF THE ASSESSEE. 5. WE HAVE HEARD SUBMISSION OF THE LEARNED DR AND PER USED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT IDENT ICAL ISSUE IN THE ASSESSMENT YEAR 2011-12 AND 2012-13 HAS BEEN DECIDE D IN FAVOUR OF THE ASSESSEE BY THE LEARNED FIRST APPELLA TE AUTHORITY. ON FURTHER APPEAL BY THE REVENUE BEFORE THE TRIBUNA L THE ISSUE WHETHER THE INTEREST AND OTHER MISCELLANEOUS INCOME IS IN THE NATURE OF CAPITAL RECEIPT OR INCOME FROM OTHER SOUR CES HAS BEEN DECIDED BY THE TRIBUNAL IN ITA NO. 4560 AND 4561/DE L./2014 FOR ASSESSMENT YEARS 2011-12 AND 2012-13 RESPECTIVELY O BSERVING AS UNDER: 7. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON TH E RECORD. IT IS NOTICED THAT AN IDENTICAL ISSUE HAVING SIMILAR FACT S WAS A SUBJECT MATTER OF THE DEPARTMENTAL APPEAL FOR THE ASSESSMEN T YEAR 2010-11 IN ITA NO. 6016/DEL/2013 IN THE CASE OF ACIT CIRCL E-13(1) NEW DELHI VS NTPC TAMIL NADU ENERGY CO. LTD. NEW DELHI WHEREIN THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE AN D AGAINST THE DEPARTMENT VIDE ORDER DATED 15.02.2016 AND THE RELE VANT FINDINGS HAVE BEEN GIVEN IN PARA 5 & 6 WHICH READ AS UNDER: 6 ITA NO.4748/DEL./2017 5. WE HAVE HEARD THE SUBMISSIONS OF BOTH THE PARTI ES PERUSED THE MATERIALS AVAILABLE ON RECORD CASE LAW S CITED BY ID. COUNSEL FOR ASSESSEE ASSESSMENT ORDER AND THE ORDER OF THE ID. CIT(A). WE FIND THAT THE ID. CIT(A) HAS ELA BORATELY 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 ID. 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 TH E A/R OF THE APPELLANT. BOTH THE GROUNDS OF APPEAL ARE DIREC TED AGAINST ADDITIONS OF RS. 175 74 129/- COMPRISING OF THE INT EREST INCOME RECEIVED FROM THE BANK(S) AMOUNTING TO RS. 1 02 740/- AND INTEREST RECEIVED FROM CONTRACTORS ADVANCES AMO UNTING TO RS. 174 71 389/-. IN THE P&L ACCOUNT THE APPELLANT HAS SHOWN UNDER THE HEAD OTHER INCOME AMOUNT OF RS. 1 02 740/- AS INTEREST INCOME EARNED ON SHORT TERM DEPOSITS PA RKED WITH BANKS AND AN AMOUNT OF RS. 174 71 389/- AS INTEREST EARNED ON INTEREST BEARING ADVANCE GIVEN TO CONTRACTORS T OTAL RS. 1 75 74 129/- WHICH WAS ADJUSTED AGAINST EXPENDITUR E DURING CONSTRUCTION ACCOUNT IN SCHEDULE - 15 AND TH E NET EXPENDITURE DURING CONSTRUCTION WAS CAPITALIZED UND ER THE CAPITAL WORK IN PROGRESS IN SCHEDULE - 4 OF THE BAL ANCE SHEET. THE AO IN THE ASSESSMENT ORDER OBSERVED THAT THE AS SESSEE HAS NOT OFFERED ABOVE INCOMES FOR TAX. AO OBSERVED THAT THE FACTS OF CASE ARE SIMILAR TO THE CASE OF TUTICORIN ALKALI CHEMICAL & FERTILIZERS LTD. V. CIT (SUPRA). THEREFO RE THE AO TREATED THE ABOVE RECEIPT OF RS. 175.74 LAKH AS CHA RGEABLE TO TAX U/S 56 OF THE ACT AS 'INCOME FROM OTHER SOURCES ' FOLLOWING THE DECISION OF HON'BLE APEX COURT IN THE CASE OF C IT VS. TUTICORIN ALKALI AND CHEMICALS & FERTILIZERS LTD. ( 1997) 227 ITR 172. 