ATHENA KARNAL SOLAR POWER PVT LTD,GURUGRAM V. DCIT,CIRCLE-1(1), GURGAON

ITA 3126/DEL/2025

AI Insights

The case involves Athena Karnal Solar Power Private Limited, the appellant, contesting the decision of the lower tax authorities regarding the treatment of interest income earned on bank deposits. The interest income was netted off against the interest paid on a term loan for the development of a solar power plant and was considered under capital work in progress (CWIP) in the financial statements for FY 2017-18. The lower authorities had added this interest income back to the taxable income, which the appellant challenged. The Tribunal's decision favored the appellant, aligning with the Supreme Court's judgment in a similar case, which recognized the direct link between the deposit of money and the acquisition of plant and machinery, thus treating the interest earned as incidental.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 793685 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2018-2019
• Appeal Filed On: 13-05-2025
• Other Referred Cases: Commissioner of Income-tax Vs. Karnal Co-operative Sugar Mills Ltd., Tuticorin Alkali Chemicals and Fertilizers Limited v. CIT, CIT v. Bokaro Steel Ltd.
• Laws Referred To: Income Tax Act, 1961, ICDS-V
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: OM PRAKASH
• Assessee Lawyers: VED JAIN; AYUSH GARG

Judgement Text

"1 ITA No. 3126/Del/2025 Athena Karnal Solar Power (P) Ltd. Vs. DCIT IN THE INCOME TAX APPELLATE TRIBUNAL DELHI (DELHI BENCH ‘C’ NEW DELHI) BEFORE SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER AND SHRI YOGESH KUMAR U.S., JUDICIAL MEMBER ITA No. 3126/DEL/2025 (A.Y. 2018-19) Athena Karnal Solar Power Private Limited J5/132, Third Floor, Rajouri Garden, New Delhi PAN: AAOCA1340E Vs. ACIT/DCIT Circle 1(1) Gurgaon Appellant Respondent Assessee by Sh. Ved Jain, Adv, Sh. AyushGarg, CA and Sh. Devesh Agarwal, CA Revenue by Sh. Om Prakash, Sr. DR Date of Hearing 18/09/2025 Date of Pronouncement 26/09/2025 ORDER PER YOGESH KUMAR, U.S. JM: The present appeal is filed by the Assessee against the order of Ld. Commissioner of Income Tax (Appeals/ National Faceless Appeal Centre (‘Ld. CIT(A)/NFAC’ for short), New Delhi dated 21/04/2025for the Assessment Year 2018-19. 2. The solitary issue involved in the present appeal is regarding capitalization of interest income. It is the specific case of the Assessee that interest income earned on bank deposit up to previous year ending on 31st March 2018 has been netted off from the interest paid up to 31st March 2018 on term loan taken for the development of the Printed from counselvise.com 2 ITA No. 3126/Del/2025 Athena Karnal Solar Power (P) Ltd. Vs. DCIT solar power plant. The net interest (i.e. interest expense less interest income) has been considered under capital work in progress (CWIP) in audited financial of F.Y 2017-18. As per the Assessee the said treatment of interest income is in line with provision of ICDS-V as prescribed under the income tax Act, 1961. The claim of the Assessee has been turned down by the lower authorities and made addition/confirmed of Rs. 2,03,54,362/-, which is under challenge in the present Appeal. 3. The Ld. Assessee's Representative submitted that the issue involved in the present appeal is squarely covered by the Judgment of the Hon'ble Supreme Court in the case of Commissioner of Income-tax Vs. Karnal Co-operative Sugar Mills Ltd. reported in 1999 (4) TMI 7- Hon'ble Supreme Court, thus sought for allowing the Appeal. 4. Per contra, the Ld. Department's Representative relying on the orders of the Lower Authorities sought for dismissal of the Appeal. 5. We have heard both the parties and perused the material available on record. The issue of treatment of interest income which has been capitalized by the Assessee is no more res-integra. The Hon'ble Supreme Court in the case of Commissioner of Income-tax Vs. Karnal Co-operative Sugar Mills Ltd (supra) held as under:- “In the present case, the assessee had deposited money to open a letter of credit for the purchase of the machinery required for Printed from counselvise.com 3 ITA No. 3126/Del/2025 Athena Karnal Solar Power (P) Ltd. Vs. DCIT setting up its plant in terms of the assessee's agreement with the supplier. It was on the money so deposited that some interest has been earned. This is, therefore, not a case where any surplus share capital money which is lying idle has been deposited in the bank for the purpose of earning interest. The deposit of money in the present case is directly linked with the purchase of plant and machinery. Hence, any income earned on such deposit is incidental to the acquisition of assets for the setting up of the plant and machinery. In this view of the matter the ratio laid down by this court in Tuticorin Alkali Chemicals and Fertilizers Limited v. CIT , will not be attracted. The more appropriate decision in the factual situation in the present case is in CIT v. Bokaro Steel Ltd. . The appeal is dismissed. There will be no order as to costs.” 6. In view of the above facts and circumstances, by relying on the ratio laid down by the Judgment of the Hon'ble Supreme Court (supra), the impugned addition sustained by the Ld. CIT(A) is hereby deleted. 7. In the result, Appeal of the Assessee is allowed. Sd/- Sd/- (S. RIFAUR RAHMAN) (YOGESH KUMAR U.S.) ACCOUNTANT MEMBER JUDICIAL MEMBER Date:- 26.09.2025 R.N, Sr.P.S* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI Printed from counselvise.com 4 ITA No. 3126/Del/2025 Athena Karnal Solar Power (P) Ltd. Vs. DCIT Printed from counselvise.com "