4.2 THEREFORE THE ISSUE TO BE DECIDED IN THIS APPE AL IS WHETHER THE ABOVE RECEIPTS ARE CAPITAL RECEIPT AS C LAIMED BY THE APPELLANT OR INCOME FROM OTHER SOURCES U/S 56 O F THE ACT AS HELD BY THE AO. THE WHOLE EMPHASIS OF APEX COURT DECISION IN THE TUTICORIN ALKALI CHEMICALS & FERTIL IZERS LTD. (SUPRA) WAS THAT FUNDS WERE FOUND TO BE SURPLUS. TH E COMPANY WAS READY TO COMMENCE TRIAL PRODUCTION AND THE SURPLUS FUNDS WERE DEPOSITED IN BANK TO EARN INTERE ST. 4.3 IN THE INSTANT CASE THERE IS NO DISPUTE THAT PR OJECT WAS UNDER CONSTRUCTION DURING THE PREVIOUS YEAR RELEVAN T TO AY 2010-11 AND THE BUSINESS HAD NOT COMMENCED. THE APP ELLANT COMPANY WAS INCORPORATED ON 23-05-2003 AS A JOINT V ENTURE 7 ITA NO.4748/DEL./2017 COMPANY BETWEEN NTPC LTD. AND TAMIL NADU ELECTRICIT Y BOARD FOR THE PURPOSE OF CONSTRUCTION OF POWER PLAN T FOR GENERATION OF ELECTRICITY. THE TOTAL PROJECT WAS ME ANT TO PRODUCE 1500 MW OF ELECTRICITY THROUGH 3 UNITS @ 50 0 MW BY EACH UNIT. THE SAID POWER PLANT WAS LOCATED AT VELL UR AT THE OUTSKIRT OF CHENNAI TAMIL NADU. THE CONSTRUCTION O F THE POWER GENERATING UNIT WAS STARTED ON 28-03-2007. AS PER LETTER OF CEO COMMERCIAL OPERATION IS DECLARED IN RESPECT OF UNIT - I W.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 RS. 905.5 CRORES AND HAD BORROWED FUNDS IN THE FORM OF SECURED LOAN OF RS. 1808.27 CRORES. THESE FUNDS WER E ESSENTIALLY UTILIZED DURING THE INITIAL PERIOD OF C ONSTRUCTION FROM A.Y. 2004-05 TO A.Y. 2010-11 FOR CONDUCTING SU RVEY INVESTIGATION & PRELIMINARY EXPENSES FOR PURCHASIN G LAND FOR INFRASTRUCTURE DEVELOPMENT WORK AND FOR DISBURSEMEN T AS ADVANCE TO THE CONTRACTORS ENGAGED FOR CONSTRUCTION OF POWER PLANT ETC. 4.4 FURTHER THERE IS NO FINDING GIVEN BY THE AO TH AT ADVANCES WERE MADE BY THE APPELLANT OUT OF SURPLUS FUND. FRO M THE BALANCE SHEET IT IS OBSERVED THAT AS AGAINST THE AB OVE FUNDS OF RS. 2713.77 CRORES (WITHOUT CONSIDERING AMOUNTS DUE TO SUNDRY CREDITORS) SUMS AGGREGATING TO RS. 2998.02 CRORES WERE USED FOR ACQUIRING / CONSTRUCTION OF FIXED ASS ETS. AGAINST THE LIABILITIES AND PROVISIONS AGGREGATING TO RS. 2 93.45 CRORES BANK AND CASH BALANCES WAS RS. 4.74 CRORES ONLY. FU RTHER THE DEBIT BALANCE OF PROFIT AND LOSS ACCOUNT AS APP EARING IN THE BALANCE SHEET AS ON 31.03.2010 WAS RS.1.13 CROR ES. FROM THE ABOVE IT IS EVIDENT THAT INVESTMENT IN FIX ED ASSETS IS MORE THAN THE FUNDS AVAILABLE AND FIXED ASSET IS PA RTLY FUNDED BY CURRENT LIABILITIES. THE LIABILITY TOWARD S SUNDRY CREDITORS (RS.86.78 CRORES) ARE FAR MORE THAN THE F UNDS LYING IN BANK (RS.4.74 CRORES). THEREFORE IT IS CLEAR THAT ADVANCES WERE NOT GIVEN OUT OF SURPLUS FUNDS AVAILABLE WITH THE COMPANY. SIMPLY BECAUSE MONEY IS LYING IN BANK MEAN T FOR CONSTRUCTION OF THE PLANT IT CANNOT BE TREATED AS THE SURPLUS MONEY. THE SURPLUS MONEY CAN ARISE ONLY AFTER MEETI NG ALL THE OBLIGATIONS RELATING TO THE CONSTRUCTION OF THE POW ER PLANT AND IF THE MONEY IS FOUND TO BE SURPLUS AFTER THE COMPL ETION OF CONSTRUCTION OF THE UNIT. IN THE INSTANT CASE THE W ORK OF CONSTRUCTION OF THE POWER PLANT WAS UNDER PROGRESS. THEREFORE FUNDS CANNOT BE SAID TO BE AT SURPLUS. 4.5 SOME OF SUCH FUNDS WHICH WERE LYING UNUTILIZED WERE TEMPORALLY PARKED BY THE APPELLANT IN BANK TO EARN INTEREST. THE PURPOSE OF BANK DEPOSITS YIELDING INTEREST WAS EVIDENTLY 8 ITA NO.4748/DEL./2017 TO MAINTAIN LIQUIDITY OF FUNDS AND TO REDUCE THE CO ST OF CONSTRUCTION OF THE POWER PLANT. THEREFORE INTERES T EARNED ON SUCH UNUTILIZED FUNDS TEMPORALLY PARKED WITH BANKS TO MAINTAIN LIQUIDITY AND TO REDUCE COST IS INEXTRICA BLY LINKED WITH THE SETTING UP OF THE PROJECT. SIMILARLY THE INTEREST INCOMES EARNED ON ADVANCE TO CONTRACTORS ENGAGED FO R CONSTRUCTION OF POWER PLANT IS ALSO INEXTRICABLY LI NKED WITH THE SETTING UP OF THE POWER PLANT. THESE INCOMES HAVE A LSO GONE ON TO REDUCE THE EXPENSES FOR SETTING UP OF THE PLA NT AS EVIDENT FROM SCHEDULE 15 OF ANNUAL REPORT SHOWING D ETAILS OF EXPENSES DURING CONSTRUCTION. HON'BLE SUPREME COURT ON IDENTICAL ISSUE IN CIT V. BOKARO STEEL LTD. 102 TAX MAN 94 (SC) AFTER CONSIDERING THE DECISION IN THE CASE OF TUTIC ORIN ALKALI CHEMICALS AND FERTILIZERS LTD. (SUPRA) HELD THAT IN TEREST FROM ADVANCE TO CONTRACTORS RENT CHARGED ON CONTRACTOR HIRE CHARGES FROM CONTRACTORS ARE INEXTRICABLY LINKED TO THE SETTING UP OF THE PROJECT AND AS SUCH CAPITAL RECEIPTS. IN THAT SAID DECISION HON'BLE APEX COURT HELD:- '5. WE WILL TAKE THE FIRST THREE HEADS UNDER WHICH THE ASSESSEE HAS RECEIVED CERTAIN AMOUNTS. THESE ARE TH E RENT CHARGED BY THE ASSESSEE TO ITS CONTRACTORS FOR HOUS ING WORKERS AND STAFF EMPLOYED BY THE CONTRACTOR FOR THE CONSTR UCTION WORK OF THE ASSESSEE INCLUDING CERTAIN AMENITIES GRANTED TO THE STAFF BY THE ASSESSEE. SECONDLY HIRE CHARGES FOR P LANT AND MACHINERY WHICH WAS GIVEN TO THE CONTRACTORS BY THE ASSESSEE FOR USE IN THE CONSTRUCTION WORK OF THE ASSESSEE A ND THIRDLY INTEREST FROM ADVANCES MADE TO THE CONTRACTORS BY T HE ASSESSEE FOR THE PURPOSE OF FACILITATING THE WORK O F CONSTRUCTION. THE ACTIVITIES OF THE ASSESSEE IN CON NECTION WITH ALL THESE THREE RECEIPTS ARE DIRECTLY CONNECTED WIT H 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 CONTRACT ORS PERTAINING TO THE WORK OF CONSTRUCTION. TO FACILITA TE THE WORK OF THE CONTRACTOR THE ASSESSEE PERMITTED THE CONTRACT OR TO USE THE PREMISES OF THE ASSESSEE FOR HOUSING ITS STAFF AND WORKERS ENGAGED IN THE CONSTRUCTION ACTIVITY OF THE ASSESSE E'S PLANT. THIS WAS CLEARLY TO FACILITATE THE WORK OF CONSTRUC TION. HAD THIS FACILITY NOT BEEN PROVIDED BY THE ASSESSEE TH E CONTRACTORS WOULD HAVE HAD TO MAKE THEIR OWN ARRANGEMENTS AND T HIS WOULD HAVE BEEN REFLECTED IN THE CHARGES OF THE CON TRACTORS FOR THE CONSTRUCTION WORK. INSTEAD THE ASSESSEE HAS PR OVIDED THESE FACILITIES. THE SAME IS TRUE OF THE HIRE CHAR GES FOR PLANT AND MACHINERY WHICH WAS GIVEN BY THE ASSESSEE TO TH E CONTRACTORS FOR THE ASSESSEE'S CONSTRUCTION WORK. T HE RECEIPTS IN THIS CONNECTION ALSO GO TO COMPENSATE THE ASSESS EE FOR THE WEAR AND TEAR OF THE MACHINERY. THE ADVANCES WHICH THE 9 ITA NO.4748/DEL./2017 ASSESSEE MADE TO THE CONTRACTORS TO FACILITATE THE CONSTRUCTION ACTIVITY OF PUTTING TOGETHER A VERY LARGE PROJECT W AS AS MUCH TO ENSURE THAT THE WORK OF THE CONTRACTORS PROCEEDED W ITHOUT ANY FINANCIAL HITCHES AS TO HELP THE CONTRACTORS. THE A RRANGEMENTS WHICH WERE MADE BETWEEN THE ASSESSEE-COMPANY AND TH E CONTRACTORS PERTAINING TO THESE THREE RECEIPTS ARE ARRANGEMENTS WHICH ARE INTRINSICALLY CONNECTED WITH THE CONSTRUCTION OF ITS STEEL PLANT. THE RECEIPTS HAVE BEEN ADJUSTED AGAINST THE CHARGES PAYABLE TO THE CONTRACTORS AND HAVE GONE TO REDUCE THE COST OF CONSTRUCTION. THEY HAVE THER EFORE BEEN RIGHTLY HELD AS CAPITAL RECEIPTS AND NOT INCOME OF THE ASSESSEE FROM ANY INDEPENDENT SOURCE. 7. HOWEVER WHILE INTEREST EARNED BY INVESTING BORR OWED CAPITAL IN SHORT-TERM DEPOSITS IS AN INDEPENDENT SO URCE OF INCOME NOT CONNECTED WITH THE CONSTRUCTION ACTIVITI ES OR BUSINESS ACTIVITIES OF THE ASSESSEE THE SAME CANNO T BE SAID IN THE PRESENT CASE WHERE THE UTILIZATION OF VARIOU S ASSETS OF THE COMPANY AND THE PAYMENTS RECEIVED FOR SUCH UTIL IZATION ARE DIRECTLY LINKED WITH THE ACTIVITY OF SETTING UP THE STEEL PLANT OF THE ASSESSEE. THESE RECEIPTS ARE INEXTRICABLY LI NKED WITH THE SETTING UP OF THE CAPITAL STRUCTURE OF THE ASSE SSEE - COMPANY. THEY MUST THEREFORE BE VIEWED AS CAPITAL RECEIPTS GOING TO REDUCE THE COST OF CONSTRUCTION.' 4.6 HON'BLE DELHI HIGH COURT IN INDIAN OIL PANIPAT POWER CONSORTIUM LTD. VS. 1TO (2009) 315 ITR 255 (DEL.) H ELD THAT WHERE INTEREST ON MONEY RECEIVED AS SHARE CAPITAL I S TEMPORARILY PLACED IN FIXED DEPOSIT AWAITING ACQUIS ITION OF LAND A CLAIM THAT SUCH INTEREST IS A CAPITAL RECEI PT ENTITLED TO BE SET OFF AGAINST PRE-OPERATIVE EXPENSES IS ADMIS SIBLE AS THE FUNDS RECEIVED BY THE ASSESSEE COMPANY BY THE J OINT VENTURE PARTNERS ARE 'INEXTRICABLY LINKED' WITH THE SETTING UP OF THE PLANT AND SUCH INTEREST EARNED CANNOT BE TRE ATED AS INCOME FROM OTHER SOURCES. THE HON'BLE DELHI HIGH C OURT APPLIED THE RATIO OF HON'BLE SUPREME COURT IN BOKAR O STEEL LTD. (SUPRA) WHILE ARRIVING AT THE ABOVE DECISION. HON'BLE HIGH COURT ALSO DISTINGUISHED THE FACTS BEFORE THEM FROM THE FACTS WHICH WERE BEFORE THE APEX COURT IN THE CASE OF TUT ICORIN ALKALI CHEMICALS AND FERTILIZERS LTD. V CIT. THE DI STINCTION 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 ESSENT IALLY FOUND TO BE THE SURPLUS FUNDS IN THE HANDS OF THAT COMPANY AND THE VERY PURPOSE OF MAKING FIXED DEPOSITS WAS T O EARN INTEREST ON SUCH SURPLUS MONEY. APEX COURT UNDER TH OSE PECULIAR CIRCUMSTANCES HAD HELD IN TUTICORIN ALKAL I CHEMICALS 10 ITA NO.4748/DEL./2017 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 POW ER COMPANY (P) LTD. VS. CIT IN ITA NO. 1238 HON'BLE D ELHI HIGH COURT IN ITS DECISION ON 17/07/2012 HELD THAT:- 'IT IS NO DOUBT CORRECT THAT THE PROVISO TO SECTION 36 (1) (HI) OF THE INCOME TAX ACT ENACTS THAT ANY AMOUNT OF THE IN TEREST PAID TOWARDS ('IN RESPECT OF) CAPITAL BORROWED FOR ACQUISITION OF AN ASSET OR FOR EXTENSION OF EXISTING BUSINESS R EGARDLESS OF ITS CAPITALIZATION IN THE BOOKS OR OTHERWISE 'FOR ANY PERIOD BEGINNING FROM THE DATE ON WHICH THE CAPITAL WAS BO RROWED FOR ACQUISITION OF THE ASSET TILL THE DATE ON WHICH SUCH ASSET WAS FIRST PUT TO USE' WOULD NOT QUALIFY AS DEDUCTIO N. HOWEVER IN ALL THESE CASES WHEN THE INTEREST WAS RECEIVED BY THE ASSESSEE TOWARDS INTEREST PAID FOR FIXED DEPOSITS W HEN THE BORROWED FUNDS COULD NOT BE IMMEDIATELY PUT TO USE FOR THE PURPOSE FOR WHICH THEY WERE TAKEN THIS COURT AND INDEED THE SUPREME COURT HELD THAT IF THE RECEIPT IS 'INEXTRIC ABLY LINKED' TO THE SETTING UP OF THE PROJECT IT WOULD BE CAPIT AL RECEIPT NOT LIABLE TO TAX BUT ULTIMATELY BE USED TO REDUCE THE COST OF THE PROJECT BY THE SAME LOGIC IN THIS CASE TOO. THE F UNDS INVESTED BY THE ASSESSEE COMPANY AND THE INTEREST EARNED WER E INEXTRICABLY LINKED WITH THE SETTING UP OF THE POWE R PLANT.' 4.8 THEREFORE DECISIONS OF HON'BLE SUPREME COURT I N THE CASE OF BOKARO STEEL LTD. (SUPRA) HON'BLE DELHI HI GH COURT IN INDIAN OIL PANIPAT POWER CONSORTIUM LTD. (SUPRA) AN D NTPC SAIL POWER COMPANY (P) LTD. (SUPRA) ARE SQUARELY AP PLICABLE IN THE INSTANT CASE. IDENTICAL ISSUE WAS RAISED IN APP EAL FOR AY 2008-09 WHICH WAS DECIDED BY ME IN FAVOUR OF THE AP PELLANT IN A. NO. 102/2010-12 VIDE DECISION DT. 17/12/2012 FOLLOWING THE ABOVE DECISIONS OF SUPREME COURT AND DELHI HIGH COURT AS UNDER: '8.1.5 SINCE THE WORK OF CONSTRUCTION OF THE POWER PLANT HAS JUST STARTED AND FUNDS WERE ESSENTIALLY UTILIZED FO R CONDUCTING SURVEY INVESTIGATION & PRELIMINARY EXPENSES FOR L AND PURCHASE FOR INFRASTRUCTURE DEVELOPMENT WORK AND F OR DISBURSEMENT AS ADVANCE TO THE CONTRACTORS ENGAGED FOR CONSTRUCTION OF POWER PLANT ETC. THEREFORE FUNDS CANNOT BE SAID TO BE AT SURPLUS. MOREOVER THE LIABILITY TOWA RDS SUNDRY CREDITORS (RS.23.52 CRORES) ARE FAR MORE THAN THE F UNDS LYING IN BANK (RS.3.34 CRORES). INTEREST INCOME IS ALSO INEX TRICABLY LINKED WITH THE SETTING UP OF THE POWER PLANT BECAU SE INTEREST INCOME HAVE GONE ON TO REDUCE THE INCIDENTAL EXPENS ES FOR SETTING UP OF THE PLANT AS EVIDENT FROM SCHEDULE 12 OF BALANCE 11 ITA NO.4748/DEL./2017 SHEET SHOWING DETAILS OF INCIDENTAL EXPENSES DURING CONSTRUCTION. IN VIEW OF THE ABOVE AS THE INTEREST ON STDR ARE 'INEXTRICABLY LINKED' TO THE SETTING UP OF THE PROJ ECT AND THE FACT THAT NO SURPLUS FUNDS ARE ALSO AVAILABLE WITH THE APPELLANT COMPANY THEREFORE SUCH INCOME IS REQUIR ED 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 RS. 36 06 774/- AS INCOME FOR OTHER SOURCE U/S 56.' 4.9 IN VIEW OF THE ABOVE FACTUAL AND LEGAL POSITI ONS IN THE INSTANT AY 2010-11 SINCE THE WORK OF CONSTRUCTION O F THE POWER PLANT WAS UNDER PROGRESS INTEREST INCOMES AR E ALSO INEXTRICABLY LINKED WITH THE SETTING UP OF THE POWE R PLANT AND SUCH INCOMES HAVE GONE ON TO REDUCE THE EXPENSES FO R SETTING UP OF THE PLANT AND AS THERE WAS NO SURPLUS FUNDS A VAILABLE WITH THE APPELLANT COMPANY THEREFORE SUCH INCOME IS REQUIRED TO BE CAPITALIZED TO BE SET OFF AGAINST TH E PRE OPERATIVE EXPENSES. AS SUCH THE A.O. IS NOT JUSTIFI ED IN ADDING THE SUM OF RS. 1 75 74 129/- AS INCOME FROM OTHER S OURCE U/S 56. THE APPEAL IS ALLOWED IN GROUND NOS. I & 2 OF A PPEAL. 6. IN THE BACKGROUND OF THE AFORESAID DISCUSSION AN D THE PRECEDENTS WE ARE OF THE VIEW THAT THE ID. CIT(A) HAS PASSED A WELL REASONED ORDER WHICH DOES NOT NEED ANY INTER FERENCE 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 TH E DEPARTMENT PREFERRED AN APPEAL BEFORE THE HONBLE JURISDICTION AL HIGH COURT IN ITA NO. 541/2016 WHEREIN VIDE ORDER DATED 20.09.201 6 THE ORDER OF THIS BENCH OF THE TRIBUNAL WAS AFFIRMED. 9. SINCE THE FACTS FOR THE YEAR UNDER CONSIDERATION ARE IDENTICAL TO THE FACTS INVOLVED IN THE CASE OF ACIT CIRCLE- 13( 1) NEW DELHI VS NTPC TAMIL NADU ENERGY CO. LTD. NEW DELHI IN ITA N O. 6016/DEL/2013 FOR THE ASSESSMENT YEAR 2010- 11. SO RESPECTFULLY FOLLOWING THE ORDER DATED 15.02.2016 PASSED BY THIS BENCH OF THE ITAT NEW DELHI WE ARE OF THE VIEW THAT THE ID. CI T(A) WAS FULLY JUSTIFIED IN DELETING THE IMPUGNED ADDITION MADE BY THE AO. ACCORDINGLY WE DO NOT SEE ANY MERIT IN THIS APPEAL OF THE DEPARTMENT. 10. IN ITA NO. 4561/DEL/2014 THE FACT ARE IDENTICA L AS WERE INVOLVED IN ITA NO. 4560/DEL/2014 FOR THE ASSESSMEN T YEAR 2011- 12 WHICH WE HAVE ALREADY DISPOSED OFF IN THE FORMER PART OF THIS ORDER. THEREFORE THE FINDINGS GIVEN THEREIN FOR TH E ASSESSMENT YEAR 12 ITA NO.4748/DEL./2017 2011-12 SHALL APPLY MUTATIS MUTANDIS FOR THE ASSESS MENT YEAR 2012-13. 11. IN THE RESULT APPEALS OF THE DEPARTMENT ARE DI SMISSED. 5.1 SINCE THE ISSUE IN DISPUTE HAS ALREADY BEEN DECIDE D BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE IN EARLIER YEARS RESPECTFULLY FOLLOWING THE SAID FINDING OF THE TRIBUNAL THE FIN DING OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE IS UPHELD. THE GROUN DS RAISED BY THE REVENUE ARE ACCORDINGLY DISMISSED. 6. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH MAY 2021 SD/- SD/- (KULDIP SINGH) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 11 TH MAY 2021. RK/- (DTDS) COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR ITAT NEW DELHI